MGT 112 UC San Diego Cola Wars Continue Case Study Essay Questions please use the following session handouts and reading to answer those 5 short essay ques

MGT 112 UC San Diego Cola Wars Continue Case Study Essay Questions please use the following session handouts and reading to answer those 5 short essay questions. please let me know if you have any questions MID TERM 1: MGT 112
-Please answer all questions
-5 short essay questions (5 points each)
-Total points that can be achieved (25 points)
-Please upload the finished document to TritonEd by Apr 30, 5pm.
-Average time to finish the assignment: approximately 180 mins
-The exam is open book/open notes
-page limit: overall 5 pages (approximately 1 page per question)
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1. Building on the case study “Cola Wars Continue,” please analyze the 5
competitive forces of the industry (i.e., using the article of M. Porter on “The Five
Competitive Forces that Shape Strategy”)?
2. Building on the case study “Cola Wars Continue,” how can Coke and Pepsi
sustain their revenues and profits with the growing popularity of non-carbonated
soft drinks (you can take today’s perspective or the perspective at the time the
case was written)?
3. Please analyze how to potentially avoid “Red Ocean Traps” using a hotel, retail,
restaurant, healthcare, or entrepreneurship example.
4. How can a potential new entrant in the automotive industry (e.g., BYTON
https://www.byton.com) try to “overcome barriers to entry in an established
industry” (see Tesla article)?
5. Please analyze the concept of “digitally transforming customer experience” using
an own example or a recent business example along the concepts highlighted in
“The nine elements of digital transformation.”
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For the exclusive use of J. Wu, 2020.
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REV: JANUARY 8, 2018
THALES S. TEIXEIRA
MORGAN BROWN
Airbnb, Etsy, Uber: Growing from One Thousand
to One Million Customers
By 2016, online two-sided platforms (or marketplaces) were among the fastest-growing internet
startups in existence. These marketplaces sought to match suppliers of assets for rent, physical
products, or services with customers demanding them. Among the most notable two-sided platforms
that quickly reached one million customers were Airbnb, Etsy, and Uber. They offered short-term
property rentals, handcrafted goods, and car rides, respectively. As two-sided markets grew past the
first thousand customers, network effects kicked in as more consumers bred more suppliers and vice
versa. But how did these platforms ride the next level of growth, going from a thousand to a million
customers? How did they change their acquisition tactics to reach this next level of scale?
Airbnb
Airbnb was a two-sided marketplace that sought to match people who owned real estate properties
with people interested in renting short-term lodging. Founded in August 2008 and based in San
Francisco, the company was privately owned. By 2009, it had more than a thousand customers and by
mid-2011, more than a million. As of 2015, it had over 1.8 million listings in 34,000 cities worldwide.
Start with the Perfect Experience and Work Backward
In 2008, after hosting their first three guests in their San Francisco apartment, Joe Gebbia and Brian
Chesky began receiving emails from people around the world requesting Airbnb in their own cities
and in places they would like to visit. As Gebbia put it, “People told us what they wanted, so we set
off to create it for them.” 1 Indeed, much of Airbnb’s growth could be attributed to the fact that people
asked for the service Airbnb offered.
In order to learn what people wanted, the founders used their services. In the summer of 2009, as
the company was searching for new office space, Chesky stayed exclusively in Airbnb listings in order
to gather firsthand data about the service. 2 That same summer, Airbnb was not gaining much traction
in New York, so Gebbia and Chesky flew out and booked spaces with 24 hosts to figure out what the
problem was.
HBS Professor Thales S. Teixeira and independent researcher Morgan Brown prepared this case with the help of Research Associate David LopezLengowsk. This case was developed from published sources. Portions of this case are excerpted from Morgan Brown’s cases studies published at
growthhackers.com (www.growthhackers.com/growth-studies). Funding for the development of this case was provided by Harvard Business
School and not by the companies. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements,
sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2016, 2018 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-5457685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized,
photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.
This document is authorized for use only by Jingxin Wu in Spring 2020 MGT 112 Zimmermann taught by JILL ROSENOW-FARWELL, University of California – San Diego from Mar 2020 to Jun
2020.
For the exclusive use of J. Wu, 2020.
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Airbnb, Etsy, Uber: Growing from One Thousand to One Million Customers
It turned out that users were not doing a great job of presenting their listings. According to Gebbia,
“The photos were really bad. People were using camera phones and taking Craigslist-quality pictures.
Surprise! No one was booking because you couldn’t see what you were paying for.” Their solution to
this problem was low-tech but effective. According to Chesky, “A web startup would say, ‘Let’s send
emails, teach [users] professional photography, and test them.’ We said, ‘Screw that.’” 3
Instead, they rented a $5,000 camera and went door to door, taking professional pictures of as many
New York listings as possible. This approach led to two to three times as many bookings on New York
listings, 4 and by the end of the month Airbnb’s revenue in the city had doubled. As it turned out, what
drove the rapid growth in New York also helped in Paris, London, Vancouver, and Miami. 5
This led to the Airbnb photography program, which was officially launched in the summer of 2010.
Hosts could automatically schedule a professional photographer to photograph their space. 6 Though
initially only 20 photographers were contracted by Airbnb, the service became an instant hit. 7
Though this initiative was not cheap for the cash-strapped startup, the founders felt that the longterm benefits—improved listings were two-and-a-half times more likely to be booked—were well
worth the cost. By 2012, there were more than 2,000 freelance photographers employed by Airbnb to
photograph 13,000 listings on six continents (see Exhibit 1). 8
As Chesky explained, “We start with the perfect experience and then work backward. That’s how
we’re going to continue to be successful.” 9 This approach extended beyond revamping listing photos.
The founders looked at the characteristics that users valued and worked to engineer those into the
entire site. With initial traction came new scrutiny from the media and the established hospitality
industry.
Disrupting an Established Market
When Chesky and Gebbia first advertised their loft-turned-lodging space and home-cooked
breakfast, they were promising more than simply a place to sleep. And as Airbnb grew, this remained
a core component of the user experience. It was this ability to deliver more than just a place to sleep
that allowed Airbnb to disrupt the established lodging market in such a major way. Yet in order to
really compete with hotels, it had to do more than just offer a better experience.
A major advantage of Airbnb was that it tended to be substantially cheaper—generally 30% to 80%
lower than hotels in the same location. 10 A 2008 TechCrunch article on the startup, which was still
called AirBed & Breakfast at the time, explained: “In general, the prices are usually much cheaper (rates
in San Francisco, for instance, range from $10 to $175 a night, with the median being $85). And you get
to stay with a friendly local who can steer you to restaurants and stores you probably would never find
otherwise.” 11 One commenter pointed out that there was one drawback to Airbnb:
If this ever becomes mainstream, the whole thing will come crashing down. The kind
of people that *DO* rob, abuse, rape and murder people will start using these systems,
and that will spread legitimate fear, corrupting the whole thing. Pray that this remains
underground, that’s the only way it can survive. 12
As of 2012, with more nights booked than Hilton and a greater valuation than Wyndham and
Hyatt, 13 there was no denying that Airbnb had gone mainstream. However, the company did not “come
crashing down” thanks to a number of efforts to help overcome the inherent trust issues, even though
Airbnb had its fair share of mishaps.
2
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2020.
For the exclusive use of J. Wu, 2020.
Airbnb, Etsy, Uber: Growing from One Thousand to One Million Customers
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Professional photographs did a lot to inspire trust on one side of the equation—not only by helping
to ensure that listings were not seen as very low-end accommodations, but also by simply verifying
addresses. In addition to enhanced photos, in the summer of 2011, the company introduced Airbnb
Social Connections, which leveraged users’ social graphs via Facebook Connect.
When Social Connections was enabled, listings showed the profiles of mutual connections—friends
who had stayed with the host or were friends with the host. Social Connections also allowed guests to
search for hosts based on other characteristics, like school of graduation. The service was also quick to
point out that the feature could be turned off with just a click, and that connections were only visible
to those with whom the user was already connected. Regarding Social Connections, Chesky explained:
This has been one of our most requested features, particularly for people that want to
have something in common with the people they are staying with. Social Connections
helps you find places to stay with mutual friends, people from your school or university,
or hosts that your friends stayed with and recommend. 14
When the featured launched in 2011, Chesky claimed that there were already 16,516,967 connections
among current Airbnb members—a number that continued to grow. 15 It was important to the founders
that Airbnb was not just a transactional website, but rather a place to engage with before (and after)
booking travel accommodations.
Optimizing the Product for Engagement
In the summer of 2012, Airbnb redesigned the site around a new “Wish Lists” feature.
The Wish Lists offered the ability to save properties that users most liked. It had been possible on
the Airbnb site for a couple of years, but the team wondered whether the function was optimized for
maximum engagement. As with the listing photos, they began with a test and waited to see what
happened. In this case, they decided to change the generic star icon to a heart as a means to tag
preferred properties. It was the aspirational difference between a star and a heart that led Airbnb to
develop Wish Lists. Wish Lists were functional, designed to facilitate sharing and collaboration, but
they also spoke to the aspirational potential of the heart by helping position Airbnb listings as content.
This gave users a reason to visit the site not only when they were looking to book a room, but when
work was boring or the weather oppressive. Users could visit Wish Lists as a way to escape, browsing
whimsical Airbnb-curated lists such as It Yurts So Good 16 and Castles. 17
Much to management’s surprise, engagement increased by 30% as a result. Gebbia explained that
the heart “showed us the potential for something bigger.” 18 That potential was aspirational rather than
utilitarian—something more than a simple accommodations search tool. “You have to have search,”
Gebbia explained after the Wish Lists launch. “But what if you don’t know where you want to go?” 19
Four months later, 45% of Airbnb users were engaging with Wish Lists and over a million had been
created. 20 Ultimately, like the site’s use of Social Connections, Wish Lists helped the site to stand out
among competitors. Rather than merely a place to search for accommodations, Wish Lists helped
Airbnb to move toward a more engaging, social discovery form of planning travel.
Early Controversy
During the summer of 2012, Airbnb received $112 million in a Series B funding round from
Andreessen Horowitz, Digital Sky Technologies, General Catalyst Partners, Jeff Bezos, Ashton
Kutcher—who also joined the company’s advisory board—and CrunchFund. Then on June 22, just
3
This document is authorized for use only by Jingxin Wu in Spring 2020 MGT 112 Zimmermann taught by JILL ROSENOW-FARWELL, University of California – San Diego from Mar 2020 to Jun
2020.
For the exclusive use of J. Wu, 2020.
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Airbnb, Etsy, Uber: Growing from One Thousand to One Million Customers
three days after funding that valued Airbnb at over $1 billion, an Airbnb user’s home was ransacked. 21
It was unclear whether the company actually refused to help the user, named EJ, as TechCrunch’s
Michael Arrington initially reported: “I spoke to Airbnb about EJ’s situation. They won’t reimburse her
for damages, they say, and they do not insure against losses. They are helping police track down the
person who did this, but their help ends there.” 22
Airbnb was quick to email TechCrunch with the following corrections, which appeared as an
update at the end of the article:
1.
We have been assisting investigators and they have a suspect in custody.
2.
We have been working with the host since the event and we have offered to
assist her to the situation to [everyone’s] satisfaction. If you read the blog post,
you’ll see that she points this out:
I would be remiss if I didn’t pause here to emphasize that the customer
service team at airbnb.com has been wonderful, giving this crime their full
attention. They have called often, expressing empathy, support, and genuine
concern for my welfare. They have offered to help me recover emotionally and
financially, and are working with SFPD to track down these criminals. I do
believe the folks at airbnb.com when they tell me this has never happened
before in their short history, that this is a one-off case.
3.
We actually have an entire safety FAQ for our users. You can find it here:
http://www.airbnb.com/safety 23
The same day the TechCrunch article went live, Chesky also contributed a guest post on
TechCrunch entitled, “On Safety: A Word from Airbnb,” in which he asserted:
We are committed to improving upon our product with safety as the cornerstone of
the Airbnb marketplace. We are fully committed to the vision that one day you will be
able to travel to any city or town around the world, and with the click of a button, access
local people and cultures safely and easily. We will work tirelessly alongside our
community until that day is fully realized. 24
Among these improvements, Airbnb promised it was working on a number of initiatives, including
doubling the customer support staff, creating a dedicated Trust & Safety department, creating a Host
Education Center with safety tips for hosts, designing enhanced user-profile verification, facilitating
richer communication between guests and hosts pre-booking, and offering insurance options to hosts,
though the specifics of those insurance options were initially unclear. 25
In the month that followed EJ’s initial post and Arrington’s coverage of it, the media attention did
not die down. In another blog post on July 28, EJ asserted:
On June 29 I posted my story, and June 30 thus marks the last day I heard from the
customer service team regarding my situation. In fact, my appointed “liaison” from
Airbnb stopped contacting me altogether just three days after I reported the crime, on
June 25, for reasons that are unknown to me. I have heard nothing from her since. I
blogged my story, and all these kind and supportive people just . . . disappeared. 26
4
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2020.
For the exclusive use of J. Wu, 2020.
Airbnb, Etsy, Uber: Growing from One Thousand to One Million Customers
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She went on to claim that “one of the founders” (though not Brian Chesky) was the only person
from Airbnb with whom she had been in contact, and that he had repeatedly requested she take down
her initial blog post, limit access, shut down the blog entirely, or “update the blog with a ‘twist’ of
‘good news’” because of “the potentially negative impact it could have on his company’s growth and
current round of funding.” 27
To make matters worse, on July 30, Paul Graham, founder of incubator Y Combinator, accused
Arrington of lying about Airbnb’s unwillingness to pay for the host’s damages, referring to Arrington’s
claims in a July 29 TechCrunch article as “bullshit.” 28 That day, Arrington responded in another
TechCrunch post, referring to the whole situation as a “grossly mishandled PR crisis.” 29
The next day, Arrington highlighted the case of Troy, another Airbnb host who had had a similarly
nightmarish experience two months prior—Troy’s valuables and identity were stolen, meth pipes were
left strewn around his home, along with a random cat, and “thousands of dollars of bizarre damage”
was done to his rented home. 30 In a comment from one of TechCrunch’s initial posts about the Airbnb
situation, the host explained:
I had a similar problem with haphazard communication from people at Airbnb. I gave
them multiple opportunities to make me a happy customer to which they did but then
retracted their offer after [there] was miscommunication among the team. Sometimes days
went by without hearing from anyone, while I was fear-stricken, totally disoriented, and
angry. It was almost the most absurd customer service crisis one could ever imagine. But
I am one squeaky wheel, and we eventually found an agreeable solution that I was
generally pleased with. 31
The user, who had used Airbnb as both a host and a guest since the incident, went on to accept most
of the blame for the situation, explaining, much as EJ had, that he had had a gut feeling when renting
to this particular guest that something was not right. Airbnb eventually gave Troy multiple free nights
as restitution. His main criticism was that “[t]he reason they’re able to charge these high fees is
[because] they lull people into a sense of false security. If they disclosed that, people would just use
Craigslist” 32—a point that was also echoed by EJ in her initial post.
Then on August 1, Chesky issued an unconditional apology via the company blog, announcing
Airbnb’s updated guarantee to cover up to $50,000 in damages from vandalism or theft, a 24-hour
helpline, something both EJ and Troy noted as lacking in their experiences, and several more improved
security measures. 33 Then in May 2012, Airbnb partnered with Lloyds of London to expand its
guarantee even further, covering every booking with its $1 million Host Guarantee.
The company pointed out, however, that the guarantee was not a replacement for home or renter’s
insurance, and it did not cover cash and securities, collectibles, rare artwork, jewelry, pets, or personal
liability. Hosts that made claims under the Host Guarantee also had to “agree to cooperate with Airbnb
and its insurers, including providing documentation of the loss they’re claiming and agreeing to
inspection in the rare cases it may be necessary.” 34
Though the company’s initial handling of the situation was dubious, management learned from
their mishandling of damage…
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