How Successful Expedia Company Is - Case Study Example

Success for Expedia Company Name Institutional Affiliation Success for Expedia Company Introduction Expedia, Inc. is an American based travel company founded by Richard Barton in 1996. As a company operating in the travel industry, it manages various international online travel brands with the examples of Hotwire.com, Travelocity and HomeAway. Its operation focuses in managing travel websites and metasearch engines in revolutionizing the sector. This report discusses the success in Expedia, Inc. identifying the measures of success, reason for its successful outcome and an analysis of the company’s capabilities. It also includes an analysis of the firms’ leadership and strategies as contributors to its success. The report concludes with a recommendation for the future of the business. Measures of Success Walker and Brown (2004) explain that there are many factors in a business that may equate to its successful outcome. This includes the financial and non-financial performance measures with research centering on financial results. Important in this measure is the understanding that the various stakeholders to an enterprise will hold varying opinion about these measures including the preference in utilizing a particular technique (Walker & Brown, 2004; Zaman, 2017). Concerning the financial measures, Zaman (2017) identifies it as a mechanism that considers the business results involving elements such as return on assets, return on equity and net income. Similarly, Walker and Brown (2004) argue that financial model explain growth and profitability outcome. Comparatively, the non-financial measures center on non economical elements with the examples of autonomy, job satisfaction, productivity improvement, environmental compliance and innovation (Walker & Brown, 2004; Zaman, 2017). In reference to Bulley, Baku and Allan (2014), competitive intelligence in a company is a factor that directs a business success. It involves gathering information from external source to provide an edge in the business ahead of the competition. According to Bulley et al. (2014), it informs the planning and strategic implementation in the enterprise. Here, imperative are its functions as a non-financial measure of success. At this point, it is important to include entrepreneurial opportunities generated by a company as a success element (Rahman, Amran, Ahmad & Taghizadeh, 2015). This entails the support from these companies to people, especially those at the base of the economic pyramid. The support includes technical and training aimed at improving the competencies of this category (Rahman et al. 2015). Examining the performance in Expedia, Inc. the annual financial reports of 2016 identify its financial successes (Expedia, Inc. 2017). Figure 1 illustrates the financial summary comparative of four companies with Expedia, Inc. leading in performance. Figure 1: Performance Comparison Graph Table 1 further identifies the continued growth of the firm through its profits which aligns with the financial success measure (Expedia, Inc. 2017). Table 1: Selected Financial Report Financial Times (2017) includes data on share price and dividend projection in figure 2 and 3 respectively. From this data, it is evident that the company progressively improves productivity. Therefore, from these different measures and their outcomes, Expedia, Inc. is a successful company. Figure 2: Share Price Forecast Figure 3: Dividends Reasons for Company Success Utilizing technology Expedia, Inc. utilizes technology in the form of the internet to generate a system of mass communication (Nelissen, 2016; Smith & Rupp, 2004). Moreover, with the technology, there is an improvement in business relations among the different stakeholders, enhanced communication and enhancement of value through the rich and richness platform (Nelissen, 2016; Smith & Rupp, 2004). Currently, the company holds an award from Fortune for being among the leading companies in utilizing technology in the workplace (Expedia, Inc 2017). Implementing Human Resource Management Practices The application of the human resource management practices in an innovative way generates competitive advantage (Sun & Walsh, 2011). In particular, Expedia exercise the application of collaboration technique fueled by the firms’ belief that each individual is capable of making an impact. With this idea, the company pulls together its talents to accomplish greater success (Expedia, Inc 2017). Utilizing Mergers and Acquisition The use of mergers and acquisitions (M&E) is a common strategy employed in expanding businesses, especially in tours and travel industry (Fäh, 2016). Expedia has managed to employ the technique in acquiring the Orbitz Company (Fäh, 2016) and HomeAway in 2015 (Nelissen, 2016). Consequently, the acquisition led to an increase in knowledge, expansion of its operations and enhanced strength in the market which interprets to successful outcomes. Advertising Advertisements improve a consumers’ attraction to a particular product or service. In Expedia, Inc. it not only advertises its particular range of services but utilizes third party agencies in enhancing its revenue collection from these forms of marketing (Expedia, Inc 2017; Nelissen, 2016). According to Nelissen (2016), the company enjoys a 66% annual growth of its media and advertising business. Tapping Mobile Internet as a Marketing Tool In reference to Withiam (2013), the number of mobile internet users is on a rapid increase projected to surpass the numbers of desktop computer users in the near future. In response to these trends, Expedia manages to optimize its mobile services for an ease in access to both its brand in the hotel and tours business as well as to the customers (Nelissen, 2016). Statistics have 40% of online traffic emerging from these mobile channels (Nelissen, 2016). Incorporating Innovation in Performance Improvement Based on Baynote, Inc (2010), the company identified the specific travel needs in its consumers resulting to the innovation of its search engines. The company created a free-form search system to replace the traditional keyword search system. Furthermore, the company developed a personalized onsite search technology (The Baynote Observer) to refine individual searches to the particular product or service that interest the potential client (Baynote, Inc. 2010). This model allows the continuous monitoring of the activities of its customers including the most visited sites which enable the firm to improve its advertisement on these areas (Baynote, Inc. 2010). Gender Balance Exercising gender equality at the workplace initiates the growth of positive work cultures. For Expedia, Inc. the gender par parity functions at a ratio of 1:1 for both genders (Expedia, Inc 2017). Moreover, the company has a 50% of its workforce in the US as women with a total of 35% of these women holding leadership positions (Expedia, Inc 2017). Interestingly, these women equal 25 and 26percent of the professionals in the technology and computer positions in the company. With this extensive inclusion of un-gendered work environment, Expedia holds an award of being of the best place to work, especially regarding its standards on equality (Expedia, Inc 2017). The Companies Philosophy Expedia, Inc (2017), the company operates with a giving philosophy featuring four different areas. The particular areas include providing community grants to charitable organizations, matching gift program, employee volunteerism program and corporate charitable partners (Expedia, Inc 2017). The engagement of the firm in these activities follows the belief of people helping people to make a difference. As such, the firm establishes a close relation with the society leading to their success in attracting consumers. Analysis of the Company It is imperative to perform analysis of an existing company to determine its abilities to perform as well identify areas of weakness. One of the effective tools is the value chain model identifying channels that add value to the customers. Jurevicius (2013) describes value chain analysis as a process through which a company identifies its primary and support functions that realize value to the consumer as the end product. Further understanding of the concept includes the views by Fine, Vardan, Pethick and El-Hout (2002), were the model functions to provide the firm with a competitive advantage through its mechanisms of distinguishing areas of strength and weakness. Its role is particularly important in today’s business environments characterized by changes in technology and market trends (Fine et al. 2002). With these changes, enterprises are in a constant need to gain competitive advantage which interprets to integration and re-integration of the firms’ assets. Consequently, this entails a continuous value-chain assessment and designing. The designing of the model focuses on particular elements that follow a sequence of events beginning with conception to the different phases in production and finally to the output. Concerning these elements, Fine et al. (2002) provides four key components including the architecture, sourcing, investment and alliance. Imperative is the development of the value chain framework stemming from these primary components. Fine et al. (2002) explains that the framework in analyzing begins with identifying the product, processes and subsystems of the firm that realize value to the customer. In this case, Expedia is a service company specializing in online travel management. It process involves managing information for its travel brands which it perform collaboratively with third parties through their advertisement channels (Expedia, Inc 2017; Nelissen, 2016). Here, the managing of information from the different brands enables these value chains to generate value to the client. Comparatively, the third parties ability to progress information management and sharing points to their coordinative role in value creation generation. At this point it is important to consider these particular functions, process and successes in Expedia as its strategic capabilities. The discussion by Han (n.d) defines capabilities as the enterprise capacity to carry out a particular task. For this to occur, the firm must integrate its resources and capabilities to create a value chain model otherwise referred to as the source of competitive advantage (Daniele & Frew, 2005). According to Daniele and Frew (2005) Expedia has four groups of strategic capabilities which are finances, infrastructure management, customer relationship and product innovation. Expedia performance through the year indicates of its strong financial position which functions as a core strategic capability. Concerning infrastructure management, Daniele and Frew (2005) identifies that the internet and the technology employed by a company provide competitive infrastructure. This is true in Expedia evident by establishing specific search engines such as the The Baynote Observer and the Expert Searching and Pricing (ESP) platform (Baynote, Inc. 2010; Daniele & Frew, 2005). Moreover, these techniques establish enhanced consumer relationship management systems and direct connectivity with different service providers. Regarding product innovation, Daniele and Frew (2005) identify it as those elements that differentiate a particular company from its competitors. Expedia as the case in reference has introduced a dynamic service platform that functions as travel and tour agency. Furthermore, it has generated compelling value to both its suppliers and consumers through opening up a platform that integrates their needs and eases accessibility. There is also the provision of transparency by allowing target markets to compare services from competing firms (Daniele & Frew, 2005). Contrastively, there is the concept of consumer relationship building realized through four sequential steps (Daniele & Frew, 2005). Expedia employs the technology elements in managing its progress in tapping and retaining of clients. In particular, there is the use of third-party channels for advertisement and marketing (Expedia, Inc 2017; Nelissen, 2016). Figure 4 illustrates an adapted value chain for the company. Figure 4: Adapted Value Chain Barney (1991) explains the value of sustained competitive advantage in a firm which is a significant focus in strategic management. In identifying these areas availing advantage, companies use a framework model which emphasis the need to implement effective strategies (Barney, 1991). Important in this strategy mechanism is its abilities to exploit the internal strength through a system that taps environmental opportunities and eliminates external threats and internal limitations (Barney, 1991). Further discussion in the subject includes the contribution of the resource-based view in introducing basic assumptions in analyzing strategic capabilities (Eisenhardt & Martin, 2000). However, with these assumptions there are three primary concepts that generate the successful outcome including the firm resources, competitive advantage, and sustained competitive advantage (Barney, 1991). Concerning the firm resources as a strategic capability, Barney (1991) mentions that these resources can only provide competitive advantage if they posses characteristics such as valuable, rare, imperfectly imitable and absence of strategic equivalent substitute for these resources. These characteristics develop the VRIN evaluation criteria in identifying the firms’ strategic capabilities in gaining sustainable competitive advantage (Eisenhardt & Martin, 2000). Furthermore, with complementarities the potential of meeting sustained competitive advantage becomes enhanced. Eisenhardt and Martin (2000) refer these complementarities as dynamic capabilities which include the human, physical and organizational assets that are useful in implementing value-generation mechanisms. These resources act as drivers in the utilization of the strategic capabilities and their recreation into new and more beneficial assets in competitive advantage. Table 2 provides a VRIN summary for Expedia, Inc. Resource/Capabilities V R I N Technology yes no no no Finances yes no no no Collaboration yes yes yes yes Culture yes yes yes yes Reputation yes yes yes yes Corporate management yes yes yes yes Marketing yes no no no Sale, distribution and Services yes no no no Product development yes yes yes yes Table 2: VRIN summary for Expedia, Inc The information in table 2 presents Expedias’ strategic capabilities projected through the VRIN framework. From the table, both the technology and finances which account for the firms’ infrastructure are valuable in realizing competitive advantage. Important is their ability to support other resources that meet the four vital characteristics such as the organization culture, collaboration, reputation, corporate management and product development. Moreover, the resource contributing to sustainable advantage stem from both the financial and non-financial assets cementing their importance of a company’s success and strategic evaluation in managing performance. Examining the framework relative to the adaptive value chain, these strategic core abilities are the primary components deriving Expedia, Inc ability to successfully manage the integration of different suppliers (brands) for efficient tailored consumer services. From the analysis, the integration of the tangible, intangible and human resources has progressively allowed the company to develop and maintain strategic capability in attaining sustainable competitive advantage. Leadership in Expedia Leadership is an imperative segment in influencing performs in an organization. According to Stangl, Inversini and Schegg (2016), leadership practices are an outcome of the culture within the organization. Companies such as Expedia, Inc operate in complex business environment a result of changes in market trends and technology. As such the leadership in the management function becomes crucial for success. According to a report by Tnooz (2013), Expedia has experienced some reshuffling of its leaders in a quest to generate enhanced positive performance. Tnooz (2013) explain that the changes are in projection to the organization structure evaluation process whose performance function to optimally align the functions of its business units or the brands. Moreover, the report mentions the reshuffling as a strategy to ensure long-term business success (Tnooz, 2013). Literature on leadership styles supports the mechanism of transformational leadership over transactional leadership mechanism. This follows the comprehensive approach of the technique with a social approach rather than the economical concern employed in transactional leadership style. Examining the leadership at Expedia, Dara Khosrowshahi, as the current president and CEO strikes as a transformative leader (Expedia, Inc 2017). Under his leadership, the company has grown to one of the largest global online firms. His abilities to generate such success follow his extensive experience in the tour and travel industry. With this skill, he developed an effective strategy to see improvement in Expedia brand operations (Expedia, Inc 2017). His focus is on innovation and global growth evident from his career advice on optimizing on a progressive short term-basis (Tnooz, 2013). He also believes in collaboration through team work regardless of the person’s position in the firm. Important in the leadership at Experdia, Inc is the availability of structured corporate governance that directs the conduct of the employees. Expedia, Inc (2017) includes that the corporate governance sets high standards for employees conduct and performance. In this governance system, it is the duty of the board of directors to function as influential forces in directing the shareholders and manage the company’s business. Furthermore, the model identifies particular procedure and standards that act as guideline in the effective management of the firms’ functions (Expedia, Inc 2017). Inclusive in Expedia corporate governance is the code of business conduct and ethics whose revision follows a collective decision by the board of directs. Imperative in this decision is the consideration of the company’s interests, laws and regulations in the industry (Expedia, Inc 2017). Therefore, with this system, the firm is able to develop an organization culture governed by specific guidelines. Consequently, the availability of this extensive corporate culture ensures that the efficient and skillful leadership is in place to execute the business activities. Business Strategy in Expedia, Inc Current market conditions place industries in a progressive quest for productivity gains. There is also the utilization of technology to advance output, especially in the service industry (Huang & Rust 2014; Runfola, Rosati & Guercini, 2013). A majority of companies are applying automation techniques aimed at meeting human needs in a more advanced and effective system. However, this has not always been successful interpreting for the need to structure an efficient strategy before the execution of a particular business operation. For service industry, consumer perception of the service or product is vital for their continued success. As such, there is a need to monitor and understand consumer behavior to inform decision-making (Runfola et al. 2013). According to Huang and Rust (2014), Expedia has progressively managed to generate and increase in productivity in service delivery. Its success stems from its business strategy that views productive as a strategic function developed from the characteristics of the business and the technology in use (Huang & Rust 2014). In reference to (Runfola et al. 2013), business strategy entails the process of delivering value to the consumer or target market. In re-delivering value in the contemporary business environment, two factors become of necessary importance. This included the state of technology employable by the firm governed by both its financial and human resources as well as the importance ascribed in meeting customer satisfaction. As aforementioned, Expedia exploits the technology of the internet and mobile internet as its primary sources of generating productivity (Nelissen, 2016; Smith & Rupp, 2004). Furthermore, its tapping into these technologies enhances its relations with its shareholder through revolutionizing the communication system for faster and efficient information sharing. The discussion by Huang and Rust (2014) includes the central position of consumer satisfaction in realizing enhanced productivity. Interestingly, companies adopting business models that prioritize customer satisfaction over efficiency face lower productivity rate. This follows the dependency on efficiency to effect better or improved consumer satisfaction (Huang & Rust 2014). However, in Expedia, the management has managed to balance the element by analyzing the market margins. Furthermore, the firm collaboration techniques along the working culture enhance its efficiency in delivering quality service to the consumer and therefore achieving excellent consumer satisfaction (Expedia, Inc 2017). Consequently, its business strategic process provides it with a positive reputation evident from the numerous awards for different performances. Important about the reputation is the gaining of consumer loyalty that enables the company to expand its operations and gain tremendous financial successes (Expedia, Inc 2017). Huang and Rust (2014) explains that a business strategy development should consider the competition and channels of establishing competitive advantage. One of the plans involves pricing and price margins relative to the competitors. In Expedia, as one of the leading online service industry, it provides its consumers with competitive pricing a feature realized through its transparency concept (Runfola et al. 2013). Here, the act by the company to compare prices of its different brands provides the consumer with vital information in decision-making (Runfola et al. 2013). Furthermore, by developing the comprehensive package from its different brands, the firm manages to gain a competitive advantage from other online agencies specializing in a particular field. In reference to the different classification of business models described by Runfola et al. (2013), Expedia, Inc practices E-Market place strategies in effecting its wholesome service package. Strategic Recommendations The strategy employed by Expedia about the acquisition of business in the tours and travel industry could pose a potential challenge in the effective management of the firm. The trends in the business point to a pattern of frequent acquisition of competitive brands which expand its operations about these enterprises. However, these acquired companies interpret to an extension of Expedias’ complexity environments which could alter its future success. With acquisitions, there is a change in organization culture and management which lead to re-structuring of the parent company to accommodate these changes. As such, the frequent changing of the traditions that provide it with both imitable and non-substitutive resources can alter its business strategies towards long-term success and substantive competitive advantage. Reflecting on the firms’ resources and capabilities, it is possible that the management can utilizes these assets in managing the projected challenges. In particular, the company has a strong financial resource with which it can fund research and development (R&D) sectors in identifying viable target markets. Here, the use of financial resource for informed R&D in learning what to acquire and when to do so will mitigate the challenge of making unprofitable acquisitions. Furthermore, the employment of its technology will enhance its ability to generate growth within these acquired franchises limiting the possibility of loss. Concerning the internal and external challenge of organization culture changes, the management can employ its social cultural working processes in realizing corporation among its employees. Furthermore, the availability of the corporate management model serves as a unifying factor in directing the conduct and behavior of the workforce. Concerning these suggestions, it is likely that they will receive positive response by the different shareholder in the business. However, the investors might have a feasibility concern about the effectiveness of relying on R&D results in directing their investments. It is possible that they may require better systems of informing their decision-making concerning which investments are viable and carry the potential of success. Examining the suggestions on culture, the employee may consider the initiative appropriate since cultural difference is a persistent challenge in M&A business partnership as well as multinational firms such as Expedia. Lastly, these suggestions will resonate positively with the consumer especially since the business goal is to enhance consumer satisfaction in the industry. References Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of management, 17(1), 99-120. Baynote, Inc. (2010). Success Story, Expedia. Retrieved from http://www.baynote.com/wp-content/uploads/2012/04/expedia-2010-10-27.pdf Bulley, C. A., Baku, K. F., & Allan, M. M. (2014). Competitive intelligence information: A key business success factor. Journal of Management and Sustainability, 4(2), 82. Daniele, R., & Frew, A. (2005). 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