In 2014, a San Francisco-based home-sharing website, Airbnb was selected as one of the 36 Technology Pioneers of 2014 as a start-up company for deployment of new technologies, and offering solutions to long-standing problems. Recognizing Airbnb’s contribution to the sharing economy, the Technology Pioneers 2014 report cited, “The ‘sharing economy’ is another potentially revolutionary trend. The Internet is making it possible now for people to benefit from sharing their extra spare capacity. This trend is represented this year by Airbnb, which is transforming the travel sector by enabling people to rent out rooms in their homes, or even their entire properties.
In October 2007, during a major conference, all the hotels in San Francisco were fully booked, and the visitors were attending the conference were finding it difficult to find a place in a hotel. Brian and Joe, who are based designers, decided to take advantage of the situation and generate a little cash for themselves by turning their apartment into a bed and breakfast (b and b) small house. They rented out their extra space to three strangers who were attending the conference during the weekend. To their delight, they made more than US$1,000.
Airbnb is acting as a matchmaker between the hosts, who wanted to rent their space, and travelers who were looking for accommodation. The company’s Website acted as an online virtual marketplace, where hosts and guests could meet. It created a platform providing access to an unlimited number of apartments, or spare rooms within apartments, to the global market of travelers. Airbnb was helping customers and hosts to communicate, promoting an “environment where humanity exists in technology.” So, technology can play a major role in this process of matching people.
Airbnb’s revenue came from charging a small fee for every reservation processed through its Website, depending on the type of reservation and the price. Observers said that Airbnb had tried to keep the commissions low to discourage customers from shifting to offline transactions. Some analysts believed Airbnb’s lower prices had made it an attractive alternative to the traditional hotels.
The owners of the apartments (hosts) could list their offers through the Airbnb website. While listing any offer, certain details about the hosts’ space had to be filled in: room space, room type, apartment location, renting, prices, options, etc… On the other side, travelers can use the Web mobile application from their phones, or the Website from any computer, to check the availability and prices within a very attractive and dynamic Web page.
Businesses based on the sharing economy, like Airbnb, relied heavily on mutual trust between the hosts and the guests. While the hosts had to overcome their fear of renting their space to strangers, the guests also had to be ready to stay in places belonging to strangers. Although Airbnb received many positive stories, some hosts and guests shared their bad experiences. The economic impact of Airbnb could not be neglected, making approximately $7,000,000 as annual income.
The business value chain model.
List the primary and support activities highlighted by the value chain analysis. (5 pts)
If Airbnb wants to outsource their services, which of the value chain activities is concerned? Support your answer. (15 pts)
Porter’s competitive forces model.
List Porter’s competitive forces. (5 pts)
Which of these forces (threats), according to Porter’s model, are faced by Airbnb? Explain and use evidence from the case. (15 pts)
Information system strategies to deal with competitive forces.
List the information system strategies that a company may use to deal with the competitive forces. (5 pts)
What is the strategy used by Airbnb to deal with the competitive forces, and how can technology help? Explain and use evidence from the case. (15 pts)
Explain the current trends in a computer hardware platform that Airbnb are using in their business strategy. (20 pts)
Explain the current trends in the computer software platform that Airbnb are using in their business strategy. (20 pts)