Business Report on Airbnb Company
- Pages: 17
- Word count: 4146
- Category: Business
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It is indisputable that Airbnb is currently one of the leading companies in the world. Its success is not because of chance or fate, but because of the ability of the two designers Brian Chesky and Joe Gebbia, who, in the process of trying to find out ways getting money to rent on their San Francisco apartment, ended up discovering an entrepreneurial opportunity, which has currently turn the founders join the billionaire ranks (Konrad, 2014).
Closer look at the company’s history reveals that it has done well since the time it was founded. Starting was not easy, but with their creativity and innovation, the founders managed to explore and exploit the opportunity. For example, to gather for the growing demand, they started by enlisting a room from their former roommate and engineer (Konrad, 2014). After seven years, the Airbed and Breakfast turned into Aibnb (GrowthHackers 2014). It is now the leading and has even surpassed Hilton Hotels. For example, sources indicated that the company was valued at $10B. It surpasses legacy players such as Wyndham and Hyatt (GrowthHackers 2014).
Currently, it accommodates more than 10 million guests and has more than 550,000 properties distributed in different parts of the world (GrowthHackers 2014). Many investors and sponsors are willing to invest in the company. This is evidenced by the fact that investors such as Y Combinator, Sequoia Capital, Keith Rabois,
Andreessen Horowitz, Ashton Kutcher, Founders Fund, and TPG have contributed towards supporting the company (GrowthHackers 2014). From these investors, the company has received more than $770M (GrowthHackers 2014). As it shall be explored later, the founders, who are designers by profession, contributed significantly towards the success of the company. This is because they manage to sustain early growth using their own creative skills. There were early challenges during early growth, but the founder managed to overcome.
Despite the fact that Airbnb has been doing well, there are many questions that need to be answered to satisfy the investors and sponsors. They, for example, need to know whether the business is facing threats in the future or whether existing opportunities overweigh the threats. They also need to know the strengths and weaknesses of the company. They also need to know the financial performance of the company, the type of model the company is using and also stakeholder analysis. It is thus the goal of this report to describe all these key elements of the Airbnb Company. In particular, the report would focus on analyzing the system model, the stakeholder analysis, the SWOT analysis. Following the analysis, the report will identify some of the problems facing the company and then suggest some of the steps that should be taken.
The report has a number of objectives to meet. Some of the objectives include the following:
To evaluate whether the system modeling adopted by the Airbnb is appropriate or not.
To evaluate whether marketing strategies are appropriate and feasible
To evaluate whether the corporate citizenship of the company is appropriate.
To evaluate whether the company motivates its employees accordingly.
To evaluate whether the company has a good partnership with manufacturers, distributors, retailers and sponsors and even investors.
To determine the key strengths of the company.
To determine the major weaknesses facing the company.
To determine the key opportunities that the company has.
To determine the weaknesses facing the company.
Description of modelling
It is indisputable that the concept of modelling is not new. Almost every entrepreneurial discipline builds models to invent, and then to specify, the final system (Wolcott and Lippitz, 2007). And like any other model, analytical models are readily understood by the people who are to implement the system. Models are not always an exact replica of the system. Some models are more useful if they show a “justified distortion” emphasizing aspects of the system that are significant to the reader (Wolcott and Lippitz, 2007). System modeling is one of the key elements to consider when analyzing a company. Every company has its own system model and that what works in one company may not work in another. Before venturing into the kind of system model adopted by Airbnb, it is important to briefly describe four key models that a business or a company can adopt.
The first model is called opportunistic modeling (Wolcott and Lippitz, 2007). This is characterized by diffused ownership and ad hoc resource allocation. In this case, the founder may just start a business venture without having any target or planned end. This is often the initial form of modeling and that most of the companies pass through this form of the system model (Wolcott and Lippitz, 2007). The second model is called enabler. This is characterized by diffused ownership and dedicated resource allocation. This is where the owners of a given venture started thinking that to reach the end, there is a need for support from other stakeholder, preferably sponsors or investors (Darrow, 2013). The third form of the model is called an advocate and is characterized by focused ownership and ad hoc resource allocation. In this model, the founders may decide that the best way of achieving the growth goals is by seeking a new specialist who will manage the venture. The last model is called producer and is characterized by focused ownership and dedicated resources. In this case, the owners or rather the founders of a business venture may decide that the best way of achieving their target goals is by employing the services of new management and also seeking the support of the investors who can sponsor t project financially.
The rich picture
Closer look at Airbnb reveals that it started its operation through what is called the opportunist approach or model. This is because the company or rather the founders had no intention of starting the company when they first started to give out their room as a lodging space. The intention of the founders was to give out their room, get some money, which could help them rent an apartment.
As the rich picture suggests, opportunistic modeling can be carried out using the existing initial ownership and initial resources that the owners can get. The Airbnb started this way. The founders had no plan of who should be the real owner and therefore they ended up coming up with a company without designated organizational ownership (Wolcott and Lippitz, 2007). However, after realizing that the idea was worthwhile both nationally and internationally, the founders of the Airbnb have started adopting new and better system models that help the company achieve its growth goals. The new system model adopted by Airbnb is called enabler model. As presented in Figure 1 above, the model is based on the fact that with adequate support, the founders of the company, who are designers by profession, could carry out the business and achieves the set goals accordingly.
Enabler model, as stated earlier, is characterized by diffused ownership and dedicated resource allocation (Wolcott and Lippitz, 2007). This model is normally adopted in cases where employees are ready and willing to develop and invent new concepts if they are given adequate support in terms of funding. Right from the time the company was started, it is apparent that the founders were creative and were dedicated in coming up with ideas that meets the needs of the customers. For example, the way they market their first lodging space clearly indicates that they were creative and could come up with marvelous ideas if only they had funding (Wolcott and Lippitz, 2007). This implies that there was no need for the founders to seek new specialist or managers to help the company meet its goals.
As a result of expansion, the Airbnb has been forced to employ new employees and hence it is currently adopting the producer mode. This model entails inclusion of Craiglist model. Craiglist model is model that is used to facilitate booking system (Darrow, 2013). The model is presented in the figure below.
The use case diagram
System modeling can be further elaborated through the use of use case diagram. A use case diagram captures the functional aspects of a system. In essence, it describes “who” can do “what” with the system in question. Since it is graphical representation, it comprises of two components; the system boundary and actors.
From the use case diagram above, it is apparent that there are three main actors. The actors identified include the sponsors, the employees and the owners. From the use case diagram, it is apparent that the role of employees towards achieving the set targets is imperative. it is also clear that without the help of sponsors or investors, the Airbnb company could not have expanded to where it is currently. This implies that the sponsors have a key role to play as far as the objectives of the organization. The adoption of such system model is thus justifiable.
Contex-level flow diagram
Another way of presenting a system is through the use of context-level flow diagram. The diagram is meant to visualize and simplify the whole processes in a diagram. It should be noted that the success of the Airbnb depends on how well the booking system is conducted.
From the context level diagram above, it is apparent that the booking system is not an easy task. The first step in the booking process is where the visitor makes a search. As stated in the introductory sections, the founders of the company have created a website that can facilitate online searching and booking. After making the search, the searcher is expected to contact the host to inquire about a listing. This means that the host should be always online and should be able to manage the traffic or too many inquiries. If the host is online, he or she accepts the inquiry and then the guest would be expected to book the place. Accepting the inquiry means informing the guest or rather the searcher about the available accommodations and rooms. The Airbnb has also created an alternative where the guest can instantly book some listings without a contract.
From this information, it is apparent that the search page is a vital component of Airbnb ecosystem. It is a means through which the company can manage its inventory. This means that the greater challenge is to ensure that the search page is designed properly. The company has improved its search page significantly. For example, it is apparent that the new design of Airbnb’s search page comprises of pictures of the listings as well as a map that displays here the listings are located. The new search page has aided in solving the problems identified by the Insights team. According to the engineer designing the search page, one of the problems faced by the old search is what is called pogosticking. Pogosticking, according to the engineer was caused by lack of enough information on the results page and hence the users could not make a well-informed decision.
Another problem associated with the earlier search page is that many users could miss important filters, because such filters had not been positioned properly. Because of this, they could not narrow down their search properly.
The last problem associated with the older search is that despite the fact that the location was considered a central factor as far as booking process is concerned, the map was tiny and difficult to use. The other problem is that the code had not been modified despite the many changes that the company had gone through. Because of these problems, the IT and Insight team had to design a new search page that could facilitate the booking process. The search team started by redesigning and rewriting the page and also establish or built a prototype.
However, these moves did not solve the problem. This is because it was found that a prototype can only help a user to a point at which shippable code is necessary. What the new designers did was to seek a new direction, take cues from its award-winning mobile app. They designed a new page whereby the users can scroll through photos right from the search results and that by doing so listings would appear in cards that contained all of their relevant information and that they could have a glimpse of a larger map. The success of the project is attributable to lead designer, Kyle Pickering and engineer, Jan Overgoor. According to the engineer, one of the factors that enabled them to move further and very quickly is the tininess of the team. The engineer is also confident that he knew he project inside and out.
The success of the project is also attributable to the collaboration. One of the article reveals that Kyle Pickering and Jan Overgoor have experience in their field of specialization and this enabled them to bounce ideas off each other and keep a tight feedback loop . They were also dedicated and could keep or conduct daily standups and frequent reviews. They were also aggressive in the sense that they created a detailed spreadsheet to monitor every proposed feature.
Collaboration and borrowing from other companies is also one of the factors that enabled the designers come up with a booking system that is effective (Overgoor, 2014).for example, Jan Overgoor claims that they utilized a technology developed by Twitter called Flight.js to facilitate the client side of the page by preventing it from collapsing into sphageti code (Overgoor, 2014). They also utilized the technology from erb called Mustache because it is simpler to read, organize and write (Overgoor, 2014). According to the statements from the designers, they are constantly improving performance everywhere they can. For example, the designers recently changed the backend caching scheme so as to ensure that the emerging usage patterns is better (Overgoor, 2014). They are also working on the front-end performance in areas such as render time, image loading, scrolling, and CSS selectors (Overgoor, 2014).
It is clear from the different models described above that Airbnb has the most appropriate system model. According to the rich picture, it is apparent that only the major components of the company are shown. However, what needs to be stressed is that the performance of the company largely depends on the booking system (Overgoor, 2014). This means that apart from the effort and contribution of the owners and sponsors or investors, the booking system is the central factor making up the Airbnb Company (Overgoor, 2014). This is because the number of the customers depends on how easy it is to book the room. From the initial description, it is apparent that the company is doing well because of dedicated designers lead by Lead designer, Kyle Pickering and engineer, Jan Overgoor (Overgoor, 2014). It is clear that that Kyle Pickering and Jan Overgoor have experience in their field of specialization and this enabled them to bounce ideas off each other and keep a tight feedback loop (Sanghani, 2014). They were also dedicated and could keep or conduct daily standups and frequent reviews. They were also aggressive in the sense that they created a detailed spreadsheet to monitor every proposed feature.
As stated, collaboration and borrowing from other companies has also enabled the company to come up with a booking system that is effective. For example, Jan Overgoor claims that they utilized a technology developed by Twitter called Flight.js to facilitate the client side of the page by preventing it from collapsing into sphageti code (Sanghani, 2014). Sources also indicate that the designers are utilizing the technology from erb called Mustache because it is simpler to read, organize and write (Sanghani, 2014). According to the statements from the designers, they are constantly improving performance everywhere they can. It can therefore conclude that the system model adopted by the company is effective and appropriate.
Like any other business, there are individuals or groups that are likely to affect the performance of the Airbnb Company. Stakeholder analysis would help in rating such individuals or groups according to their influence and impact on the overall performance of the company. Some of the key stakeholders include the following: The government, the competitors, the associations, the partners, the employees, the customers, the investors, and the shareholders.
Government is one of the key stakeholder as far as the operation and success of Airbnb Company is concerned. Government constitutes an external factor influencing the performance of the company. The government can influence the performance of the company by what is called a fiscal monetary policy. Given the fact that the company is an international company implies that it is likely to face the risk currency valuation and fluctuation. This means that the company’s management needs to be good in predicting the performance of any given currency before fixing the prices.
Investors constitute another very important stakeholder, making up the Airbnb company. It is indisputable that the current performance of the Airbnb company is mainly because of the efforts and supports from the investors. Many investors and sponsors are willing to invest in the company. This is evidenced by the fact that investors such as Y Combinator, Sequoia Capital, Keith Rabois, Andreessen Horowitz, Ashton Kutcher, Founders Fund, and TPG have contributed towards supporting the company. From these investors, the company has received more than $770M. The company has also received huge funding Andreessen Horowitz, Digital Sky Technologies, General Catalyst Partners, Jeff Bezos, Ashton Kutcher.
Employers are central factors as far as the performance of the Airbnb Company is concerned. From the article by Overgoor, it is apparent that the company is endowed with dedicated designers lead by Lead designer, Kyle Pickering and engineer, Jan Overgoor (Overgoor, 2014). It is clear that that Kyle Pickering and Jan Overgoor have experience in their field of specialization and this enabled them to bounce ideas off each other and keep a tight feedback loop (Sanghani, 2014). They were also dedicated and could keep or conduct daily standups and frequent reviews. They were also aggressive in the sense that they created a detailed spreadsheet to monitor every proposed feature.
The Airbnb Company also attributes its success to the dedicated management. The founders of the company, according to the article entitled “Airbnb: The Growth Story You Didn’t Know” managed to defy all odds and venture into a business that is currently among the leading in the travel industry. Right from the time when the founders conceived the idea of earning the money to date, they have been able to display the entrepreneurial spirit. They are innovative, creative, and risk takers. Just to restate, it is apparent that Brian Chesky and Joe Gebbia, while in the process of trying to find out ways getting money to rent on their San Francisco apartment, ended up discovering an entrepreneurial opportunity, which has currently made them join the billionaire ranks. The ability of management to think like the two founders is an indication of high sense of creativity and innovativeness. It is therefore apparent that the management is most appropriate for its job and roles.
Competitors are normally an obstacle towards the progress of any company. However, for the case of Airbnb, competition is not a big problem. Since the Airbnb enters the market, it has been experiencing exponential growth. The competitors are not an obstacle to the Airbnb Company (Fawkes, 2013). Sources indicated that ability of Airbnb to deliver more than just a place to sleep enabled the company to disrupt the established lodging market greatly. The company’s competitive edge is also attributable to its appropriate pricing methods. Sources indicate that the Airbnb offers its services at relatively cheaper prices. Its prices are 30-80% lower than area hotels.
The partners and associations
The success of the company is also because it is flexible in forming partners and associations with major organizations and major investors. , Jan Overgoor, for example, claims that they utilized a technology developed by Twitter called Flight.js to facilitate the client side of the page by preventing it from collapsing into sphageti code (Overgoor, 2014). They also utilized the technology from erb called Mustache because it is simpler to read,
organize and write (Overgoor, 2014).
Strength of the Airbnbb Company
The Airbnb Company has several strengths. Some of these strengths are already discussed in the foregoing sections.
Dedicated research team- lead by Kyle Pickering and Jan Overgoor, the company has been able to tailor its services to suit the customers’ needs.
Good management- Lead by Brian Chesky and Joe Gebbia, the company has invented and implemented new processes that are meant to facilitate the achievement of goals.
Diversified services- By being able to deliver more than just a place to sleep, Airbnb Company has managed to dominate the travel industry.
Partnership with other organizations- By partnering with organizations such as Twitter, Airbnb Company has managed to design search page which is very efficient.
Attractiveness to investors- By being able to attract investors, Airbnb Company has managed to expand very quickly without going through financial pressure.
Weaknesses of Airbnb Company
Despite the above-mentioned strengths Airbnb Company faces some weaknesses.
Diseconomies of scale- It is clear that for the company to remain competitive, it needs to satisfy the needs of the clients. However, the case of Airbnb Company shows that it needs a highly efficient inventory. For example, there must be individuals on the ground and those running the booking system. If the company expands, it will reach a point where it would be hard to manage the traffic and the organization of the rooms.
The company faces one major threat:
Adoption of the company’s strategies by hotels- there are high chances that hotels are bound to adopt the strategy of providing more than sleep and this will place hotels in a better position because they own the residential facilities.
It is apparent that the Airbnb has almost exhausted all the available opportunities. However, there is one major opportunity that is yet to be exploited.
Acquiring the residential houses- the Airbnb Company needs to acquire its own residential facilities in different places to secure its future.
Inefficiency of booking system
Problem statement: Inefficiency of booking system is one of the major problems that is likely to occur in the Airbnb Company.
List of issues: According to the feedback from some of the customers, many loyal hosts of the site are experiencing big problems getting seen and eventually to get inquiries/reservations. Some clients even complain that they may book a room and after some time, their booking is changed.
List of objectives: The major objective is to improve the efficiency of the booking system.
List of requirements- The major requirement is that the designers need to work extra hard to ensure that everything is okay. They need to address the complaints from the customers.
List of constraints: The major constraint is that as the Airbnb company plans to expand, traffic is likely to increase.
Diseconomies of scale
Problem statement: Diseconomies of scale is another problem that affects the Airbnb Company
List of issues: As stated in SWOT analysis section, If the company expands, it will reach a point where it would be hard to manage the traffic and the organization of the rooms. This will further complicate the booking system.
List of objective: To solve this problem, the company needs to diversify its booking system according to the regions served.
List of requirements: The major requirement is the employment of new designers and engineers in such regions to facilitate the implementation of new booking systems.
List of constraints- The company is likely to experience major financial constraints because new employees and computers would be required.
Cybercrime and terrorism
Problem statement: The third major problem that is likely to face the Airbnb Company is cyber crime.
List of issues: The reason why cybercrime is considered major problem is because the company relies on the internet, which is vulnerable to insecurity issues such as cybercrime and terrorism.
List of objectives: The key objectives that can enable Airbnb company handle cybercrime is to secure its network using effective firewall and to apply appropriate identification and authentication procedures.
List of Constraints: The major constraints are that criminals can easily fake their details and also the fact that it is hard to secure a network that is extensive.
Based on the foregoing analysis, it is expected that the top management needs to be constantly updated so that they can diagnose the problem and design the best solution as fast as possible. Some of the key steps of achieving this include the following:
Motivate the designers so that they can work harder in identifying any loophole in the booking system.
Collect feedback from clients and address any problem or any complaints swiftly.
Install comprehensive screening at various listings to ensure that the information of the person matches the ID documents.
Cooperate with the internet providers such as Google so that they can identify the criminals in cases where there is a criminal act conducted by one of the customers.
- Overgoor, J. (2014). Data Experiments at Airbnb.
- Sanghani, N. (2014). Code Redesigng Search.
- Konrad, A. (2014). Airbnb Cofounders To Become First Sharing Economy Billionaires As Company Nears $10 Billion Valuation.
- GrowthHackers (2014). Airbnb: The Growth Story You Didn’t Know.