A Tech Company Business Evaluating (Porter’s Forces, PESTEL, SWOT); Trivago Case Study

Introduction

Changes in the communication and business strategies have led to a number of inventions through innovative ideas (Whitmore et al, 2015). There are numerous businesses that have gained popularity in the market due to their innovative ideas of serving people. Similarly Trivago, one of the leading companies in the online accommodation (hotel booking) industry, have gained paced in the fast moving world for its entrepreneurial idea (Trivago, 2019).

This report analysis the business and the business model of Trivago from the reports of the company. In addition to this a detailed discussion would be made with regard to the competitive edge and the competence of the firm along with a discussion on the main changes and trends that would be taking place in the recent year that may affect the business of the company. Porter’s 5 forces have been conducted for the purpose of studying the competitive edge as well as the capability of the firm to cope with the market trends. Moreover, few recommendations will also be made suggesting what steps must be taken by the management of the firm to overcome those challenges.

Trivago’s Core Business and Business Model

Trivago is an organization with a hotel comparison website that provides opportunity to the visitors to compare their accommodation criteria’s in terms of price, number of rooms, features, star ratings, customer reviews and so on (Trivago, 2019). As per the reports of the company, it is a hotel and accommodation search platform offering its customers online meta-search for hotels by means of facilitating them for searching hotel accommodation via hotel chains, online travel agents, as well as independent hotel.

As a website for comparison of hotel and accommodation price, Trivago makes money from the advertising partners largely through the cost-per-click business model. It has also been reported that the booking platforms, hoteliers along with other room providers list rates as well as advertise on the website of Trivago, thereby paying the company for the number of clicks received from the users.

Porter’s 5 Forces Analysis

According to the point of view of the scholars Mathooko and Ogutu (2015), in order to gain an insight about the competitive edge of an organization it is essential to identify and assess the business environment, strengths and competence of the company in the industry within which it operates. This requires assessing the microenvironment through the use of Porter’s 5 forces analysis. As suggested by Rothaermel (2015), Porters 5 forces could be used to analyses the bargaining power of the suppliers, bargaining power of the customers, competitive rivalry in the industry, threats from the substitute products or services as well as threats to the company from new entrants in the market. The following components have been discussed below with repect to Trivago and the group companies altogether:

Bargaining Power of the Suppliers

Almost every single organization in the internet information industry procures the necessary raw material from several suppliers (Chung and Kim, 2016). It has been found out that the suppliers have the power and are in the most dominant position to have an adverse impact on the revenues that the organizations can earn in the industry. In addition to this, in the Information Technology industry, it has been found that the suppliers primarily use negotiating power for the purpose of extracting higher prices from organizations in the industry. This in turn lowers the profitability of the internet information service providers. It will also have an impact on the Trivago’s business as well.

 Bargaining Power of the Customers

As it is evident from the reports that there is large number of suppliers in the internet information providing industry, it is a lot more in number than compared to the organizations providing such products (Lee et al, 2018). Thus, it indicates that the buyers have only few firms to choose, and do not have much options to assert control over the prices. In addition to thus, the differentiation in the product is very less and hence, the buyers do not have as many alternatives to make selection. Such situation makes bargaining power of the buyers such as Trivago much weaker within the sector.

The above forces that has been determined by means of using the Porter’s 5 forces analysis help in analyzing the microenvironment of the Trivago business as well as each area of competencies that can be developed so as to manage the business in the long run.

 Competitive Rivalry in the Industry

 There are few number of competitors in this industry and therefore, within the industry, it makes the competition among the existing firms companies a weaker force (Schwab, 2017). The products and services offered in the industry are highly differentiated, which in turn makes it is difficult for the existing companies to win the customers due to products uniqueness. 

Threats from the Substitute Products or Services

There are very few substitutes available for the products that are produced in the internet information providing industry. In addition to this, such substitutes are produced by very low profitmaking industries. Thus, it indicates that there has been no maximum cap on the profit making capacity of companies such as Trivago. Thus, these factors signify that the threat from substitute products is weaker.

Threats from New Entrants in the Market

New entrants in internet information providers bring new ways and innovation with advanced ways of doing things, which in turn put pressure on Trivago. In addition to this, through lower pricing strategy, as well as reducing costs, along with the provision new value propositions to the customers, the new entrants can easily attract the customers. Trivago needs to manage all such challenges from the new entrants for building effective barriers in order to safeguard its competitive position.

Competitive Advantage of Trivago

According to the point of view of the scholars Noe et al (2017) it is essential for the investors as well as other stakeholders of an organization to identify the competitive advantage of the business, in terms of favorable or superior position in the industry. On the other hand Evans (2016) in their work have argued that gaining an insight into the competitive edge which a company holds is one of the important aspects while analyzing the business prospects of an organization. Therefore the competitive advantage of Trivago has been determined as follows:

Business Strategy

The business strategy implemented by Trivago revolves around 3 main pillars, namely hotel booking differentiation in terms of price scanning, and advertising or business promotion. In addition to this, the competitive advantage of the company involves two major components, gap in the offerings and competitive advantage period.

In the first place, the gap in offerings is identified by the distance between the offerings made by the hotels registered with Trivago and the nearest competitors. On the other hand, the competitive advantage period, is the time for which the company is able to maintain its differentiated position.

Use of Data Analytics

To gain competitive advantage the business is using data analytics to provide the best services to its customers. According to the point of view of the scholars Quinlan et al (2019), the use of data analytics is one of the most essential tools that helps in establishing good customer relationship as well as ensure long term customer retention. Therefore, with the use of such advanced technology, Trivago has made large number of customer base. There are millions of customers during the recent years that have approach Trivago for flights and hotel booking.

With the use of data analytics, the company has been able to capture a lot of data and information about the partners as well as the customers which it uses for future refine. In addition to this, it has also been reported by the company that it makes use of the latest technology and filter options for customized serve to the online visitors of the website. In this manner the use of data analytics can provide the customers with a lot of information about the business and the offerings made by the company.

Advertising and Business Promotion

It is an evident fact that in order to increase product awareness as well as to attract large number of customers, many organizations advertise about their business and offerings. In addition to this, there are diverse marketing channels that are used for the advertisement and business promotion. Similarly, Trivago also promotes its business throughout the world. Along with its own business, it also promotes the hotels and flights that are parented with the company; this increases the interest of the customers as the company follows transparent method of business promotion. The offerings made by the company are in line with the offerings made by the hotels and flights.

Option for Price Scanning

While comparing the type of accommodation of air travels, customers usually seek for the quality of product or service, the ratings, customer reviews as well as other alternative options that could be provided by the business. However, in addition to the above services, in terms of accommodation and air travels, Trivago scans the price for the same room or flight across a number of booking sites, thereby allowing the website visitors to opt for the best deal.  In this manner it adds value to comparison shopping (Trivago, 2019).

Main Changes/Trends in the Business (Micro and Macro) Environment

Irrespective of the size of the business, where large or small, changes are unavoidable. The rise in the business competition and globalization all over the world, organizations are finding innovative ways to offer unique and best alternative services to the potential customers so as to main competitive edge in the market as well as to gain additional market share each time they offer new product or render new service to the customers. This is one of the major reasons that changes in the business trend may affect the organizations in a number of ways.

Rising Competition

According to the point of view of the scholar Dai (2018), due to the increase in the demand of the customers pertaining to the necessity of flights for air travel either for vacation or business trips as well as requirement of accommodation will ultimately led to the rise in competition among firms. In order to gain market sustainability, organizations would compete in the market with unique service and products so as to attract the customers in diverse ways. This in turn would compel the management of the firm either to adopt advanced strategies to overcome the challenge of competition or to quit the market.

International Expansion

Expansion of local businesses in the international market creates another competition for Trivago to take up diverse approach towards expansion of product or service lines as well as to implement strategies to beat the rival companies that expands in the global market. The expansion of product and service lines would require additional investments in terms of finance, human resources, technology and such other requirements to cope with the necessary changes.

Changes in Customer’s Preference

According to the point of view of the scholars Li et al (2017), it is true that as day’s passes by, the taste and preference of the customers is prevalent due to the changes in the market trends. The present day’s customers are tech savvy and prefer to cope with the changes and become ready to set them apart from the rest of the world with their personality, skill, talent as well as avail the latest product and service. Thus, changes in the taste and preference of the customers in the coming years will also become a hurdle for the business to cope with such changes with existing strategies. Rather the management needs to adopt innovative strategies to overcome this challenge.

Digital Revolution

Digitization is one of the most significant revolutions in the history. According to the point of view of the scholars Li et al (2017), companies are using latest technologies to provide its customers with the best of all services. This not only satisfies the customers but also helps the organization to maintain its market reputation. It is an evident fact that in order to sustain in the market, organizations should keep themselves updated with the trends in the market. Else the new entrants might take over the industry by attracting the customers with its advanced products and services.

Home Sharing

There is a new trend in the industry pertaining to the accommodation of tourists. People are sharing their home for the tourist for additional income (Kavadias et al, 2016). For instance, any individual can register himself with the concerned administrators, and provide the tourist accommodation facility, either along with or without fooding facility. The accommodation facility is similar to that of the hotels. This is one of the emerging trends in the world that has slowed down the business of the hotels.

The above changes in the trends in the coming years would create a huge impact on the business of Trivago. It will not only hamper the business but also the brand image if the management is unable to cope with the changing trends. In addition to this, the rising competition would lead to heavy investment in adoption of advanced technology and innovative strategies to attract and retain the customer base.

Recommendation

As observed from the above changes and emerging trends in the future, the companies providing internet information services needs to implement appropriate strategies so as to overcome the challenges imposed by such emerging trends; else it might ruin the business prospects of the companies. Thus, it will be essential for the management of Trivago to adopt the appropriate strategies as recommended below:

Invest in R&D

One of the major strategy to cope with the future trends in both micro and macro environment is to invest in research and development so as to learn about the changes taking place in advance. The areas of business that might get affected must be studied and immediate actions must be taken to over the risks and challenges.

Develop Future Business and Improve Product Lines

Besides accommodation and air travelling services, Truvago must also strove to increase its line of operations as a backup and the emerging trend that takes place in the market. This will help the company to meet the risks of financial loss as the new business line will help in generating revenues. The business must also connect with individuals who provide accommodation services and partner with them to improve business.

Invest in Innovation

Investing in innovation involves spending funds in improving the services that is offered through the digital platform. For instance, improving the website and making it user friendly so as to attract the customers due to ease of use. This in turn would also improve the business of the organization.

Improvement in Databases and Analytics Features

The data bases and analytics features that are also the core of the business must be kept up to date so as to maintain the business prospects. In addition to this, the business must also improve its analytics features so that the users are able to connect with the business through the website. The mobile applications must also be improved and regular updates must be made so as to improve the user’s experience.

Align the Business in Line with the Competitive Trends

It is true that there would be improvements in the business trends and market trends which will create a pressure on Trivago. Therefore, the company must align its services in line with the changing trend by adopting the latest changes in the market, customer preference. This can be done through market study.

Conclusion

Evaluating the business and the competitive features of Trivago, it can be said that the company has been able to generate enough business from the customers all over the world. The competitive analysis of the micro environment has been conducted using the Porter’s 5 forces. Along with this, the emerging trends that would affect the business of Trivago is also discussed which indicates that the company needs to update its operations and business trends so as to cope with the market and the changes that might emerge in the next 5 years. It will be essential for the company to take up diverse strategies and plans so as to overcome the challenges in the future.

 

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