Can Business Model of Priceline.Com Be Saved Essay Example

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What determines whether com will ultimately succeed or fail? What are the reasons behind this outcome?

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P13 Q4: What is the extent of the Priceline model's applicability?

Examining the present competitive landscape of Priceline.com and evaluating its advantages and disadvantages.

According to Porter's Five Forces Model, every industry is affected by five forces that determine its outcome: 1. Established companies, 2. Potential newcomers, 3. Substitute products or services, 4. Suppliers, and 5. Buyers.

The business environment is comprised of five forces: products substitutability, offering suppliers, competing suppliers, and customer demand.

Porter formulated a model for evaluating the competitive environment of an industry, which can also be applied to Priceline.com. In this case, the competitive forces include competitors who offer similar products, services, or information. Priceline.com faces exceptional competition from other online intermediaries like Expedia and Hotels.

The competition in the industry is not only affected by the presence of existing rivals such as Expedia. com, Cheaptickets. com, and Travelocity, as well as the discounts offered by airlines on Orbitz.com and hotels on Travelweb.com, but it can also be influenced by potential new entrants. This means that new

firms entering the industry can pose a threat to existing companies.

Your potential new entrants include off-line competitors who do not have a website, as well as new businesses entering the market through their website. Biddingfortravel.com and Flyertalk.com are examples of competitors that have disrupted Priceline.com's market by displaying the exact prices paid for hotels and flights by their users.

The power of buyers is significant in the producing industry as visitors and potential customers to your website and competitors can impact prices. Strong buyers can control pricing. As for suppliers, they are the companies that provide products or parts for manufacturers, as well as services on your site. This also includes vendors that offer web-enabling technology such as web hosting and software. A strong supplier can also influence the producing industry by selling raw materials at a high price to gain some of the industry's profits.

The presence of substitutes implies alternative means and sources that cater to the same products, services, or information offered by your Website. As the availability of substitutes increases, the demand will become more flexible because customers have more options. The existence of substitute threats arises when changes in their prices influence the demand. By utilizing these definitions for the five forces, your understanding of the competitive business environment where your Website operates can be enhanced. 1. 2.

Priceline, a well-known e-commerce enterprise, is encountering various hurdles including dwindling revenue and profits, the exit of crucial executives, overindulgent business expansion, and the effects of terrorism on the economy. As a result, we will conduct a SWOT analysis to assess the organization's strengths and weaknesses.

One benefit that Priceline possesses is its creation of

an exclusive business approach known as "Name Your Own Price".

Priceline.com uses a patented internet pricing system called Name-Your-Own-Price(a) to help customers save money on various products and services, such as leisure airline tickets, hotel rooms, rental cars, new cars, home equity loans, and home refinancing. Priceline acts as the intermediary between buyers and suppliers by utilizing communication and information sharing on the internet to create an innovative distribution channel and retail pricing system. This enables efficient price discrimination while also allowing customers to balance their preferences for product brand, quality characteristics, and affordability. By submitting desired prices through Priceline.com, customers provide sellers with valuable information that facilitates profitable exchanges.

The key factors that contribute to Priceline's sustainability and value creation are its impressive number of registered users, which has exceeded 16 million since its inception in April 1998. In the year 2002 alone, Priceline sold an incredible quantity of travel bookings, including 2.9 million airline tickets, 4.5 million hotel room nights, and 2.8 million rental car days. Furthermore, the company's strong branding recognition also plays a crucial role in its success.

Priceline.com, the second largest electricity sector company following Amazon.com, operates in various regions across Asia Pacific including China, Hong Kong, Taiwan and India. Their pricing model is well-known to over two-thirds of adults and they have formed strong partnerships with notable corporations like eBay. Priceline.com made an exclusive agreement with eBay in 2002 for offering hotel reservation and air travel services.

During March 2003, Priceline entered into cooperation agreements with Travelweb.com and Budgethotels company. Additionally, Priceline has formed a partnership with AOL Time Warner to advertise its travel deals through its online platforms.

According to Priceline, America Online's

large membership base will greatly benefit their own customer base. However, Priceline has struggled financially for most of its history and had a particularly damaging year in 1999, losing over $1 billion. Although they have had some profitable quarters, they still posted a $23 million loss in 2002 despite reducing their losses to $15 million in 2000.

Priceline's stock has experienced fluctuation, currently trading at a single-digit value. The management's lack of foresight is highlighted by the situation with Webhouse Club, one of Priceline.com's associates. In the autumn of 2000, Webhouse Club faced financial difficulties, and the top management of Priceline.com blamed the investors for the failure rather than identifying its root cause.

Essentially, the closure of Web House was the result of a failed business operation model. Priceline had to pay for discounted products in order to attract customers when expanding into new business areas, which added unnecessary costs before entering those areas.

Priceline ventured into multiple areas of business, including hotel reservations, financing services, car rentals, and car sales. However, this diversification has resulted in increased costs and a lack of feasibility in new areas of operation. Priceline has attempted to promote their brand and products through an extensive advertising campaign, but the risk of diversifying their business operations remains.

Priceline has expanded into new areas such as food and gasoline, however, the operations of purchasing and pricing products are inconvenient for customers. For instance, if a customer pays for gasoline on priceline.com and then uses an authorized car to draw gasoline from a market that has an agreement with Priceline.com, but the market does not have the product, the customer will need to either change shops

or change the time. This results in an increase in the cost of customer exchanges and the company loses the planned advantage of convenient exchanges. Due to poor financial conditions and problems from business expansion, some key executives have resigned and core staff have left Priceline.

Priceline.com has faced severe consequences due to insecure service quality. The Consumer Product Safety Commission (CPSC) provided advanced warning to the company, stating that they had received over 300 complaints from consumers regarding Priceline.com's service quality. As a result, this has affected the XX brand and decreased customer loyalty.

Priceline presents a promising business model that is particularly beneficial for time-sensitive, fast-updating products such as hotels and airlines. This model enables sellers to steer clear of selling their inventory products at low prices against high marketing demand. This innovative model, named the demand collection system, is increasingly favored by industries like hotels and airlines and is backed by a robust strategic partnership with renowned companies.

Priceline partnered with eBay in 2002, becoming the sole provider of air ticket and hotel service ordering for the e-commerce giant. Priceline also signed a cooperative agreement with Travelweb.com and Budgethotels in March of 2003, further strengthening its presence in the e-business sector and increasing future opportunities for success.

According to the text, Priceline's business model can be easily replicated. The company does not have any proprietary technology and only needs to create a website and gather consumer information. As a result, competitors can easily enter the industry because the barriers to entry are low.

Despite experiencing a loss of 1 billion dollars in 1999, Priceline managed to reduce its losses significantly to only 15 million dollars

by 2001. However, the company faced further setbacks in 2002 when it incurred losses amounting to 23 million dollars. The aftermath of the tragic events on September 11th led to concerns about terrorism that adversely affected the tourism industry and placed safety issues at the forefront of Priceline's challenges. Additionally, major airlines decreased their transmission quantities by up to 30%, resulting in fewer discounted air tickets available for purchase and negatively impacting Priceline's sales. To compound matters, Priceline also had to contend with increased competition from rival online travel agencies such as Expedia, Hotels.com, and Cheaptickets.

Priceline.com's approach to business involves collaborating with companies such as Travelocity and Orbitz, as well as independently vending airline tickets. Nevertheless, the company was constrained in its expansion due to insufficient funds caused by the financial downturn in 2000.

The central elements of Priceline.com's business model and the benefits it provides for customers are under examination.

The "Name your own price" model, also referred to as the demand-collection method, is employed by Priceline.com. This technique allows buyers to specify how much they are willing to spend on a specific product or service, with their declaration being enclosed in

tags.Priceline acts as an intermediary between customers and suppliers, utilizing direct and indirect distribution channels on the internet to match a customer's request with a willing supplier at the requested price. This transaction service provides access to various leisure products including airline tickets, hotel rooms, rental cars, cruises, vacation packages, and home mortgages. The basis of Priceline's business model is centered around its core components of customer, supplier, and value proposition which includes elements such as product or service, business processes,

resources, supply chain, revenue and value proposition.

As per Priceline.com, it is imperative to create value for customers as well as within a team. Greater value in a product or service leads to increased willingness to pay and repeat purchases. Similarly, offering value within a team can lead to individual achievements and overall benefits.

Priceline bridges the gap between consumers and sellers by allowing them to connect and make discounted deals. Consumers may not be aware of the discounts offered by sellers, while sellers may not know the specific requirements of consumers seeking discounts. Priceline acts as the internet middleman, providing a valuable service that enables it to thrive. In this article, we will delve into the various values that Priceline.com offers its users.

Standing from the perspective of consumers, Priceline aims to simplify the process of finding products by reducing the time and effort spent searching. Consumers need only provide basic details such as their desired product, price and Priceline will handle the rest. This results in cost savings for the consumer as Priceline eliminates the need for an exchange step, enabling suppliers to offer product discounts and ultimately attracting more consumers.

From the standpoint of producers, Priceline aims to reduce costs and increase revenue for manufacturers. By providing information directly to manufacturers, Priceline helps to eliminate exchange costs and improve efficiency. This allows manufacturers to offer discounts on their products as well as increase revenue through the provision of relevant information and enhanced use of time inelastic products such as airline tickets and hotel bookings.

Q3: In light of these considerations, what is your opinion on Priceline?

Will Priceline ultimately succeed or fail? In my opinion, despite facing

numerous challenges, Priceline will succeed due to multiple advantages. Priceline has a strong brand, as revealed by a market research firm called Opinion Research Corporation International of Princeton, which ranked Priceline as the second most-recognized e-commerce brand on the Internet after Amazon.com. Additionally, Priceline provides services and has offices set up in several countries and regions worldwide. Two-thirds of all American adults have heard of Priceline and its name-your-own-price commercial formula.

Since its operation in April 1998, Priceline has acquired over 16 million registered users who contribute to its increasing profits. To ensure its survival and success, Priceline must take the following actions: firstly, it should prioritize survival over development and address its current issues of excessive business, poor management, and financial crisis. Once these problems have been solved, it can then consider expanding further. Secondly, Priceline should seek a strong partner for cooperation and build a strategic relationship to gain support and resources for development. Given its significant brand value and large user base, it would benefit from partnering with a suitable entity to help it overcome its current troubles. Lastly, to alleviate the economic pressures brought on by excessive expansion and prevent further management issues, Priceline should give up unnecessary businesses and instead focus on its core operations.

Priceline's focus should be on its strong business and the implementation of differentiated sales strategies instead of carrying a superfluous burden. One unique aspect of Priceline's business model is the "name your price" reverse-auction pricing system, which utilizes the internet's information-sharing and communication capabilities to offer a new way of pricing goods and services. While this approach has proven to be successful for Priceline within a short

period, competitors can quickly replicate it. Given the current intense competition in the market, Priceline needs to re-adjust its sales modes and differentiate them again to regain a dominant position in the market.

My opinion is that if Priceline takes advantage of its branding and large user base to implement the above action, it will overcome its poor condition and ultimately succeed. Priceline has teams dedicated to approaching hotels in Europe for a wide variety of options to meet different traveler needs. At Priceline, you can name your own price and book a hotel at an incredibly low rate. Simply enter desired star rating and area, and the system will provide the best available options within seconds. Priceline can use its top-notch e-commerce platform, supplier relationships, and technology to quickly launch a superior consumer offering.

Priceline's survival as an internet middleman is due to the lack of symmetry between consumers' knowledge of the discount products that sellers can provide and sellers' understanding of the requirements for their discounted products or services. This condition persists and allows Priceline to thrive, even if individual companies within the industry struggle due to mismanagement. The "Name your own price" business model can continue indefinitely until a superior replacement emerges.

It is currently believed that the Priceline.com business model can be applied to various industries involved in the exchange of products, including its current core markets of airline and hotel reservations, as well as rental cars, cruises, vacation packages, home mortgages and business-to-business services within the human resource market. Priceline and its competitors have the ability to extend this business model to other industries such as guess service reservations, food, groceries

and gasoline, personal finance services such as home mortgages, refinancing and home equity loans through an independent licensee, and even house rentals or second sales. It is believed that Priceline’s business model is not only suited to industries with expiring or rapidly aging inventory such as unsold airline seats or vacant hotel rooms but to similar industries as well.

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The first link leads to an article on Forbes about Priceline in the markets section, dated May 5, 2006. The second link leads to an unknown destination on clickz.com.

The article "The Strength of Priceline" was referenced in various academic materials, including a study and writing skills introduction by Jenny Pittman and unit information for ISY00740 E-Business for Management, revised by Angele Cavaye and Jun Xu. The article was also mentioned in Efraim Turban and David King's works as well as those by Dennis Viehland and Jae Lee.