Executive Summary
People can be divided into two main groups: those, who like traveling, and those, who are not fond of traveling at all and prefer to stay at home. Traveling is a possibility for people to increase their level of knowledge, relax and have fun, or just change everything around for a while. Traveling is the passion that makes people think about possible changes, improvements, and chances that can be unavailable one day and become accessible another day.
Nowadays, there are many online companies that can offer their services in traveling regionally and globally. In this project, two different organizations will be analyzed and compared in terms of their business models, corporate governances, and other ideas they can offer to their customers.Expedia is a regional online travel company that makes a variety of travel services and products available to ordinary Arab consumers.
The company provides its customers with a chance to enjoy the peculiarities of the Arab world and combine the possibilities to find cheap flights, interesting tours, and unforgettable moments about the United Arab Emirates travels. Priceline is a global traveling company that offers its services online. This organization shows that online traveling can be safe even globally, and people can trust Priceline their dreams and expectations.
Being founded more than 15 years ago, Pricline.com was a pioneer in different fields that made online traveling attractive to many people. These two organizations develop the online travel industry and aim at providing people with high-quality services, care, and support. Expedia and Priceline take their own places in the chosen field, and the fact that one of them is a regional company, and another is a global organization does not change anything but prove that online traveling can be successful as regionally as well as globally.
Introduction
The online travel industry was originated in the 1970s when several American companies created SABRE and united several large travel agencies to help ordinary Americans choose travels they could like the most (Growth of the travel industry online n.d.). During the next decades, the field of online traveling was considerably improved. Nowadays, it is hard to identify an actual number of regional and global companies that can provide people with different travel services. In this case study, a comparison of a regional UAE company (Expedia) and a global organization (Priceline) will be developed to clarify if the size or other characteristics can influence the success of their work and recognition by the customers.
Online traveling may have different faces, and Expedia and Priceline perform the role of symbolic mirrors that can reflect the essence of online traveling in a variety of safe ways. Though both organizations were based in the USA, their growth and development made them available worldwide. Today, Expedia is a famous online travel company in such countries as the UAE, China, and America. Priceline is a part of a global online provider, the Priceline Group, that work in more than 200 countries under such brands as booking.com, priceline.com, KAYAK, etc. The Priceline Group is a powerful online travel organization that offers a number of opportunities for people with different incomes, and Expedia tries to stay one of the customer-centric companies that offer cheap flights and economic opportunities.
Expedia
Company Background
The history of Expedia is not too complicated or full of different, unpredictable events. In 1996, the idea to provide people with a possibility to research and book travels was offered by a small division of the Microsoft Company (History of the online travel industry pioneer 2015). From that period of time, a number of changes were implemented, and Expedia became a famous brand for many regional companies. Nowadays, Expedia is one of the well-known online travel companies in the United Arab Emirates.
The company introduces the UAE as one of the main crossroads of the Middle East and Western cultures (United Arab Emirates vacation 2016). The development of the company in the UAE was not as fast as it was planned. The company tried to launch a UAE version of the website for about three years (Bundhun 2011). The results of its penetration to the UAE’s online travel market remain to be unclear because the company offers a number of Arab tours and cruises without a website in Arabic. The company continues learning the Arab business and the peculiarities of the chosen region. The Middle East is one of the biggest tourism destinations and source markets (Bundhun 2011), and this regional company develops rather optimistic goals.
Performance
Expedia has already increased its market share up to 8% in the region. The main directions chosen by the company are the acquisition of small regional operators to optimize the existing resources and the development of the company as the core of the Arabic culture and the opportunities the UAE visitors can get. UAE Expedia will try to penetrate the key online travel markets and launch an office in the UAE during the next five years (Expedia: annual report 2014). The financial situation of the company is presented in Appendix 1.
Business Model
The success of the company depends on a properly chosen business model. The peculiar feature of the online travel agency (also known as OTA) industry is the possibility to use different business models that can be changed and improved during the implementation process regarding the peculiar features of the company. During a long period of time, Expedia used the merchant business model within the frames of which hotel rooms and services were offered to the company with a number of discounts so that the company could sell them at a markup price (Schmidt 2015).
The benefits of this business model are evident. Expedia makes the investments and earns a lot using the difference between discounts and markup prices. However, nowadays, the benefits of the agency business model could be found as well. There is the Expedia Traveler Preference Program with the help of which customers are free to decide what services are appropriate for them and what payment methods are convenient. Though this model is not as beneficial as the merchant one, it attracts the attention of many customers, and Expedia could enlarge its customer database considerably.
The Use of Technology
Regarding the fact that Expedia is a regional online company in the UAE, the use of technology is a crucial point for consideration. IT technologies serve a solid basis for the work of the chosen organization. The company can gather enough information about its potential customers, offer services online, and contact people from different parts of the world. The United Arab Emirates is the country that is known worldwide. Still, not all people can get direct access to it. Therefore, IT technologies can help to develop the connection between the Middle East and the world in a short period of time. The online travel market cannot exist without properly development technologies. Expedia uses the technological innovations to make its services available online via PCs and smartphones.
Corporate Governance
Expedia is one of the companies that underline the power of connection. It informs that every person is able to influence the sphere of online travel considerably by adding personal opinions and feedbacks. Corporate governance of the company is based on a number of standards every employee should follow. The Board of Directors has to “serve a prudent fiduciary for shareholders and to oversee the management of Company’s business” (Corporate governance 2015).
Therefore, the representatives of the company have developed the Code of Ethics where they promoted the ideas of honest and ethical conduct, respect for human rights, and even the interest conflicts that help to solve the situations when people cannot come to the same conclusions using their own attitudes and approaches to work.
Priceline
Company Background
The history of Priceline Company is interesting and educative indeed. Being one of the first online travel organizations, Priceline names itself as the king of the online travel market and continues offering new ideas and suggestions on how it is possible to improve the field and generate the most successful ideas. The success of the company was based on the service called “Name Your Own Price” and its successful implication in a short period of time.
This option attracted the attention of many people, who became able to make their own suggestions. Customers were not dependent on the prices set by the company. They enjoyed the possibility to participate in this activity, and the company raised its additional capital in a short period. At the end of the 1990s, Priceline made a decision to use the same strategy on selling different good and services. Still, the idea turned out to be unprofitable, and the company focused on travel services only. A new CEO offered to acquire small companies and operators in order to promote the business. Priceline turned into a solid group cooperating with such companies as Booking.com and Agoda.com available globally.
In addition to America, a number of European and Asian countries were involved in the travel business. The company offered different accommodations, airline tickets, and various vacation packages. Customers were eager to make reservations at the most appropriate for them time.
Performance
Using the information from the annual reports of the company, it is possible to find enough information about the performance of the company, its goals, and visions. Nowadays, Priceline is a well-known global online travel company that aims at providing people with a number of reservation services including hotels, hostels, apartments, airline tickets, car rentals, etc. The company helps people to learn the world and enjoy the opportunities available. At the same time, it becomes possible to “connect consumers wishing to make travel reservations with providers of travel services around the world” (The Priceline Group Inc. 2015).
In Appendix 2, the financial situation of the company is described. It helps to understand that the incomes of the company have been considerably improved during the last several years. It means that the performance of the company is high indeed, and the employees are able to complete their functions and provide customers with the services that are expected.
Business Model
Being a global leader in online travel services, Priceline Group develops its business model successfully. In fact, the offered model is based on the combination of two different models. On the one hand, there is the “Name Your Price” model that is a kind of merchant business model with the help of which Priceline can not only provide its consumers with choices but also sell space for different suppliers and gain profits.
On the other hand, there is the agency business model that also works for Priceline effectively. There are many Priceline consumers, who have already benefited from the existing price-disclosed business model. Besides, this model helps the company earn money from the commissions that occur on every transaction. In addition to the commissions earned from reservations of different services, the company gets transaction gross profit (The Priceline Group Inc. 2015). The company does not make expensive investments but uses its brand as a ticket for unknown hotels, hostels, restaurants, etc. to be used.
The Use of Technology
A clever use of technology is the key concept of Priceline. Recently, the company has started using the Direct Connect online platform with the help of which individual airline information can be available to the Priceline Group. Besides, it is expected that Priceline starts using technology in order to understand better the customers’ needs for innovations and improvements.
Corporate Governance
The Priceline Group is the organization with clearly defined corporate governance and the rules that should be followed by every member of a team. One of the main commissions of the company is to work with dignity, honesty, and respect. Besides, it is necessary to consider the law. There is also a specially developed Code of Business Conduct and Ethics that is usually applied to every worker include the members of the Board of Directors (Investor relations: corporate governance 2014).
Comparison of Expedia and Priceline
Essence of Iceberg Theory
The giant of psychoanalysis, Sigmund Freud, offered the theory with the help of which he created a model of a human mind with its level of consciousness and compared it with an iceberg with some issues being evident and clear and some issues remain to be unknown still influential in human behavior (Nevid 2011). In the picture below, it is possible to understand that there are so many things that people cannot gain an understanding of.
Almost the same situation can be observed in marketing and strategic management. Some groups of people like customers observe such companies as Expedia and Priceline on the conscious level and see only the smallest part of the organizations and what could happen there. The preconscious level is what can be understood by analytics and reporters, who try to consider the latest achievements of the companies and the results of their work.
Finally, there is an unconscious level that can be hardly understood by the majority of analytics and not understood by ordinary customers. Though companies under analysis may be free from such concepts as immoral urges, violent motives, and some shameless experiences, the same ideas may be interpreted in strategic management and considered as all those irrational wishes and selfish needs of companies to be used as the sources of inspiration and motives for work.
As a rule, employees and the representatives of the Board of Directors can spread the light on the conditions under which the organizations should work, develop values and goals, and complete their functions. The following views are described to comprehend the quality of the work offered by the two companies under analysis.
Top-Down Views
Expedia and Priceline are the regional and global leaders in the online travel industry. They have already succeeded in the establishment of strong and effective brand names and the development of good organizational structures and cultures. Both companies are good at evaluating their opportunities and skills in regards to their competitors. Still, the methods used by Priceline seem to be more effective as people know a lot about the Name Your Own Price strategy, and many regional companies still fail to accept the same model.
Inside Views: Vision and Growth
The inside views of both companies are similar as both of them want to stay the best representatives in the chosen sphere of business and continue impressing their customers with new options and opportunities. However, the achievements of Expedia are more noticeable in comparison to the achievements made by Priceline. The latter has already made considerable contributions to the industry and tries to stick to the already done work. The former has much work to be done to be a powerful regional online travel company in the UAE online travel market.
Bottom-Up Views
The business models developed by Name Expedia and Priceline seem to be similar as they are based on the merchant approach when companies gain profits from the commissions of the transactions of other companies. The success of Expedia depends on how successfully it can cope with the competitors such as Etihad. Though Expedia may be considered not only as a regional company in the UAE but also as a powerful global body, it should use the latest technologies and the most successful ideas to continue developing on the necessary level. It should consider its style and prove that the UAE online travel market has to be developed and improved. People should trust online companies and choose their trips regarding the ideas, opportunities, and affordable prices offered by Expedia.
As a globally recognized organization, Priceline can make various changes in its price policy. It may involve different investors and operators that would be honored to cooperate with the Priceline Group. However, such organization as Priceline should also pay more attention to the ideas developed by regional companies in order not to meet a new competitor in the face of a small regional company.
Conclusion
In general, the evaluation of such powerful online travel companies as Priceline and Expedia shows that both organizations have made considerable contributions to the travel industry. Each organization has its own rises and falls, strengths and weaknesses, threats and opportunities. Expedia is introduced as a regional leader, and the Priceline Group is a global leader. They show how the same merchant business model can be used in different ways and lead to rather different outcomes: Expedia starts focusing on the needs of its customers and establish low prices, and Priceline learns how to improve its price policy that can attract customers and underline the importance of quality of travel services that can be offered online.
References
Bundhun, R 2011, ‘Expedia to target UAE’s online travel market’, The National. Web.
Corporate governance. 2015. Web.
Expedia: annual report. 2014. Web.
Growth of the travel industry online n.d. Web.
History of the online travel industry pioneer. 2015. Web.
Investor relations: corporate governance. 2014. Web.
Nevid, JS 2011, Essentials of psychology: concepts and applications, Cengage Learning, Belmont, CA.
Schmidt, A 2015, ‘Expedia: a global heavy weight in the travel industry’, Market Realist. Web.
The Priceline Group Inc. 2015. Web.
United Arab Emirates vacation. 2016. Web.
Appendix 1
Appendix 2
