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Airbnb Company: Leveraging the Sharing Economy Case Study

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Updated: Oct 2nd, 2020

What segments of customers did Airbnb serve? What is Airbnb’s positioning in the hospitality market?

The effectiveness of Airbnb’s strategy can be evaluated with the assistance of the served segments, as they tend to focus on the travelers and foreigners, who want to have a unique experience with the locals and affordable accommodation (Tranton 2016). In turn, visitors are free to select what price is affordable for them, as Airbnb tends to provide a vast variety of options while giving the apartments’ owners a possibility for additional income. Consequently, this unique segmentation strategy differentiates the company from its competitors.

Speaking of the positioning, the firm tends to unite the services of the individual service providers while using the concept of the hotel in one entity (Lane 2014). The company has a tendency to create a separate segment while offering reasonable pricing, an extended range of opportunities, and exceptional experience. This matter contributes to the rise of the market share of the organization while highlighting its unique features and differentiating the company from the competitors.

The firm utilizes effective advertising instruments to ensure the rapid spread of the information. In this case, the company used internet marketing, word of mouth, and participation in various events to encourage the information sharing about the existence of the service (Sundararajan 2016). This aspect is a vital attribute of the strategy’s effectiveness, as it creates the perception of the trusting organization due to the ability to highlight the vitality of customer’s preferences.

The initial goal of the company was to provide inexpensive services to increase the availability of the traveling for the individuals with low income (Lane 2014). Meanwhile, the company’s offerings tend to be cheaper than booking a regular room in the hotel. This price to quality ratio underlines the effectiveness of the firm’s strategy, as Airbnb tends to attract more customers than the competitors. Consequently, this matter can be regarded as one of the cultivators of the company’s growth.

As for the selling channels, the company is entirely internet-based with the user-friendly interface while displaying all the options associated with the search (Sundararajan 2016). The popularity of the internet is growing on the regular basis, and it is beneficial for the companies to utilize this approach for selling their services (Sundararajan 2016). Consequently, the utilization of its website and mobile applications allows the company to develop an association of the brand with the affordable living, exceptional experience, and the best service provider in the sphere while increasing effectiveness.

Identify and discuss the different factors in the concept of Airbnb as well as in its implementation that have supported this rapid growth?

The rapid growth of Airbnb in customer’s base is dependent on a variety of factors including the possibility to have an additional income for the accommodation owners, inexpensive options, unique experience, and external funding opportunities. Firstly, the company attracted many apartment owners by providing a safe environment for the individuals, who are seeking for the opportunity to share their accommodation with the visitors (Sundararajan 2016). This matter contributed to the quick growth of the customer’s base while extending the availability of options on the regular basis.

Another factor is the pricing strategy, as the firm was able to introduce an innovative pricing policy while being beneficial for the travelers with the different levels of income (Lane 2014). In this case, this matter contributes to the growth of the customer’s base due to the affordability of the options and extended coverage of the target groups. This aspect played a critical role in the company’s development while offering an opportunity for the individuals with the low level of income to pursue traveling and leading to the service’s popularity.

Simultaneously, staying with the locals allowed having a unique possibility for the cultural exchange, and this feature is exclusive due to its absence in the hotels. Meanwhile, Airbnb’s concept generates the sense of community, as the customers tend to share their experiences and portray the beneficial characteristics of the sellers (Lorentzen, Topso & Schoroder 2015).

Furthermore, the company ensures the safety of the operations while offering guarantees for the money return in case of emergency associated with the inability of the apartment owner to comply with the characteristics portrayed on the website (Sundararajan 2016). A combination of these critical features explains the popularity of Airbnb services, as the customers have quick access to the feedback and select the best options based on the opinions of other users.

Lastly, the external sources of funding have a substantial influence on the company’s rapid growth and continuous development, as the additional financial resources contribute to the expansion of the services and possibilities of the website (Parahoo 2016). In this case, this matter allowed having a significant investment in taking an advantage of the internet capabilities and contributed to the generation of the well-established service to attract customer’s attention. Nonetheless, a simultaneous application of the factors mentioned above has a positive impact on the company’s popularity, as it determines the matters, which form Airbnb’s distinct competitive advantage.

Using information from above case, appraise the approaches Airbnb used to finance its early startup phase as well as its later operations? Do you think this was an appropriate strategy?

The financing options were critical elements of the company’s success, as it has a tendency to provide additional resources for the functioning of the organization. In this case, the owners of the start-up decided to launch the substitute product lines to gather the financial sources for the website development (Parahoo 2016). Meanwhile, it could be said the participation in the business incubator allowed the users to utilize the acquired funding for the establishment of the company (Parahoo 2016). In the end, the sophisticated strategy led to the rapid growth of the firm while attracting the attention of the investors, who were highly interested in the development of the services.

As for the strategy’s appropriateness, it could be said that the effectiveness of the strategy cannot be underestimated as it has a substantial impact on the company’s development and expansion of the customer’s base. The introduction of the side product lines such as cereals had a beneficial influence on the advancement of the start-up foundation. Meanwhile, the participation of incubator led to the well-established managerial approach while attracting a substantial attention to the company’s functioning. Furthermore, the company should continue to utilize events as a promotional instrument to attract investors, as this matter forms a correlation with the company’s liquidity while generating an association with the trusting business.

Nonetheless, the firm should use its connection with the principles of the sharing economy as this matter is critical to the national development and welfare (Lane 2014). In this case, Airbnb should devote significant attention to the participation in various events, which allows promoting the nature of the company while emphasizing the potential social benefit for the region. This approach will contribute to the upsurge in the company’s liquidity while increasing the awareness of the potential investors.

In the end, the company has to utilize all of the matters mentioned above for the company’s funding. However, some of the aspects were critical for the company’s financial development at the initial stage. Currently, it remains apparent that the firm should devote significant attention to the participation in the events, which increase its global recognition and attract substantial investments. In this case, the organization should promote the necessity to expand the services in the recent future. For instance, Airbnb can present the possibility of the similar service related to car rental while depicting the advantageous nature of this matter to the overall economy.

Based on theoretical concepts you learnt in the course, what advice you have to offer to Maysoon. Is this a good idea? Should she go ahead? What are the risks?

Maysoon’s idea of establishing a new business concept while providing similar services as Airbnb in Gulf region could be considered as beneficial. It is apparent that the concepts support the principles of sharing economy highlighted in Airbnb strategy, as these services tend to be advantageous for the apartment owners while leading to the rise of the wealth of the region (Lane 2014). Consequently, Maysoon’s notion might attract the funding from the local investors and governmental entities leading to the rapid development of the business.

Meanwhile, the establishment of the local service of the accommodation’s provider might be cherished by the local population due to the ability to comply with the cultural differences via company’s interface and design (Boeing 2013). Based on the factors provided above, it could be concluded that Maysoon should consider the idea for the implementation, but it is vital to conduct a sufficient risk assessment before launching the start-up.

Nonetheless, the risks tend to exist, as the hospitality and tourism sector is the most competitive business segment in the country. The rising competition could be regarded as one of them, as the companies such as Airbnb focus on the expansion of their geographical coverage (Hahn 2015). Meanwhile, the popularity of Airbnb might lead to the establishment of the similar services in the region and the introduction of the adjustments to the changing industrial trends by the hotels and hostels. The firm has to consider the possibility to reach no significant response from the potential users due to the novelty of the service (Rao 2011).

Furthermore, the foreign travelers might prioritize the international nature of Airbnb since the complication might be associated with the understanding of the dissimilar interface adapted to Gulf countries.

Despite the beneficial environment for this business idea’s development, Maysoon should consider various factors before launching the project. The evaluation of the actions of the competitors will have a beneficial influence on the design of the marketing campaigns and pricing strategy (Rao 2011). In turn, the assessment of the customer’s preferences will help determine the adequacy of the demand for the service with the selected price (Rao 2011). Furthermore, the well-established system is required before launching to ensure the maintenance and sufficient flow of the services. In the end, a combination of these evaluations will have a critical impact on the strategy’s formation to minimize the influence of the risks on the overall performance.

Reference List

Boeing, M 2013, Analysis of cultural differences and their effects on marketing products in the United States of America and Germany, Anchor Academic Publishing, Hamburg.

Hahn, J 2015, Rapid internationalization of internet companies: how do success factors of “Born Globals” apply to internet companies, Hesterlung und Verlag, Nordestedt.

Lane, R 2014, You only have to be right once: the unprecedented rise of the instant tech billionaires, Penguin Group LLC, New York.

Lorentzen, A, Topso K & Schoroder, L 2015, Spatial dynamics in the experience economy, Routledge, London.

Parahoo, S 2016, Airbnb: leveraging a sharing company, case study.

Sundararajan, A 2016, The sharing economy: the end of employment and the rise of crowd-based capitalism, The MIT Press, Cambridge.

Rao, K 2011, Services marketing, Dorling Kingsley, New Delhi.

Tranton, P 2016, Airbnb: the basics and tips for beginners, Conceptual Kings, New York.

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