BS7114 - Airbnb's Strategic Management & Competitive Advantage

This report provides a comprehensive analysis of Airbnb's strategic management within the hospitality industry. It identifies key customer segments, defines Airbnb's business model, and assesses its competitive advantages. The report also explores the strategic group of Airbnb, examines the microenvironment using Porter's Five Forces, and discusses the main sources of Airbnb's competitive edge, including technological innovation, people, and efficient processes. Furthermore, it addresses the trends and changes affecting Airbnb's competitive advantage, such as demographic shifts, and offers a CEO's perspective on strategic initiatives. The analysis highlights Airbnb's success in creating value through quality services, attractive offers, and a unique C2C model, ultimately solidifying its position in the competitive market.

Running head: STRATEGIC MANAGEMENT
Strategic Management
Name of the Student
Name of the University
Author note

1STRATEGIC MANAGEMENT
Executive Summary
The assignment helps in the analysis of the different kind of strategic marketing strategies
that has helped Airbnb in attracting more customers. Proper ascertainment has been done that
has helped them in overcoming the different challenges and solve the issues effectively. The
competitive advantage gained by Airbnb has helped the company in gaining more customers
in the market and this created huge value to their company as well. Furthermore, it was seen
that there has been different kind of challenges faced by the company and this created huge
competitive advantage for their customers as well.
Furthermore, the main aim and purpose of the assignment is to analyse the strategic group of
Airbnb that has helped them in competing with other firms in the competitive market with
implementation of different kind of strategies. The strategic group has been analysed
effectually as this helped the respective company Airbnb in handling different conflicts and
solved them appropriately.
Lastly it was seen that Airbnb has created different kind of strategic initiatives that helped
them in maintaining proper competitive advantage in the entire competitive market. Proper
analysis has been done wherein CEO has provided his views and solved the different kind of
strategies.

2STRATEGIC MANAGEMENT
Table of Contents
Introduction 2
Main Customer Market Segments 2
Strategic Group of Airbnb 4
Competitive Advantage of Airbnb 6
Value created by Airbnb 6
Main sources of competitive advantage of Airbnb 7
Viewpoint as CEO: 9
Conclusion 10
References 11

3STRATEGIC MANAGEMENT
Introduction
The report helps in analysis of the customer groups along with market segments in the
hospitality industry of the respective company named Airbnb. The business model of Airbnb
will be discussed along with analysis of the competitive advantage along with the sources.
The Porter’s Five Forces Model will analyse the main players in the industry. The different
trends and changes in the micro and macro business environment has to be analysed
effectively and reflective analysis is required to be provided in order to understand the
situation of Airbnb and the steps taken to implement the changes as well.
Main Customer Market Segments
a) Main customer or the market segments of hospitality industry are as follows:
❖ Family is one the customer segments of the hotel industry wherein they have specific
kind of needs and they require kid friendly atmosphere that is suitable in nature as
well. The hotel industry targets these customers with the help of offering them
discounted products as this will help them in gaining competitive advantage in the
market (Wheelen et al. 2017)
❖ Business travellers is the other market or customer segment wherein as they are the
prized customers as of their willingness is high in paying room prices and enjoy stable
stay in an effectual manner as well. Proper attention from the hotel attendants is
required by them as this will help them in gaining more customers in the future
❖ Backpackers and couples are the other category wherein they will spend time on
exploring the city and the couples will be requiring high quality services wherein the
brand management plays a major role in the company as well. These kinds of

4STRATEGIC MANAGEMENT
customers prefer luxurious services and enjoy their stay effectually (Airbnb.co.in.
2018).
b) Business Model of Airbnb
Key Partners
Partners who are
business
partners
Hosts
Lobbyists
Travel managers
Venture
capitalists
Other Partners
Payments, cloud
storage and
maps
Insurance
Key Activities
Refining the
value proposal
Analyze the data
and improve
Remove the
frictions from
different
transactions
Value
Proposition
For the guests
Generation of
income
Ease of the
different
transactions
Booking
management and
calendar
Meeting new
individuals
For the hosts
Lower cost
Easy kind of
transactions
Transparent
ratings
Customer
Relationships
Manage the
interactions
Company Image
Own the
relationships
Customer
Segments
Hosts
Type of
accommodation
Rental kind of
preferences
Geographic and
demographic
Guests
Behavioral
Demographic
Type of travel
Business leisure
Key Resources
Listings
User generated
content
Analytics and
brand
application
Channels
Digital
advertisements
Program
referrals
Content kind of
marketing
Transparent
ratings
Cost Structure
Expansion and development
Revenue Streams
Charging the transaction fees based on

5STRATEGIC MANAGEMENT
Customer Support
Legal and insurance
Acquisition cost
Transaction costs and infrastructure
savings on the:
❖ High net income of the hosts
❖ Lower cost for the guests
Rental Guests- 5-15%
Events Guests- 0%
Rental hosts- 3-5%
The main customer groups or the market segments in the hospitality industry are as follows:
❖ Budgeted travellersare one of the market segments in the hospitality industry wherein
it is seen that the customers who will be travelling to different places with a certain
kind of budget. It is seen that the budgeted travellers want to stay comfortably with
low budget and this can be affordable options for them (Moutinhoand Vargas-
Sanchez 2018).
❖ Business Professionals are the one the other customer segment wherein the
professionals will be requiring proper place to stay in a low budgeted hotel, then they
can afford Airbnb company as they offer the same kind of hospitality services at a
lower rate and budget as well
❖ Solo travellers are the other customer segment who travel all over the world and they
are the ones who travel the world by spending their money on different kind of sight
seeing and they prefer affordable kind of lodging that can be provided to them by
Airbnb (Hill, Jonesand Schilling 2014).

6STRATEGIC MANAGEMENT
Strategic Group of Airbnb
Airbnb has entered into the strategic partnership with Uber, wherein both of the
companies tried to increase their presence into the comprehensive company of travel. Both
the companies tried to capture greater share of the spending of the tourists and both of the
companies are trying to perform effectively in an appropriate manner in comparison to the
different competitors in the market. It has been seen that the founders of Airbnb started the
business as newcomers and they did not have any kind of knowledge or expertise in the field
as well.
Business Environment of Airbnb
With the implementation of the Porter’s Five Forces Analysis, it is essential in nature
for Airbnb to understand the different kind of competitive advantage that can be positive in
nature for them to compete in the business. There is huge competition in the market wherein
the analysis of the business environment is essential in nature to understand the main players
in the market or the industry.
❖ Threat from the new entrants is one of the forces wherein there is high barrier to
entry due to huge cost and lack of the suitable kind of location. Proper adoption of the
local culture under the scale worldwide is essential in nature that has to be ascertained
by Airbnb as this will help them in adopting local and legal policy that can prevent
settling place. The threat from new entrants is considered weak along with flexible in
nature (Grant 2016)
❖ Threats from the substitutes is the other force wherein it is seen that the substitutes
can be both domestic and international in nature and there are no real outside
substitutes as well in Airbnb. Airbnb has to understand the different kind of threats in

7STRATEGIC MANAGEMENT
an effectual manner that will help them in reducing such threats as well (Lasserre
2017)
❖ Bargaining power of the suppliers is the other force wherein it is low in nature in
comparison to the wide range and number of suppliers compared to the different
industry players (Rothaermel 2015)
❖ Bargaining power of the buyers is the force wherein the strongly segmented buyers
have low power and the tour operators are the only ones who are included in this
segment. Both the political and economic situations will change the behaviour of the
buyer as well
❖ Rivalry among the competitors is the strongly segmented market that keeps the
rivalry aside with the effect of low price and Airbnb needs to introduce different kind
of technological advancements that will help them in competing with other
competitors in the market as well (Ginter 2018)
Competitive Advantage of Airbnb
The competitive advantage of Airbnb is that it is engaged in providing different kind
of online services related to hospitality. It helps in making the individuals enable to rent or
lease short-term lodging arrangements that includes different kind of apartment rentals or
hotel rooms and beds. The company do not have any kind of owned lodging; however, they
help in providing lodging to customers on commission basis. It has more than 3,000,000
listings of lodgings in 65,000 cities in more than 191 countries and the services provided by
Airbnb is unique and it is the latest kind of disruptions in the industry in regards to
manifestation in the industry of travel and lodging.

8STRATEGIC MANAGEMENT
Airbnb is being able to work on large scale and this is helping them in finally gaining
the competitive advantage in the market as well with the effects of the network. It is seen that
the large number of hosts are listed on Airbnb and the greatest number of booking of
customers are done through Airbnb as well(Johnson 2016). Airbnb is made unique and
different in nature with the help of reviews of the individuals along with word of mouth and it
is unique from the competitors as well. However, it is seen that Airbnb has to be work hard in
achieving the competitive advantage on the entire edge of inventory that is niche in nature
along with other complementary services as well.
Value created by Airbnb
Furthermore, it is seen that Airbnb is being able to grab the largest kind of market
share by providing quality services and attractive offers. IT has been seen that Airbnb is the
one of the best providers of the hospitality services with the help of the different reviews of
the customers and it has been seen that the customers are satisfied with the services of the
Airbnb Company as well(Goetsch and Davis 2014).
Airbnb is gaining the competitive advantage in the market over the cost structure and
it acts as the host for the different customers who wants to book different kind of services
through Airbnb are satisfied with different kind of room and other food and lodging services
as well. It helped in bringing the C2C model in the entire industry and it is unique in nature as
this provides platform for the individuals who are looking for the different rental places.
Main sources of competitive advantage of Airbnb
There are different sources of competitive advantage of Airbnb that are as follow:
❖ Technological innovation is one of the main source of competitive advantage of
Airbnb wherein this helps them in providing the different kind of consumer products

9STRATEGIC MANAGEMENT
and services in a better manner in comparison to other companies (Gamble and
Thompson 2014)
❖ People are the driving forces of the competitive advantage of Airbnb wherein the
people are better in creating, innovating and establishing the relationships and this
helps in gaining the competitive advantage as well (Madsen and Walker 2015)
❖ Processes and practices is the other source of the competitive advantage of Airbnb
wherein this has helped them in providing huge competition to the other competitors
in the market. The different kind of processes adopted by Airbnb is better in nature in
comparison to the others in the market and this will assist in gaining more advantage
in the future as well.
Main trends/changes in business that affects competitive advantage of Airbnb
❖ The demographics is one of the factors that can affect the competitive advantage of
Airbnb as the household patterns are changing and the different kind of major changes
in ethnicity is critical in nature to identify the changes as this will help them in coping
up with the changes. The demographic changes have to be ascertained effectually as
this will help in solving the issues and attract more customers in the future as well.
Different kind of changes needs to be adopted by the company that will assist them in
creating positive impact on the business.
❖ Secondly, the social and cultural trends are the other factor that will affect the needs
of the customers in a drastic manner. The preferences of the different customers are
changing in an effectual manner wherein this is causing huge shift in the demands of
the customers as well in the next ten years. Airbnb needs to create competitive
advantage in the organization with the implementation of coping up with the different

10STRATEGIC MANAGEMENT
cultural trends as this will help them in solving the issues effectually (Ethiraj,
Gambardella and Helfat 2016)
❖ The distribution channels and suppliersare the other major change in the
microenvironment that is causing huge changes in the organization and proper
accessible solutions has to be generated effectively with implementation of different
strategies(Brewster 2017). Airbnb has to analyse the different distribution channels
and suppliers effectually as they are the major kind of assets of the company who has
to be properly provided with different facilities as they will help in providing more
profitable business(Saeidi et al. 2015).
❖ Investors are the other factor who are responsible for affecting the business in both
positive or negative manner. Without the help of proper funds, it is not possible to
operate the business in an effectual manner. Investors play a major role in the
organization to succeed in the long run. Airbnb needs to understand the viewpoint of
the investors effectually as this will assist them in providing them business
effectually.
These are the different kind of changes that can create positive along with negative
impact on their business. The company needs to include the different kind of distribution
channels and suppliers as this will help in creating huge number of customers effectually. The
investors play a major role in the organization that will help in gaining competitive advantage
as well.
Airbnb has to analyse both macro and micro environment effectually as this will help
them in understanding the situation appropriately (Barney 2014). Airbnb needs to take proper
measures relating to the investors along with suppliers of the company as this will assist them
in gaining competitive advantage in the business. Airbnb needs to introduce new marketing

11STRATEGIC MANAGEMENT
strategies into their business as that will help them in creating their own space in the market
and this will help them in providing power to compete with the competitors in the market as
well in the next 10 years.
Viewpoint as CEO:
As a CEO, I would be taking care of different kind of activities that has to be
ascertained and proper steps has to be taken by me in order to improve the situation for our
hotel in comparison to Airbnb. In order to sustain the revenues and profit of the company, I
will be implementing the steps that are as follows:
❖ Firstly, proper creation and promotion of the different special and reasonable
packages has to be adopted by the respective hotel. The packaging will help the hotel
in adding value to the stay of the customers in the hotel. The different kind of
additional services will help them in gaining competitive advantage in comparison to
Airbnb (Sakas, Vlachos and Nasiopoulos 2014)
❖ New client segments have to be introduced by the respective hotel as this will assist in
powering the strong growth. Proper identification and observation of the different
activities will help them in creating a soothing environment for the customers at an
affordable rate with same kind of offerings as Airbnb(Schilke 2014).
❖ Proper introduction of the new services is essential in nature that has to be adopted
by the hotel(Bettis et al. 2016). The new services that is offered to the customers
helps in making them enamored with the services offered by the hotel will help them
in making more profitable business effectively. Proper introduction of aggressive new
services will assist the hotel in competing with Airbnb wherein this will gain

12STRATEGIC MANAGEMENT
competitive advantage in gaining more clients from all kind of income groups
effectively
❖ Proper increase of penetration in the existing market will help the hotel in
competing with Airbnb. The different kind of foundational part of the hotel business
will help in gaining the easiest and quickest sales in the market and this will help in
inclusion of the extensions of the new product line in an effectual manner
These are the different steps that can be taken by me as the CEO of the hotel to help
them in gaining competitive advantage in the entire market. With the implementation of these
strategies, the company will be able to compete with Airbnb and this will assist them in
increasing sales and revenues in the market as well.
Conclusion
Therefore, it can be concluded that there are different kind of customer segments of
the entire hospitality industry and Airbnb has spe3cific customer segments who creates huge
impact on the business. The macro environment analysis of Airbnb has been done that
provided proper view on the industry players and solved the issues in an effectual manner.
The main trends and changes has been discussed that helped them in providing and creating
value for Airbnb as well.

13STRATEGIC MANAGEMENT
References
Airbnb.co.in. 2018. Vacation Rentals, Homes, Experiences & Places - Airbnb. Airbnb.
Retrieved 20 April 2018, from https://www.airbnb.co.in/
Barney, J.B., 2014. Gaining and sustaining competitive advantage. Pearson higher ed.
Bettis, R.A., Ethiraj, S., Gambardella, A., Helfat, C. and Mitchell, W., 2016. Creating
repeatable cumulative knowledge in strategic management. Strategic Management
Journal, 37(2), pp.257-261.
Brewster, C., 2017. The integration of human resource management and corporate strategy.
In Policy and practice in European human resource management (pp. 22-35). Routledge.
Ethiraj, S.K., Gambardella, A. and Helfat, C.E., 2016. Replication in strategic
management. Strategic Management Journal, 37(11), pp.2191-2192.
Gamble, J. and Thompson, A.A., 2014. Essentials of strategic management. Irwin Mcgraw-
Hill.
Ginter, P.M., 2018. The strategic management of health care organizations. John Wiley &
Sons.
Goetsch, D.L. and Davis, S.B., 2014. Quality management for organizational excellence.
Upper Saddle River, NJ: pearson.
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley &
Sons.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an
integrated approach. Cengage Learning.
Johnson, G., 2016. Exploring strategy: text and cases. Pearson Education.

14STRATEGIC MANAGEMENT
Lasserre, P., 2017. Global strategic management. Palgrave.
Madsen, T.L. and Walker, G., 2015. Modern competitive strategy. McGraw Hill.
Meihami, B. and Meihami, H., 2014. Knowledge Management a way to gain a competitive
advantage in firms (evidence of manufacturing companies). International letters of social
and humanistic sciences, 3, pp.80-91. (Meihami and Meihami, 2014)
Moutinho, L. and Vargas-Sanchez, A. eds., 2018. Strategic Management in Tourism, CABI
Tourism Texts. Cabi.
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Saeidi, S.P., Sofian, S., Saeidi, P., Saeidi, S.P. and Saaeidi, S.A., 2015. How does corporate
social responsibility contribute to firm financial performance? The mediating role of
competitive advantage, reputation, and customer satisfaction. Journal of Business
Research, 68(2), pp.341-350.
Sakas, D., Vlachos, D. and Nasiopoulos, D., 2014. Modelling strategic management for the
development of competitive advantage, based on technology. Journal of Systems and
Information Technology, 16(3), pp.187-209.
Schilke, O., 2014. On the contingent value of dynamic capabilities for competitive advantage:
The nonlinear moderating effect of environmental dynamism. Strategic management
journal, 35(2), pp.179-203.
Wheelen, T.L., Hunger, J.D., Hoffman, A.N. and Bamford, C.E., 2017. Strategic
management and business policy. pearson.