Airbnb Analysis

Airbnb Analysis

Airbnb is a well-known online marketplace company that arranges or offers lodgings, mainly home-stays, or even tourism experiences. Airbnb neither holds events, nor does it possess any single real estate that is listed. Instead, the company plays the role of a broker and receives commissions from every booking. The company is located in San Francisco, California. In this assignment, Porter’s Five Forces will be used to evaluate the competitive environment of Airbnb. PFF is a model that analyses businesses. The analysis assists in explaining the reason why different sectors manage to sustain various profitability levels.

Rivalry in the Sector

The first porter’s force is the rivalry in the sector which is the number of rivals and their capability to undersell or charge a decreased price as compared to a particular company. The more the number of opponents, including the equivalent products and also services offered, the lesser the company’s power. Airbnb was successfully established, but as the sector advanced, the company faced stiff competition. The company’s rivalry emerged in three modes. The first one was copycats whereby the company identified more than 500 sites of imitators. Two of the significant imitator sites were Airizu and also Wimdu. The sites’ founders were two German brothers. Various European investors had heavily funded the two brothers; thus, the brothers were fond of imitating American companies then try to sell the imitated companies back to their founders. The two imitator sites i.e. Airizu and also Wimdu, looked and even felt like the Airbnb Company and targeted Airbnb’s market but from the European dimension. They even claimed to be associated with Airbnb. That was a deceptive marketing routine capable of destroying the future of the original company.

The other mode was vacation rentals whereby some of its competitors like HomeAway and Flipkey who were highly funded. As a result of the high funding, they offer better rental vacation deals which were more comfortable as compared to what Airbnb’s offer. Another competition mode was the one-stop vacation service whereby a site like Travelocity was a threat. The site’s primary focus was the travellers in search of hotel rooms and not the rare kind of experience offered by Airbnb. The large hotels had enough cash to purchase smaller sites meant to serve a distinct market with crazy price offers, thus enticing Airbnb customers. Airbnb, therefore, faces a very stiff competition that originated from the three forms. Sites like HomeAway and Expedia keep working day and night to beat Airbnb. To address competition, the company has simplified its current system concerning bookings and also payments.

Possibilities of Newcomers into the Sector

The second porter’s force is the possibility of newcomers into a sector. New entries into a business come with new scopes and also desire to obtain market share, thus constraining costs and the investment rate that is reasonable to compete. The more the new entries the more the prices go down. However, a company can boost its investment to keep off new rivals. For Airbnb, there are no numerous entry barriers; hence any site can suddenly appear and become Airbnb’s competitor.

Nevertheless, Airbnb has been in existence for over ten years; it is well funded and operates in nearly 200 countries worldwide. For a new site to pose any serious threat to Airbnb or be its rival, the site has to first and foremost have numerous million dollars for venturing into the business. It should also put forward significant branding equity for capturing different customers’ requirements and demands.

Suppliers’ Power

In association with Airbnb, the suppliers’ power is minimal as the company controls the customers and also the suppliers. It thus makes it challenging for individuals attempting to hire out without another alternative means of connecting with clients that use the Airbnb App. In the case of Airbnb, the host is usually the supplier, who provides apartments or rooms to travellers. Suppliers manage the business. Airbnb is closely engaged with its suppliers to prevent issues with the customers.

Customers’ Power

With Airbnb, customers’ negotiation authority is high as a result of the broad scope of services the company offers like prices, host rates, and even location. Airbnb when compared to various accessible options, it is considered a less expensive option for a majority of travelers. Airbnb’s customers lack a price negotiation’s platform from its suppliers on the company’s website. However, there is another alternative whereby they can choose from different available prices and also styles.

The Risk of Replacement Products

The substitute products for Airbnb are classified into several groups. The first group is hotels which the company considers as the significant competing products that keep increasing. They are always accessible and famous to the majority of travellers. Hostels are other substitute products that usually allure backpackers. A majority of the backpackers travel by themselves and prefer an excellent way of meeting other like-minded travellers. Backpackers prefer hostels as they offer accommodations which present ample social interactions’ opportunity. Hostels are also additionally youthful, less expensive, and provide intimate communication compared to apartments or traditional hotels.

In conclusion, Airbnb’s functions and systems have endured it all and survived through the challenges encountered in the world of business. The company also totally relies on the information system to drive it so that it can serve its clients more excellently every day.

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