Ctrip Case Study: Strategy for Sustainable Competitive Advantage

This case study examines Ctrip's establishment and rise in China's online travel market, highlighting its sustainable competitive advantages. Initially, Chinese travel agencies were small and inefficient, lacking online presence. Ctrip emerged as a relevant aggregator and consolidator by combining talents and leveraging internet technology. The company's strategy involved creating a user-friendly website, focusing on hotel reservations due to less government regulation, and targeting frequent independent travelers. Ctrip established a 24-hour hotline and innovated a prepaid model to overcome credit card limitations. The company distributed membership cards, used personal digital assistants (PDAs) for sales, and partnered with air ticketing companies to offer unique services. Ctrip also capitalized on the rise of credit cards and electronic tickets. The company's customer-centric culture, emphasis on service quality, and expansion to budget travelers contributed to its success. Ctrip's strategy, known as 55443, prioritized leading the market through high-quality service and a non-hierarchical, scientifically managed culture.

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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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The online platform by Ctrip that had a 24-hour hotline to serve orders while sustaining
connections with hotel suppliers was a plus for the company (Garvin and Dai 2012, pp.3). The
first call center got established in 2000. Ctrip also understood better that to stimulate growth, it
had to acquire a hotel reservation enterprise that was well versed with the know-how of its
leadership team. In 2000, credit cards had not yet received much acceptance in China, in this
case, a prepaid model served the purpose, and most hotel reservation businesses paid deposits
first to the hotels. It is at this time that Fan saw an opportunity and maximized through it by
innovating a new model by entering allotment contracts with the hotels.
In the first one decade, Ctrip depended on two main channels in luring customers to
ascribe to its services (Garvin and Dai 2012, pp.3). One of the facilities was through the
distribution of membership cards and brochures at designated places such as the airports, office
premises, railway stations and fostering relationships with primary airlines and financial stations
to ensure that customers could become Ctrip subscribers and enjoy the many discounts and
bonuses. Since it was possible for competitors to copy the first approach, the company made
some changes. First, the company armed the sales staff with personal digital assistants that were
coupled with an IT system to help the PDAs perform more effectively (Garvin and Dai 2012,
pp.3). The PDAs were upgraded such that the sales staff could register members directly by
entering their mobile numbers in the gadgets. The mobile phone numbers were vital as they
facilitated accessing customers’ records making it easy to identify the segment that such
customers belonged to enabling the sales staff to customize their conversations when dealing
with such clients. The PDAs were later upgraded to tablet PCs, and this was remarkable as the
sales staff could now show customers photos and videos of their products leading to
improvements in the quality of their interaction with such clients.
Ctrip spearheaded a technology that is widely used and made the enterprise a landmark in
the online air ticketing (Garvin and Dai 2012, pp.4). For instance, through booking flights from
Ctrip and one is in Shanghai, one not only had an opportunity to book return tickets from
Shanghai to another town such as Beijing but also book a flight that departed from a third town
such as Hangzhou to Guangzhou. Such technology of issuing a ticket from a third city did not
exist in the past and lob came to fruition after Ctrip partnered with companies in air ticketing.
Ctrip also took advantage of the continued increase of credit cards and the onset of
electronic tickets which led to continued growth for Ctrip as there were reduced fraud and
minimal errors (Garvin and Dai 2012, pp.4). The introduction of delivery teams to distribute
tickets by Ctrip in primary cities led to quality improvements and helped the company achieve
competitive advantage. Also, the teams used motor scooters that facilitated delivery within a
two-hour framework and collection of payments in the city. Soon it was reported that direct
delivery was responsible for more than 50% of air ticket capacity. The online platform
established by Ctrip was the first of its kind in China and was to serve reservations for
international flights.
The strategy adopted by Ctrip was known as 55443 prioritized services as the primary
element (Garvin and Dai 2012, pp.6). The five translated to the company leading the way far of
the market such that the second player is unable to catch up for the next five to ten years. Four,
on the other hand, means that the company leads the market; however, the advantages are easy to
get replicated in the short run. Lastly, three means that the company is at the same level as the
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market. Most people prefer using Ctrip due to its high-quality service and branding. Ctrip has
managed to build its brand through its service since services are hard to copy and this makes
Ctrip one of the unique companies in a nation that is non-service oriented. Ctrip’s culture is one
that is highly customer-eccentric, nonhierarchical and managed through scientific principles
(Garvin and Dai 2012, pp.8). The needs of customers at Ctrip are a priority, and each department
is tasked with setting standards for customer service.
The recruitment of new employees to the call center at Ctrip involves recruiting
candidates that are willing to serve others rather than other skills such as the capacity to speak
Mandarin and typing (Garvin and Dai 2012, pp.10). Once employees join the company, the
managers emphasize the importance of attitude. Li Yan, a senior director at Ctrip, acknowledges
that it is normal to make mistakes among employees; however, a right attitude and willingness to
serve others is what counts. Such traits enable Ctrip’s employees to deal with the customers
politely and professionally.
Ctrip has also gone all far to increase the portfolio of its customers with the inclusion of
budget travelers that were previously considered to be budget-oriented (Garvin and Dai 2012,
pp.13). The directors came to understand that this market was one large opportunity. Thus, Ctrip
had to introduce a model with repeat customers and products that could be used repetitively.
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References
Garvin, D.A. and Dai, N., 2012. Ctrip: Scientifically Managing Travel Services.
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