Wotif.com Market Opportunity Identification - Lab Report Example

Market Opportunity Identification Introduction Wotif.com is one of the leading online travel and accommodation services companiesin the world. The company has grown from its humble as a startup in a garage in 2000 to become a global company with offices in various countries (Norman 2012). In its quest for expansion and new international markets, Wotif.com has to look at the Asian region. Specifically, China offers a potential market for the company’s expansion plans in order to assert its position as an international online travel service provider. This market identification report will deliver an environmental analysis of the Chinese online travel market by evaluating the macro and micro business environment. The report will also evaluate the Strengths, Weaknesses, Opportunities and Threats (SWOT) posed by the Chinese market. The potential consumer market in China for the online travel services offered Wotif.com will be analyzed in order to gauge the attractiveness of the market. 2. Environmental analysis The Chinese economy has experienced a tremendous growth in the recent past. Before the economic recession set in, the economy of China was growing at two digit levels annually (Ding 5). It is notable that even with the impacts of the global financial crisis negatively affecting many economies in the world, China is still experiencing a significantly higher economic growth rate. The Chinese economy is greatly diversified with categories such as manufacturing, mining, energy, services, real estate among others. This implies that the growth in the economy cuts across all the major economic sectors including tourism and Information Communication Technology (ICT). Thus, China is an attractive international investment destination as its economy offers chances for business growth and expansion. It is notable that China has the highest population in the world currently standing at over two billion people (Tian 2011). The majority of the population comprises of local people. The high population offers a huge domestic market that can be harnessed for business gain. China has a stable political environment with the leadership of the country entrusted on the Communist Party. The transition structures in China are clear and there are no chances of political upheavals or drastic changes in policy. The Communist Party elects the President who is the head of state and the Prime Minister who serves as the head of government. The centralization of power has ensured that there are uniform economic policies in China and minimal chances for political upheavals. The government has also adopted investment policies and laws which encourage foreign investments in the country. The Chinese Online Travel Agency is charged with coordinating the affairs of the online travel industry in China. Imperatively, the political and legal environment in China is conducive for investments in the online travel sector. China is one of the leading countries in the world in terms of technological advancements. Internet penetration is high with most families in the main cities having accessing to internet services (Ding 7). Most of the international and local hotels in the main cities such as Beijing and Guangzhou have adopted robust information technology systems to run their operations. Suffice to say, the hotels already have their own online booking systems. According to (Tian 2011), a majority of tourists visiting China in 2011 used online travel websites to make their accommodation and booking reservations. This implies that the Chinese market is technological ready for online travel services and the market is bound to grow as technology penetration increases. One of the main competitors in the Chinese online travel market is Ctrip. Ctrip is the market leader in the rapidly growing Chinese online travel market (Tian 2011). The company specializes in both inbound and outbound travel demand for the Chinese market. Recently, the company partnered Booking.com in order to expand its services to include over fifty thousand hotels worldwide. Ctrip has the advantage of being among the first online travel services company in China and it had a market share of 55.8% in 2008 (Tian 2010). The other competitor of Wotif.com is Expedia. Expedia is a global company that specializes in online travel and accommodation bookings. The company has presence in several markets and it also owns significant equity in some Chinese online travel companies. It is notable that Expedia has the capability to leverage on the economies of scale in order to compete in the Chinese market. The company already has an extensive network that it can connect with the Chinese market to rapidly gain further market share. The micro environment in terms of consumers is favorable in China. According statistics, China’s online market has developed rapidly in the recent past with a huge number of citizens using internet to make hotel reservations. China National Tourism Administration (Norman 2012) indicates that over seventy percent of the Chinese population used internet to book flights. The large number of people using online services in China points out that there is a sufficient market for online travel services websites. 3. SWOT Analysis Wotif.com is a company that was established during the height of the dot.com boom. Unlike most of the companies that were established during this period, Wotif.com has managed to survive and grow tremendously over the past decade. The company was established in the year 2000 as a startup in garage. With its roots in Australia, the company has managed to expand its reach to cover several countries. The company is the market leader in online travel services in Australia and it has offices in several countries. It is imperative that the company has had experience in the online travel industry for over ten years. This means that it has refined its online system to be more robust. Thus, the company has the requisite experience to able to navigate the online travel market in China. The company has been listed in the Australian Stock Exchange (ASX: WTF) since 2006 and it has a sound management team (Symmons 2010). Despite the recent global economic recession, Wotif.com has increased its sales and its share price has not declined. According to Citigroup’s, Wotif.com is valued at 13.8 times value of its market capitalization compared to Expedia which is rated at just 4.8 times of its market capitalization value (Symmons 2010). This indicates that the company is performing well and it has investor confidence. The company can leverage on its market value to raise funds from investors to fund its foray into the Chinese market. Wotif.com is has a globally recognized brand name. The company has numerous loyal customers who have utilized its services around the world. Brand recognition can help the company to easily penetrate the Chinese market as it is already known internationally. In retrospect, the international travelers who have used the services of the company for other destinations can greatly appreciate the additional of the Chinese market into the company’s offerings. This will make the company a one stop shop for all international online travel booking services. It is important to note that Wotif.com does not have experience in terms of operations in the Asian market. The company has established its services mostly in Australia and some European countries (Symmons 2010). Its foray into the Chinese market may be challenging given the fact that Asian markets are not exactly similar to the European markets. The lack of experience in the Asian markets and other international markets may pose a challenge on the market strategy that the company will adopt in order to conquer the Chinese market. The Chinese authorities also have various restrictions on the operations of international companies. The authorities are especially sensitive to internet services as they endeavor to control the flow of information in China. For instance, the global internet giant Google was forced out of the Chinese market due to extreme restrictions on the nature of information that the company would make available to the Chinese public (Ding 11). In this regard, Wotif.com will face significant challenges in adjusting its system to meet the local Chinese restrictions and demands. China has the highest population in the globe and it is also experiencing very high economic growth rates. This presents an opportunity to Wotif.com to capitalize on and set up its online travel booking services. The number of tourists visiting China for both business and pleasure has been on the rise in the recent past (Tian 2010). China has established its position as an industrial and economic giant in the globe with its economy being the second largest in the world. China is also the leading manufacturing center in the world with industries spanning across virtually all sectors. This means that international tourism to China is bound to increase as business executives visit the country. Imperatively, the international visitors will seek the services of online travel booking companies to arrange their travel. The foray of Wotif.com to China may face the threat of local online travel companies and government censorship. As noted, Ctrip is the leading Chinese online travel company and it is based in China. According to the recent trends, the Chinese favor their local companies compared to foreign companies. For instance, despite Facebook being the largest social networking site in the world, it is the second in terms of market share in China (Ding 11). Thus, patronage of local companies in China may pose a threat to the establishment of Wotif.com as an online travel services company in China. The SWOT analysis indicates that Wotif.com has significant strengths that can favor its foray into the Chinese online travel market. The Company has a tried and tested technology that proves success. Also, Wotif.com is in a good financial position and a good brand name which it can leverage to enter the Chinese market. The growing economy of China indicates that international tourism will be on the increase to the country thus offering an opportunity for online travel services companies a conducive investment environment. However, the challenge of operating in the Chinese market as well Chinese government restrictions pose significant threats to the entry of Wotif.com into the Chinese market. The local online companies also have the advantage of being the first in the market and also local patronage. Despite these challenges, the Chinese online travel market is attractive and Wotif.com has the capacity to compete effectively. 4. Segmentation and target profile Psychographic segmentation base can be used to establish potential market for Wotif.com’s online travel services. The social class is a critical determinant in evaluating the potential users of the online travel services. In this regard, middle level business executives form a significant segment for the online booking services. According to the Chinese National Tourism Administration, most of the international visitors to China come for business purposes (Tian 2010). Hence, the middle level business executives who travel frequently to China are potential customers for Wotif.com in China. The lifestyle of individuals can also be used to establish a market segment for the services of Wotif.com. People going for holidays in China made up a significant portion of the tourists who visited China. It is imperative to note the leisure travel accounted for a significant portionof international visitors to China. This means that the leisure segment which seeks for bargains for holidays can account for a significant portion of the customers for Wotif.com. The holiday makers are occasional travelers depending on the season. According to (Ding 10), most people going for holidays conduct online research in order to compare the prices for various destinations. Thus, this market segment is a perfect fit for the services offered by Wotif.com as it offers accommodation and travel packages at low prices. According to behavioral aspects, the technologically savvy individuals can form a significant segment for the company. The young and technologically savvy individuals use the internet frequently and thus more likely to use online travel services (Yang & Ching-Fu 237). Suffice to say, these segment is attracted to the online booking services due to its ability to offer convenient and relatively cheaper booking options. According to Yang and Ching-Fu (238), young and technologically savvy people use the internet frequently and they are often inclined to seek for bargains on the internet. This segment is unlike the older people who are used to the traditional travel agents’ services. Through the internet, the young people can quickly find information and make their bookings with just a few clicks. This segment seeks the benefits of convenience, economy and ease of access to information travel booking. Geographically, the market can be segmented into the domestic and international travelers. It is imperative to note that the huge population in China offers a large market for online travel and booking services. Domestic tourism has been on the rise in the China in the past decade as more people obtain disposable income. Thus, the local population for both domestic and outbound travel can form an attractive market segment. The middle level business executives travel frequently and spend significant amounts on travel and accommodation bookings (Yang & Ching-Fu 241). Suffice to say, this market segment is available throughout the year since business always goes on despite the season. The average amount of money spent by this segment is higher compared to the holiday makers who seek bargains. Most of the costs of the business travelers are catered for by their companies. Thus, this market segment is very lucrative as it offers a potential for high income as well as business throughout the year. On the other hand, the number of people travelling to China for leisure has increased significantly in the recent past. The Chinese government has made great efforts to brand its cities as prime tourist destinations and it has also increased the number of cultural events that can attract tourists. This means that many people may be motivated to visit China for leisure purposes and the potential in this segment is bound to grow with time. Although holiday makers are restricted to specific seasons, their numbers are sufficient to earn the company significant revenue. Also, Wotif.com offers bargains for travel and accommodation hence it is likely to be attractive to this market segment. As noted, the growing Chinese economy has made more working class people to have significant disposable income. This middle class working people can easily afford annual holidays to various destinations in the world. Therefore, the company can target this group since it already has numerous affiliations and partnerships with international hotels. In this regard, Wotif.com can benefit by offering services to Chinese domestic tourists as well as outbound travelers. However, this segment is quite challenging given the fact that the Chinese people have a tendency to patronage their local companies’ services and products. Wotif.com will have to compete with the local market leader, Ctrip, for clients from this segment. The best market segment for Ctrip is the international business executives’ category. This segment has potential for high revenues as well as the capacity to net corporate clients. It is imperative to note that business trips occur all year round thus the company will be assured of business during all seasons. Also, the economic growth of China implies that more business executives would be compelled to visit the country hence increasing the number of potential clients. The business executives have higher spending capacity and this will earn the company higher revenues from commissions and fees. 5. Conclusion The rapid growth of the Chinese economy has made the country an economic giant and an attractive tourist destination. The economic growth has enabled the country to attract foreign investors and also to improve revamp its image as an international tourist attraction destination. Also, the China has a high population which is can form a large market for the services offered by Wotif.com. The company has a robust online travel system that can effectively serve the needs of its clients in the Chinese market. The business model of partnering with hotels and airlines to offer discounted services can work in the Chinese online travel market since the most of the hotels are part of international brands. However, the company may have to reconsider its fees based price system since most of its competitors in the Chinese online travel market have slashed their fees. Despite challenges in terms of local regulations and competition, it is evident that Wotif.com can effectively compete in the Chinese online travel market and make significant revenues. 6. Recommendations In order for the company to compete effectively and take advantage of the opportunities offered by the Chinese online travel market, it is imperative that the company should restructure its system to suit the government regulations in China. This is important considering the fact that Chinese authorities have restrictions on the flow of information to the Chinese public. Also, the company should partner with local companies in order to facilitate its operations in the Chinese market. The company does not have experience of operating in the Asian region and therefore the local partner will assist in providing the required experience. References Ding, W 2011, "Challenges and Opportunities of Hotel Online Booking in China." Design, User Experience, and Usability. Theory, Methods, Tools and Practice (2011): 3-12. Norman, K 2012, ‘Online travel market ‘, New Media Trend Watch, 12 May, viewed on 17 March 2013 http://www.newmediatrendwatch.com/world-overview/91-online-travel-market Symmons, D 2010, ‘Wotif still leading but may get competition yet’, 16 June, viewed on 17 March 2013, Tian,J 2010, ‘Overview: Chinese online travel industry’ , Chinavestor Market Research, 20 April, viewed on 17 March 2013, http://www.chinavestor.com/internet/71629-overview-chinese-online-travel-industry.html Vinod, B, 2010, "The future of online travel." Journal of Revenue & Pricing Management 10.1: 56-61. Yang, Ching-Chiao, & Ching-Fu C. 2012, "Market Segmentation of Website Services in Travel Agencies." Asia Pacific Management Review 17.3: 233-246. Read More