Presentation Ecom

8/2/2019 Presentation Ecom

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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%20INC


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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 ?

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