Module Code: 6MNST001W

Module title: Global strategic management

Report on strategic
analysis of Airbnb

Thomas Camden Haddad

W15410986
Word count: 1850

Date: 04/19/18
Table of contents

Executive summary ----------------------------------------------------------------------------- Page 3

Introduction --------------------------------------------------------------------------------------- Page 4

The strategic analysis -------------------------------------------------------------------------- Page 5

Analysis of the external environment: PESTLE and 5 forces

Analysis of the internal environment: Value chain

Analysis of the business level strategy

Analysis of the corporate strategy

Analysis of leadership, cultural and ethical issues -------------------------------------- Page 11

Conclusion ---------------------------------------------------------------------------------------- Page 12

References ---------------------------------------------------------------------------------------- Page 13

Executive summary

This report is a case study on Airbnb. The company was founded in 2008 and follows

the model of “Software as a service”.

The first part of the report will include an analysis of the external environment with the

use of two different theories: PESTLE and porters five forces. Because of its strong use

of technology, the firm is often described as the world’s largest hotel without owning a

single piece of land.

The second part of the report is an analysis on the internal environment using the value

chain. The study will then take a look at the business and corporate strategies that

Airbnb followed and should follow to maintain and grow successfully. Finally, the ethical

and cultural issues will be discussed.

Introduction

In 2008, Airbnb was founded in California. It introduced a new kind of service for

travelers looking for short-term lodging and home owners looking to rent their place.

The company uses its online platform to connect the landlord and tenant. It’s a third

party that acts as a broker to make sure the deal goes well. The way the company

makes profits is by charging a commission on each deal, it does not make money by

owning land.

The company was founded by Brian Chesky and Joe Gebbia when they were college

students. Since then, it grew enormously to eventually operate in 191 countries and

threaten the accommodation industry with their unique business strategy.

What are the strategies that the firm used? Is there any ethical or leadership issues

within the company?

The report will first take a look at the external and internal environment of Airbnb. The

study will then focus on the business and corporate level strategies. Finally, any ethical

or leadership issues will be discussed.

The strategic analysis

Analysis of the external environment: PESTLE and 5 forces

Economic:
"Sharing
economy"

Enviromental: Social: Benefits

Greener than society
hotels Political:
Non
licensed
market

Technology:
Legal: Problems
Simpler way to
with Taxes and
find
renting laws
acccomodation

Technology enabled Airbnb to grow rapidly all over the world but it’s their principle of a

“sharing economy” that got the company to where it is now. According to Wired, Airbnb

would “usurp the intercontinental hotels group as the world’s largest hotel chain without

owning a single hotel”. The sharing system enables people to be on the supply and

demand side. This means that it also benefits society as landlords could now rent their
home or room for short-term periods in order to make a quick buck. Airbnb consumes

less energy and water compared to hotels per guest night and it produces less

greenhouse gas emissions (Airbnb, 2014).

The company faces political and legal issues in some countries more than others.

Airbnb still operates in a non-licensed market where it’s not clear what their position is in

this environment. It’s disruption on certain businesses has led to some political debates

around their future. Taxes and renting laws are still a nuisance for Airbnb. In 2017, EU

finance ministers ordered Airbnb to pay more taxes in France and Germany as they

we’re paying very little amounts because they were taking advantage of being a “Digital

platform”.

Threat of new entrants: Even if it’s an Threat of substitutes: There are different
online platform and any website could kinds of substitutes available but none of
pop-up. Airbnb is still safe as they them really offer the exact service that
already operate in 191 countries and it’s Airbnb has to offer. The principle of sharing
very hard for a new company to find the is still unique and most substitutes would be
funds needed to compete. traditional like couchsurfing or a hostel.

Bargaining power of suppliers: Low as it is

Bargaining power of buyers: Very low as Airbnb that controls the connection
there are no alternatives at the moment. between buyers and sellers.

Inter-firm rivalry: Low as Airbnb is still

unique in its genre.
Analysis of the internal environment: Value chain

Operations: It acts
as a 3rd party and Firm infrastructure:
Logistics: Airbnb is
provides a secure None stable, it’s an
available to
and easy way for online platform.
anyone who
wants to find and buyers and sellers
rent a home.

Service after sales: When the

Marketing and sales: service is done, home owners
Marketing is low but and tenants can report any
users are expanding issues with the Airbnb customer
rapidly. Sales are done service. However, the
by reserving, scheduling complaints are usually for
and paying a stay on the future reference and cannot be
website. resolved immediately. They are
marked as bad reviews.

Airbnb’s main strategy is differentiation. There is no other company

Technology
that has
development: Thea similar business. It offers a unique service that
company is primarly a
revolutionized
digital platform and it the accommodation industry. However, the company
focuses immensely on its
also offers low-cost accommodation for customers that needs it. It
technological
development in order to
improve its has lotswith
access of different places for many kinds of prices. This is
customers.
something that most hotels can’t offer. Usually, if a hotel is

expensive than most rooms will be expensive. Airbnb’s success

comes from this advantage of being different and also offering many
Analysis of the business level strategy

The blue ocean strategy

Before Airbnb, travelers had two options: Find classic lodging as Hotels or B&B or use

couch surfing platforms which had a bad reputation of only being used by college

students. Brian Chesky and Joe Gebbia saw an opportunity to position themselves in-

between those two options. If done well, they would offer a completely new

accommodation service for travelers. They did so without using any complicated

technology but rather by getting inspired of the new wave of social platforms and

“sharing economy” platforms.

Why is Airbnb following a blue ocean strategy? It’s because of their ability to enter an

uncontested market with virtually no real competitor and the ability to simultaneously

follow a differentiation and low-cost strategy. What differentiates Airbnb the most from

other accommodation services is that It owns no land and can provide high returns to its

customers. Buyers and sellers benefit enormously from their service. The company has

an enormous impact on society. It’s a third party that enables both customers (hosts

and renters) of their websites to benefit. The possibility of renting a house or room

quickly for a short-term period can enable invidividuals to pay loans or earn extra

income efficiently. This business model will empower customers and build a close

relationship between Airbnb and its users. The availability of their service in 191
countries and the ability to fix prices according to the location results in a constant

expansion of customers worldwide. The company takes advantage of the

new economic model of collaborative consumption which increases efficiency between

individuals. In major cities, hotels are threatened by the success of Airbnb’s strategy.
They don’t have the same pricing power that they used to have as they need to be able

to compete with this new service (Harvard business school, 2018). Hotels are not very

flexible with prices which poses an additional problem of not being able to catch up to

Airbnb. What also differentiates Airbnb from traditional accommodation is their ability to

be present anywhere in the world and follow their consumers anywhere they want to go.

Travellers will always feel close to Airbnb and the website will be their go to tool when

they want to travel.

Analysis of the corporate strategy

 Market development: The first goal for Airbnb is to expand to the middle-east and

far east. The founders also want Airbnb to expand into the luxury and business

trips market. The company is making it easier for firms to place their travelling

employees in rooms instead of hotels. Airbnb has partnerships with Hyundai and

Domino’s pizza and it’s looking to increase its partnerships (The economist,

2017). The firm bought a holiday rental site for $300M in order to enter the luxury

market and expand their portfolio of properties. Many of these rooms costs

thousands of dollars each night.

 Product development: Airbnb is looking to introduce new products like city tours

(The economist). It’s also working on hiring freelance photographers for their

website, which is another great way for their customers to gain income from their

service. The company is finding ways to enhance their software experience by

creating apps for different platforms (For example: An apple Iwatch app was

created). According to Joe Zadeh, the VP of the product management team, the

biggest challenge is to make the booking process really simple (Tech crunch,

2018). The introduction of instant bookings and the creation of apps has the goal

of simplifying the process.

Analysis of leadership, cultural and ethical issues

 People of color or with disabilities are more likely to be rejected by hosts. A black

woman claim that a landlord rejected her by saying that the apartment she

booked wasn’t available anymore only to discover that it appeared to be available

later on (CNN, 20116) However, Airbnb is currently working on these issues. In

2017, it bought the start-up “accomable” that focuses on travel listings that are

disabled friendly (Tech crunch, 2017)

 A law in New-York city states that it is illegal to rent for less than 30 days. Airbnb

still allowed their service and did not notify people looking to rent for less than the

period allowed (Forbes, 2017). However, it’s important to consider that the law is

outdated and did not take into account the internet.

 Airbnb received a lot of backlash from local communities all over the world. Some

local residents are not satistfied with the fact that new neighbors appear

constantly. Also, most of them are on vacation and looking to have fun which

creates an overcrowded area. In Barcelona, anti-tourist protests were made in

order to fight the impact of Airbnb on the housing market (The guardian, 2017)

 In 2017, Airbnb only paid $120,000 in French taxes. The company received a lot

of criticism from the minister of the economy in Germany and France as they pay

too little taxes. The French minister of the economy, Bruno Le Maire, announced
 that “These digital platforms make tens of millions of sales and the French

treasury gets a few tens of thousands” (The guardian, 2017). Indeed, many

digital platforms in Europe take advantage of a law that allows them to pay less

taxes if they are based In Ireland.

Conclusion

Airbnb created an uncontested market on the principle of a “sharing economy”. It

revolutionized the accommodation industry and shaped a new path for many

businesses. According to the Fox business network, it’s funding grew from $620,000

to $1B in 6 years. Forecasts estimate that Airbnb will eventually grow bigger than

large international hotels like Mariott and Hilton. Airbnb is currently available in 191

countries and still looking to expand. There is no other company that has a similar

business model. Airbnb should be a good shape in the years to come with the right

strategies in place.
References

Airbnb. 2018. About us. [ONLINE] Available at: https://press.atairbnb.com/about-us/.

[Accessed 21 March 2018].

Airbnb. 2018. A GREENER WAY TO TRAVEL: THE ENVIRONMENTAL IMPACTS

OF HOME SHARING. [ONLINE] Available
at: https://blog.atairbnb.com/environmental-impacts-of-home-sharing/. [Accessed 23
March 2018].

Forbes. 2016. Airbnb - Not Quite The Simple Sharing Economy Company. [ONLINE]
Available at: https://www.forbes.com/sites/chrisversace/2016/10/24/airbnb-not-quite-
the-simple-sharing-economy-company/#1819cd102b39. [Accessed 23 March 2018].

Fox Business. 2016. How Airbnb Became More Valuable Than Marriott & Hilton.
[ONLINE] Available at: https://www.foxbusiness.com/features/how-airbnb-became-
more-valuable-than-marriott-hilton. [Accessed 23 March 2018].

Harvard business school. 2018. The airbnb effect. [ONLINE] Available

at: https://hbswk.hbs.edu/item/the-airbnb-effect-cheaper-rooms-for-travelers-less-
revenue-for-hotels. [Accessed 21 March 2018].

Tech crunch. 2015. Airbnb’s Joe Zadeh Talks Product Direction And Keeping Things
Simple. [ONLINE] Available at: https://techcrunch.com/2015/09/17/airbnbs-joe-
zadeh-talks-product-direction-and-keeping-things-simple/. [Accessed 28 March
2018].

Tech crunch. 2017. Airbnb buys ‘Airbnb for disabled people’ startup Accomable in
accessibility upgrade. [ONLINE] Available
at: https://techcrunch.com/2017/11/16/airbnb-buys-accomable-a-specialist-in-travel-
listings-for-disabled-people/. [Accessed 23 March 2018].

The economist. 2017. Among private tech firms, Airbnb has pursued a distinct
strategy. [ONLINE] Available
at: https://www.economist.com/news/business/21722653-its-culture-cohesive-and-
its-finances-disciplined-among-private-tech-firms-airbnb-has. [Accessed 23 March
2018].
The guardian. 2017. Airbnb faces EU clampdown for not paying 'fair share' of tax.
[ONLINE] Available at: https://www.theguardian.com/business/2017/aug/10/airbnb-
faces-eu-clampdown-fair-share-tax. [Accessed 26 March 2018].

The independent. 2018. Airbnb: How the home-stay rental network will change 2018.
[ONLINE] Available at: https://www.independent.co.uk/travel/news-and-
advice/airbnb-changes-2018-how-upgraded-plus-properties-hotels-b-bs-
a8225046.html. [Accessed 21 March 2018].
Wired. 2018. Airbnb and Hotels: What to Do About the Sharing Economy?.
[ONLINE] Available at: https://www.wired.com/insights/2014/11/hotels-sharing-
economy/. [Accessed 21 March 2018].