Priceline is one of the Web’s most well-known companies. Its “Name Your Own Price” reverse-auction pricing system is a unique business model that uses the information sharing and communications power of the Internet to create a new way of pricing products and services. At Priceline, consumers can enter a bid for travel, hotels, rental cars, and even home financing. Priceline queries its vendors (airline, hotel, and financial service firms) to see if anyone will accept the bid. Priceline offers a compelling value proposition to customers, allowing them to save money by trading off flexibility about brands, product features, and/or sellers in return for lower prices. Vendors also can gain additional revenue by selling products they might not …show more content…
The good news has continued since. In 2004, Priceline recorded operating income (income before tax adjustments) of $30 million; in 2005, $35 million; in 2006, $61 million; and in 2007, 155.5 million. (During the period between June 2003 and December 2006, Priceline’s stock held relatively steady in the mid-$20–$30 range, but has since steadily increased, reaching a high of $144 in May 2008 before dropping back down into the $95-$100 range in the months following). In 2008, Priceline continued to exceed analyst expectations, with operating income for the second quarter of 2008 totaling $54.1 million compared to $34.6 million for the same period in 2007. Suddenly, Priceline was the darling of Wall Street with its stock price doubling in the course of a year, and far outstripping rivals like Orbitz and Travelocity, both of whom were have earnings declines. Priceline's rise occurred when worldwide travel was declining due to rising oil …show more content…
In October 2000, after only 10 months of operation, Priceline’s affiliate Priceline Webhouse Club, unable to raise additional financing, shut down its business, after running through $363 million. The financial climate at the time, with its renewed emphasis on profitability, made it impossible for Jay Walker, Priceline’s founder, to raise the additional hundreds of millions that would be required before Webhouse might become profitable. Walker did not see the closure as a failure of the Priceline business model, however. Instead, he characterized it as the result of the “fickle sentiments” of investors. Many analysts did not accept Walker’s characterization. Instead, they pointed to other factors. First, many of the major manufacturers of food and dried goods chose not to participate in Priceline Webhouse. So, to generate consumer interest, Priceline Webhouse subsidized discounts on most products itself. Although some major manufacturers, such as Kellogg’s and Hershey’s, did eventually sign up, many, such as Kraft, Procter & Gamble, and Lever Brothers, did not. The second miscalculation was that bidding on groceries and gasoline did not exactly provide a “hassle-free” way to shop. Customers were required to bid on and pay for groceries online, then use a special identification card to pick them up at a participating supermarket. If the particular items purchased were not available at the store, the customer would
After he was hired, then CEO Ron Johnson introduced a pricing philosophy called “the true price,” which involved the replacement of sales through coupons with everyday low prices. This eliminated the need to inflate prices that would later be discounted for sales. However, Johnson overestimated the rationality of consumers and forgot that coupons were communication tools that announced the beginning of the shopping season5. Their core customers were dependent on coupons and often times waited until sales before they would shop. The coupons gave customers psychological justification to shop for good deals. Besides alienating core customers by removing coupons and sales, he tried to turn JC Penny into a more modern shopping experience complete with boutique stores within the larger store, Wi-Fi, and juice bars with smoothies and coffee3. National brands replaced p...
Some dominant economic features of this industry include the number of rivals, the number of buyers, vertical integration, and supply/demand conditions. The number of rivals in this industry varies on the scope of how large or small the firm is. Larger rivals include Whole Foods and Walmart and smaller rivals include Lucky’s Food Market and Pathmark. For example, Walmart has a highly differentiated product selection. it offers various forms of products that are ‘identical’ to better convenience its consumers. Walmart also has large channels of distribution where its “shippers are always on the lookout for ways to speed product from source through supply chains to the consumer” (Walmart, 2014 Pg.1). The number of buyers in this industry is consumers who are buying large volumes of products, where these buyers do not necessarily have any buying power. The majority of of grocery stores are in the retail industry, where larger involvement occurs from integrating operations, and suits the industry as a competitive
Historically, Dollar General operated in a highly price sensitive market segment, with 55% of its consumer base earning an average annual gross income of less than $40,000.[2] To attract these customers, Dollar General employed an Everyday Low Price strategy similar to Wal-Mart’s. Thus, keeping costs low and driving high traffic volumes were critical to the company’s financial success. Dollar General achieved this strategy in several ways, including keeping rents and labor costs low, locating in low-income, high traffic areas that offered consumers few substitutes, and offering a wide variety of popular CPG and white label goods.
FreshDirect used many different strategies while penetrating the online grocery industry, more specifically the overall cost leadership and differentiation strategy. According to Dess, McNamara and Eisner (2016), “By holding down costs or making more efficient use of resources than larger competitors, new ventures are often able to offer lower process and still be profitable.” By utilizing the combination of the differentiation and overall cost leadership strategy, FreshDirect was able to successfully infiltrate the market and gain a competitive advantage over its competitors. In order to achieve overall cost leadership, FreshDirect’s goal was to reduce cost as much as possible through eradicating the go-between suppliers
The main purpose of this report was to evaluate and research the financial information about Priceline during the past five years to evaluate the future developing of the company.
They offer their customers lower prices than traditional stores, and like Costco, they sell their products in bulk to keep members interested. What makes them a threat to Costco is the cost of becoming a member to shop at their stores. For Costco’s basic membership, known as a Business membership, a price increase had to occur to outweigh price increases from their suppliers. This led to the Costco Business membership annual fee being set at $55. When looking into the case study assembled by Thompson, Peteraf, Gamble, and Strickland (2014), they point out that Sam’s Club is able to offer similar benefits to its members.
My company of choice for this report is Macy 's. 'The Magic of Macy 's ', as the company advertises it, has inspired me to shop there, take advantage of their incomparable discounts and great online shopping experience. Macy 's, Inc. is one of the largest department store chains in the United States of America. Macy 's manages stores under the Macy 's and Bloomingdale 's brands. I enjoy shopping at both of the company 's store brands, Macy 's and Bloomingdales. Bloomingdales provides a more personalized experience
In April 1992, American Airlines launched "Value Pricing" -- a radical simplification of the complex pricing structure that had evolved over more than a decade following deregulation of the U.S. domestic airline industry. American expected that the new pricing structure would benefit consumers and restore profitability to both American and the industry as a whole. The critical issue raised is: Would American's bold initiative work?
The rivalry aspect of Porter’s Five Forces that influence’s the grocery industry finds that there is a high degree of competition for consumer’s business among the dominate retailers as well as those companies trying to take any share of the market they can get. The large retailers engage in intense competition among each other as well as other stores that are competing for sales. Price wars drive down the profit margins for individual items and new and improved store design to bring in customers increases fixed cost. Improved distribution lines affect distribution and storage cost is competitive adjustments that the major retailers use to stave off the increasing competition. The last area of rivalry that the major companies use is the relationships they have with their suppliers to sign exclusive deals or lower cost than those prices paid by competing firms. As more retailers such as Wal-Mart and Target add groceries to their sales floor the competition increases as well as the stores that offer individual grocery items in their stores such as Dollar General, Walgreens and CVS. The grocery rival...
James Baldwin’s piece “Notes of a Native Son” encapsulates his personal experiences in society as a Black man facing prejudice, as well as his relationship with his father and how American civilization impacted it. As discussed in class, the majority of Baldwin’s opinions on his father stemmed from his father’s experiences with prejudice prior to his passing. Throughout the piece, the audience learns with Baldwin where his preconceived notions of his father originate from as he experiences racism himself. Similarly, Langston Hughes’s poem “I, Too” displays a desire for Black people, including himself, to be incorporated into society and not discriminated against. A third piece I discovered that blends nicely with these two is “The Melting Pot”
and is especially popular among eBay customers. Fig.1 briefly illustrates Company’s business. The system enables its
By the 1980s, just before the rise of Wal-Mart, Kmart had become complacent. It believed it would be the king of discount retailing, now and forever. It didn't perform an accurate SWOT analysis, but to be fair, who could have seen the rise of Wal-Mart to the position of the world's number-one retailer? Still, as Wal-Mart built new stores in town after town, supported by cutthroat pricing and solid logistics, Kmart's complacency would cost them. Part of the problem was that as Wal-Mart was pouring money into information technology (IT), Kmart's IT budget continued to shrink – not just once, but several years in a row. While Wal-Mart's logistics and supply chain management got sharper, Kmart's stagnated. And while Wal-Mart was able to squeeze more value out of its stores and its systems, Kmart lost ground. By the time Kmart had finally decided to start devoting more resources to IT, it was so far behind Wal-Mart that catching up would have been a near-impossible task without the recession in the early part of this decade. With the effects of the recession taken into account, Kmart instead was consigned to also-ran status among discount retailers.
Now, dealing with monumental problems, Priceline.com is faced with a daunting future and a questionable long-term success. Will Priceline.com find itself pushed out the market by copycats, despite its patent? Fundamentally, can Priceline.com's survive?
After enjoying much initial success by utilizing the internet and a patented technology which connected buyers to sellers, priceline began to suffer growing pains early on. Initially priceline was successful because it concentrated solely on airline seats. Airlines were more than happy to fill empty seats for any price rather than fly with an undersold plane. Copying its success, priceline quickly followed into offering hotel rooms, another commodity in which hotels would rather book a room at a minimal price than have it empty. As priceline spread out to encompass more areas such as home mortgages and groceries, it faced a diluted image to shoppers. Some ventures were huge resource drains to the company both financially and in talent. As employees tried fixing what was wrong with problem areas, profitable areas such as hotels and airfare began to receive direct competition from the airlines and hotels themselves as well as other websites such as expedia.com.
Digital marketing such as the internet has allowed consumers to easily compare prices online through apps from app stores or price comparison websites such as pricerunner.co.uk. This can reduce search costs for t...