Strategic Management and Leadership for Expedia Inc - Case Study Example

Strategic Management and Leadership for Expedia Inc Name Institution Strategic Management and Leadership for Expedia Inc Introduction Expedia, in term of booking volume, it is the largest online travel services provider in the world. The business witnessed improvement in its activities that pushed its competitive advantage to the desired level (Schmidt, 2015). Currently, Expedia is the second largest travel service provider in the world with a gross booking volume of $4.4 billion and in the first nine months of 2014, the business experienced increment in its volume. The major factors that are pushing such growth in the business are healthy performance of the hotel room nights and provision of the air tickets (Expedia, 2001). Through its top line growth and discipline in marketing and selling, the business has been able to lay a solid bottom line. For the first time, the net income of Expedia grew by 141% year-on-year to $332. Evaluation of Business Success Business’ revenue growth is attributed to both Expedia’s core online travel agency (OTA) and Trivago. The revenues generated by core OTA rose from $1,268 million in 2014 to $1,463 million in 2015 representing an increment by 25%. Moreover, Trivago also experienced strong growth on sales 25% to $90 million. The products offered by Expedia are designed mainly for the upper income earners and consumers seeking individualized and customized products (Rezdy, 2016). As a result, the business segments are flight and hotels booking, restaurant reservation, limousine transfers, and event ticket bookings. Furthermore, the business also offers concierge services in various countries such as UK, France, Italy, and Spain. Strategic management and leadership have become common phenomena in the modern services sectors (Law & Chen, 2000). Currently, with the rising rate of globalization effect on the services sector, strategic management is proving to be important success tool for most businesses. The business strategy used in Expedia plays fundamental in facilitating travel: for leisure, managed business travelers, and unmanaged businesses (Staritz, 2011). Expedia is committed to providing travel suppliers, advertisers, and travelers to with the best set of resources to ensure that they their travel needs through leveraging on the critical assets of Expedia. For instance, Expedia has a brand portfolio, technology, and is committed to innovation to undertake global research. Through a partnership with Ctrip, lowering commissions to improve the reach and aggressive network expansion are some of the factors that have facilitated the growth and success of the business. Expedia sold off its stake in eLong to various investors including Ctrip (Liu, Yang & Gu, 2009). Both Ctrip and Expedia have been able to enter into partnership with the aim of sharing some inventories in certain geographies major within the packaged tours and air segments. Expedia’s partnership with the Chinese online travel firm assists in market penetration. In the past few decades, there have been increased numbers of businesses investing in ticket offering platforms. As a result, various entities have focused on strategic management practices to maintain their competitive advantage. For such reason, Expedia has been focusing on commission reduction on its charges to the hotels that uses its site to reach potential customers. Moreover, the business has been aggressively spending on various loyalty programs to attract more hotels and travelers (Musikanski, 2013). Through lowering the Expedia’s commission, many entities are likely to join its platform. Aggressive network expansion is another critical strategy. The business acquired different services and stakes from other business, which added 27,000 properties to the business’ global, supply portfolio. By establishing connection with other entities, Expedia has the opportunities to exploit various market segments and penetrate the market further. Expedia also entered into commercial agreement with different airlines such as Qatar Airways and China Southern Airline (ZHN), which improves its reputation on global scale. Expedia Value Chain Analysis Value chain analysis is an important tool that businesses use to work out methods of creating the greatest possible value for its customers. In addition, the value chain program design consist of various elements including selection and analysis of the whole value chain, identification and assessment of appropriate market-based solutions, determination, and prioritization of suitable method to facilitate organizational development (Musikanski, L2013). Therefore, value chain is important in increasing economic benefits for the targeted consumers. Organizational value chain needs to describe various activities needed to bring organizational products and services from conception through various production phases, delivery to the final customers, and disposal after use. For example, Expedia is an online travel business and third party integrator within the leisure and travel industries that utilize the value chains (Expedia, 2017). In the wake of advancement in technology and digitalization of various business activities, about 6 of 10 Americans are able to shop online while about 4 of 10 use online banks. Moreover, many videos are uploaded to YouTube with many people spending more time online on the social media platforms. The customers use internet to increase a range of activities: shopping, banking, watching televisions, and sharing photos (Presutti & Mawhinney, 2013). Hence, they spend a great proportion of their time and wallet over the internet. Internet is changing the manner in which businesses operate. Internet forms the basis Expedia’s value chain. Compared to other strategic management practices, online costs are much lower compared with traditional retailing; therefore, the prices are always lower. Expedia is considered the parent of various online travel brands like Classic Vacations, eLong, Hotwire.com, Venere, Egencia, and Expedia Local Expert (Bushell & Healy, 2013). Currently, the companies under Expedia Inc. operate in more than 60 countries with more than 100 branded points of sale. To make these value chains effective and efficient, Expedia manages information properly which in turn creates the desired value for the customers (Presutti & Mawhinney, 2013). Furthermore, the business uses information networks provided by the third-party information technology integrators for coordination of various value chains. With increased competition within the industry, the market is becoming very complex. This makes the market in which Expedia operates to be challenging and diverse. Potential customers are need to organization vacation: the hotels are responsible for accommodation; the restaurants take care of meals; and trains, taxis, and airline take care of transport (Liu, Yang & Gu, 2009). The customers also seek sites for relaxation and entertainment, diving schools, museums, and mountain guides. With its years of experience, Expedia can create complete packages from various options. In addition, both the locals and internet-based travel agencies may assist consumers in selecting the packages that they consider appropriate for them. Besides, consumers are also searching for new travel destinations and experiences across the globe. However, the internet allows even the most remote holiday destination to be presented to the people for selection. Other important factors that determine organizational value chain are marketing and sales, operations, firm infrastructure, procurement, and technological development. Expedia and other high street retailers offer customers with the choice of booking holiday online. Currently, 55% of holiday bookings are undertaken online since most travel operators are insisting on website optimization and promotion to ensure efficiency and effectiveness in the services offered. Expedia is the only travel agent that offers complete list of some of the best hotels for both short and long-term destinations across the globe. With the current focus on business sustainability through environmental protection, Expedia is the only travel agency that commits towards reduction of CO2 levels. Its carbon management strategy aims to reduce CO2 emissions by 6%. Based on the operations, the business has self-owned resources that enable it to operate within the travel and holiday industries, which assist in offering better, and quality prices at lower prices. Moreover, the business understands the needs of each customer: type of accommodation, pick up, and drop facility. Expedia extensively evaluates the market and prepares itself for any forthcoming market needs ahead. Marketing and sales and operations for the primary activities for the business. Support activities are firm infrastructure, procurement, and technology. Although Expedia targets customers from different market segments, it focuses more on the couples. The business offers holiday packages in many countries within Africa, Middle East, America, Asia, Europe, and Caribbean through luxury hotels, adult, and family holidays. The business has resources and mitigation plans to handle risks from specified issues associated with business niche and economic difficulties. To operate within the industry, the business has its fleet of vehicles and planes flying around different countries. Expedia also owns various business operations, which assist in delivering services of higher value at lower prices compared to the competitors. Technology plays significant role within the industry from supporting marketing activities to easing booking operations. Booking industry needs to be technologically advanced to survive the competitive market. Business technology is divided into external and internal technological development. Expedia Uniqueness as VRIO Resource VRIO is an analytical method use to evaluate organizational resources and the competitive advantage. It stands for value, rareness, imitability, and organization. Once the business understands its resources, then it is easy to understand its competitive advantages and weaknesses. The analysis of Expedia VRIO revealed that the resources and capability of the business are many: effective human resources, improved technology, global brand recognition, organizational culture, customer loyalty, strong global presence, and good corporate social responsibility image (Schmidt, 2015). Moreover, the business has diversified operations, which assist to explore different market segments and ensure adequate market penetration for business sustainability. Moreover, Expedia is in partnership with different hotels and travel agencies, which with the shares bought in other businesses, the business has the capacity to penetrate even areas considered remote. As a result, it assists in bringing out remote areas to global scene. Expedia has heavily invested in research and development (R&D) to maintain its competitive advantage. Expedia is an online travelling business providing travelling information and reservation tools to potential customers. Hence, its first priority is R&D function (Law & Chen, 2000). The overall performances of R&D are high since it strives to maximize the number of customers, partners, and suppliers by framing wide-range of collected brands. To be the leader in the market, Expedia believes on relying on widespread brand collection, as this would assist in maximizing the value and market shares. Currently, improved technology and operations serve as the temporary competitive advantage for Expedia (Expedia, 2017). Focusing on increased integration of technology into business activities, consumers’ needs are going beyond receiving the products and services. Reliability and efficiency are becoming important factors. This competitive advantage used by Expedia is not costly to imitate; as a result, numerous competitors may use it in their advantages as well or improve the current condition to outdo the level of integration used by Expedia. This is similar with the expansion to international markets and application of technology and proper corporate social responsibility image considering that competitors are able to adopt these resources and capabilities. Consequently, the business used customer loyalty, brand recognition, and organizational culture in establishing its permanent competitive advantage. Expedia resources and capabilities are valuable considering that they contribute significantly to the fulfillment of the needs of customers at a price that they are willing to pay. Besides, the price is determined by through customers’ preferences to use Expedia services over those of the competitors within the booking and travel industry. The business’ resources and capabilities are limited in supply though they create competitive advantage and to some extent go beyond parity. Since rarity of the business’ capabilities and resources persist within a long period, there is generation of sustainable competitive advantage (Staritz, 2011). Expedia has an organizational structure that structured; therefore, it exploits the potential of institutional resources and capability including management and controlling the systems, business process, and compensation policies. Initially, the resources and capabilities of the business were difficult to imitate due to the high costs associated with asymmetries within the market. It is important to note that any business that lacks resources and capabilities experiences significant cost advantage cost to acquire them compared to the organizations that already posses them. Leadership Contribution to Organizational Success Leadership is an important aspect of ensuring business success. In Expedia, leadership is viewed as a potent source used in developing management and sustaining organizational competitive advantage to ensure efficient organizational performance enhancement. The business uses transformational leadership style which assists Expedia achieving its objectives and in an efficient manner through connecting job performance to the valued rewards. The leadership style also ensures that employees have adequate resources to undertake their delegated roles (Bass & Riggio, 2014). It is important to have visionary leaders with ability to create organizational strategic vision for the future state, modeling the vision through acting consistently, and communicating the established vision to all members of the organization. Research reveal that visionary leaders often create high levels cohesion, motivation, trust, and cohesion which propels organization in a mid of increasing market competition. These are the features reflected in Expedia’s leadership style. Through transformational leadership, the business has been able to achieve the outlined goals through empowering the employees who are committed to achievement of goals. Initially, the business was characterized with poor access to information, bureaucracy, hierarchy, and authoritarian leadership methods; thus, limiting empowerment of the workers and contributing to dissatisfaction, absenteeism, and burnouts. The types of leadership used within the business depend on the organizational culture. With continued exploitation of the foreign markets and deep penetration into the market, Expedia had to adjust its culture depending on the region of operation, which assisted to improve its market share and employee loyalty (Elliott & Asghar, 2014). However, research claim that instead of implementing wide organizational changes for the employees, businesses may consider training the supervisors to realize similar impacts. Furthermore, Expedia’s management has leadership background through training and development enshrined in organizational policy. Training management of leadership is cost effective and easy to control compared to implementation of different organizational changes. The leadership style embraced by the business fosters healthy employee work environments and positive management mechanisms like shared institutional objectives, rewards schemes, learning and career development opportunities, and empowerment strategies. However, poor management and leadership practices contribute employees’ stress. Inclusivity, engagement, and employee participation are becoming important practices in achieving sustainable business growth. While making important institutional decisions that affect the workers, it is important to involve them and hear their contributions (Anderson, 2008). Expedia considers employees as its greatest assets; as a result, their contributions to organizational decisions are highly considered. Autocratic decision-making process is always associated with increased levels of organizational ambiguity and functional identity. Not surprisingly, organizations that receive high leadership ratings engage employee in participative decision-making process, which accord them opportunities to learn from diversified opinions. Effective leadership is dependent on the ability of the leaders to understand the nature followers. Leaders need to be empathetic to understand the thoughts, points of view, and feelings of the followers. Empathy is instilled among the organizational management. The empathetic qualities among Expedia management tend to inspire greater depth of self-exploration in the employees (Elliott & Asghar, 2014). Moreover, the supportive interpersonal orientation tends to increase the positive perception of the employees regarding job satisfaction, leadership, and feelings. To bring the required organizational change through ensuring higher performance, Expedia’s management fully engages and connects with the employees. The main factors used by the business to change the organization through commitment are evocations, mobilization of the emotions, and framing. In transformational leaders, implicit behaviors are emotional bonds. Any leader that responds empathetically to arising situation has the ability to improve organizational effectiveness (Bass & Riggio, 2014). Furthermore, leadership styles also persuade the employees to embrace positive ideals and visions. Even though there is little, research undertaken on the effectiveness of leadership on organizational performance. There are criticisms associated with transformational leadership used by the company as it focuses excessively on the subordinate relationship and exclusion of different functions undertaken by the leaders. Moreover, the style also excludes organizational and environmental variable, which are important mediators in the leadership-performance relationship. Business Competitive Strategy Business strategy is important in facilitating travel. The current business strategy is commitment to provision of travelers, advertisers, and travel suppliers with the best set of resources to ensure that they serve their travel needs through leveraging on the critical assets of Expedia. The business may use its brand portfolio, technology, and commitment to innovation to achieve its desired competitive advantage (Expedia, 2017). Based on the portfolio of travel brands, Expedia seeks to appeal to the broadest possible range of the travelers, advertisers, and suppliers through collection of various brands within the market. The business targets various demographics from the travelers seeking value services, luxury travelers that seek high-touch services, and customized vocational packages. The business believes that its flagship Expedia brand appeals to a wider range of customers and with the extensive services that offers ranging from discounted services to the dynamic bundling of higher-end travel package. Moreover, the business has hotels.com website and associated international version targeting travelers seeking premium hotel services (Barney & Hesterly, 2015). In countries like the US, the business targets customers with short booking windows especially those who prefer driving to their destinations and make significant portions of their bookings over the phones. Through organizational Egencia, the business has been able to make products and services to the corporate travelers within the European, Asia Pacific, and North American market. Additionally, Expedia uses the TripAdvisor Media Network, which allows it to reach a wider market segment with user-generated content. Expedia believes that it appeals to the suppliers and advertisers through its geographic breadth and array of business models, which allows it to offer a wide range of products and services to the industrial range of customers through the agencies, advertising business models, and the merchants. To remain competitive within the market, Expedia aim to continue supporting and investing in its brand portfolio, business models, and geographic footprints with an aim of benefiting the advertisers, suppliers, and travelers. Technology and continuous innovation also contributes to organizational business strategy (Bushell & Healy, 2013). Through the years, Expedia has established a tradition of technological innovation evident from Expedia.com’s setting up of the Microsoft division and introduction of various innovations like Expedia.com which is a TravelAds sponsored search engine for the hotel advertisers and improving search results for the iPhone and iPod applications (Microsoft Corporation, 2000). For the business to continue meeting the needs of the customers, it intends to continue being innovative on behalf of the advertisers, suppliers, and travelers; as a result, it would improve the experience of the travelers, presentation and integration of the suppliers, marketing the search engines, improving the platform, and optimizing the search engines. The aim of Expedia is to continue exploring new market segments, which makes global reach to stand as its strategy (Rezdy, 2016). Through its Expedia, hotels.com, and TripAdvisor Media Network brands, it has the ability of operating both internationally and within North America. Additionally, the business also offers Chinese travelers numerous products and services since it has the majority of stake in eLong and offers hotels to the European travelers through its fully owned subsidiary, Venere (Expedia, 2001). Through expansion into the global market, Expedia is leveraging on technology, building its brand, operations, and proper supplier relationships. To remain competitive, the business intends to continue leveraging on the investment while adding more points of sale within new markets, introduction of new features on the websites to meet the needs of the customers, and offering proprietary and user-generated content for the clients. Furthermore, the business has a wide breadth of products and services that it offers. Expedia offers comprehensive, innovative products and services associated with travelling. In future, the business plans to improve and continue growing such offerings and expands the global points of sale (Liu, Yang & Gu, 2009). As a result, the travelers are able to interact with them at their convenience through organizational 24/7 telesales service which plays important role in appealing organizational products and services to the customers. Challenges for Success Booking and travelling industry is becoming highly competitive that most businesses are unable to achieve their competitive advantage. In addition, Expedia over depends on the US market. Through the years, the business has developed a strong and diversified presence in the US where it still derives the greatest portion of its revenues. In fiscal 2006, the total revenue from the US market was 72.2%, which increased its risks of negative financial impacts because of various events likely to have affect business operations. Such high dependence on the local market often increases organizational exposure to various domestic challenges like changes in the regulations, labour strikes, and unfavorable economic conditions. These factors are likely to affect organizational operations. Therefore, to prevent such challenges, it is of essence that the business diversifies its operations and continues to explore various market segments. This will, in turn, reduce its susceptibility to local problems and profitability. Fluctuation of cash from the business operations is another problem. Through the years of operations, the business has not been able to generate consistent cash from its numerous operations. Expedia has registered fluctuations in cash from the operations, which could upset organizational plans of expanding into the new markets. The business has focused much on integrating technological factors in its operations without consideration of the dangers associated with technological use. There have been increased cases of security issues from the customers refraining from booking online due to issues associated with mistrust of organizational capacity to ensure safety of the customers’ personal information and financial details. References Anderson, K. D. (2008). Transformational teacher leadership: decentring the search for transformational leadership. International Journal of Management in Education, 2(2), 109-115. Barney, J. B., & Hesterly, W. S. (2015). Strategic management and competitive advantage: Concepts and cases. Pearson. Bass, B. M., & Riggio, R. E. (2014). Transformational leadership. New York: Routledge. Bushell, G., & Healy, M. (2013). Expedia: The de minimis Notice and 'by object' Restrictions. Journal of European Competition Law & Practice, 4(3), 224-226. Elliott, K., & Asghar, A. (2014). Transformational Leadership in Science Education. Reframing Transformational Leadership, 3(1), 99-115. Expedia, Inc. (2001). Expedia. Author. Expedia. (2017). 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