By March 2015, the online travel agency industry had consolidated around two lea
ID: 397558 • Letter: B
Question
By March 2015, the online travel agency industry had consolidated around two leaders: Expedia (which had acquired Travelocity, Lastminute.com, and orbitz) and Priceline (which owned booking.com, Kayak and OpenTable). These two market leaders competed with numerous smaller online travel agents (e.g, TripAdvisor, Travelzoo), with traditional travel agencies (e.g, Carlson Wagonlit, TUl, American Express-all of which had adopted a "bricks 'n' clicks" business model), and with direct online sales by airlines, hotel chains, and car rental companies. Amazon and Google were both viewed as likely entrants to the market. The online travel agents are dependent upon computerized airline reservation systems such as Sabre, Amadeus, and Travelport. Use Porter's five forces framework to predict the likely profitability of the online travel agency industry over the next ten years.Explanation / Answer
Porter's five forces analysis is a very useful methodology to analyse the external environment effect on any organisation or industry. By applying the external five forces we can easily determine the after effects of those forces on the specific organisation.
Five forces of porter's analysis for online travel agency industry is as follows.
Competition rivalry
As this travel industry is highly volatile in terms of operating environment, level of competition is definitely increasing the availability of better pricing as well as new approaches of attracting the customers is being used by many of the competitors in the specific marketing environment. Biggest brands in the specific industry such as Expedia and Priceline are directly affect the overall industry by implementation of new plants and acquiring smaller competitors. This type of approach is increasing the level of effect of diesel specific companies in the industry.
Supplier Bargaining
Supply bargaining in this industry is a relatively less as many of the hotels as well as ticket booking companies directly depend on these companies together most of the revenue. Buy successfully altering the overall pricing segments and earning use benefits from different travel and hotel industry, online travel agency industry has a dominated the bargaining part with supplier has a little availability of obtaining better revenue from the specific websites providing reservation capabilities to the hotel as well as other industries related to tourism and travel..
Customer bargaining
Due to the availability of extreme options, power of customer bargaining is definitely relatively very high. As customer always have an option to shift to other service provider for getting better offers and pricing, retaining the customer dedicated to the specific service requires different approaches increasing the power of customer bargaining.
Threat of new entrants
As Amazon and Google are not showing interest in entering this type of industry, there is no such big brand available for showing their operation capabilities to compete with Expedia and Priceline. This is specific type of marketing environment removes the threat of new entrants and imposes very less risk in term of new entry of any specific big company in Operation.
Substitute threats
Substitution Threats are also relatively low as availability of market capture is already done by big organisations. Expedia and Priceline are holding more than 50% of the online travel agency industry. If any new substitute arises then this is specific companies are very well known for purchasing a specific business and merging them with them to maintain better standard of revenue generation from the similar market.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.