Read “Excellent Strategic Management Showcased: Priceline.com Inc.” on page 90 of your course textbook. As you read, pay close attention to Priceline’s strategy, and write a case study describing the following point: 1. What are Priceline’s internal strengths and weaknesses? 2. Who are priceline’s competitors? 3. Do you see Priceline’s strategy as effective or ineffective? Why? Your case study must be at least one page in length, not including a title and reference page. Outside sources are not a requirement for this case study, but if you choose to use them, they must be cited and referenced according to A PA standards.
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Priceline.com , Inc.: EXCELLENT STRATEGIC MANAGEMENT SHOWCASED
Do you prefer Priceline or Expedia to find low travel prices? Headquartered in Norwalk, Connecticut,
Priceline.com Inc. is the leading online travel company where buyers name their own price for airline
tickets, hotel rooms, rental cars, cruises, and vacation packages. Founded in 1997 with a patented
business model, Priceline.com operates through the Booking.com, Priceline.com, TravelJigsaw, and
Agoda brand names. Priceline.com uses excellent strategic management to dominate the online travel
business. For example, the company generates annual sales of more than $4 billion and has an EPS of
more than $30. Pricelines common stock (PCLN) had the best five-year (20072011) performance of all
companies in the S&P 500: a total return of 972 percent. Many analysts have a $750.00/share price
target for Priceline stock. In the last 12 months, PCLNs return on assets was 23.08 percent, compared to
its competitors Expedia (EXPE)s 4.19 percent and Orbitz World Wide (OWW)s 2.60. PCLNs return on
equity was 48.41 percent, much higher than EXPEs 13.44 percent and Orbitz World Wide OWWs
negative 21.25. PCLNs profit margin for the last 12 months was 25.58 percent, compared to EXPEs
10.42 percent and OWWs negative 4.83.
With more than 5,000 employees, Pricelines customers can choose set-price options. For airline tickets
and hotel reservations, Priceline.com generates sales on the margin, keeping the difference between
the price paid by the individual and what Priceline.com paid for the ticket or hotel room. Pricelines
recent success has been especially driven by international travel, particularly to emerging market
destinations. About 65 percent of Priceline.com hotel room bookings are expected to be non-European
going forward, up from 42 percent the prior year.
Priceline provides price-disclosed hotel and rental car reservation services on a worldwide basis with
approximately 185,000 hotels and accommodations in 160 countries. The companys rental car services
operate through its Name Your Own Price demand-collection system, as well as vacation packages
consisting of airfare, hotel, and rental car components; cruise trips; and destination services, including
parking, event tickets, ground transfers, and tours in the USA. Priceline provides an optional travel
insurance package that covers trip cancellation, trip interruption, medical expenses, and emergency
evacuation, as well as for loss of baggage, property, and travel documents for air, hotel, and vacation
package customers; and collision damage waiver insurance for rental car customers in the USA.
Pricelines major competitor, Expedia, was founded in 1996, a year before Priceline. Priceline has four
times the volume of revenues of Expedia, but the two firms aggressively compete every day for
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