Airbnb Porter Five Forces Analysis Essay Sample
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Airbnb Porter Five Forces Analysis Essay Sample
1. Bargaining power of customers (buyers)
The economic growth in Peru helps to develop tourism and hospitality in this country. The percentage of business in this country increased in these years and people is starting to know about the brand. The guest has no bargaining power because they know the price of the room or the apartment when they are looking that online. There are few exceptions when the customer can negotiate with the host but it is not usual. The customer has different options to decide which is going to be the place where he or she will stay during their visit in Peru. They have different prices and styles to decide so the buyer power is high. Comparing to other options like hotels or motels, Airbnb is cheaper so the customer would consider the price at the time to make a decision.
2. Bargaining power of suppliers
For Airbnb, the supplier will be the host that offer the room or apartment to rent, they make the business happen. The hosts is the basic level to provide a guest service. In Peru, as in Latin America, Airbnb works hand by hand with the host to avoid problems with the customers. They know that the market in Peru will increase a lot in the next years. Airbnb offers freedom to the host to decide the conditions to their guests, always following some rules and brand standards. The host can decide if he or she wants to change the price depending on any situation. The rents are unique and focus on amazing places for a high volume of travelers finally provides a range of prices for all types of customers.
3. Threats of new entrants
According to the threats that Peru can pass through we can consider them as “low and flexible”. Airbnb reaches their target through web pages, which is why the capital investment of making a web page its low. If they get people very good at creating this page, they can operate easily Airbnb and the distributions channels are not going to be any threat at all because the service offered it’s through their web page with no necessity of being known in another internet page. As they create a new way to get money by transactions by the sharing economy model and is for that reason that the governments are no prepared to deal with them right now, there are not law for this kind of businesses so there is no way for them to pay taxes. Nevertheless the threats of entrance are not consider as a big risk, the appearance of a new company between the other pages like booking.com can be consider as their principals competitors.
4. Threats of substitute products or services
As Airbnb is growing, so its competitors or companies that offers the same concept. We considered 3 principal categories: Hotels: it is considered as the most easily and known way for every traveler where you pay for a hotel room according on the nights you want to stay where room and have different services.
Hostels, backpackers or other similar type of accommodation: you also pay for the number of nights you are going to stay with the difference of the lack of services in comparison of the hotel and they have simple rooms.
Couchsurfing: it is a web platform where hostess off all over the world offers their couch or a place to stay in their houses for foreign people with no cost at all. This service is expected to be reciprocal.
5. Intensity of competitive rivalry
As mentioned before, companies as booking.com (that have seen Airbnb as a threat) are the main competitors of this web page. Also the new entrance of similar companies like Airbnb such as 9flats that has the same concept, although it’s not well known in Peru, it is in another countries mostly in Europe and have limited the business model. As the entrance and exits barriers are low, it is easy to be part of the market and to exit. This can be a threat for the reputation of the web page as they can finish its operations in Peru whenever they want, leaving their clients and hostess with no advantage at all. The hostess can finish with no money and the client with no place to stay.
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