Integrated Capstone Project: Analyzing Airbnb's Growth and Strategy

This integrated capstone project provides a comprehensive analysis of Airbnb's business strategy, focusing on its diversification efforts, risks, and challenges. The project begins with an introduction to Airbnb, its product and service offerings, and the roles of guest and host users. It then delves into Airbnb's diversification strategy, examining its goals, risks, and implementation within a multi-business corporation framework. The project identifies and analyzes various issues and problems faced by Airbnb, including government actions, implications of fair housing, taxation, and resistance from the hotel industry. It explores recommended solutions to address these challenges, providing a detailed understanding of Airbnb's growth and market position. The project highlights how diversification, while offering growth potential, also introduces complexities that require careful management and strategic adaptation. The document also offers a comparative analysis of Airbnb's diversification strategy with other companies, such as Canon, Walt Disney, and Virgin Group, to highlight the general diversification of strategies. The project concludes with a discussion of the potential impacts and challenges of Airbnb's diversification, providing insights into its future development.

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INTEGRATED CAPSTONE PROJECT

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EXECUTIVE SUMMARY
Every business has a potential to grow as well as clear chances to wind up
with the losses. There are many factors both external and internal that define the
success of the business. What matters here is a conscious plan to execute in present
and anticipation of possible threats and opportunities. These challenges are
multiple, when the business is new with the new product or new service. The issues
and concerns are direct multiples to the regular business. Though the new business
management is enough conscious and flexible, there are continuous threats from
the new competitors, who negatively get affect, from the growth of such business.
Diversification strategies and multi-business corporations do further multiply the
challenges and a strong desire and passion to do the business will respond and
receive all challenges and convert them to opportunities.

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Contents
INTEGRATED CAPSTONE PROJECT.............................................................................5
INTRODUCTION...............................................................................................................5
BACKGROUND.................................................................................................................5
Airbnb..........................................................................................................................................5
Product and Service.....................................................................................................................6
Guest User...................................................................................................................6
Host User.....................................................................................................................6
Coordination................................................................................................................7
DIVERSIFICATION STRATEGY.............................................................................................7
Goal..............................................................................................................................8
Risks............................................................................................................................9
ANALYSIS OF MULTI-BUSINESS CORPORATION............................................................9
Advantages..................................................................................................................9
Disadvantages............................................................................................................10
ISSUES AND PROBLEMS...............................................................................................11
Positive Actions from Governments..........................................................................................15
ANALYSIS OF ISSUES....................................................................................................15
RECOMMENDED SOLUTIONS.....................................................................................16
REFERENCES..................................................................................................................17

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INTEGRATED CAPSTONE PROJECT
INTRODUCTION
Every business has the potential, when the product or service serves its
potential customers, with genuine usage. However, the same applies to the other
businesses, especially, competitors. Eventually, something more than the genuine
product development and market is required and that is business forecast and
anticipation of legal amendments (Global News, N.D). On an overall, fluctuations
are natural and consistent performance and expansion of the business becomes the
key aspects. The project has considered and taken the example of Airbnb and it’s
international growth strategy.
BACKGROUND
Airbnb
Airbnb is a lodging privately held company, founded in August 2008, by the
founders, Brian Chesky, Nathan Blecharczyk and Joe Gebbia, in San Francisco,
California. The company offers hospitality service, through peer to peer rental of
property. The company operates with the income of $450 million and revenue of
$2.6 billion, by the year 2017. The total net income gained is $93 million, by 2017,
serving worldwide with hospitality operations, with 3,100 employees.
Airbnb, an American company, operates hospitality service and online
marketplace to rent or lease short term lodging, such as hostel beds, holiday
cottages, homestays, hotel rooms, for people, especially travellers, all over the
world, to facilitate or participate in experiences relating to tourism, like walking
tours, restaurants reservations, etc (Sikich & Chris, 2017). The company provides
such services as a broker and does not conduct any tours and does not own any real

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estate. However, it earns its revenue by receiving a fee from percentage service, in
conjunction with every booking done.
Airbnb having offered lodging to the participants and travellers stands as a
potential example of collaborative consumption and sharing. The website of the
company has completed more than 4 million of listings for lodging, covering 191
countries and 65,000 cities and facilitated check-ins of over 260 million.
Product and Service
The Airbnb produce and service can be accessed through mobile Apps for
iOS, Android, Apple Watch apart from its website. Account creation and
registration can be done by the users, for free of cost. The product is associated
with both the guests and hosts of lodging. When the guests utilize the service, they
are charged with 6 to 12% of fee and hosts are charged with 3 to 5% of fee of
hosting service. The company allows the hosts to add ‘experiences’ to the guests
and these are charged with 20% of the commission to the company (Dia &
Hannington, 2018).
Guest User
A guest can search for the facility of lodging in the website of Airbnb.
Specific search can be attempted with variety of filters, starting from price, type,
location, dates, etc. He or she must provide his or her valid details of telephone
number, photo, payment information, email address along with the name. A scan of
valid identity card, issued by government should be provided, if the host requires
it.
Host User
Host initially, has to login and can create a listing and only be live, after he
or she is willing and ready to publish. Host has the independence to set various
prices, for different stays, like night, day, monthly, weekly etc., and has flexibility
to modify and adjust the pricing according to the season. Hosts in addition provide

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the description about the residence, available dates, amenities, policies for
cancellation and other rules set by him or her that to be agreed to by the guests.
Hosts are advised to provide the residence pictures of lodging that is offered.
Coordination
Hosts can be contacted directly by the guests, through messaging, directly,
through the company. The host can accept the request by enabling ‘instant book’,
automatically and the booking is further accepted or denied by the guest. Once the
reservation is done, meeting times and contact information can be coordinated by
the host with guests.
DIVERSIFICATION STRATEGY
Diversification strategy is a major and potential corporate strategy
implemented usually, with the intention of entering into new industry or market, in
which the specific business does not operate currently and new product is created
in the same industry. As the business is new, it is the most risky section, since the
new idea and business strategy has no experience and difficult to predict the
requirements and potential of the market. The key and primary concern here is that
the product, which is new, is unsure of becoming successful or not (Kane & Laura,
2017). Airbnb has implemented diversification strategy and is made clear from its
varied and new product and in the wider international market.
Diversification stands as one significant and main strategies of growth, out
of four such strategies, according to Market or Product matrix defined by Igor
Ansoff’s.

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Figure: Four Significant Growth Strategies
Diversification by Airbnb is a challenging strategy among the four, since it
demands new knowledge and skills in the development of product, along with
simultaneous new insights into market behaviour. Diversification strategy by
Airbnb demands new resources that include new facilities, new technologies to
expose to higher risk levels of the organization. Diversification hence has higher
potential of demand and risk and ideally, the strategy would be successful, when
the products have enough tendency to stimulate or create new markets, to promote
new product innovation in the markets.
Diversification strategy and product diversification involves new products to
add or introduce either being marketed or manufactured. Diversification strategies
also include new markets or products internal development, licensing of new
technologies, importing or distributing a product line, acquisition of an alliance,
firms with a complementary company. Generally, combination of these options
becomes a final strategy for many new and innovated business operations. And
such combination is determined in function of consistency and available
opportunities with the resources and objectives of the company. Airbnb has
performed all these tasks to ensure that the strategy of diversification is in course
to proceed with.

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Goal
Diversification by Airbnb has the goals, basically in two dimensions. The
first dimension of goal is related to the nature of the strategic objective, which can
be either offensive or defensive. Defensive is usually, because of spreading the
risks to diversify when the current market orientation or current product provides
no further growth opportunities and related to the market contraction. Offensive
diversification reason is towards new positions conquering, promising increased
profitability, compared to the opportunities of expansion. Airbnb has the goal in
offensive dimension, as it threaten the business and even existence of the small
hotel businesses, in large number of countries.
The second dimension of goal is diversification expected outcomes, such as
either growth and profitability or great coherence with activities, done currently.
Airbnb proved it with profitability.
Risks
Among the four significant strategies, diversification strategy has got highest
risk level and demands investigation to be highly careful, because it needs jumping
into a new and unknown market, dealing with unfamiliar service or product.
Eventually, the Airbnb, the home-sharing company puts itself into a great
uncertainty (Austen & Ian, 2017), initially, when the operations are commenced. In
addition to that diversification may also necessitate important financial and human
resources expansion that may detract sustained investments, commitment and
focus, in the core industries.
Having considering the risks associated with the divergence strategies,
chances of success can be measured by conducting different tests, like cost-of-
entry test, attractive tests, better-off-test. Though there are many companies,
including Airbnb, which have attempted the diversification strategy to introduce

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new products or services, a few good examples to mention and remind are as
follows.
1. Canon diversification into office equipment, which is completely new range,
from its regular camera production
2. Walt Disney moving to theme parks properties, from production of animated
movies
3. Virgin group moving to mobile phone and travel from music production
4. Apple moving to mobile devices from personal computers
ANALYSIS OF MULTI-BUSINESS CORPORATION
Multi-Business Corporation is the one, which deals with multiple
businesses, either related or unrelated to the existing businesses. Such business
corporations have to deal with the multiple strategies and multiple business
operations. MBC has got many advantages and certain disadvantages too (Bort &
Julie, 2018). Airbnb is proved to be Multi-business Corporation dealing with the
multiple businesses, like home sharing, walking tours, making reservations with
the existing businesses with multiple strategies.
Advantages
1. The risk of investment is reduced to a greater extent.
2. It can create a capital market, internally, in case external market is not well
created.
3. It can obtain growth of earnings, by acquiring new and newer companies
Disadvantages
1. The cost of management increases, because of the additional layers
2. Accounting disclosure is a bit difficult tasks, as they cannot there cannot be
separate accounting managed for each of the business. It makes the

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investors, managers and regulars harder to manage analyze and hide the
issues.
3. Trading can be done at discount rate, to the overall business individual
value, because investors may win diversification on their own through
purchasing multiple stocks, simply. The whole becomes then worthless,
rather than the total parts’ sum.
4. Clashes in culture can destroy the entire value.
5. Innovation development can be prevented by inertia.
6. Inability to manage, lack of focus unrelated businesses equally well
7. Too big to fail
8. Dilution of brand, where the loss of brand, its association with the price,
product area, cachet, market segment or quality.
Airbnb is assumed to be a multi-business corporation, as it has acquired
many other companies and businesses. Airbnb has acquired Acceleo, a German
company, acquired Localmind company, in December, 2012. Localmind is a
company with another business function, like a platform for question and answer,
based on the locations, online. Airbnb partnered to offer chargers, at some of the
houses of the hosts, with Tesla Motors company. Airbnb is also into the restaurant
reservation booking business. Later the company acquired Luxury Retreats
International company, based out of Canada and stands as a largest acquisition till
now, in February 2017. Travel accessibility company, Accomable, has been
acquired by Airbnb, in November, 2017.

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ISSUES AND PROBLEMS
Airbnb, having started into a new industry, in one way a parallel industry of
hotel and lodging and in one way, a completely new industry, where the individual
house owners, or the public becoming key stakeholders, and incur profits, by
sharing their housing space, it has gone through many issues and resistances, from
small hotel businesses to government, at macro level. The issues are many and are
listed as follows (Aichner & Coletti, 2013).
1. Implications and discrimination of fair housing
2. Terms of use and privacy
3. Transparency of pricing
4. Review system for guest
5. Israeli settlement boycott
6. Affordability of housing
7. Taxation
8. Resistance and concerns from the hotel industry
9. Government actions towards short-term rental and Airbnb
Here, most of the issues are anticipated and natural for the new businesses,
like, which are initiated by Airbnb. However, actions by government are somehow
serious issues and concerns the company has to consider to make certain
adjustments to cope up with the new actions, rules and regulations made by the
government (Julia & Rob, 2016).
There are multiple legislative bodies in all over the world, which have
attempted to mitigate the Airbnb effects, by passing legislations accordingly.
1. A new law has been passed in San Franscisco, in the year 2017, regarding
Airbnb and demanded its hosts to register with the city, prior to their