Airbnb: Business Model Development and Future Challenges SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Airbnb: Business Model Development and Future Challenges
In 2007, the founders of Airbnb were looking to solve a problem and ended up transforming their idea into a $10 billion company. What started as a quick website to advertise an overnight stay on their apartment airbeds along with breakfast in the morning eventually grew into an online accommodation booking business that spanned the world. Airbnb used its business model to carve out an extremely important space in an already crowded industry. However, along with success came challenges in terms of the scalability of its business model. In 2014, Airbnb was also facing legal challenges by state attorneys general that could make its business model suspect. The founders had to decide whether to defend their business model in a court of law and in the court of public opinion, or change it. Sayan Chatterjee is affiliated with Case Western Reserve University.
Swot Analysis of "Airbnb: Business Model Development and Future Challenges" written by Sayan Chatterjee includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Airbnb Model facing as an external strategic factors. Some of the topics covered in Airbnb: Business Model Development and Future Challenges case study are - Strategic Management Strategies, Networking and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Airbnb: Business Model Development and Future Challenges casestudy better are - – increasing transportation and logistics costs, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, increasing government debt because of Covid-19 spendings, wage bills are increasing, there is increasing trade war between United States & China,
cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Airbnb: Business Model Development and Future Challenges
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Airbnb: Business Model Development and Future Challenges case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Airbnb Model, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Airbnb Model operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Airbnb: Business Model Development and Future Challenges can be done for the following purposes –
1. Strategic planning using facts provided in Airbnb: Business Model Development and Future Challenges case study
2. Improving business portfolio management of Airbnb Model
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Airbnb Model
Strengths Airbnb: Business Model Development and Future Challenges | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Airbnb Model in Airbnb: Business Model Development and Future Challenges Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Airbnb Model in the sector have low bargaining power. Airbnb: Business Model Development and Future Challenges has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Airbnb Model to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Leadership & Managing People field
– Airbnb Model is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Airbnb Model in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Airbnb Model is present in almost all the verticals within the industry. This has provided firm in Airbnb: Business Model Development and Future Challenges case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Training and development
– Airbnb Model has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Airbnb: Business Model Development and Future Challenges Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Successful track record of launching new products
– Airbnb Model has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Airbnb Model has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Analytics focus
– Airbnb Model is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Sayan Chatterjee can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Learning organization
- Airbnb Model is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Airbnb Model is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Airbnb: Business Model Development and Future Challenges Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Airbnb Model has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to recruit top talent
– Airbnb Model is one of the leading recruiters in the industry. Managers in the Airbnb: Business Model Development and Future Challenges are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Leadership & Managing People industry
– Airbnb: Business Model Development and Future Challenges firm has clearly differentiated products in the market place. This has enabled Airbnb Model to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Airbnb Model to invest into research and development (R&D) and innovation.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Airbnb Model digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Airbnb Model has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Highly skilled collaborators
– Airbnb Model has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Airbnb: Business Model Development and Future Challenges HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Airbnb: Business Model Development and Future Challenges | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Airbnb: Business Model Development and Future Challenges are -
High bargaining power of channel partners
– Because of the regulatory requirements, Sayan Chatterjee suggests that, Airbnb Model is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Slow decision making process
– As mentioned earlier in the report, Airbnb Model has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Airbnb Model even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Need for greater diversity
– Airbnb Model has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Low market penetration in new markets
– Outside its home market of Airbnb Model, firm in the HBR case study Airbnb: Business Model Development and Future Challenges needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Airbnb: Business Model Development and Future Challenges HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Airbnb Model has relatively successful track record of launching new products.
Skills based hiring
– The stress on hiring functional specialists at Airbnb Model has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High cash cycle compare to competitors
Airbnb Model has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Airbnb: Business Model Development and Future Challenges, in the dynamic environment Airbnb Model has struggled to respond to the nimble upstart competition. Airbnb Model has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Airbnb Model has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
No frontier risks strategy
– After analyzing the HBR case study Airbnb: Business Model Development and Future Challenges, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Products dominated business model
– Even though Airbnb Model has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Airbnb: Business Model Development and Future Challenges should strive to include more intangible value offerings along with its core products and services.
Opportunities Airbnb: Business Model Development and Future Challenges | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Airbnb: Business Model Development and Future Challenges are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Airbnb Model to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Airbnb Model to hire the very best people irrespective of their geographical location.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Airbnb Model can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Airbnb Model can use these opportunities to build new business models that can help the communities that Airbnb Model operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Using analytics as competitive advantage
– Airbnb Model has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Airbnb: Business Model Development and Future Challenges - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Airbnb Model to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Airbnb Model to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Airbnb Model is facing challenges because of the dominance of functional experts in the organization. Airbnb: Business Model Development and Future Challenges case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Airbnb Model in the consumer business. Now Airbnb Model can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Airbnb Model can develop new processes and procedures in Leadership & Managing People industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Building a culture of innovation
– managers at Airbnb Model can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Leadership & Managing People segment.
Leveraging digital technologies
– Airbnb Model can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Manufacturing automation
– Airbnb Model can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Airbnb Model can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Airbnb: Business Model Development and Future Challenges, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Airbnb Model can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Airbnb: Business Model Development and Future Challenges External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Airbnb: Business Model Development and Future Challenges are -
Technology acceleration in Forth Industrial Revolution
– Airbnb Model has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Airbnb Model needs to keep up with the evolution of technology in the Leadership & Managing People sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Airbnb Model business can come under increasing regulations regarding data privacy, data security, etc.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Airbnb Model.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Airbnb Model in the Leadership & Managing People industry. The Leadership & Managing People industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Airbnb: Business Model Development and Future Challenges, Airbnb Model may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Airbnb Model can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Airbnb Model with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Shortening product life cycle
– it is one of the major threat that Airbnb Model is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Airbnb Model high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Environmental challenges
– Airbnb Model needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Airbnb Model can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
Regulatory challenges
– Airbnb Model needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Leadership & Managing People industry regulations.
Increasing wage structure of Airbnb Model
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Airbnb Model.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Weighted SWOT Analysis of Airbnb: Business Model Development and Future Challenges Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Airbnb: Business Model Development and Future Challenges needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Airbnb: Business Model Development and Future Challenges is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Airbnb: Business Model Development and Future Challenges is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Airbnb: Business Model Development and Future Challenges is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Airbnb Model needs to make to build a sustainable competitive advantage.
