Post on 05-Apr-2018
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Priceline.comand the search of a Business Model that
worksSUBMITTED BY :
(GROUP 1)NIKHIL K. KHATTERNISHIMA KUKREJA
NISHTHA JAINPALLAVI SRIVASTAVASHREYA AGGARWAL
SHANTNU DAS
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TOPICS DEALT :
The company (mission, vision and topexecutives)
Services and Expansion plansExpansion difficultiesCustomer and market reactionEffect on FinancialsWill it succeed or Fail?Business modelOverall impact on the travel Industry
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www.priceline.com
A company and a commercial website thathelps users obtain discount rates for travel-related purchases such as airline ticketsand hotel stays, rental cars, and homefinancing.
Not a direct supplier of these services Instead it facilitates the provision
of travel services by its suppliers toits customers. (B-to-B-to-C) Priceline was the brainchild of
digital entrepreneur Jay S. Walker.
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FOUNDER
Jay Scott Walker (born November 5, 1955) isan American inventor, entrepreneur and chairmanof Walker Digital , a privately held research and
development lab focused on using digital networks tocreate new business systems.
Walker Digital launched Priceline.com in 1998,partially self-funding the startup company. Additionalfunds came from investorsincluding Microsofts co-founder Paul Allen, financier George Soros, LotusDevelopment Corp. CEO Jim Manzi ; and cable TVmagnate John C. Malone.
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VISION
GO WHERE NO ONE HAS GONE
Corporate vision
Leading the firm into future by entering
into retail market through the competitiveadvantage of internet
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History
Priceline commenced operations on April 6,1998, with sale of online tickets.
In early history, Priceline wasnt profitable. 1999- lost over $1 billion. 2001- lost over $15 million. 2002- $23 million loss as travel declined after
September 11 attack; Key executives
resigned. 2003- Priceline first gained prominence for
its Name Your Own Price system; $10.4million net income.
Profits continued since then.
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KEY EXECUTIVES -PRICELINE.COM INC (PCLN)
Name Title Jeffery H. Boyd Chief Executive Officer,
President, Member of
Group Management Board Daniel J. Finnegan Chief Financial Officer,
Chief AccountingOfficer and Senior VicePresident
Kees Koolen Member of GroupManagement Board Robert Rosenstein Chief Executive Officer of
Agoda Company Pvt. Ltd. Christopher L. Soder Member of Group
Management Board and ChiefExecutive Officer of NorthAmerica
http://investing.businessweek.com/research/stocks/people/person.asp?personId=231187&capId=33254&previousCapId=33254&previousTitle=PRICELINE.COM%20INChttp://investing.businessweek.com/research/stocks/people/person.asp?personId=25228411&capId=33254&previousCapId=33254&previousTitle=PRICELINE.COM%20INChttp://investing.businessweek.com/research/stocks/people/person.asp?personId=45977600&capId=33254&previousCapId=33254&previousTitle=PRICELINE.COM%20INChttp://investing.businessweek.com/research/stocks/people/person.asp?personId=116117685&capId=33254&previousCapId=33254&previousTitle=PRICELINE.COM%20INChttp://investing.businessweek.com/research/stocks/people/person.asp?personId=2943968&capId=33254&previousCapId=33254&previousTitle=PRICELINE.COM%20INChttp://investing.businessweek.com/research/stocks/people/person.asp?personId=2943968&capId=33254&previousCapId=33254&previousTitle=PRICELINE.COM%20INChttp://investing.businessweek.com/research/stocks/people/person.asp?personId=2943968&capId=33254&previousCapId=33254&previousTitle=PRICELINE.COM%20INChttp://investing.businessweek.com/research/stocks/people/person.asp?personId=116117685&capId=33254&previousCapId=33254&previousTitle=PRICELINE.COM%20INChttp://investing.businessweek.com/research/stocks/people/person.asp?personId=45977600&capId=33254&previousCapId=33254&previousTitle=PRICELINE.COM%20INChttp://investing.businessweek.com/research/stocks/people/person.asp?personId=45977600&capId=33254&previousCapId=33254&previousTitle=PRICELINE.COM%20INChttp://investing.businessweek.com/research/stocks/people/person.asp?personId=45977600&capId=33254&previousCapId=33254&previousTitle=PRICELINE.COM%20INChttp://investing.businessweek.com/research/stocks/people/person.asp?personId=25228411&capId=33254&previousCapId=33254&previousTitle=PRICELINE.COM%20INChttp://investing.businessweek.com/research/stocks/people/person.asp?personId=231187&capId=33254&previousCapId=33254&previousTitle=PRICELINE.COM%20INC8/2/2019 Presentation Ecom
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Priceline.com Initial Services
Initially offered customers ability to name theirown price for an airline ticket
Customers were prompted to enter a credit cardnumber and their bid on a selected flight
Priceline.com staff (seller) would then sell to the
appropriate bidder
Quickly followed by adding other services, suchas: hotel rooms, new cars, and mortgages
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Priceline.com Expansion of Services
Initial market interest prompt companyofficials to investigate new services
Decided to offer customers the same nameyour own price system to purchase gasolineand groceries through a new division:Web-house Club (1999-2000)
Company officials view as a starting point tooffer more services along the same lines:clothes, electronics, house wares, etc.
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Priceline.com Expansion Difficulties
Initially, could not get cooperation from
vendors (not enough deep discounts)
In response, company decides to subsidize
discounts to create customer interest
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Priceline.com; Customer and MarketReactions
Buyer strategy loses appeal to customers asthey realize they have to give credit cardnumber with each bid (no final
confirmation) Customers file complaints with Connecticut
Attorney General when vendors will notprovide gas at prices previously agreed to
Competitors take advantage of of new
strategy: search engines to find lowestprices from vendors (customers have finalapproval of price)
48 Hours expose creates backlash againstcompany
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Priceline.com Expansion Effects onFinancials
Company profits reflect customer trend tocompetitors
Table of Annual sales and income (inmillions US)
2000 2001 2002 2003
Annual
Sales
1235.4 1171.8 1003.6 863.7
Annual Net
Income
(315.1) (7.3) (19.2) 11.9
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Priceline.com Expansion Effects
on Financials (Contd)
Stock Prices tumble
in wake of financialreport (see graph)
Company forced
into $75 milliondollar buyout ofWebhouse Club
50
80
110
140
170
3/30/2004
4/30/2004
5/30/2004
6/30/2004
7/30/2004
8/30/2004
Stock Prices
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Priceline.com Inc. M&A Summary
Priceline.com Inc. has made 8acquisitions while taking stakes in 4
companies. priceline.com Inc. has 6divestitures during this period.
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Year
Acquisitions
StakesDivestitur
es
2012 0 0 0
2011 0 0 02010 0 1 0
2009 0 0 0
2008 1 0 0
2007 2 0 0
2006 0 0 0
2005 1 0 0
2004 2 1 0
2003 1 1 1
2002 1 0 02001 0 0 3
2000 0 0 1
1999 0 1 1
TOTAL 8 4 6
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Business Model
Name Your Own Price system is uniquebusiness model (B-to-B-to-C), where
travellers would name their price. Purchaser can select a general location,
service level and price
The hotel, rental car company or airline isdisclosed only after the purchase, with norights to cancel.
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Business Model: Core Components
Reverse Auction PricingModel
innovative model : allows
consumers to purchasetravel services at discountedprices
Priceline operate as themiddle man or broker
receives its revenue basedon the difference betweenthe price quoted by thecustomer and offered by theservice provider.
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Will Priceline succeed or fail?
Success
Sustainable business
model
Suffered failure in theearly days but bouncedback well.
Revenues grew by 20% in2010, much higher thanits competitors.
Recently acquired TravelJigsaw.
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How has Priceline and similar onlineservices impacted the travel servicesindustry?
Reduced layers of separationand the need for agents.
Helped service providers clearexcess inventory and earnrevenue.
Lower costs to consumers
Shift in Consumer
Demographics
Niche travel deals
Price has become the drivingfactor
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Priceline (Since 2007)
Since 2007, business model changed to focus moreon traditional online reservation services wherecustomers have the flexibility to select from brand
and features rather than their more restrictive anddiscount Name your own price model. Website organized much like those of its competitors.
Customers can still choose to bid, but this is nolonger the only option.
Higher customer satisfaction due to increased
alternative. User-friendly service to customers such as Travel
Ekspert blog (launched in jan 2009) which providesadvice to consumers and also offers over 2.5 millionhotel reviews.
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Travel Expert
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Value for money remains high, strengthened byelimination of booking fees, while service qualityhas improved.
Pricelines stock value soared by nearly 200% in2009.
Pricelines strongest competitors are Expedia,Orbitz Worldwide and Travelocity
Priceline is well above the industry average and
competing quite strongly against its directcompetitors. High income , profits and assets can be seen in
the income statements and balance sheet from2006 to 2010.
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Balance Sheet 2006-2010
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Thank youqueries ?