Table of Contents
Expedia, Inc. Overview ………………………………………………………………Page 3
Strategic History of the Organization ………………………………………Page 3
Mission Statement and Strategic Vision of Expedia, Inc. ………………………Page 4
Current Business Level Strategy ………………………………………………Page 5
Five-Forces Analysis of Online Travel Industry ………………………………Page 5
Driving Forces of Online Travel Industry ………………………………………Page 11
Functional Analysis ………………………………………………………………Page 16
Current Ratio ………………………………………………………………………Page 20
Quick Ratio ………………………………………………………………………Page 21
Asset Management Ratios
The Days Sales Outstanding (DSO) Ratio ………………………………………Page 22
Total Asset Turnover ………………………………………………………………Page 23
Debt Management Ratios
Debt to Assets Ratio ………………………………………………………………Page 24
Debt to Equity Ratio ………………………………………………………………Page 24
Return on Total Assets (ROA) …………………………………………….. Page 25
Return on Common Equity (ROE) …………………………………………….. Page 26
Net Profit Margin ………………………………………………………………Page 26
Market Value Ratios
Price/Earnings (P/E) Ratio ………………………………………………………Page 27
Price/Cash Flow Ratio ………………………………………………………Page 28
Organizational Structure and Culture ………………………………………………Page 29
Core Competencies ………………………………………………………………………Page 31
Distinctive Competencies ………………………………………………………………Page 32
SWOT Analysis and TOWS Matrix
Strengths ………………………………………………………………………Page 33
Weaknesses ………………………………………………………………………Page 35
Opportunities ………………………………………………………………………Page 36
Threats ……….………………………………………………………………Page 36
TOWS Matrix ………………………………………………………………Page 37
KSI #1 and Alternatives ………………………………………………………Page 39
KSI #2 and Alternatives ………………………………………………………Page 40
KSI #3 and Alternatives ………………………………………………………Page 42 Action Plan for Year 1: 2009 ………………………………………………………Page 43
References …………………………………………………………….………………..Page 46
Expedia, Inc. Overview
According to Hoovers, Expedia is the current market leader in online travel services compared to its rivals Priceline, Orbitz, and Travelocity (Hoovers, 2008). This online travel service allows its customers to book online airplane tickets, hotel reservations, cruises, car rentals, and customized vacation packages. In addition, Expedia offers news, maps, and other travel-associated content with its portfolio of brands including Hotels.com, Hotwire, TripAdvisor, eLong, and Classic Vacations.
As Expedia grew, the company decided to expand itself using a growth strategy that focused on international expansion. This was evident in 2006, when Expedia launched its new website for one of the worlds’ major traveling markets, Japan. Altogether, Expedia’s international brands include: eLong, Expedia Australia, Expedia Canada, Expedia France, Expedia Germany Expedia Italy, Expedia Japan, Expedia Netherlands, Expedia United Kingdom, and Hotels.com for global sites while Expedia’s domestic brands include Classic Vacations, Expedia.com, Expedia Corporate Travel, Hotels.com, Hotwire.com, and TripAdvisor (Expedia, Inc., 2008). Expedia, Inc. also operates in more than 50 global points of sale with destination sites in South and North America, Latin America, Europe, the Middle East, Africa, and Asia Pacific (Expedia, Inc., 2008). Interestingly, Expedia generates its money by charging transaction fees, or by purchasing travel inventory directly from the travel provider at discounted prices then charging customer’s premiums in addition to the original fee (Wikinvest, 2008).
Strategic History of the Organization
Expedia was founded in 1995, when the Microsoft Corporation decided to launch a new online travel service, but did not make its introduction to the Internet until 1996 (Expedia, Inc. 2008). In 1996, Expedia was still connected to the Microsoft Network, MSN (Expedia, Inc., 2006). Microsoft took initiative and provided financially for the start-up of this new company. In 1998, Expedia started to operate within the United Kingdom as well as investing heavily in technology to offer advanced search capabilities and other services to its customers. In 1999, Microsoft decided to spin of Expedia into its own publicly traded company, but kept a majority of Expedia’s shares for itself. In 2001, USA Networks, Inc. decided to acquire Expedia from the Microsoft Corporation and spent approximately $1.5 billion for its possession. In 2002, USA Networks, Inc. changed its brand name to USA Interactive, Inc. Then in 2003, USA Interactive, Inc. renamed itself as USA Interactive and then acquired the remaining shares of Expedia for approximately $3.3 billion (Expedia, Inc., 2006). During this time, the company began to grow its domestic and international travel portfolios with various companies. Additionally, Expedia prides itself in serving its customers with the best services and resources possible regarding travel for business or pleasure and continues to strive for this mission. Currently, Barry Diller serves as chairman and senior executive of Expedia, Inc., while Dara Khosrowshahi serves as CEO and president (Expedia, Inc., 2008). Both individuals continue to make efforts to make the best out of online travel experience for their Expedia customers (Expedia, Inc., 2008).
The following is the mission statement for Expedia, Inc.:
“To get the world going by building the world’s largest and most intelligent travel marketplace” (Expedia, Inc., 2008).
The following is the strategic vision for Expedia, Inc.: “Expedia, Inc. is looking toward its next decade by continuing to innovate how travelers plan, purchase and share their travel experiences. We’re continuing to enhance our sites and travel booking tools and features while building our brands and travel offerings globally” (Expedia, Inc., 2008).
Current Business Level Strategy
Expedia plans to continue to meet the demands of its consumers and the current and future trends of society. The company plans to continue to be innovative with its technology and services it provides to travelers worldwide. Lastly, the company plans to gain a competitive edge over its competitors by understanding how travelers plan as well as buy and arrange travel tickets and packages. Expedia hopes to keep improving its websites and travel booking tools making these even more accessible to consumers while also improving brand image and travel contributions worldwide (Expedia, Inc., 2008).
Five-Forces Analysis of Online Travel Agencies
According to Thompson, Strickland, & Gamble, 2008, there are five critical competitive forces that operate and vary from industry to industry within the overall market. These five competitive forces that industry members face include: (1) rivalry among competing sellers, (2) buyers, (3) potential new entrants, (4) suppliers of raw materials, parts, components, or other resource inputs, and (5) firms in other industries offering substitute products. The following chart is a model for substitutes, rivalries, buyers, new entrants, and suppliers in the online travel industry.
Five-Forces Model for Online Travel Agencies
|Hotel suppliers||Orbitz Worldwide, Inc.||Leisure travelers|
|Car rentals||Travelocity.com Inc.||Travel agents|
|Call and book travel agents|
The following charts will analyze all five competitive forces and the level of strength each force endures regarding the online travel industry. High, medium, and low levels were assigned to each category based on subjective views by the group after researching and analyzing information available on Expedia, Inc. and examining the theories provided by Thompson et al.
|Rivalry among Competing Sellers||Force|
|Rivalry intensifies when competing sellers are active in launching fresh actions to boost their market standing and business performance||High|
|Rivalry intensifies as the number of competitors increases and as competitors become more equal in size and capability.||High|
|Rivalry is usually stronger in slow-growing markets and weaker in fast-growing markets.||Med|
|Rivalry is usually weaker in industries comprised of so many rivals that the impact of any one company’s actions is spread thin across all industry members; likewise, it is often weak when there are fewer than five competitors.||Med|
|Rivalry increases when buyer demand falls off and sellers find themselves with excess capacity and/or inventory.||Low|
|Rivalry increases as it becomes less costly for buyers to switch brands.||High|
|Rivalry increases as the products of rival sellers become more standardized and diminishes as the products of industry rivals become more strongly differentiated.||High|
|Rivalry is more intense when industry conditions tempt competitors to use price cuts or other competitive weapons to boost unit volume.||High|
|Rivalry increases when one or more competitors become dissatisfied with their market position and launch moves to bolster their standing at the expense of rivals.||Med|
|Rivalry becomes more volatile and unpredictable as the diversity of competitors increases in terms of visions, strategic intents, objectives, strategies, resources, and countries of origin.||Med|
|Rivalry increases when strong companies outside the industry acquire weak firms in the industry and launch aggressive, well-funded moves to transform their newly acquired competitors into major market contenders.||Low|
|A powerful, successful competitive strategy employed by one company greatly intensifies the competitive pressures on its rivals to develop effective strategic responses or be relegated to also-ran status.||Low|
There are approximately four prominent competing online travel agency firms known as Orbitz Worldwide, Inc., Priceline.com Inc., Travelocity.com, and Expedia.com Inc. (Yahoo! Finance, 2008). Each firm in the industry attempts to increase their market presences using business models to catch the eyes of consumers, such as pricing, packaging, guarantees, and extra services (Rogow, 2007). For example, active launching of fresh products is high as competitors strive to differentiate their products and brands from those of rivals in order to remain independent (Rogow, 2007). An example of product differentiation in the online travel industry is making the online process more efficient with mobile devices, such as PDAs and Blackberrys for on-the-go travelers (Rogow, 2007). Other firms may also include weather forecasts to intended destinations for their customers traveling agendas (Rogow, 2007). Furthermore, as the market for online travel continues to grow, acquisitions between certain firms in the industry continue to make certain firms even larger in the competitive arena attempting to gain more market share (Rogow, 2007). Overall, since the business model strategies being used by these competing online travel agencies are relatively easy to duplicate, competition within the industry is strong.
|Potential New Entrants||Force|
|The presence of sizable economies of scale in production or other areas of operation.||High|
|Cost and resource disadvantages not related to scale of operation.||Low|
|Strong brand preferences and high degrees of customer loyalty.||Low|
|High capital requirements.||Med|
|The difficulties of building a network of distributors or retailers and securing adequate space on retailers’ shelves.||Med|
|Restrictive regulatory policies.||Low|
|Tariffs and international trade restrictions.||Low|
|The ability and inclination of industry incumbents to launch vigorous initiatives to block a newcomer’s successful entry.||High|
Potential new entrants that try to compete in the online travel industry must compete with large size firms that have acquired additional sources to compete (Rogow, 2007). Therefore, new entrants into the market would be direct sellers, metasearch engines, call and travel book agents, and call centers. We currently live in an era that is technology-based. Many customers conduct their research online from multiple sources. New entrants could include physical call centers for those who prefer to talk to an actual person instead of doing the research themselves, or have fears of potential threats from the Internet, such as credit card fraud or identity theft (Rogow, 2007).
New entrants will have to enter paying higher costs to compete in this industry or accept cost disadvantage and lower profitability. Customer loyalty does not seem to be a factor in the online travel industry since customers seem to be price-sensitive and will search for the best price available (Rogow, 2007). This does make it easier for incumbent companies to enter the industry. Lastly, the online travel agent industry uses a global distribution system (GDS) to check real-time flight schedules, pricing, and other factors when traveling. Many of the four main competitors have already acquired current GDS companies, or have made strategic alliances with several GDS companies making it even more difficult for new entrants to succeed (Rogow, 2007).
|Firms in Other Industries Offering Substitute Products||Force|
|Whether substitutes are readily available and attractively priced.||High|
|Whether buyers view the substitutes as being comparable or better in terms of quality, performance, and other relevant attributes.||High|
|Whether the costs that buyers incur in switching to the substitutes are high or low.||High|
Substitutes for online travel agent firms include direct sellers and metasearch engines. Direct sellers include the actual airlines, hotels, car rental facilities, etc. Customers have the opportunity to call, or visit the webpage of the actual location for an intended destination, or can use an online travel agent to find the lowest fares possible for them. Customers also have the choice to use metasearch engines that use multiple databases and other search engines to generate a list of choices that is easier than going to each search engine individually and trying to understand the results. In addition, online travel agencies try to lure customers away from booking trips with actual hotels, car rentals, and airlines by offering certain guarantees or packages if purchased from an online travel agency instead of the company itself (Rogow, 2007).
|If buyers’ costs of switching to competing brands or substitutes are relatively low.||High|
|If the number of buyers is small or if a customer is particularly important to a seller.||Low|
|If buyer demand is weak and sellers are scrambling to secure additional sales of their products.||Low|
|If buyers are well informed about sellers’ products, prices, and costs.||High|
|If buyers pose a credible threat of integrating backward into the business of sellers.||Low|
|If buyers have discretion in whether and when they purchase the product.||High|
Currently, there are two types of buyers for online travel purchases: primary and secondary. Primary buyers consist of actual travel agent firms that use GDS to pull information from various hotels, car rentals, and airlines and make the information available to customers. Secondary buyers consist of corporate and leisure travelers. Pull factors are evident with the abundant amount of information and services available to customers regarding different carriers and low price fares (New Media Age, 2007). In addition, certain push factors that are present with online travel agencies are insufficient information about other competing firms unless otherwise researched by the consumer and price sensitivity (New Media Age, 2007). Overall, online travel agencies use GDS to find open reservations that are then transferred to the use of consumers for both leisure and corporate travel.
|Suppliers of raw materials, parts, components, or other resource inputs||Force|
|Whether the item being supplied is a commodity that is readily available from many suppliers at the going market price.||High|
|Whether a few large suppliers are the primary sources of a particular item.||Low|
|Whether it is difficult or costly for industry members to switch their purchases from one supplier to another or to switch to attractive substitute inputs.||Med|
|Whether certain suppliers provide a differentiated input that enhances the performance or quality of the industry’s product.||Med|
|Whether certain suppliers provide equipment or services that deliver valuable cost-saving efficiencies to industry members in operating their production processes.||Med|
|Whether suppliers provide an item that accounts for a sizable fraction of the costs of the industry’s product.||Low|
|Whether industry members are major customers of suppliers.||High|
|Whether it makes good economic sense for industry members to integrate backward and self-manufacture items they have been buying from suppliers.||High|
There are approximately six types of suppliers the online travel industry utilizes including: hotel, airline, car rental, destination services, travel agencies, and cruise lines. For example, when a hotel has a vacancy, it will show up on the GDS, which will then become available to the online travel agents with consumers following soon after. Upon using a specific online agency, results will be generated for consumers regarding location, date, price, time, etc. Overall, there is no physical component supplied to online travel agents. Information is pulled through various technology systems and is redirected to customers looking for travel savings.
Driving Forces of the Online Travel Industry
The following analysis will now focus on five of the driving forces concerning the online travel industry.
Emerging New Internet Capabilities and Applications
With the driving force of emerging new Internet capabilities and applications, online reservation systems and hotel websites for the travel industry are on the rise. According to comScore, in January 2008, there were more than $824.4 million Internet users worldwide (European Travel Commission, 2008). In addition, The European Travel Commission reported that “Internet users have increased by 265.6% from eight years ago” (2008, pg. 1). Because of this, the online travel industry will more than double its revenues in the next three years, “from $38 billion last year to more than $80 billion in 2007” (Internet World Stats, 2005). According to the World Youth & Student Educational Travel Confederation’s global study of young independent travelers, young travelers who book online have increased from 10% to 50% in the past five years. And 80% of these travelers use the Internet to search for information before departing on their trip (European Travel Commission, 2008). The independent and youth travelers have basically grown up online from an early age and automatically turn to the Internet for travel information, advice, and reviews. Many websites and search engines are becoming increasingly informative for travelers who would like information on their preferred destination before booking a reservation. Online reviews have been the most helpful to consumers as friends and family opinions are decreasing. According to the statistics given by the Internet Advertising Bureau, 88% of users rate information provided by search results higher than that of friends and family (European Travel Commission, 2008). Feedback from travelers is also preferred as an Internet transaction where companies email their previous customers and ask for customer feedback from their previous stay. JupiterResearch’s research has found that the most compelling means to solicit feedback from travelers is e-mail: 42% of online travelers who contributed content did so because they received an email inviting their feedback (European Travel Commission, 2008). With daily transactions of booking a reservation online, travel websites are becoming more aware of security issues with the use of credit cards and online identity theft. Internet travel companies are increasing their spending on technology to improve security, performance, and reservation system databases.
With the driving force of increasing globalization, the online travel industry is targeting every country imaginable for reservations. Currently, online travel websites are particular to their area, such as only offering bookings in the United States, but an increase in overseas travel has created an additional source of profit. The growths in bookings made outside the United States have outpaced the growth in domestic bookings. This is mainly because more people are traveling and are “increasingly comfortable trusting their reservations to Web sites” (European Travel Commission, 2008). Several Internet travel systems have noticed an increased in international travel to the United States by 11.8% in 2004 (Travel Industry Association, 2008). This is largely in part to the use of the Internet and how information on destinations help foreign travelers decide on where and when to book their trip. For example, from Nielsen ratings on Internet usage: 38.7% of the population in Asia use the Internet, 26.4% of the population in Europe use the Internet, and falling closely behind is North America’s 18% of the population that use the Internet (Internet World Stats, 2008). Online travel companies are increasingly competing to gain the trust and respect of foreign travelers to visit the United States and to book their reservations on their website. Companies are also adding more resources and information on their websites for customers to allow them to have the opportunity to book an international vacation.
Changes in an Industry’s Long-term Growth Rate
With the driving force of changes in industry’s long-term growth rate, many Internet company travel websites are increasing and retail travel agencies are decreasing. Travel agents are no longer the main representatives that customers will pay attention to. As consumers get comfortable with the Internet, and the reservation systems get easier, the content will “quickly force the $1.3 trillion dollar business to adjust how it markets” (Rubel, 2007). Travel agents have been the “key intermediary between travel suppliers and consumers,” with detailed information on particular destinations as their main competitive edge over others in the industry (Cheyne, 2006). Travel agents who have retail spaces are being forced to close down their stores as hotels, airlines, and other travel partners are increasingly using the Internet as their form of booking agent. Companies once relied on travel agents to sell their destinations, but because their online websites offer much more for their customers, they no longer need these travel agents to help them sell their services. Because of this, travel agents could become more competitive “through more effective use of information technology and that the perceived value of the services required can influence consumer choices” (Cheyne, 2006, pg. 1).
Changes in Cost and Efficiency
With the driving force of the changes in cost and efficiency, consumers booking their trips online are searching for the most inexpensive way to travel. Bargain hunting between travel companies is rapidly growing as a customer will not only search on one website, but will search through many to get the best price for their intended destination. Travelers are continuously looking for better deals or packages that will increase their value of their intended trip. Companies are competing for bookings and reservations and will add amenities to the package or credit towards the hotel’s restaurant or room charge in order to gain business and compete with others in the industry. More and more travelers are also booking online and are willing to pay an extra few dollars to guarantee their reservation or to have that special added amenity given from the company or hotel. With the amount spent on a vacation booked online, “51% of luxury travelers are willing to book a $2,000 to $5,000 vacation package online; and another 29% are comfortable booking a $5,000 or more vacation package” (European Travel Commission, 2008). The standard traveler of 24% would be willing to spend $2,000 to $5,000 for a vacation booked online, and almost 50% of travelers are comfortable spending up to $1,000 and $2,000 (European Travel Commission, 2008).
Growing Buyer Preferences for Differentiated Products Instead of a Commodity Product
With the driving force of growing buyer preferences for differentiated products instead of a commodity product, online travel companies are competing for differentiation with many added benefits being offered to the customer. Internet booking reservation systems have specific areas in which customers can make a particular need or request prior to their stay. Online travel companies are increasing the amount of hotel photos and videos on their websites to allow customers to feel connected to their interested destination. Online brochures have also increased as a way for travel agencies to promote a particular destination and to offer an increased amount of information on a specific region. A new travel-focused social networking website has been launched to help travel companies promote their services to consumers through classified ads, videos, blogs, and profiles (European Travel Commission, 2008). Because customers are not as brand loyal as they once used to be, companies are having a harder time attracting previous buyers for repeat business. With the help of social networking websites, travel companies can advertise to the increased amount of Internet users worldwide and hopefully gain new and repeat business on a continuous basis.
Currently, the online travel industry is continuing to grow and is projected to represent 34% of all travel spending by the year 2010 (Jupitermedia, 2005). This projection is due to the lower distribution costs of online travel agencies and higher total travel spending for air, cruise, and hotel sectors (Jupitermedia, 2005). One important factor that must be taken into consideration is rising fuel costs for travel that are requiring firms to raise their costs and prices (Jupitermedia, 2005). This will certainly affect how well online travel agencies will be able to continue to offer reasonable prices to consumers while staying competitive in the market (Jupitermedia, 2005). Lastly, another important factor that will determine the future of online travel agencies is the continued growth of business travel (Jupitermedia, 2005). It is projected that the business travel market will account for $31.5 billion by the year 2010, which was estimated to be around $15.1 billion during 2005 (Jupitermedia, 2005).
To analyze the functional value chain of Expedia, Inc., the major functions include R&D, Marketing, Service, and Information Technology and Operation. The functional analysis uses four criteria to evaluate the performance of each function. The measures of criteria are efficiency, quality, innovation and customer response. The following table is the result of the functional analysis with a rating scale of High, Medium, and Low.
Table: Functional Analysis
|R&D||Marketing||IT & Operation||Service|
Expedia, Inc. is an online traveling company that provides traveling information and reservation tools to its customers. Therefore, the first priority of R&D function within Expedia, Inc. is seeking a variety of travel products and services and obtaining a wide range of travel brands.
Overall, the performances of R&D within Expedia, Inc. are high because Expedia, Inc. strives to obtain maximum customers, partners and suppliers through frame wide-ranging brands collection. In order to be the leading brand in this industry, Expedia, Inc. believes relying on widespread brands collection would get maximum value and market shares. Therefore, Expedia, Inc. mentions that “Expedia, Inc. believes its flagship Expedia brand appeals to the broadest range of travelers, with its extensive product offering ranging from single item bookings of discounted product to complex bundling of higher-end travel packages” (Expedia, Inc., Annual Report, 2007, pg. 5).
In order to enhance its suppliers, Expedia, Inc. uses the extent brands collection and international points of sales. This can help Expedia, Inc. offer a variety of products and services. According to the annual report of Expedia, Inc., Expedia will keep investing in R&D to maintain the best brand portfolio and create maximum value to its suppliers, partners and customers (Expedia, Inc., Annual Report, 2007, pg. 5).
The marketing strategy of Expedia, Inc. is to construct an effective, profitable channel by raising awareness of the consumers who are sensitive to price and to enhance the benefit of its subsidiary companies and itself. Furthermore, the media strategy of Expedia, Inc. includes TV commercials, print media, direct mail, and Internet such as portal website, Expedia.com, and other co-operative enterprises. By using these types of media, Expedia, Inc. has a straight channel to communicate with its target market.
Furthermore, Expedia, Inc. has cooperated with other hotels, transportations, and travel agencies. The company and the co-operative enterprises posted their commercials on each other’s company website while also setting the commission for each website which has online booking from each strategy alliance partners. In addition, Expedia, Inc.’s “affiliate partners can make travel products and services available through an Expedia-branded website, a co-branded website, or their own private label website. Expedia, Inc. also provides its affiliates with technology and access to a wide range of products and services” (Expedia, Inc., Annual Report, 2007, pg. 8). In conclusion, Expedia, Inc. uses its variety of marketing channels and the affiliate partners to maximize the value of its various brands to obtain more consumers. In general, the performance of the marketing is high.
Information Technology & Operations
Expedia, Inc. constantly continues to aggressively innovate its Information Technology and Operating system. For instance, Expedia, Inc. introduced “TravelAds sponsored search product for hotel advertisers, Hotwire’s Airfare Savings Hub and Hotels.com’s slider tools to improve search results and the TripAdvisor Media Network to offer travel applications for download on Facebook.com” (Expedia, Inc., Annual Report, 2007, pg. 5).
In general, Expedia, Inc. keeps innovating to its suppliers, advertisers and customers by providing a service-oriented technology platform on its websites across its broadest brands collection. Expedia, Inc. believes this will make its IT innovation more flexible and faster. And Expedia, Inc. believes this changeover will help it to improve its “site merchandising, browse and search functionality” and also improve “search engine indexing” which will add noteworthy personalization features (Expedia, Inc., Annual Report, 2007, pg. 5).
For its suppliers, Expedia, Inc. develops “proprietary technology” which will make more efficient communication between its websites and hotel central reservation systems. This process will also help the hotels manage its reservations easier through Expedia, Inc.’s websites. This “direct connect technology” can help hotels upload the information of their products and services from hotels’ central reservation systems to Expedia, Inc.’s websites. At the same time, when the customers book the hotels on Expedia, Inc’s websites, the system will automatically confirm hotel reservations. Before the “direct connect system” are introduced, all the process are made manually via proprietary extranet (Expedia, Inc., Annual Report, 2007, pg. 5). Expedia, Inc. also makes efforts in data handling. In order to improve data handling, Expedia, Inc. built the “enterprise data warehouse” that will increase segmentation and merchandising on its’ websites and also improve its e-mail communications with its travelers (Expedia, Inc., Annual Report, 2007, pg. 5).
In order to make its operation and service more flexible, Expedia, Inc. provides 24-hour-a-day, seven-days-a-week service by telephone or via e-mail through a combination of outsourced and in-house call centers. Expedia, Inc. mentions that it “plans to make significant investments in its call center technologies in 2008 and beyond” (Expedia, Inc., Annual Report, 2007, pg 8-9). In the IT& Operation function, the rate of Expedia, Inc.’s performance is high. This is because Expedia, Inc. invests aggressively on its IT and operation functions in order to provide a better service for its consumers, suppliers, and partners.
In the service function, Expedia, Inc. mainly focuses on the partner service because all of its operations will rely heavily on its suppliers and partners and its overall performance in this function area is high. In order to succeed in this industry, Expedia, Inc. heavily depends on its capability to expand or maintain the relationships with its suppliers and GDS partners. Expedia, Inc. also mentions that if Expedia, Inc. could not improve its existing relationship with suppliers or partners and could not change its lack of ability to get new arrangements with its new partners on favorable terms, it will reduce Expedia, Inc.’s quality, amount and breadth of attractively priced travel products and services that it provides to its customers (Expedia, Inc., Annual Report, 2007, pg. 11). In fact, this situation will affect Expedia, Inc.’s financial performance and this is why Expedia, Inc. heavily focuses on the partner service (Expedia, Inc., Annual Report, 2007, pg. 11).
The financial analysis examines the financial ratios of Expedia, Inc. and also compares the ratios with its main competitors and the industry average. The fiscal year of Expedia, Inc. ends in December 31 (Expedia, Inc.); hence, we can use the numbers from the income statement in 2007, as well as the previous two years, to compare the results with the company’s competitors. Unfortunately, when we tried to perform the trend analysis for three years, we were not able to find Travelocity.com’s financial information for 2007, Expedia, Inc.’s competitor, since it is a privately held company. Therefore, this analysis will not include the analysis of Travelocity.com for the year 2007.
According to our analysis, the financial circumstance for Expedia, Inc. is comprehensive. Compared with its main competitors, in some aspects, Expedia, Inc. is doing well but in others it is not. Consequently, we will list the overall financial conditions of Expedia, Inc. using different aspects such as liquidity ratios, assets management ratios, debt management ratios, profitability ratios, and market value ratios.
Source: “Financial Markets”. Retrieved from www.quote.com
According to our analysis, the average current ratio in the online traveling industry from 2005 to 2007 decreased from 1.13 to 0.59. In 2005 and 2006, the current ratio of Expedia, Inc. was below the industry average, although the ratio in 2006 increased. This indicates current liabilities of Expedia, Inc. exceed its current assets, which means that the company may have problems paying off its liabilities compared to competitors.
Although the current ratio of Expedia, Inc. in 2007 decreased and is still below 1, the industry average also decreased to the same level as Expedia, Inc. Compared with the industry average, Expedia, Inc. seems equal to that of the industry since both suffered from the same decreases.
In general, online travel companies normally do not have inventory. As the inventory is zero, the results of the quick ratio will be the same as the current ratio since Expedia, Inc. does not have inventory (Hsu & Chen, 2008).
Source: “Financial Markets”. Retrieved from www.quote.com
Therefore, the quick ratio in 2005 and 2006 of Expedia, Inc. was below the industry average and below 1, this shows Expedia, Inc. has difficulties paying its current liabilities because its liabilities exceed its assets. In 2007, the quick ratio of Expedia, Inc. decreased again and was also below 1, but compared with the industry average it performed alright. This is because in 2007, the quick ratio of the industry average also decreased to the same level as Expedia, Inc.
Asset Management Ratios
The Days Sales Outstanding (DSO) Ratio
From our trend analysis of the past three years, the industry average of the DSO ratio continued to decrease, but for Expedia, Inc. it continued to increase. Compared with the industry average, the DSO ratio of Expedia, Inc. in 2005 and 2006 was lower than the industry average. But in 2007, its ratio was higher than the industry average. Based on these results, we can conclude that Expedia, Inc. collects its outstanding receivables quicker than its competitors during the first two years. But in 2007, the DSO ratio of Expedia, Inc. was higher than its competitors, which demonstrated the company collected its receivables at a slower rate than its competitors. Overall, the industry’s ability to manage its outstanding receivables seems to be getting better. Conversely, Expedia, Inc.’s ability to manage its outstanding receivables is getting worse because it was above the industry average during 2007.
Source: “Financial Markets”. Retrieved from www.quote.com
Total Asset Turnover
Based on our trend analysis, the industry average of the total asset turnover ratio for these three years was approximately 0.60. However, Expedia, Inc.’s total asset turnover ratio during these three years was below the industry average. This demonstrates that Expedia, Inc. does not manage its assets efficiently in order to generate sales. Compared with Expedia, Inc., other competitors have a higher total turnover ratio, which confirms they manage their assets efficiently in order to generate sales.
Source: “Financial Markets”. Retrieved from www.quote.com
Debt Management Ratios
Debt to Assets Ratio
For Expedia, Inc., the debt to assets ratio continuously increased from 2005 to 2007. Although the ratio increased during these three years, it stayed below the industry average. From the creditor’s point of view, Expedia, Inc.’s debt to asset ratio was below the industry average making creditors more willing to finance Expedia, Inc. since the company demonstrates more strength to pay off its obligations. Alternatively, when the industry average is increasing, this indicates that other competitors of Expedia, Inc. have more liabilities and do not have enough strength to pay off obligations making it harder to get additional funds by outsiders.
Source: “Financial Markets”. Retrieved from www.quote.com
Debt to Equity Ratio
The debt to equity ratio of Expedia, Inc. and the industry average both increased within these three years. According to our analysis, the debt to equity ratio of Expedia, Inc. for these three years was below the industry average. Compared with other competitors, we can say Expedia, Inc. mainly uses its stockholders’ fund to finance its assets and it also indicates that the financial strength of Expedia, Inc. is better than other competitors. For other competitors, they have a high debt to equity ratio which means they use large portions of debt to finance their assets. Meanwhile, we can say the financial strength of competitors is weaker than Expedia, Inc.
Source: “Financial Markets”. Retrieved from www.quote.com
Return on Total Assets (ROA)
According to our analysis, we found the three years’ ratios of Expedia, Inc. to be increasing. Overall, this means Expedia, Inc. uses its assets well to generate more profits. However, when compared with the industry average, we can see the company does not perform well. The company does not reach the industry average in 2005 and 2007. Therefore, Expedia, Inc. has more room to grow in its profitability margin.
Source: “Financial Markets”. Retrieved from www.quote.com
Return on Common Equity (ROE)
According to our chart, we can see that Expedia, Inc. has upward ROE ratios in these three years. It means that Expedia, Inc. continues to improve its operation and make it better. However, it is not good when it is compared with the industry average. We can see that the differences between Expedia, Inc. and the industry average are too much. Expedia, Inc. needs to make efforts in making more profits for their stockholders.
Net Profit Margin
Source: “Financial Markets”. Retrieved from www.quote.com
According to the chart, we can see that Expedia, Inc. has stable net profit margin ratios during these three years. Moreover, when we compared the ratios of Expedia, Inc. with the industry average, we found that Expedia, Inc. does a good job in the online travel industry. The ratios of Expedia, Inc. are much higher than the ratios of the industry average meaning Expedia, Inc. earns a lot of profit in its industry.
Market Value Ratios
When we examined the analysis, we discovered Orbitz Worldwide Inc., a competitor of Expedia, Inc., does not trade its stock until July 2007; therefore, we could not find its market price of 2005, 2006 and the beginning of 2007.
Price/ Earnings (P/E) Ratio
Source: “Financial Markets”. Retrieved from www.quote.com
As we can see in our chart, Expedia, Inc. has unstable price/earnings ratios during these three years. However, Expedia, Inc. does well when it compares with the industry average. The price/earnings ratios of Expedia, Inc. are much higher than the ratios of the industry average. This means more investors are willing to invest in this company. It also shows us that Expedia, Inc. has lower risk and good growth prospects.
Price/ Cash Flow Ratio
According to the chart, we can also see that the ratios of Expedia, Inc. are higher than the ratios of the industry average. Just like the price/earnings ratio, it can also tell us that Expedia, Inc. has lower risk and has good growth prospects.
After performing a financial analysis on Expedia, Inc. and examining its competitors in the online travel industry, here is what was concluded:
- Our analysis indicates Expedia, Inc. does not have enough financial strength to pay off short-term obligations because current liabilities exceed current assets.
- In 2005 and 2006, Expedia, Inc. was able to manage its outstanding receivables but in 2007, Expedia’s collection of its outstanding receivables slowed down considerably.
- Expedia, Inc. does not manage its assets efficiently to generate maximum sales.
- Compared with competitors, Expedia, Inc. has more opportunity to obtain finances from creditors since it has more strength to pay off long-term obligations.
- Expedia, Inc. mainly uses its stockholders’ fund to finance its assets. This also indicates that the financial strength of Expedia, Inc. is better off compared to its competitors.
- Expedia, Inc. uses its assets well to generate more profits. However, when compared to the industry average, Expedia, Inc. has more room to increase profitability.
- Expedia, Inc. continues to improve its operation, but it needs to make an effort in producing more profits for its stockholders.
- Expedia, Inc. earns a lot of profits in the online travel industry.
- Expedia, Inc. has lower risk and has good growth prospects.
Organizational Structure and Culture
Expedia, Inc. is an online travel industry that will continue to face many issues such as customers’ responses, involved processes, and productivity. Wise companies use good management teams to provide these issues in such areas as sales, operations, customer service, IT and more relying on employees throughout the organization to put their knowledge into practice and skill on these teams (Anonymous, 2008). Expedia, Inc. uses this kind of structure to make its performance more efficient. Expedia’s director of learning and development said that employees have to know what a scope statement is, or how to do a work breakdown structure before you can fully contribute to the project teams. Moreover, the executives of Expedia, Inc. realized their management teams would work more efficiently if the team members and team leaders had the same knowledge about project success (Anonymous, 2008). According to the website of Expedia, Inc., we know their organizational structure is divided into the geographical areas of Europe, Asia, Africa and etc. Each of them takes charge of their own areas and does the functions by themselves. They meet the needs of the culture of the local customers and promote especially to their target markets. Furthermore, Expedia, Inc. also has their functional management team, such as marketing, accounting, and human resources.
Here is a chart of Expedia, Inc.’s organizational structure:
|Board of Directors||Corporate Management||Business Management|
|Barry Diller Chairman & CEO, InterActiveCorp||Barry Diller Chairman and Senior Executive, Expedia, Inc.||Paul Brown President, Expedia, Inc. Partner Services Group
President, Expedia North America
|Dara Khosrowshahi CEO, Expedia, Inc.||Dara Khosrowshahi President & CEO, Expedia, Inc.||Dermot Halpin President, Expedia Europe, Middle East and Africa|
|Victor A. Kaufman Vice Chairman, InterActiveCorp||Micheal Adler CFO, Expedia, Inc.||Henrik Kjellberg President, Expedia Asia Pacific|
|George “Skip” Battle Chairman, Fair Isaac Corp.||Paul Brown President, Expedia, Inc. Partner Services Group President, Expedia North America||Jean-Pierre Remy President, Expedia Corporate Travel|
|Simon J. Breakwell Retired Executive, Expedia, Inc.||Pierre Samec CTO, Expedia, Inc.||Eric Grosse President, Hotwire Group|
|Jonathan L. Dolgen Principal, Wood River Ventures, LLC||Burke Norton Executive Vice President, General Counsel and Corporate Secretary, Expedia, Inc.||Stephen Kaufer President & CEO, TripAdvisor.com|
|William R. Fitzgerald Senior VP, Liberty Media Corp.||Connie Symes VP, HR, Expedia, Inc.||Sean D. Kell Senior Vice President & General Manager, hotels.com|
|Craig A. Jacobson Partner, Hansen, Jacobsen, Teller, Hoberman, Newman & Richman, LLP||Dhiren Fonseca Senior VP of Corporate Development, Expedia, Inc.||Tim MacDonald President, Classic Vacations|
|Peter M. Kern Managing Partner, InterMedia Partners, LP||Gary Fritz Senior VP of Corporate Development, Expedia, Inc.||Guangfu Cui CEO, eLong, Inc.|
|John C. Malone Chairman, Liberty Media Corp.||Audrey Lincoff VP, Corporate Communications, Expedia, Inc.|
Expedia, Inc. devotes itself to maintaining its leadership in customer service and in online services. Because Expedia, Inc. is an online travel company, it needs to keep good relationships with consumers in order to maintain a good reputation. One of the important organizational cultures is to build good customer service. They need to rely on their good reputation to get more profit for the company. Expedia, Inc. keeps building a strong corporate culture because it believes in the importance of enhancing business judgment at all levels of the organization as well as in strengthening the skill of employees to work in management teams (Anonymous, 2008).
In order to determine the core competencies of Expedia, Inc., an analysis for the functional department will be taken into consideration. Because the functional department has major competitive advantages and strengths, it can be classified as the core competencies of the organization.
The marketing department of Expedia, Inc. is devoted to constructing effective, profitable channels by raising awareness for consumers who are price sensitive while also enhancing the benefit of its subsidiary companies. The company has closely cooperated with other hotels, transportations, travel agencies and affiliate partners to enhance the quality, efficiency and customer response for their marketing department (Expedia, Inc., Annual Report, 2007). Therefore, the marketing department is regarded as a core competency of Expedia, Inc.
The Information Technology and Operation department of Expedia, Inc. dedicates its energy to enhancing the efficiency, quality, and innovation within the function. For example, Expedia, Inc. continues to innovate for their suppliers, advertisers, and customers by providing a service-oriented technology platform on its website. They also developed new technology to make the communication between their websites and the hotel central reservation systems more efficient. Expedia, Inc. has also built an enterprise data warehouse to improve the handling of data in order to increase segmentation on their websites and e-mail communication with travelers. In terms of operation, the company invested in call centers to provide 24-hour-a-day, seven-days-a-week service by telephone or e-mail through a combination of outsourced and in-house call centers (Expedia, Inc., Annual Report, 2007). There is no doubt that the Information Technology and Operation department is regarded as the core competency of Expedia, Inc.
The result of the distinctive competencies will also be evaluated in the VRIO analysis. The VRIO analysis uses four criteria to evaluate distinctive competencies. The measures of criteria are the following: Is it valuable? Is it rare? Is it difficult to imitate? Does the organization use it well?
The following table is the result of our VRIO analysis:
Table: VRIO Analysis
|Is it Valuable?
|Is it Rare?
|Is it difficult to Imitate?
|Does the Organization use it well?
|R&D- extensive brands collection||Yes||Yes||Yes||Yes|
|Marketing- effective channel; affiliate partners||Yes||No||No||Yes|
|IT& Operation- service-oriented platform, proprietary technology, data handling||Yes||No||No||Yes|
|Service- maintain and expand the relationships with suppliers and GDS partners||Yes||No||No||Yes|
The row with the highlight represents the distinctive competency of Expedia, Inc. Based on the VRIO analysis, the R&D department is the distinctive competency of Expedia, Inc. The R&D department collects a wide number of brands to add to their portfolio to enhance the efficiency and quality of its value chain. In order to be the leading brand in the online traveling industry, Expedia, Inc. believes that relying on a wide number of brands will provide maximum value and market share. Through the collection of a wide number of brands, Expedia, Inc. can offer a variety of products and services. Concurrently, the company also uses the extent of their collection of brands and international points of sales to enhance its suppliers (Expedia, Inc., Annual Report, 2007). Just like Expedia, Inc. mentions “Expedia, Inc. believes its flagship Expedia brand appeals to the broadest range of travelers, with its extensive product offering ranging from single item bookings of discounted products to complex bundling of higher-end travel packages” (Expedia, Inc., Annual Report, 2007). Overall, this is a valuable strength for Expedia, Inc. to get maximum value and market share. It is also hard to imitate their competitors since the strategy used by Expedia, Inc. requires a large amount of funds. With R&D, Expedia, Inc. utilizes this department on a much larger scale than its competitors, and therefore it is concluded that this is its distinctive competency.
The use of the global distribution service (GDS) for booking worldwide.
With the large number of hotels, airlines, and car rental companies using Expedia to load their pricing and information on their network, synchronization is key. GDS allows Expedia to exchange data with their merchants at a faster pace than manually entering each request every time. GDS eliminates any possible errors that may occur with accurate transactions and consistent information. The benefits of GDS: “ensures that trading partners work in a standardized way thereby reducing duplicate systems and processes; ensures that product information is updated and consistent between trading partners; and provides a single point of entry for retailer and supplier trading partners through their chosen data pool, thereby reducing the cost of operating multiple vendors” (GS1UK, 2008).
Strong brand name and high market share.
Expedia is a well-known online travel agency with a good reputation for low prices and a one stop shopping website for all your travel needs. In the first quarter results for 2008, Expedia had “over $20 billion in annual gross bookings and excellent first quarter results, Expedia(R) is far and away the leader in online travel services,” said Barry Diller, Expedia, Inc.’s Chairman and Senior Executive (PRNewsWire, 2008). Expedia is one of the largest online travel agencies worldwide.
Good reputation among customers and merchants.
Expedia has grown into a national brand with being the most popular search engine for online travel. “The reputation of Expedia as an industry leader, superior technology and extensive marketing support have greatly expanded our capabilities and given us access to millions of pre-qualified customers” (Microsoft, 1998). Companies and merchants alike highly benefit by partnering with Expedia because of their increased popularity and reputation.
Developed several long-term contracts with businesses.
The most popular Hotel and Motel franchises, Airline companies, Cruise lines, and Car Rental Agencies are all connected with Expedia. The most popular merchants are all located on Expedia with the help of Expedia’s representatives gaining the sales and needed businesses for their Internet travel service. Several hotels, for example, like to partner with Expedia as a long-term service to focus on the commitment to their customers that their reservations are easily accessible online and offered at the lowest price.
Creates several options for customers and businesses with rental cars, hotels, cruises, and the airline industry.
Customers visiting the Expedia website have the opportunity to make reservations for their entire trip from airline to hotel to car rental. Expedia is focused on being a one-stop shop for the potential traveler.
No personal one-on-one travel agent.
Customers that want the extensive knowledge and background of a particular city or hotel will not get the information they need with Expedia. Travel agencies have the detailed and personal information and experience of visiting several destinations and will pass on this information to their customers to create and maintain a close relationship.
Website maintenance issues or server problems.
With the use of technology, there is an uncertainty on the reliability of the server or network being used for the Internet.
No new innovations.
Being on online travel agency, Expedia has not created new innovative ways to book a vacation and has not changed their look of their website.
Inexperienced Board of Directors in the travel industry.
Several of the Board of Directors do not have a travel industry background which can hurt the company with this lack of experience. For example, according to ExpediaInc.com, currently, Barry Diller is the Chairman and CEO of InterActiveCorp, and Chairman of Expedia, Inc. For 8 years, Mr. Diller served as Chairman and Chief Executive Officer of Fox, Inc. and was responsible for the creation of Fox Broadcasting Company in addition to Fox’s motion picture operations. Before joining Fox, Mr. Diller served for ten years as the Chairman and Chief Executive of Paramount Pictures Corporation. In both instances, Mr. Diller has the experience in the entertainment industry, and does not have experience in the travel industry.
Partnering with other travel agencies or organizations.
Expedia has the opportunity to expand their partnership with several other travel agencies and online agencies worldwide. Their potential to buy out small agencies or develop a relationship with them can increase their productivity and sales in each segment.
Expansion to other countries.
Expedia is currently in North America and Europe and is now teaming with Asia. The expansion into other areas of the world will give Expedia a competitive advantage over other online agencies that focus on one country.
Develop a new and easier reservation system for customers.
The ease of use of Expedia’s website can change the way customers feel about the entire experience in booking a vacation. New reservation systems with easy to use calendars, suggestion boxes, requests, will help customers feel like Expedia is their own personal travel agent.
Security or privacy information and transaction issues.
With the continuous issue of identity theft and credit card fraud, there are several instances where customers are reluctant to book their vacation over the Internet.
Competition in price and packages.
Expedia’s competition consists of several online travel agencies such as Orbitz Worldwide, Inc., Priceline.com Inc., and Travelocity.com. Expedia has continuous competition regarding the lowest price guarantee and the creation of unique packages to differentiate themselves with their competitors.
Economy slow down and increase in fuel costs.
With the current economic downturn in the United States and the dollar loosing its value, customers are hesitant to spend their money on vacations. Fuel costs are rising, and airplane tickets along with car rentals are getting to be more expensive. This can hurt Expedia’s price competition and customers may look at other online travel agencies for a cheaper vacation.
|1. The use of the global distribution service (GDS) for booking worldwide.||1. No personal one on one travel agent|
|2. Strong brand name and high market share.||2. Website maintenance issues or server problems|
|3. Good reputation among customers and merchants||3. No new innovations|
|4. Developed several long term contracts with businesses||4. Inexperienced Board of Directors in the travel industry|
|5. Creates several options for customers and businesses with rental cars, hotels, cruises, and the airline industry.|
|Opportunity||S-O Strategy||W-O Strategy|
|1. Partnering with other travel agencies or organizations||Expedia should continuously expand into new countries with the use of the GDS and the company’s reputation.||Increase technological innovation for their reservation system.|
|2. Expansion to other countries|
|3. Develop a new and easier reservation system for customers|
|Threat||S-T Strategy||W-T Strategy|
|1. Security or privacy information and transaction issues||Build a strong global brand.||Improve customer relationship with new products or rewards.|
|3. Competition in price and packages|
|4. Economy slow down and increase in fuel costs|
To pursue opportunities that will blend with their company’s strengths, Expedia should continuously expand into new countries with the use of the GDS and the company’s reputation. Expedia’s is well known for their abundance of booking options with hotels, airlines, care rentals, and cruise lines. Expanding or partnering with new countries will allow customers to have a wider range of options while planning a vacation with Expedia. Customers and merchants will always come to Expedia first before visiting another competitor’s website.
To create ways that the firm can use its strengths to minimize its vulnerability to their threats, Expedia should build a strong global brand. Because Expedia has a solid brand to work with and is well known throughout the world, their continued development into new countries will help gain a competitive advantage over others in the industry.
To repair their weaknesses and pursue their potential opportunities, Expedia should increase technological innovation for their reservation system. With new and already established competition, Expedia will need to change the look of their website to attract new customers and keep old ones. The process of developing an easier reservation system with a customizable interface will allow customers to continuously book on Expedia.
To create a defensive plan with preventing the firm’s weaknesses from making it vulnerable to the external threats, Expedia should improve customer relationship with new products or rewards. Because of the lack of relationship development over the Internet, Expedia can create new ways of acknowledging their merchants and customers and making them feel important. Because of the current economic downturn, customers who do choose to book a vacation will hopefully only visit Expedia’s website and will allow them to profit even in the off seasons.
Key Strategic Issue #1
Expedia, Inc. should build a strong global brand by entering new countries.
Identification and Explanation
Although Expedia, Inc. is already a well-known on-line traveling agency, building a strong global brand to expand their geographic coverage would be most beneficial. For example, Expedia, Inc. could enter the Asian market such as China, which can be a potential market for an increase in profits.
Alternative 1: Slow Development
Expedia, Inc. currently operates over 17 websites for different countries worldwide, one currently being India which was recently created in March 2008. The company is currently looking to expand into the Korea and Vietnam markets. They are also planning to move carefully into Latin America because their ability to conduct business in this country is limited. (Khosrowshahi, 2008)
The company should be wary about a quick expansion into several markets. The goal should be to carry out possibly two to five markets per year to specifically gain the knowledge and research needed to effectively develop a strategy for each country. The pros of a slow development would be the increased knowledge gained from the research and development of strategy created for one particular country. Because each country operates on a different scale and has several segments, the company would need the time to really know what a particular country is looking for in terms of traveling and using an online travel agency. The cons of a slow development would be the potential for competitors to expand into the same countries as Expedia, Inc., which would cause an increase in competition and lower market share.
Alternative 2: Rapid Expansion
With a rapid expansion, the company will be able to increase their market and become the most well known global brand in the travel industry. Large and small countries alike will be able to log on to Expedia, Inc.’s website and book their travel arrangements anywhere in the world. The company should expand with five to ten countries per year to effectively gain a competitive advantage in the online travel industry. The cons of a rapid expansion are the possible mistakes or errors the company would make with learning each country’s culture. Each country has a completely different culture from their neighbors or surrounding areas. Because of the quick time frame, the company has the potential to miss information that might be crucial to their development in each particular country. And with mistakes comes a decrease in profits and relationships.
Expedia, Inc. should expand to four countries in the next year. This will help gain a competitive advantage over other competitors in the industry. With the focus on four countries, the company will be able to put aside one full quarter for each country. They will be able to commit to a three-month research and development program to effectively learn the culture of each country, which will help increase their relationship and understanding of each market.
Key Strategic Issue #2
Expedia, Inc. must begin examining the security of on-line transactions to protect their suppliers’ and customers’ privacy and keep innovation on the forefront.
Identification and Explanation
Due to the issue of identity theft and credit card fraud, Expedia, Inc. must start to examine the security of on-line transactions and create new technology to protect customers’ privacy. The company also has to continuously improve their website and transaction systems to establish a user friendly system for both customers and suppliers. Expanding to different countries also involves currency exchange and various amounts of credit card options.
Alternative 1: Monetary Transactions
With the expansion into different countries, the ability to use different currencies and credit cards will create a perplexed transaction over Expedia, Inc’s website. Depending on the country, for example Latin America, credit card penetration is relatively low and debit card penetration seems to be accelerating (Khosrowshahi, 2008). Because of this, Expedia, Inc. should only accept the most popular credit cards such as American Express, Visa, and MasterCard. For each country that has a low usage of credit cards, each country’s website on Expedia, Inc. can allow the use of a debit card with a signed approval form for security purposes.
Alternative 2: Non-Monetary Transactions
Because of the differences in the country’s economy, monetary transactions are limited. Credit transactions and the use of credit cards in each country can greatly vary. To fix this, Expedia, Inc. can offer to create a cash payment program and create an office or location for a person to pay their bookings in full. This will not only increase their market, but also give them the opportunity to tap into different segments.
Expedia, Inc. should allow for both credit card and debit card transactions. With debit card transactions, there is a direct withdrawal from the customer’s account, which will increase actual cash flow and decrease in accounts receivable. With credit cards, the company should only allow American Express, Visa, and MasterCard as three optional choices of payment. With cash payments, the company should research into the low development and low economic countries before allowing the cash payment option to take place. For example in their recent expansion in India, it would be a great idea because not everyone will qualify for a credit card, and cash is the most preferred in terms of monetary transactions in this country.
Key Strategic Issue #3
Expedia, Inc. should start to expand their brand and product portfolios in order to improve their customer and employee relationships.
Identification and Explanation
Expedia, Inc. is the platform of providing a numerous amount of traveling products and services to customers and suppliers. Therefore, it is necessary to maintain or improve their relationships with customers through providing an extensive product or service portfolio. Expedia, Inc. could develop new suppliers and partners to provide comprehensive service. For example, the company should cooperate with insurance companies as an added benefit to booking on their website. The company can also add independent hotels and motels to increase their portfolio and allow an increase of options for their customers.
Alternative 1: “If you build it, they will come” philosophy.
Expedia, Inc. has an extensive website covering airline travel, hotels, motels, rental cars, and cruise lines. Because the company is well known around the world, they do not have to extensively sell their brand name in order to obtain new suppliers. The company can take a slow approach to this with the “if you build it, they will come” philosophy. The option is to wait for potential new suppliers to come to Expedia, Inc., which will allow the company to focus on another department and possibly pay more attention to their customers. Slowly gaining new suppliers can create a steady pace in effectively researching each supplier for their customers. For example, the Hotels.com campaign consists of a representative visiting the hotel to make sure it meets customers’ expectations. Expedia, Inc. can also create this relationship to show their customers that they care about where they stay and if it will match their needs.
Alternative 2: Extensive Sales Force.
The company can also take another approach and increase their sales force to grab all market potential and major companies to partner on their website. For example, the company would scout for the top 20 airlines, top 20 hotel chains, top 10 car rental companies, and top 10 cruise lines in each state or country. They will then ask these suppliers to register on their website so that customers will be able to book their reservations through them. The benefit for both Expedia, Inc. and its’ suppliers are that the extensive amount of accessibility in the market that both companies can reach.
Expedia, Inc. should take the extensive approach and research into all of the top brand name companies out there in order to increase sales. They should create a new sales team specifically for each department: airline, hotel, cruise line, and car rental. By doing this, the company will increase their market share and brand portfolio that will cover all major cities and countries all over the world. With the least favored cities and countries, Expedia, Inc. can wait for the suppliers to come to them, since this will not hurt the company but will only slightly increase their sales once they are registered with Expedia, Inc.
Action Plan for Year 1: 2009
The purpose of the following action plan is to provide one year of strategic direction for Expedia, Inc. This action plan will be listed on a quarterly basis, starting with the first quarter of 2009.
Quarter #1: Prepare a well-thorough operational plan to effectively develop each department.
The R&D department of Expedia, Inc. should prepare operational plans to research into and attract new suppliers. These plans also have to incorporate with other departments such as Marketing, IT, and Services in order to reach the most results. The research and development department this quarter will also start investigating into a new potential country to expand into. A new department focused on this particular country will help the company focus on the expansion and development of new websites.
Protect the security of customers’ private information.
It is very important to protect customers’ privacy through website transactions. Therefore, the IT department should examine the security of on-line transactions and customers’ privacy on a quarterly basis. The IT department would need to develop a healthy system to secure the platform and avoid hackers from stealing private information through the Internet.
Quarter #2: Search for new products and new suppliers to partner with Expedia, Inc.
To improve customer relationships, Expedia, Inc. should provide more services to their customers and clients. The sales department can contact new companies which are related to travel industry such as airlines, hotels, insurance companies or traveling production manufacturers. They can cooperate with each other to create an alliance and provide comprehensive service for their customers. Therefore, Expedia, Inc.’s customers will have numerous amounts of brands to choose from and would be an easier fit to customers’ needs.
Search for new potential markets.
Expedia, Inc. can expand their territory to other countries such as the Asian market. The Marketing and Research and Development department can perform research first to know the local regulations, buying behaviors, customers’ preferences and more. Second, they can create a new marketing plan for the new markets to evaluate the feasibility of the plan. The Marketing department should also collaborate with other departments such as IT, R&D, and Service based on the plans made in the first quarter.
Continue examining the security of customers’ privacy.
The IT department needs to continue monitoring the systems and platform to avoid stealing customers’ private information.
Quarter #3: Increase the customers’ awareness.
The Marketing department should also create and increase promotional advertising for customer awareness. They can increase the sales promotion budget and advertising spending budget for each country. Each quarter, the company should also focus heavily on the new market that they look to expand into.
Revise the operation plans.
Expedia, Inc. should revise their operation plans based on the research from each department to make their operational plans fit the strategy or goals of the company. For example, creating a new structure or much-needed department focusing on suppliers or customers alike could be a first step in this new action plan.
Continue examining the security of customers’ privacy.
The IT department needs to continue monitoring the systems and platform to avoid stealing customers’ private information. They need to examine the security system and update the information periodically.
Quarter #4: Research into new products and potential markets.
Expedia, Inc. continues to research into four countries in the year. They need to find the results of the research and review ideas and potential new markets and propose a presentation to the board members or the executive team. Therefore, their research can be implemented in the following year.
Evaluate and review the result of searching new product portfolio and potential markets
After finalizing the research, Expedia, Inc. needs to evaluate and review the results. According to the feedback of the board members, they will be able to expand their territory to these potential markets and cooperate with the new suppliers and businesses of each country.
Continue examining the security of customers’ privacy
IT department needs to continue monitoring the systems and platform to avoid stealing customers’ private information. They need to examine the security system and update the information periodically.
Action Plan Chart for 2009:
|1st Quarter||2nd Quarter||3rd Quarter||4th Quarter|
|Marketing & Sales|
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