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By Andrii Protsiuk | Chemsi Boulajouahel | Oyihoma Saleh | Sabrina Gheissari
1
Agenda
1.Industry Analysis
• Supply Chain
• PESTEL Analysis
• Porter’s 5 Forces
• Industry News & Events
2.Expedia Analysi...
Industry Supply Chain
Hotels
Airlines
Car Rentals
Cruise Lines
Travel
Agencies
Leisure
Travelers
Business
Travelers
GDS
GD...
• MonopolisEc market structure
• Decline in brick and mortar travel agencies and an increase in online travel agents
(OTAs...
PESTEL Analysis
PoliEcal & Legal Factors
• Travel PromoCon Act of 2009 (TPA): promotes leisure, business, and scholarly tr...
PESTEL Analysis
Technological Factors
• Internet has revoluConized the industry
• Decline in number of brick and mortar tr...
Porter’s Five Forces
Rivalry Among CompeEtors - HIGH
• Low degree of seller concentraCon (CR4 = 17.4%)
• Low industry grow...
Threat of SubsEtute - HIGH
• Hotels, airlines etc. are driving consumers to make bookings
directly on their website
• Intr...
Bargaining Power of Buyers - LOW
• Less concentrated industry
• Low volume and relaCvely low frequency of purchases
• Lack...
Recent News & Events
Marrioe InternaConal reached agreement
to acquire Starwood Hotels & Resorts.
Airbnb raised $1.5 billi...
Hotels Airlines Car Rentals Cruise Lines AdverEsing
Travel & Hospitality Services
#1
Travel Agency in USA
9.5%
Market Shar...
Revenue Distribution
70%
13%
9%
8%
Revenue Mix
Hotel	 Car	Rental	&	Cruise	 Adver3sing	 Airlines	
70%
13%
9%
8%
Revenue Mix...
Mission & Growth Strategy
13
“RevoluEonize Travel Through the Power of Technology.”
New Channel PenetraEonGlobal Expansion...
Analysis of Competitive Strategy
Generic Business Strategy - DifferenCaCon Strategy
Product Bundling DealsExpedia + CiE Rew...
Analysis of Competitive Strategy
Corporate Strategy
• Horizontal IntegraEon (AcquisiEons) + Product-Market DiversificaEon
•...
Analysis of Competitive Strategy
Cost Leadership
DifferenEaEon
2016
2016
ProducCvity
FronCer
ProducCvity
FronCer 16
Analysis of Competitive Strategy
COGS/
Sales
SGA/
Sales
Net Profit
Margin
Market
Share
ROA ROE ROIC
19.63% 57.70% 11.46 9.5...
Analysis of Competitive Strategy
V R I O
Brand ✓ ✓ ✓ ✓ Sustainable
IT System ✓ ✘ ✘ ✓
Supplier
RelaEonships ✓ ✘ ✘ ✓
Ecosyst...
SWOT Analysis
Strengths
• Brand Awareness/ReputaCon
• AcquisiCons - strong brand porpolio
• offers a broad range of travel ...
Financial Performance
2013 2014 2015 2016 2017 2018 2019 2020
Sales $4,771,259 $5,763,485 $6,672,317 $7,869,998 $9,282,663...
RecommendaEons
21
Future of Expedia
Threat of SubsEtute
(HIGH)
Own SubsEtutes
22
Future of Expedia
Bargaining Power of Supplier
(HIGH)
ACQUIRE
23
12
Hotel & Motel Brands
6,300+
LocaEons
35+
Countries
$860M
Global Earnings 2015
500K+
Rooms
$3bn
Market Cap
Brand Porroli...
Porter’s Five Forces
Porter’s 3 Tests
1. AsracEveness - LOW
• Despite low switching costs, industry is saturated and some
...
Financial Performance
2013 2014 2015 2016 2017 2018
 
Sales $724,650,000 $757,970,000 $859,878,000 $980,260,920 $1,117,497...
Porter’s Five Forces
Expedia + Choice Hotels Synergies
Sales Growth
Synergies that increase sales growth:
• MonopolisCc co...
NPV Analysis
2013 2014 2015 2016 2017 2018
 
Sales $5,495,909,000 $6,521,455,000 $7,532,195,000 $9,292,771,763 $10,920,167...
• Sabre CorporaCon is a travel technology company based in South-lake, Texas
• Founded by American Airlines in 1960 (Spun ...
Porter’s Five Forces
Expedia + Sabre Synergies
Sales Growth
Synergies that increase sales growth:
• Complete backwards int...
2021 2022 2023 2024 2025
 
Sales $21,442,259,829 $25,210,628,614 $29,644,147,237 $34,860,631,963 $40,998,826,138
COGS $20,...
Analysis of Competitive Strategy
V R I O
Brand ✓ ✓ ✓ ✓ Sustainable
IT System ✓ ✓ ✓ ✓ Sustainable
Supplier
RelaEonships ✓ ✓...
New Expedia Supply Chain
Leisure
Travelers
Business
Travelers
Full Backward Vertical
IntegrationHorizontal
Integration
33
QuesEons?
34
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Strategy In Action - Expedia

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Strategy In Action - Expedia

  1. 1. By Andrii Protsiuk | Chemsi Boulajouahel | Oyihoma Saleh | Sabrina Gheissari 1
  2. 2. Agenda 1.Industry Analysis • Supply Chain • PESTEL Analysis • Porter’s 5 Forces • Industry News & Events 2.Expedia Analysis • Company Overview • CompeCCve Strategy & Landscape • Financial Performance 3.RecommendaEons • Choice Hotel & Synergy • Sabre + Synergy • CompeCCve PosiConing 2
  3. 3. Industry Supply Chain Hotels Airlines Car Rentals Cruise Lines Travel Agencies Leisure Travelers Business Travelers GDS GDS GDS GDS *Global DistribuCon System (GDS) 3
  4. 4. • MonopolisEc market structure • Decline in brick and mortar travel agencies and an increase in online travel agents (OTAs) due to internet penetraCon • ShiQ in business model of travel agents from vendor commissions to service fees • 60% of industry revenue is derived from sales of internaConal travel packages to US residents $35.3bn Industry Revenue 2.3% Annual Growth 17.4% ConcentraEon RaEo (4) Industry Overview 4
  5. 5. PESTEL Analysis PoliEcal & Legal Factors • Travel PromoCon Act of 2009 (TPA): promotes leisure, business, and scholarly travel to and within the United States • Airline industry is widely regulated in relaCon to passenger safety, internaConal trade, tax policies and compeCCon • Issues like war, terrorism and diseases also impact the industry Economic Factors • US consumer spending throughout past 5 years experiencing growth • Significant decline in oil prices reflect on airline industry • Increasing GDP creaCng more disposable income Sociocultural Factors • Increasing preference of consumers and businesses to make their travel purchases online • Online reviews play a stronger role in influencing consumer-purchasing decisions • Growing embracement of the sharing economy (Airbnb, Uber, etc.) 5
  6. 6. PESTEL Analysis Technological Factors • Internet has revoluConized the industry • Decline in number of brick and mortar travel agencies • Mobile devices are driving online booking Environmental Factors • Pressure for airlines to improve fuel efficiency and reduce noise polluCon of their aircraQs • Water and Sewage regulaCons on Hotels (West coast) 6
  7. 7. Porter’s Five Forces Rivalry Among CompeEtors - HIGH • Low degree of seller concentraCon (CR4 = 17.4%) • Low industry growth (CAGR=2.3%) • Low switching cost and product differenCaCon • Low capital requirement • Intense price war Porter’s Five Forces Threat of Entry - HIGH • Low brand loyalty • Easy access to distribuCon channel, favorable locaCons and raw materials (Website and Internet) • Minimal experience needed to enter industry • Low capital requirement 7
  8. 8. Threat of SubsEtute - HIGH • Hotels, airlines etc. are driving consumers to make bookings directly on their website • IntroducCon of home-rental market (Airbnb) • AlternaCves are offering compeCCve or lower prices in a market with high price elasCcity Bargaining Power of Supplier - HIGH • Higher concentrated industries (excluding hotels) • Few subsCtutes for supplier inputs • Forward integraCon already taking place • Some price discriminaCon is possible Porter’s Five Forces 8
  9. 9. Bargaining Power of Buyers - LOW • Less concentrated industry • Low volume and relaCvely low frequency of purchases • Lack of financial capacity to backward integrate • They can easily find subsCtutes (e.g direct booking, Airbnb) • Usually price sensiCve consumers Porter’s Five Forces 9
  10. 10. Recent News & Events Marrioe InternaConal reached agreement to acquire Starwood Hotels & Resorts. Airbnb raised $1.5 billion in latest funding round bringing its valuaCon to $25 billion. Suppliers SubsEtutes 10
  11. 11. Hotels Airlines Car Rentals Cruise Lines AdverEsing Travel & Hospitality Services #1 Travel Agency in USA 9.5% Market Share $6.6bn Global Earnings 2015 14K Employees $16bn Market Cap 53% Revenue from US market 11
  12. 12. Revenue Distribution 70% 13% 9% 8% Revenue Mix Hotel Car Rental & Cruise Adver3sing Airlines 70% 13% 9% 8% Revenue Mix Hotel Car Rental & Cruise Adver3sing Airlines 12
  13. 13. Mission & Growth Strategy 13 “RevoluEonize Travel Through the Power of Technology.” New Channel PenetraEonGlobal ExpansionProduct InnovaEon Growth Strategy Passionate InnovaEve Enterprising Core Values
  14. 14. Analysis of Competitive Strategy Generic Business Strategy - DifferenCaCon Strategy Product Bundling DealsExpedia + CiE Rewards Card Expedia Mobile Apps Bases of DifferenEaEon: • Complements (Rewards card & Mobile app) • Product Features (Bundling deals) 14
  15. 15. Analysis of Competitive Strategy Corporate Strategy • Horizontal IntegraEon (AcquisiEons) + Product-Market DiversificaEon • Reduce excess capacity • Reduce compeCCve intensity and increased profitability • Increased differenCaCon strategy by widening product offering • Operates in 60+ countries offering mulCple travel and hospitality services 15
  16. 16. Analysis of Competitive Strategy Cost Leadership DifferenEaEon 2016 2016 ProducCvity FronCer ProducCvity FronCer 16
  17. 17. Analysis of Competitive Strategy COGS/ Sales SGA/ Sales Net Profit Margin Market Share ROA ROE ROIC 19.63% 57.70% 11.46 9.50% 6.23 23.00% 14.66% 6.85% 52.53% 27.66 5.40% 15.77% 29.39% 19.24% private private private 1.60% private private private Industry Avg. - - 15 - 6.84% 12.88% 8.43% CompeEEve Profile Expedia vs. Priceline • Priceline COGS benefited from reversal of Hawaii travel transacCon taxes worth $16.4 million • Decrease in Priceline’s Name Your Own Price® reservaCon services. 17
  18. 18. Analysis of Competitive Strategy V R I O Brand ✓ ✓ ✓ ✓ Sustainable IT System ✓ ✘ ✘ ✓ Supplier RelaEonships ✓ ✘ ✘ ✓ Ecosystem of websites ✓ ✓ ✓ ✓ Sustainable Economies of scope ✓ ✘ ✘ ✓ HomeAway ✓ ✓ ✓ ✓ Sustainable Expedia VRIO Analysis 18
  19. 19. SWOT Analysis Strengths • Brand Awareness/ReputaCon • AcquisiCons - strong brand porpolio • offers a broad range of travel and hospitality services Weaknesses • Dependence on search engines • Dependence on suppliers • Pressure to grow shareholder value OpportuniEes • Growing internet penetraCon • Demand from emerging markets • Mobile technology • Increasing availability of complements Threats • Sharing economy (Airbnb) • Hotels and airlines increasing efforts of direct booking 19
  20. 20. Financial Performance 2013 2014 2015 2016 2017 2018 2019 2020 Sales $4,771,259 $5,763,485 $6,672,317 $7,869,998 $9,282,663 $10,948,900 $12,914,228 $15,232,332 COGS $1,038,034 $1,179,081 $1,309,559 $1,470,897 $1,652,111 $1,855,651 $2,084,267 $2,341,049 SGA $3,151,043 $3,919,856 $4,785,243 $5,897,230 $7,267,620 $8,956,458 $11,037,746 $13,602,681 DepreciaCon + Other OperaCng Expenses $216,122 $146,784 $163,949 $147,235 $132,226 $118,746 $106,641 $95,769 OperaCng Income $366,060 $517,764 $413,566 $457,648 $506,428 $560,407 $620,140 $686,240 Taxes + Interest and Other Income $133,210 $119,667 ($350,899) $356,858 ($362,917) $369,080 ($375,347) $381,721 OperaEng Income amer taxes $232,850 $398,097 $764,465 $100,790 $869,345 $191,327 $995,488 $304,519 Expedia 5-Year Financial ProjecEon (‘000s) $102.92 Stock Price (Apr. 8) 137,780,456 Shares Outstanding $6bn AcquisiEons 11.48% WACC 20
  21. 21. RecommendaEons 21
  22. 22. Future of Expedia Threat of SubsEtute (HIGH) Own SubsEtutes 22
  23. 23. Future of Expedia Bargaining Power of Supplier (HIGH) ACQUIRE 23
  24. 24. 12 Hotel & Motel Brands 6,300+ LocaEons 35+ Countries $860M Global Earnings 2015 500K+ Rooms $3bn Market Cap Brand Porrolio 24
  25. 25. Porter’s Five Forces Porter’s 3 Tests 1. AsracEveness - LOW • Despite low switching costs, industry is saturated and some firms are consolidaCng to increase profitability and reduce compeCCon 2. Cost of Entry - HIGH • Capital intensive industry with a high proporCon of fixed costs to total cost and Incumbents with experCse are at advantage as well as access to favorable locaCons low 3. Beser-Off Test - HIGH • Industry players hold strong bargaining power and have forward integrated in an effort to increase direct booking and eliminate need for OTA. Expedia must react to threats 1 2 3 25
  26. 26. Financial Performance 2013 2014 2015 2016 2017 2018   Sales $724,650,000 $757,970,000 $859,878,000 $980,260,920 $1,117,497,449 $1,273,947,092 COGS $407,646,000 $412,637,000 $488,717,000 $557,137,380 $635,136,613 $724,055,739 SGA $111,700,000 $121,400,000 $134,300,000 $153,102,000 $174,536,280 $198,971,359 DepreciaCon + Other OperaCng Expenses $9,056,000 $9,365,000 $11,542,000 $13,080,447 $14,823,954 $16,799,856 OperaCng Income $196,248,000 $214,568,000 $225,319,000 $256,941,093 $293,000,601 $334,120,137 Taxes + Interest and Other Income $83,532,000 $92,437,000 $96,389,000 $103,587,297 $111,323,159 $119,636,734 OperaEng Income amer taxes $112,716,000 $122,131,000 $128,930,000 $153,353,797 $181,677,442 $214,483,403 Choice Hotels Financial Strength Stock Price (Apr. 8) $52.24 CAGR 14% Industry CAGR -1.06% WACC 9.96% COGS/Sales 56.83% SGA/Sales 15.61% ROA 18.64% 26
  27. 27. Porter’s Five Forces Expedia + Choice Hotels Synergies Sales Growth Synergies that increase sales growth: • MonopolisCc compeCCon over Choice Hotels (and HomeAway) • Control to differenCate product • Lower prices and travel packages • Cross-industry adverCsement Cost of Goods Sold Synergies that decrease COGS: • Economies of Scale + Economies of Scope • Decrease in licensing fees and booking fees Synergies that increase COGS: • CoordinaCon costs - Operate solo 27
  28. 28. NPV Analysis 2013 2014 2015 2016 2017 2018   Sales $5,495,909,000 $6,521,455,000 $7,532,195,000 $9,292,771,763 $10,920,167,972 $12,833,989,917 COGS $1,445,680,000 $1,591,718,000 $1,798,276,000 $2,080,744,598 $2,432,451,396 $2,844,239,405 SGA $3,262,743,000 $4,041,256,000 $4,919,543,000 $5,797,296,119 $6,831,863,243 $8,051,288,512 DepreciaCon + Other OperaCng Expenses $225,178,000 $156,149,000 $175,491,000 $160,315,870 $147,049,645 $135,545,964 OperaCng Income $562,308,000 $732,332,000 $638,885,000 $1,254,415,176 $1,508,803,688 $1,802,916,036 Taxes + Interest and Other Income $216,742,000 $212,104,000 ($254,510,000) $460,444,912 ($251,594,254) $488,716,846 OperaEng Income amer taxes $345,566,000 $520,228,000 $893,395,000 $793,970,265 $1,760,397,942 $1,314,199,190 IniEal Investment $1,953,044,145 Net Cash Flow $29,228,092,594 Discount Rate 12.68% Present Value $11,518,275,180 Stock Price (Apr. 8) $52.24 Shares Outstanding 56,389,126 Premium 30% Equity Purchase 51% Expedia + Choice Hotels 28
  29. 29. • Sabre CorporaCon is a travel technology company based in South-lake, Texas • Founded by American Airlines in 1960 (Spun Off) • Largest Global DistribuCon Systems provider for air bookings in North America. Hotels 100K Airlines 70 Data TransacEons 85K/s OperaEons About 29
  30. 30. Porter’s Five Forces Expedia + Sabre Synergies Sales Growth Synergies that increase sales growth: • Complete backwards integraCon • Strong bargaining power • Complete control over supplier network • Stronger control to create monopolisCc compeCCon • Only OTA to completely verCcally integrate Cost of Goods Sold Synergies that decrease COGS: • Greater decrease in licensing fees and booking fees Synergies that increase COGS: • CoordinaCon costs • CoordinaCon costs - Cannot operate solo, will have to integrate plaporm 30
  31. 31. 2021 2022 2023 2024 2025   Sales $21,442,259,829 $25,210,628,614 $29,644,147,237 $34,860,631,963 $40,998,826,138 COGS $20,846,641,500 $24,510,333,375 $28,820,698,702 $33,892,281,075 $39,859,969,857 SGA $4,552,977,852 $5,328,288,644 $6,236,894,900 $7,301,900,962 $8,550,443,291 DepreciaCon + Other OperaCng Expenses $13,179,999,778 $15,534,165,738 $18,309,274,327 $21,580,656,525 $25,437,133,273 OperaCng Income $110,459,129 $104,950,683 $100,770,501 $97,885,373 $96,279,094 Taxes + Interest and Other Income $3,003,204,741 $25,210,628,614 $29,644,147,237 $34,860,631,963 $40,998,826,138 OperaEng Income amer taxes $3,242,916,475 $2,988,552,188 $4,403,760,074 $4,319,215,347 $5,993,295,480 Sales post Choice AcquisiEon 0.05 Sales post Sabre AcquisiEon 0.08 COGS -0.01 Synergies Expedia + Choice Hotels + Sabre NPV Analysis Expedia + Choice Synergies $11,518,275,180 NPV Without Synergies $6,510,890,597 Total Synergies $13,105,589,748 31
  32. 32. Analysis of Competitive Strategy V R I O Brand ✓ ✓ ✓ ✓ Sustainable IT System ✓ ✓ ✓ ✓ Sustainable Supplier RelaEonships ✓ ✓ ✓ ✓ Sustainable Ecosystem of websites ✓ ✓ ✓ ✓ Sustainable Economies of scope ✓ ✓ ✓ ✓ Sustainable HomeAway ✓ ✓ ✓ ✓ Sustainable Expedia VRIO Analysis 32
  33. 33. New Expedia Supply Chain Leisure Travelers Business Travelers Full Backward Vertical IntegrationHorizontal Integration 33
  34. 34. QuesEons? 34

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