Founded in 2008, Airbnb has established itself as one of the most profitable business in the sharing economy alongside Uber through its spearheading efforts in using technology to create an opportunity in the global hospitality business. Boosting over 5 million lodging options in over 81,000 cities and 91 countries globally, the company was estimated to be worth at least $38billion as of 2018. Using Porters five forces, this report looks at the competitive forces in the industry in which airbnb is competing and how the five forces of competition including buyer and supplier power, threat of substitutes, threat of entry and rivalry, are affecting Airbnb and industry attractiveness.
Prudence, K. Magezi (2019) "Airbnb Porters Five Forces 2019" 123 Writing [Online] at https://www.123writing.com/sample/airbnb-porters-five-forces-2019
Airbnb Strategy Case Study
Key Learning Outcomes
- Use Porters five forces model to analyse an industry on the basis of the five competitive forces.
- Analyse the global vacation rental industry and how the five forces have affected Airbnb and rival firms and the impact on industry structure, attractiveness, and profitability.
- Understand how Airbnb has managed to defend against intense competition and the strategies it uses to create 'blue oceans' that are defensible, helping it capture market share and maintain competitive advantage.
Analyse Airbnb through the lens of Porters five forces to assess how the five forces affect Airbnb Company and the global Vacation Rental industry
Founded in 2008, Airbnb is a privately-owned company that operates online market place and hospitality services. With headquarters in Francisco, the company’s accommodation on market place provides access to over 5 million unique places to stay in over 81,000 cities and 91 countries globally (Airbnb press room 2018).
The company’s success has mostly been because of its low costs, convenience and ability to expand the capacity of rooms during peak periods among others. As of 2017, Airbnb’s revenue was approximately $2.6billion with $93million in profits, operating income of $450 million and net income of $93 million (Bort 2018). Below, the report looks at the competitive forces in the industry in which Airbnb is competing.
4.0 Airbnb porters five forces 2019
4.1 Bargaining power of buyers
The ability of buyers to push down the prices they pay for certain products, highly depends on their price sensitivity and their bargaining power relative to the firms within the industry (Grant 2016). In the case of Airbnb, the bargaining power of the buyer is high since the cost of switching from Airbnb to hotels is low. Though Airbnb costs may be lower, the competition has resulted in many hotels lowering their costs to the level of Airbnb in order to maintain their customer base. This makes it easy for customers to switch from one to another depending on their needs thus high bargaining power of buyers. Verdict: high bargaining power of buyers
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