Week 2 Industry Analysis

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Webster University *

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5030

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Business

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Feb 20, 2024

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docx

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Week 2: Industry Analysis Webster University – MBA 5030 1. What area(s) of the  general  external business environment do you believe changed in order to provide an opportunity for a company like AirBnB to form. Is there a changing area of the general environment that you believe will be a threat to their business model in the future? The increase in travelling for work, conferences, seminars, etc. has provided an opportunity for AirBnB to form due to hotels being booked out and lodging being in high demand for other reasons such as vacations and other trips as well. Business people or families were having difficulty booking rooms at hotels for major events or trips and needed an alternative option, thus, AirBnB was formed. The hospitality/short stay vacation industry was having a difficult time keeping up with demand, especially during major events or in popular cities. A potential threat to AirBnB’s business model could be a people pulling their homes or rooms off AirBnB and offering it up on other various lodging websites that may have less of a service fee or listing fee for using them to list that room or home for rent. There could also be a decrease in demand for travel or accommodation needs due to many companies and businesses utilizing Zoom, Skype, or other virtual webinars/meetings in lieu of in-person seminars, conferences, or meetings. 2. If we consider AirBnB to be a new entrant into the hospitality/short stay vacation industry. According to Porter’s Five Forces, how attractive is this industry (remember attractiveness is determined by more or less of the Five Forces in total)? What might be particularly difficult for a new startup? The hospitality/short stay vacation industry has strong competitive forces overall and appears to be an unattractive industry. The buyer power is high due to buyers being able to pick and choose if they’d prefer to stay in a hotel or AirBnB, and AirBnB relies on buyers to rent from them to generate revenue. AirBnB offers a variety of housing options to consumers, and
regardless of which AirBnB customers choose to stay in, AirBnB still makes a profit from their stay. The supplier power is low due to an abundance of people listing their homes or rooms on AirBnB leading to a lack of negotiating power amongst suppliers to challenge the fees and rates that AirBnB charges to list their home/rooms. The threat of substitutes is high due to a variety of alternative accommodations that are available through hotels, motels, staying with family members, or using other peer-to-peer short stay accommodations. The industry rivalry is high as well due to there being multiple peer-to-peer short stay vacation accommodations that offer similar experiences and pricing. In addition to these other peer-to-peer accommodations, there’s also internal rivalry amongst hotels and motels as well. The threat of new entrants into this industry is moderate due to the low amount of capital required to start a peer-to-peer home sharing opportunity but high amount of competition in the industry already. It may be difficult for a new startup to gain enough popularity that people choose their platform versus other well- known platforms like AirBnB or VRBO or booking directly through a hotel or motel. It can also be difficult to get hosts to want to post their homes or rooms or accommodations on a newer startup when others are already well-established. 3. AirBnB created a new business model focused on peer-to-peer short stay exchanges. They faced difficulty in progressing from the startup to the growth phase. How did AirBnB finally overcome entry barriers and experience explosive growth? In the podcast episode about AirBnB on “How I built this”, Joe Gebbia explains different endeavors he had to take to help him pay his rent and other bills. He explains how the concept of AirBnB came up and the various routes him and his friends had to take to overcome the entry barriers into this industry. They utilized credit cards to fund their costs until they could get investors to invest. To help pay off their credit cards, they made customized cereal boxes that they sold at elevated costs. With this ingenuity they were able to secure funding and a spot into a
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