Read “Excellent Strategic Management Showcased: Priceline.com Inc.” on
page 90 of your course textbook. As you read, pay close attention to
Priceline’s strategy, and write a case study describing the following points:
• What are Priceline’s internal strengths and weaknesses?
• Who are Priceline’s competitors?
• Do you see Priceline’s strategy as effective or ineffective? Why?
Your case study must be at least one page in length, not including a
title and reference page. Outside sources are not a requirement for
this case study, but if you choose to use them, they must be cited and
referenced according to APA standards.
Article from text:
Do you prefer Priceline or Expedia to find low travel prices?
Headquartered in Norwalk, Connecticut, Priceline.com Inc. is the
leading online travel company where buyers “name their own price” for
airline tickets, hotel rooms, rental cars, cruises, and vacation packages.
Founded in 1997 with a patented business model, Priceline.com
operates through the Booking.com, Priceline.com, TravelJigsaw, and
Agoda brand names. Priceline.com uses excellent strategic
management to dominate the online travel business. For example, the
company generates annual sales of more than $4 billion and has an EPS
of more than $30. Priceline’s common stock (PCLN) had the best fiveyear (2007–2011) performance of all companies in the S&P 500: a total
return of 972 percent. Many analysts have a $750.00/share price target
for Priceline stock. In the last 12 months, PCLN’s return on assets was
23.08 percent, compared to its competitors Expedia (EXPE)’s 4.19
percent and Orbitz World Wide (OWW)’s 2.60. PCLN’s return on equity
was 48.41 percent, much higher than EXPE’s 13.44 percent and Orbitz
World Wide OWW’s negative 21.25. PCLN’s profit margin for the last 12
months was 25.58 percent, compared to EXPE’s 10.42 percent and
OWW’s negative 4.83.
With more than 5,000 employees, Priceline’s customers can choose setprice options. For airline tickets and hotel reservations, Priceline.com
generates sales on the margin, keeping the difference between the
price paid by the individual and what Priceline.com paid for the ticket
or hotel room. Priceline’s recent success has been especially driven by
international travel, particularly to emerging market destinations.
About 65 percent of Priceline.com hotel room bookings are expected to
be non-European going forward, up from 42 percent the prior year.
Priceline provides price-disclosed hotel and rental car reservation
services on a worldwide basis with approximately 185,000 hotels and
accommodations in 160 countries. The company’s rental car services
operate through its Name Your Own Price demand-collection system,
as well as vacation packages consisting of airfare, hotel, and rental car
components; cruise trips; and destination services, including parking,
event tickets, ground transfers, and tours in the USA. Priceline provides
an optional travel insurance package that covers trip cancellation, trip
interruption, medical expenses, and emergency evacuation, as well as
for loss of baggage, property, and travel documents for air, hotel, and
vacation package customers; and collision damage waiver insurance for
rental car customers in the USA.
Priceline’s major competitor, Expedia, was founded in 1996, a
year before Priceline. Priceline has four times the volume of
revenues of Expedia, but the two firms aggressively compete
every day for customers worldwide.
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