Ctrip Case Study: Sustainable Competitive Advantage and Prioritized Services

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Ctrip Case Study
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Introduction
In 1999, it was remarkable as this is the year when Ctrip got established in Shanghai.
According to Jane Sun one of the company’s CFO, the Chinese travel agencies were
characterized by small, feeble and inadequate delivery of services (Garvin and Dai 2012, pp.1).
The companies were either corporate enterprises that were independent with less monitorization
of local operations or small autonomous activities. Majority of the agencies specialized in group
tours that led to luring of customers with low prices. Unfortunately, journeys as per this period
entailed red-eye flights, meals that were of low quality and shopping trips that were mandatory
that ensured that tour guides on the other side earned themselves commissions (Garvin and Dai
2012, pp.1). It is at this time that the presence of aggregators for hotels and airlines lacked.
Remarkably, only less than 5% of the hotels were owned by hotel groups. Although there
were groups, they operated autonomously (Garvin and Dai 2012, pp.1). Before the advent of the
internet boom, hotels could only promote themselves regionally through advertisements in the
newspapers which was deemed an expensive affair. Thus, a good number of travelers lacked
knowledge and awareness on the availability of hotels in different cities. The airlines belonged to

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the state and e-tickets had not been discovered (Garvin and Dai 2012, pp.2). The travellers were
only left with the option of booking flights through a local agent that departed from their cities.
Overview of the market
The fax was the only means that enabled travel agencies to access information regarding
government policy, charged prices and commissions that were to be levied. The TravelSky was
an online platitude that facilitated both processing of transaction and distribution of air ticket in
China. An agent would search through TravelSky on the availability of air ticket and assist the
customer in calculating the price. There was access to only information about local flights by
travel agencies as they could not keep a record of such bulky information about other cities. It is
due to the exponential growth of private enterprises in China that led to the high demand for
travel services. Employees in such companies had to make travel arrangements, and policies by
the government were beginning to loosen. It is at this time that Ctrip became relevant as both an
aggregator and consolidator in the market.
How Ctrip generates Sustainable competitive advantage
The combination of talents that complemented each other among the pioneers of the
company was one way of establishing the sustainable complementary advantage of Ctrip (Garvin
and Dai 2012, pp.2). For instance, Qi Ji had vast experience in business start-ups and was a
successful entrepreneur and would lead the company as the first CEO. Liang, on the other hand,
had served as the head of Oracle and was strategic as his experience in systems led him to
develop the idea of establishing an internet-based enterprise in 1999. In leading the industry,
Ctrip created a website, Ctrip.com that disseminated information though did not facilitate
transactions (Garvin and Dai 2012, pp.2). Soon, the robust content, large community and the
user-friendly website led to the company’s website being recognized as the most popular
websites in the Chinese list of travel websites. This was crucial as investors were only concerned
with the page views.
Ctrip’s decision to venture in hotel reservations market was without a glitch as no
licenses were required at that time. The situation at that time was marked by the government
regulating air ticketing and packaged tours amidst fears of fraudsters, though it did not control
the hotel reservations (Garvin and Dai 2012, pp.3). Ctrip managed to use the internet to offset
any constraints posed by the small and offline competitors who bargained the price with hotels
and solicited clients over the phone and gained their commissions following customers staying in
the prescribed hotels. Ctrip was better positioned to give a detailed, open and up-to-date
information about the vast array of hotel suppliers, and to develop a database with client’s past
orders and consumption behaviour for the targeted group. It is through the realization that with
the technology Ctrip had less competition. Also, the margin from hotel reservations was
relatively higher compared to that of air ticketing. The only thing that Ctrip required to maximize
on the hotel reservation was to establish a hotel inventory regionally.in this case frequent
independent travellers became the targeted niche by Ctrip and the company was tasked with
providing them convenience at reasonable rates.
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