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Airbnb Business Model Development and Future Challenges Case Solution

Solution Id Length Case Author Case Publisher
2457 1430 Words (6 Pages) Sayan Chatterjee Ivey Publishing : W16782
This solution includes: A Word File A Word File

The case is about Airbnb which is an online marketplace that brings property listers and travelers together at a single platform. Founded in 2007 as a solution to the founder’s problem, Airbnb quickly rose to fame and got successful with more and more people coming on board. The hosts listed their properties on the platform since it provided them with an easy way to earn an income whereas travelers used the platform because they were able to find rooms at a cheaper price than hotels and with a chance to get a more local experience. As Airbnb grew, rose to fame, and expanded into different cities and countries, the business started to face challenges in the shape of legal regulations and increasing competition. Airbnb has a model that is easy to replicate thus it must come up with some measures if the company wants to maintain its competitive advantage.

Following questions are answered in this case study solution

  1. Apply the VRIO framework to determine core and distinctive competencies of AirBnB. What do you consider its sustainable competitive advantage?

  2. Explain Airbnb’s business model. Who are Airbnb's customers? What is Airbnb's Value Proposition?

  3. Use a Value Chain Analysis to assess the activities of Airbnb. Based on your assessment, what is Airbnb's competitive advantage and how does it maintain it?

  4. Assess Airbnb’s corporate culture and how it might affect its future growth with respect to its legal challenges and competitive threats?

Case Analysis for Airbnb Business Model Development and Future Challenges Case Solution

1. Apply the VRIO framework to determine core and distinctive competencies of Airbnb. What do you consider its sustainable competitive advantage?

Airbnb has a strong position in the market due to the business having a first mover advantage. The business has been able to establish a strong relationship with all its stakeholders which has resulted in a strong and good brand reputation, recognition, brand image, and brand loyalty for Airbnb. This strong position of Airbnb is particularly valuable for the company as it provides further growth opportunities. It is also difficult for competitors to imitate this kind of strong brand loyalty and brand reputation as it would require years of hard work and investment in the business. 

Another core competency of Airbnb is the business’s ability to provide exceptional customer service. Airbnb with its superior, reliable, and personalized services has been able to gain the trust of customers which is evident by its huge user base as well as extensive listings. Achieving this type of network is extremely valuable, rare, and difficult to imitate as it takes years to develop such a user/client base.

Over the years, Airbnb has been able to get large amounts of funding as well as has earned huge revenues which has led to the business having a solid financial muscle. Thus, the company has enough financial resources to continuously grow and expand its business which is again a valuable resource for the Airbnb.

Airbnb’s technological resources are another source of competitive advantage for the firm since these resources provide the firm’s users with an easy to use platform that enables them to list their properties or get one through three clicks. The platform itself is very valuable for Airbnb however it is not rare or inimitable. 

All of these competencies provide Airbnb a sustainable competitive advantage of a trustable, well-reputed company with a huge financial muscle that provides an easy to use platform with extensive listings.

2. Explain Airbnb’s business model. Who are Airbnb's customers? What is Airbnb's Value Proposition?

Airbnb is an online marketplace that connects people who own property and want to rent it out to earn money with people/travelers looking for a place to stay. The reason why the company has been so successful is that it allows hosts to earn extra income and at the same time Airbnb provides travelers with cheaper accommodation options than hotels. Travelers also get the chance to interact more with local people. The business model of Airbnb is such that the firm earns through commission it charges from property owners and hosts on each of their property bookings as well as through the transaction fee that is paid by travelers on each of their confirmed bookings.

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