• Comprehensive Written Analysis:
◦External Environmental Analysis
Use tools, concepts and information from your own research, perform an external analysis of the
An Industry Analysis
Priceline Group has a classification under CIK 7389 - Business Services, Not Elsewhere Classified, belongs to Business Services industry, in services sector.
According to UNWTO annual report (2014) the European share of the International tourism arrivals will display a weak growth, and the strongest growth will see Asia and Pacific (+4% to 5%). The largest International Tourism designations 2014 were:
- Europe - 584 million
- Asia & Pacific - 263 million
- Americas - 182 million
- Africa - 56 million
- Middle East - 50 million
In 2014 industry displayed growth at 4.4% and 48 million travelers more than in 2013 and projected the long-term annual growth of 3.8% during the period 2010 to 2020 (UNWTO, 2014).
The online travel industry is a part of Travel and Tourism industry displayed the positive upward movement over the period of time from 2009 till October 30 2015. The Dow Jones US Travel and Tourism Index (DJUSTT) rose from 46.6 in 2009 to 636.03 in October 2015 driven by the online travel companies such as Priceline, TripAdvisor, and Expedia and significantly declined after the terrorists' attacks to 361.47 on December 19 (Google Finance, 2016). Priceline Group receives 55% of its orders traffic from Europe is looking forward to the better times and to the return of tourists (Gillespie, 2016).
Priceline Group has more than 30 competitors but only two of them are large enough and targeting the European and the US market segments, they are Expedia and TripAdvisor, Inc. (Table 1).
The table 1 shows that Priceline Group main competitor is Expedia displayed 3 times higher net income growth. At the same time Priceline has been more sophisticated on its travel booking and successful at growing the margins and added 17 cents on every dollar as compared to 11 cents for Expeida (King, 2015).
Market Environment Analysis and External Market Analysis: PESTEL.
The PESTEL analysis reveals the main opportunities and threats, as they have the external character they can impact the strength and weakness of SWOT analysis:
Political: Wars as in Syria, waves of migrants and associated with it terroristic attracts – can make some destinations unprofitable.
Economic: The resonating brand and outstanding services can easily find the investors.
Social: The flagship brand which customers know worldwide could be more relevant and esteemed by providing the customer reviews.
Technologic: A technologic leg up to expend to the other geographies.
Still the prospects of competing Expedia are promising because a plenty of room to compete. According to Huston, still even by adding the business of Priceline and Expeida together they are occupying less than 10% of space with remaining opportunity after 90% of geographies (King, 2015).Legal: Issues related to cars rental, sexual assault, hygiene and sanitation, alcoholism or narcotics may provoke the lawsuits especially on the new destinations.
Environmental: Growing new geographic locations.
Priceline Group: EFE Matrix.
External Factor Evaluation (EFE) matrix is the tool to visualize and prioritize along the two pillars of the opportunities and threats. EFE matrix allows examining the PESTEL and competitive information in the intuitive way.
The company can take advantage of the existing opportunities by minimizing the external threats. The weighted score of 2.26 demonstrate the moderate effort of the company to address the external factors through the key indicators:
Acquisitions of the new knowledge to scale in the future: The indicator has the key weight because reliance on the knowledge only can erode the business because of lagging in an innovation process. Company should develop the unique culture and use the new ways of making the business.
International expansions (acquisitions): The high weight and rating because of globalization and the emerging new destinations.
International expansions (agreements):The company has a high rating because of setting agreements with fastest-growing online travel companies provides access to the new markets such as Brazil (acquisition of Hotel Urbano).
Priceline Group: The Competitive Profile Matrix (CPM).
The main competitors of Priceline operate in the similar industries but display the progress through the different factors. As the industry is displaying the similar competitive forces each company tries to find its own Niche. In most cases the weakness of one company is the strength of the other and early identification of the opportunity can help the weaker company to take the preventive measures and to continue with the more appropriate strategy.
Although Priceline displayed the above average score, still it is not leading through the several critical success factors:
Inimitable Culture: The strength of TripAdvisor vs Priceline is in Inimitable culture of the consumer reviews.
Technological Competence: An acquisition of the Orbitz by Expedia allows reaching the exceptional technological competence in the tickets booking and reaching clients abroad. Purchase stake in metasearch website Trivago permits reaching even higher technological advance.
Distribution channels: Acquisition of Travelocity provided technology platform for leadership in the US and Canadian markets. Expedia received the other distribution channel through acquisition of Wotif.com with activities in about 70 countries and the "alternative accommodation" company HomeAway.
Width of Destinations: Expedia established the offices in India to sale, market, and research and develop the local market.
Trends: Significant to the Industry and Company.
The Porter's five completive forces analysis is important to find the weakest place in the competitive forces. The weakest competitive force is the best place to apply the main effort of the company to grow. The five forces are:
- Bargaining Power of Suppliers – are the moderate power of the developers of the internet solutions and the new approaches to making business.
- Threat of New Entrants – moderate, higher in the US and Europe and lower internationally.
- Bargaining Power of Buyers – high because of the multiple alternatives.
- Threat of substitutes – high and comes from the traditional travel agents
- Industry Rivalry – high because of the multiple and powerful competitors.
According to the assessment the lowest forces can be bargaining power of suppliers and threat of new entrants. Porter has also distinguished between the low cost and the differentiation generic strategies. The company can differentiate the efforts by acquisitions of the developers and the new businesses to scale to the market (threat of substitutes) and challenging the new destinations (threat of new entrants).
• Priceline’s Strategy: Key Areas of Uncertainty Related to Trends or Events.
Business operation uncertainty of terrorism and environmental disasters has high impact/high immediacy because of high probability, within a timeframe from several months to several years, limited reaction time. Action needed – analyze in depth develop strategy.
Scenario Analysis: high impact and low immediacy.
◦Identify the company’s mission, vision and objectives;
• Provide a company background;
• Internal Environmental Analysis:
o Corporate Level Strategy
o Business Unit Level Strategy
o Functional Level Strategy
o Assess the company’s interactions with its stakeholders, the organizational structure, the
organizational culture, and communication/decision making among managers within human resources,
marketing production, operations, finance and accounting, R&D, and computer information systems,
which can be accomplished by viewing the company’s website, interviews, and surveys.
• Identify company strengths and weaknesses. What must the company do to perform successfully
in the industry?
• Construct an IFE Matrix for selected company;
• Perform a financial analysis for the last reported fiscal year:
o Use the company’s income statement and balance sheet and calculate key (emphasis added), but no
less than 10 key financial ratios to the business;
o Research the industry average financial ratios for the same ratios above and record in a second
o In the third column, indicate whether the company’s ratio is a strength, a weakness or a neutral
• Discuss what strategies would allow the company to capitalize on its major strengths;
• Discuss strategies that would allow the company to improve upon its major weaknesses.
Gillespie, P. (2016).Tourism stocks take a hit after Paris attacks. Retrieved from http://money.cnn.com/2015/11/16/investing/paris-attacks-travel-stocks/
Google Finance. (2016). Dow Jones U.S. Travel & Tourism Index. Retrieved from https://www.google.com/finance?cid=14338860
Hoovers. (2016). Cobrands. Retrieved from www.cobrands.hoovers.com
King, D., & Rice, K. (2015). Competing models define strategies of Priceline, Expedia for dominance. Travel Weekly, 74(8), 1-8.
UNWTO: World Tourism Organization. (2014). Annual Report 2014. World Retrieved from http://dtxtq4w60xqpw.cloudfront.net/sites/all/files/pdf/unwto_annual_report_2014.pdf