Purchasing Airbnb Hotel - Paper on Business Administration Example

There are other numerous motives as to why we would want to purchase Airbnb. Some of these reasons include; market opportunities provided by Airbnb. First, Airbnb connects individuals to unique travel experiences in more than 34, 000 cities and 191 countries at any price point. It has more than 26 languages. This kind of market would offer Alibaba the significant market. Many travelers enjoy accommodations that provide a different experience from the conventional standards provided by hotels. Most of the users find the personalized service from accommodations both from hosts and from the customer's service provided by Airbnb to provide a higher experience. Although Airbnb has been primarily targeting budget-minded tourists, there has been an increasing trend of attracting business travelers. This would be beneficial to Alibaba as some of its business partners travel to areas where some of their products are produced. Additionally, the business travelers can also get unique and memorable services offered by Airbnb. Alibaba comprehends that it is the interface layer that all the value and profit is. A company like Alibaba would also want to purchase Airbnb so as to make sure that it caters for future competition. According to Spence (2016), the business model of Alibaba and Airbnb are similar. These two companies are both asset builders. These two companies develop, build and lease property and sell physical things. Additionally, Alibaba and Airbnb creates a network of peers in which the participant's interact and share in the value creation (Evan & Schmalensee, 2016). The combination of Alibaba and Airbnb would mean that both companies can operate on their platform (Rao & Nusca, 2015). Alibaba would continue selling products online while Airbnb would provide reviews and best hotels available to customers.

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Why will they accept the proposal?

The Benefits for Airbnb

1. Attract more Chinese customers

China had 120 million outbound tourists in 2015(China Tourism Research Institute, 2015), which increased 12% compared to 2014. Among these visitors, 70% of outbound Chinese tourists were independent travelers (Chinese Tourists Agency, 2016). In addition, a new and growing sector of Chinese tourist is the young backpacker or sports adventurer (Christopher, 2014). These independent travelers especially young backpackers are the target market of Airbnb since there is no travel agency to book the hotel for them in advance and independent travelers trend to seek lower costs of their trips. After the acquisition of Airbnb, we will put Airbnb advertisement on our most influential websiteTaobao. Taobao marketplace is one of the worlds top 12 most visited websites and 3rd most visited websites in China (Alexa, 2016). Also, we will put Airbnb link on our travel booking websiteAlitrip.This will be most effective advertising to increase Airbnb brand awareness and customers in China.

2. Alibaba would help solve Airbnb regulatory issues:

Airbnb like most western companies would like to climb to the top in the middle kingdom, but it faces regulatory difficulties such as the aspect where their short-term online rental industry is still new in China, and exactly what the rules are with regard to things like safety systems and taxes isnt yet clear (Cluster 2016), but with the help of Alibaba. Additionally, Airbnb is facing the problem of not being able to have control regarding confirming, verifying, and reporting real identities, and in China.This is very significant because as a failure to do so would risk violating Chinas anti-terrorism laws (which require hotels and other short-term rental places to register the identities of anyone who stays with them) (Cluster 2016). However, with the help of Alibaba Airbnb would be able to solve some of the regulatory issues that it may face.

3. Would help solve the problem of credit system:

One of the key reasons why Airbnb would want to sell to Alibaba is because of its main challenge in adapting their operations, product and management to suit the Chinese market (SOURCE). Alibaba presents an opportunity that will enable Airbnb to solve one of their biggest problem of adapting to the individualities of the Chinese market. Regarding operations, Airbnb would have to adapt to the model used by Alibaba in the provision of safety and credit. In China, there is no personal credit system. If Airbnb is bought by Alibaba, then the model used by Alibaba in the Chinese market can be implemented thus solving the challenge of credit problems.

4. Would help solve the cultural challenges that Airbnb would face:

Another aspect as to why Airbnb would want to sell to Alibaba is the different culture that they are likely to face in China. The management style of Airbnb and that of Alibaba are different. If Airbnb decides to enter the Chinese market on its own, then there are bound to be challenged in its management styles and culture (SOURCE). Alibaba would provide the best option since it has been successful and has the know-how in the Chinese market.