Increased Buyer Power and the Impact of OTAs on the Airline Industry
Online Travel Agents (OTAs) provide potential travelers with more information on flights. This gives the travelers more control over their options and thereby increasing the buyer power.
Increased buyer power implies that the airlines can no longer rely solely on their marketing strategies. It forces them to explore other alternatives to attract more travelers, such as offering competitive prices. Although travel agents and travelling agencies have been in existence for a long period of time, the efficiency of the internet and the vast amount of information available for the travelers make the OTAs more influential in increasing the buyer power.
However, the impact of the increased buyer power tied to OTAs is subject to other market factors in the airline industry. Factors such as brand strength and market share may give big airlines a competitive advantage that will not be easily affected by the increased buyer power due to OTAs. The increased buyer power tied to OTAs cannot, therefore, be considered a big factor in airline economics.
The brand name is the main resource for Buzz Cola. In penetrating the Martian market, the brand’s strength, distinctiveness and inimitability is going to be crucial to its success. The Martian market being composed of a human colony, will be hugely influenced by the market trends on Earth. This implies that the brand’s superiority on Earth would similarly be felt in Mars. Thus, Buzz Cola launch into the Martian market is guaranteed of success. This would make my acquisition of the franchise for bottling and distributing Buzz Cola on Mars a profitable venture for all parties. In addition to the brand name, the experience that Buzz Cola has in the soft drink industry will prove vital in effectively competing with any Martian-based soft drink brands. These two assets will aid in Buzz Cola’s dominance of the Martian market.
A low cost to sales ratio implies a low cost of production. In this case, where both Firms A and B produce wheelchairs with 68% and 60% cost to sales ratio respectively, Firm B has a lower cost to sales ratio. This means that Firm B incurs lower costs in its production of wheelchairs.
It can hence be assumed that Firm B has access to cheap factors of production. This would translate to Firm B having a cost advantage over Firm A.
- Trucks belonging to the trucking company would be in better condition compared to trucks belonging to independent owners/operators.
- When a trucking company has its own fleet of trucks, the trucks usage is strictly limited to transporting goods for the trucking company.
- Independently owned trucks on the other hand are not restricted to the transportation of goods for the trucking company. The owners may be using their trucks for other transportations. This would likely reduce the durability of the trucks by up to half compared to when the trucking company owns the trucks.
- The trucking company can also schedule regular servicing of the fleet of trucks it owns, this will keep the trucks in good condition for a longer period of time. This is in contrast to when the trucking company hires trucks from independent owners. It will have very limited control on the frequency and nature of servicing of the independently owned trucks, living the trucks susceptible to breakdown.
- Coordination is easier for trucking companies that deploy their own fleet of trucks than companies that contract with independent operators.
- Owning a fleet of trucks gives a trucking company an added advantage of flexibility. This is in the sense that the schedule for the trucks is limited to the company’s activities. Thus, they can deploy, direct and redirect any of the trucks with ease.
- Independently owned trucks on the other hand, might be scheduled for other activities other than the trucking company’s activities. This would mean that these trucks cannot be subjected to any redirection or redeployment that would interfere with the other activities scheduled for the truck.
- Hiring the independently owned trucks also comes with the complexity of doing double work whenever coordination is required. The owner of the truck and the individual driving the truck may be two different people. Hence, for proper coordination communication has to be made to both individuals, making it a complex process.
- A trucking company that has its own fleet of trucks would struggle at the setting up of the company. It would take a significantly a longer period to achieve break-even compared to trucking companies that contract independent truck operators. This is as a result of the additional amount of capital required for purchasing the trucks.
- A trucking company which deploys its own fleet of trucks reduces the operation cost. This is since it does not have to pay any third party for transportation. The cost incurred in servicing and fueling the trucks is regained through the profits derived from effective coordination. This results in high long term profits for the company.
- Trucking companies that own a fleet of trucks are also more valuable than those that don’t. The fleet of trucks translates to assets for such trucking companies making them better placed in attracting investment.
- Trucking companies that hire independently owned trucks generally take shorter periods to achieve break-even. This results from the lower amount of capital required for setting up compared to those that own their own fleet of trucks. These companies therefore don’t struggle as much during the infancy period.
- Trucking companies hiring independently owned trucks incur higher operation cost as compared to those that have their own fleet of trucks. The high operations cost is due to the amount that is required to be paid to the independent operators. In the long term this affects the revenue of such companies resulting in lower profits compared to companies owning their owned trucks. Reasonably poor coordination of the trucks also contributes to the lower profits.
- Trucking companies that contact independent truck owners are also less valuable than those that own their trucks. This due to less assets since they don’t own the trucks.
- After the invention and deployment of on board trip computers, it makes less sense for trucking companies to own their own fleet of trucks.
- The on board trip computers address the two main concerns associated with contracting independent truck owners. Firstly, the trucks can be better coordinated from the headquarters of the trucking company. The on board trip computer provides the company with information on both speed and location of the trucks, which are vital data for proper coordination.
- Secondly, the on board trip computer also addresses the concerns over the condition of the trucks. On top of the data on the location and speed of the truck, the on board trip computer provides vital statistics about the truck. These statistics can be analyzed to give inference on the condition of the truck. The inferences would be crucial in necessitating action from the independent operators with regards to servicing and maintenance of their trucks.
Google’s alternative to Mr. Levandowski is worse than Mr. Levandowski’s alternative to Google. Mr. Lavandowski is the best expert in the field of self-driving cars, hence there is no individual that would replace him and deliver at the same level. However, with growing interest in self-driving cars, Mr. Levandowski has viable alternatives.
Yes, Google has an idiosyncratic value issue. Some of the technologies, such as the self-driving cars technology that Mr. Levandowski works on, require continuous upgrade. This therefore makes it necessary for Google to have the best experts in the various fields working for them. This creates a dependency on the experts leading to an idiosyncratic value crisis.
The self-driving car technology being developed in Mr. Levandowski’s division in Google is an expensive venture. Thus, first convincing the investors on the potential of the technology will be important in securing the funds for developing it before Google starts funding the project. Should the investors not like the project and ask that Google terminates it, the firm would not suffer any loses. This is as oppose to a situation where the investors are consulted after funding has started, and they express dislike for the project.
Firms, such as Google, should consider two main factors before pursuing an intrapreneurship or entrepreneurship project. First, they should gauge the potential of the project. Determining the profitability of the project in both the short and long term would help in cautioning the firms from future loses. Secondly, the firms should ascertain the ownership of the technology used in the project. This will be important in avoiding cases such as that of Mr. Levandowski, where Google ended up buying technologies from its own employee.
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