University Of Amsterdam BSc Economics and Business Administration BSc Thesis + Thesis Seminar Business Administration (6013B0347Y) July 15th, 2015 Topic: An in depth analysis of a business process in the field of collaborative innovation and entrepreneurship. Supervisor: A.C.C. Gruijters, MSc (a.c.c.gruijters@uva.nl) Author: Stergios Stasinopoulos (s.stasinopoulos@student.uva.nl) (Student ID: 5675448) Title: Corporate Social Responsibility in EBusiness Service Industry; The Booking.com Case Analysis with the Business Model Canvas a. With the use of the Business Model Canvas as a guideline, a case study examining how the current business model of Booking.com, a leading ebusiness in hotel industry, could be evolve from the adoption of CSR activities, potential benefits, risks and practical implications. Keywords: ebusiness, CSR, Value Creation, Innovation, Valuebased organisation, Business Model Canvas.
Statement of originality This document is written by Student Stergios Stasinopoulos who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document are original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Table of Contents 1. Introduction 2. Secondary data analysis 2.1 Literature Research 2.2 Survey Conducted by Booking.com 2.3 Documentation Research (to support the findings from the research of Booking.com) 3. Current Business Model Analysis and CSR Inclusion Insights 3.1 Customer segments 3.2. Value proposition 3.2.2 Value proposition and CSR Inclusion 3.3 Channels 3.3.1 Existing Structure 3.3.2 Channels and CSR Inclusion 3.4 Customer relationship 3.4.1 Existing Structure 3.4.2 Customer relationship and CSR Inclusion 3.5 Revenue streams 3.5.1 Existing Structure 3.5.2 Revenue streams and CSR Inclusion 3.6 Key Resources and CSR Inclusion 3.6.1 Existing Structure 3.6.2 Key Resources and CSR Inclusion 3.7 Key Activities 3.7.1 Existing Structure 3.7.2 Key Activities and CSR Inclusion 3.8 Key partnerships 3.8.1 Existing Structure 3.8.2 Key partnerships and CSR Inclusion
3.9 Cost Structure 3.9.1 Existing Structure 3.9.2 Cost Structure and CSR Inclusion 4. Limitations 5. Future Research Suggestions 6. Concusion 7. Bibliography
1. Introduction
The importance of integrating business ethical practices with corporate strategy and its complications have been highlighted strongly in research during the last years. Companies are dealing with societal, ethical and environmental aspects as a result of pressure exerted by clients, shareholders, regulatory authorities and nongovernmental organizations. Many recent corporate scandals proved this fact; Various have been exploded with disastrous consequences not only on the environment, minority groups, various stakeholders and society as a whole, but also equally disastrous also on the profitability of the companies themselves. Therefore, many concerns arise from an ethical viewpoint, as well as from threats to the reputation and sustainability of the firms.
These same risks though, when taken into consideration proactively, could become valuable opportunities in the form of potential competitive advantages by adopting various CSR activities, such as marketing green products, saving environmental costs, ethical and fair employment practices and corporate sustainability reporting. Both academics and managers nowadays try to understand better how business ethics and CSR principles are intercrossing traditional management theories and practices and many researches on these fields are being constructed. Companies worldwide are confronted with differences in legislation, ethical standards and management practices. But how about ebusinesses specifically? Should they incorporate CSR into their strategies, operations and objectives, when most of their operations are online and globally oriented? Does it have any significance when consumers and firms are only virtually interacting with each other and none of their core or secondary business activities or transactions affect at any way the environment or any other element of what business ethics may include? And are there any benefits for their stakeholders, besides the obvious social returns?
As an indicator of the need and/or opportunity for online organizations to include CSR principles in their core operations, we can underline from one hand the increased attention and pressure from the media and NGOs’ side on business ethics of major online corporations. For example, media has focused in the past on the environmental impact of Facebook operations and their delayed reactions to CSR demands from Greenpeace International, an environmental
NGO. After 20 months of continuous pressure and a campaign supported by more than 700.000 people, Facebook announced a siting policy that states a preference for access to clean, renewable energy supply for its future data centres (2011). More recently, Apple reported via its official page that as of March 20, 2013 it uses only renewable energy sources for all of its data centers, after attracting negative attention about its practices in a report generated by Greenpeace that same year (2013). On the other hand, there are more recent examples of previously established as solely forprofit firms voluntarily emerging proactively into members of this new 4th sector, as forbenefit corporations. Facebook is a characteristic example, with its recent announcement of leading a project that will provide internet connection via satellites and droneplanes in isolated, undeveloped parts of the world. Another example, of corporate social entrepreneurship this time, is Vodafone which in collaboration with TNT Post has developed a system of tracking people with no specific residence so to deliver mails and parcels, by allocating their position via their mobile phone GPS location, as a solution to the lack of proper postal code mapping in Africa and the frequent relocation of many citizens.
This paper aims to investigate how an ebusiness could adjust its business model due to the inclusion of distinctive, business productrelated social commitments to its strategy and core operations, as a result of the adoption of CSR activities. Furthermore, we examine if/how these potential benefits from the inclusion of CSR principles as a part of its corporate strategy and business model are being evaluated by existing literature, with regards to competitive advantage/dynamics, marketing objectives, value creation and customer equity and loyalty. In order to make this research more comprehensive, our study will use a specific marketleader firm as the case organization, the online booking agency Booking.com, which currently has no CSR department and no social purpose included to its strategy. An important part of our case study is to analyse also the effect of adopting CSR activities on the business model, corporate strategy and core competences of Booking.com, by using the Business Model Canvas by Osterwalder and Pigneur (2010). The Canvas will act as a framework to map their existing model and its main components from one hand, and on the other to suggest how the inclusion of CSR activities could intersect, interact and influence those key components.
2. Secondary data analysis
With regards to our secondary data analysis, first will try to distinguish the theoretical framework of this research, focusing on the key topiccomponents of our paper and its definitions, such as corporate social responsibility, innovation, ebusinesses, value creation and valuebased organisation characteristics. Furthermore, in this part we will investigate if there are more, previous ebusinessspecific researches about how corporate social responsibility practices intersect with Ebusiness firms and its different business divisions, such as marketing or management departments. The purpose of the literature research will be to give academically supported evidence to validate the importance of our main research question, by trying to identify if there are enough indications that the adoption of corporate social responsibility (CSR) principles, socialvalue creation aims and CSR activities by an online business, could indeed benefit the firm’s objectives, performance and various stakeholders’ longterm interests.
2.1 Literature Research
In this part of our paper, we investigate more specific topics related to our research questions, within the limits of existing literature by using the conceptual framework as a structure. The objective here is to figure out if we can find in literature enough evidences that could prove or reject our main research question, whether Booking.com should create a CSR department within its organisation or not.
In order to do so, in this part of the paper we will discuss the some specific variables identified that are relevant to our research objective, as found in literature, such as:
● Is there any major difference identified between traditional firms and ebusinesses or product VS service industry, regarding the importance of CSR adoption in their performance, reputation, brand value, etc?
● What relevant research has be done specifically for companies with no significant negative impact due to its operations, with regards to the environment, society or other stakeholders?
● What activities count most for customers, according to literature? And are these findings of equal importance, by firms’ employees? In the article “Microlevel interaction in businessnonprofit partnerships”, Vock et al (2013) examines also how consumers respond to high versus low self interest arising from employees’ active partnership engagement. In addition, with regards to employees, in the article “Corporate social responsibility influences, employee commitment and organizational performance (2010), Ali et al highlight and analyse ways of influence of CSR on employee's’ organisational commitment and organisational performance.
● What are the risks associated with the adoption of CSR activities for a firm that has no negative impact at any way?
● What is existing research highlights as important considerations to be made in order to maximize benefits from the creation of a CSR department? What specific CSR goals literature suggests, with regards to Booking.com core operations and CSR activites (such as homeless people, green hotels, protection of labour rights in developing markets)? Cazier et al suggest in their article “Ebusiness differentiation through valuebased trust” (2006) that value congruence can be used by ebusinesses as a differentiation tool to distinguish themselves and create competitive advantage.
● What are the ethical implications, challenges identified in literature with regards to the tourism industry in which Booking.com operates? What are the industry specific CSR
activities adopted by other major players in this industry that should be taken into
account?
● Are they any successful examples of companies that have adopted similar practices and have been benefited from it? (Todds, Starbucks, Vodafone, etc) Are those firms made the adoption from the early or a later stage of their lifecycle and does this factor could play any significant role in the decision making? In this issue, are they any examples for Ebusinesses specifically?
These desired answers will act, not only as a scientific evidence for the management, but also as a solid foundation for our next part of the research and guide us in the crossexamination of these findings, as perceived from a company’s customers/employees perspective, as indicated in the questionnaires collected.
2.2 Survey Conducted by Booking.com
As Kotler and Keller (2012) described, modern marketing places the customer as the starting point and the first building block for a business model. Therefore, the initial type of primary data collection that we intended to carry out is a qualitative research via online questionnaires, targeting the end customer of Booking.com. According to Barney (1991) resources can lead to a competitive advantage if they are valuable, rare, inimitable and nonsubstitutable. Therefore, before we could continue to any analysis of the way Booking.com could adjust its business model in order to take a more social responsible commitment towards consumers and partners and incorporate CSR activities, a critical point of our research was to investigate to what extent consumers recognise potential CSR activities as an element that influences their purchase decisions, expectations, perceptions of hotels and online service providers such as Booking.com.
According to a press release issued on the June 17th, 2015 by the Priceline Group, current owner of the Booking.com brand, the later conducted a research which showed that more travelers than ever before have the intention to reduce the environmental impact of their
holidays and have expressed the desire to travel more sustainably. The title of the announcement was “Luxury That Doesn't Cost the Earth: Sustainable Travel on the Rise as More Travelers Seek to Reduce Their Carbon Footprint” and its most important finding was that 52% of all global travelers reported that they are likely to choose a destination based on its social or environmental impact within 2015.
The survey by Booking.com revealed that attitudes towards sustainable travel are evolving; while only 10% of respondents took a traditional sustainable trip in 2014, the following year of 2015 more than half of the global travelers are being influenced by an intention to reduce their environmental impact, or to ensure that their tourism has a positive impact on the local community, when evaluating vacation destinations. According to the release, sustainable trip is considered an ecotour, a volunteering trip, a farm stay, a camping trip or a trip to learn about new cultures.
With regard to country specific results, some countries perform naturally higher than others. For example, Brazilian nationals were most interested in sustainable travel, with 74% reporting that they would be likely to base a decision on these concerns. Among the world's top sustainable travel intenders were also the Australians and Americans with 59% and 53% respectively. At the opposite end, only 36% of the Danish and 39% of the Dutch respondents indicated that they could be influenced in their purchase decision by their potential social or environmental impact.
An interesting insight from the findings of the survey that has to be highlighted is that survey respondents were not intended to compromise their luxury standards in order to reduce their carbon footprint. When compared with other respondents, aspiring sustainable travelers were 50% more likely to book more luxury accommodations in 2015 than they did in 2014 and three times as likely to plan to stay in more 'green' accommodations in 2015 than they did in 2014. This combined interest in luxury and green stays is characterized by the release as a unique opportunity for accommodations to woo these travelers by offering highend comfort paired with an eco sensibility. Todd Dunlap, Managing Director Americas, illustrated exactly this, by stating "Sustainable travel is more than just 'going green' it's also about helping to support and retain local cultures, economies and environments while traveling. Most people don't know
how easy it is to weave sustainability into the types of trips they already want to take". He continues, "there are many ways to be a conscientious traveler in 2015 without having to sacrifice comfort levels or relaxation. Guests may not realize that as they sleep on organic cotton sheets, washed with water heated by energy generated from the hotel itself, they are staying sustainably. Or that when eating a meal made from ingredients sourced within 20 miles of their accommodation, they are a sustainable traveler supporting local business".
A last point to be underlined regarding the use of this survey’s findings is the lack of access to its data, methodology followed and other scientific related aspects of it, in order to examine the extent of its validity and possible biases occurred. This issue will be discussed also in the section “Limitations” of this paper, later on.
2.3 Documentation Research (to support the findings from the research of Booking.com) In this part we will collect secondary data from online reports/indexes and companies regarding levels of CSR firms’ activities and performance. For example, we will use the data presented in the article “Harmonization in CSR reporting” by Fortanier et al (2011) in which collected data regarding performance measured in 25 CSR items from a sample of firms at the top 250 of the Fortune Global list is presented. We will also examine reports by the Global Impact Investing Network, a notforprofit organization dedicated to increasing the scale and effectiveness of impact investing, where many useful insights can be gained.
3. Current Business Model Analysis and CSR Inclusion Insights
In this part of the paper, our focus is to examine how the current business model of Booking.com is structured and how an implementation process of a CSR department could be reflected on the overall structure of the firm’s business model. Amit and Zott (2001) suggest that a firm's business model is an important locus of innovation and a crucial source of value
creation for the firm and its suppliers, partners, and customers. In our case study, and in order to support management with an academicsupported new implementation process, we will use the business model canvas framework, developed by Osterwalder and Pigneur (2010), as a practical stepbystep guideline for our suggestion for adjustment of Booking’s business model. A detailed analysis of the points to be highlighted will be given with regards to each aspect of the canvas and the necessary adjustments necessary to existing elements of firm’s business model and possible implications will be discussed.
With regards to the structure of this section, the analysis will be presented side by side for each of the Business Model Canvas’ building blocks, firstly by presenting the main characteristics for each main aspect of Booking.com’s business model and then revisit those elements from the perspective of CSR inclusion, by highlighting the suggested actions to be made towards the inclusion of the CSR activities and possible adjustments.
3.1 Customer segments
According to Osterwalder and Pigneur (2010) the customer segment building block defines the different groups of people or organizations an enterprise aims to reach and serve. A model may define one or several customer segments. Organizations make conscientious decisions about which segments to serve and which to ignore. Customer groups represent different customer segments if: • Their needs require and justify a distinct offer • They are reached through different distribution channels • They require different types of relationships • They have substantially different profitability • They are willing to pay for different aspects of the offer.
3.1.1 Existing Structure
In the case of Booking.com one can state that it has characteristics of a massmarket customer segment. Company focuses on a very large group of customers with the same need of finding a hotel to stay at. They can cater both business travellers as well as holiday travellers. If we apply the bullet points above we find that both groups need distinct service and are reached through different distribution channels. The price policy though is similar for both holiday and business travellers. On the other hand, some customers such as businesses and groups require more delicate services than other consumers, therefore adjusting the services offered. Besides, business travellers and holiday travellers are also willing to pay for different aspects of the offer; holiday travellers might pay more for the hotel, or location while business travellers might pay more for efficient facilities and executive services.
Therefore, Booking.com uses a segmented customer segment approach to their business model. Both segments have similar but varying needs and problems, with the segments being holiday travellers and business travellers. It is clear that booking.com targets holiday travellers as their number one priority, since it makes sure this customer group always find online all the relevant information for their holiday on the website (map, hotel facilities, and reviews from other customers). Nonetheless, it provides easy invoicing process and shows additional locationbased services like group transport, catering also for business travellers.
Another very interesting point is that Booking.com does not only cater for the demandside of the hotel industry, but for the supplyside as well. Since it does not offer hotelservices itself, it operates as a platform for a vast network of hotels. The company targets every available accommodation type around the world, but these require certain quality criteria, since they want to maintain a high level of quality and reliability offered to their customers.
3.1.2 Customer segments and CSR Inclusion
Based on the recent findings of the research conducted by Booking.com, it is clear that an all brandnew customer group evolves nowadays, named for the purpose of our analysis here as the Sustainable Traveller. Based on the criteria set by Osterwalder and Pigneur (2010), as explained above, the sustainable traveller can be identified in the very near future as a new separate customer segment for Booking.com, to be added to the existing segments of holidays and business travellers. Soon enough, the business model of the company will have to satisfy the new needs of the sustainable travellers by offering a new distinctive product with unique elements from their existing ones, based on the criteria that will be essential for those travellers so to meet their purchase expectations and standards. It would also be interesting to investigate the extent to which they are willing to pay a premium for different aspects of newly offered services and/or guaranties by the service provider or directly by the hoteliers.
Equally important on the other side of the market cycle, from the hotels perspective, a continuously increasing number of hotel firms invest multiple resources in order to satisfy the newly expected standards of sustainable customers and design to offer a product solution that respects and promotes the principles of sustainability values. As a result, Booking.com will have to accordingly accommodate and promote these investments of the supply chain as well.
3.2. Value proposition
According to the definition of Keeney (1999), a value proposition in ecommerce is the net value of the benefits and related costs of both the product and the process of finding, ordering, and receiving it.
It is important to assess the existing value proposition of the organization; the company claims the maintenance of the following vision: “Through Booking.com, we offer an informative, userfriendly website with the best prices guaranteed”. Moreover, it claims to provide the following benefits for its customers (the visitors): lowest prices, no reservation fees, secure booking, and a large number of destinations, hotels, satisfied customers and unbiased customer’ reviews. Equally, the company offers extensive customer service in more than forty languages. Alternately, for the hoteliers the advantage of using Booking.com is on one hand the huge customers’ pool (450k reservations per day/2.8m per week and above), and on the other the care and assistance they would receive from Booking.com in order to maximize their revenues. The benefits are thus reciprocal.
The benefits, as described above, are generally clear to understand. Customers of Booking.com must trust that the price, the hotel description and the customer reviews are accurate. More importantly, however, they must trust Booking.com with their payment details and personal information (e.g. to ensure no misuse of credit cards). Gefen & Straub (2004) state that trust is the product of an expectation that the word, promise or written statement of another party will be held. This product will in turn lead to behavioural intentions. However, this interaction is interpersonal; an aspect that naturally lacks in eCommerce (Gefen & Straub, 2004). Thus, websites must ensure that customers build trust despite the absence of a specific person to be trusted. Booking.com attempts to overcome this obstacle by offering different points of personal reference. In order to achieve that, the customisation in the form of “mybooking.com” option is provided. By logging in with only his or her email address, the customer can personalise the search for hotels in terms of prices and locations. Equally, special offers are optionally sent to the customer’s email account. Such kind of customisation ensures a certain type of personalisation, which is according to Gefen & Straub (2004) paramount for creating trust in ecommerce.
Moreover and more generally, when clicking on individual hotels, the customer is presented with a large amount of pictures of the individual hotels, giving the customer a thorough impression of the hotel. This in turn results in trust and impressions can also be made by reading the description of the hotel and the rooms. But of course, photos can lie. Booking.com addresses this problem by offering the opportunity for customers who booked a hotel to review it after their visit – they are made alert to this option by receiving an email sent to their personal email addresses. The knowledge that such an opportunity exists creates trust in the reviews of the hotels for existing customers an important step in the creation of customer loyalty. Similarly, the sites of the hotels contain all the information the customer needs. The exact terms of the booking are in all steps of the booking process clear. The customer is thus never left unsure about an aspect, which results in confidence and thus trust in the website. This point is naturally critical when monetary transactions are involved. The extensive privacy statement that can be found in many ways on the website adds to this confidence, as does the very prompt confirmation email the customer receives after booking.
Furthermore, the company does not let its customers book blindly. For instance, when the same name and account books consecutively a hotel room for the same night at the same or another hotel, the website alerts the customer to this fact in order to avoid a mistake in the dates. This creates a sense of personal care. This kind of care is equally enhanced by the provision of customer service in forty different languages. The customers are therefore in almost all cases able to communicate with a real person in their mother tongue. Consequently, when problems or questions on the side of the customers arise, they know that no communication obstacles would prohibit their resolution.
Based on the above, we can conclude that the value proposition must be made by the ecompany as clearly as possible. The customers must have highly defined reasons for using the website in order not to use alternative paths. In terms of Booking.com, the benefits are the provision of the lowest prices, a large network of hotels and a secure booking. Through the creation of different interpersonal touch points for the customers and an extensive Customer Care department, available also by telephone, the company ensures the emergence of their customers trust. These touch points include customisation options, through information and visualisation of the hotels, extensive privacy statements, and personalised customer service. 3.2.2 Value proposition and CSR Inclusion 3.3 Channels 3.3.1 Existing Structure
Now that we are familiar with the customers and the value proposition of the company, we can assess how Booking.com is transferring this value to the customers. The channels building block describes how a company communicates with and reaches its customer segments to deliver a value proposition. Channels are of an extreme importance for bringing up the value propositions to the market. What is typical for Booking.com channels is their channel typology – they have own direct channel, which is running with websales. Moreover, the web site of Booking.com is their only market expression and it is the main focus of the business.
The five channel phases described by Osterwalder and Pigneur (2010) are being crucial for managing well and successful the business of Booking.com. More elaborate interpretation of each phase will be described in the following paragraphs. The matrix of Keeney (1999) “Means Objectives Related to the Internet Commerce” will be taken into consideration to evaluate better each part.
1. Awareness How do we raise awareness about our company’s products and services?
The website of Booking.com offers an infrastructure, which enables the customers to search, compare and access offers for hotels all around the world. In addition, consumers can compare hotel reviews, the respective prices in different currencies and the dates of their desired trips. The access to information is much easier and at deeper levels than within the bricksandmortar retail structure. Keeney’s (1999) fundamental objectives are met: maximised access to information, maximised product information and minimised misuse of personal information. More particular, customers have many search possibilities as they have thousands of hotels and destinations to choose from. Once they choose, they get a more focused profile of what they are interested in (price, location, rating, pictures, review). As the reviews are unbiased and the prices and particular hotel information are updated every day, the consumer receives quite accurate information of the product as well. Finally, no personal information is needed while comparing the offers, but in the purchase stage so it is perfectly safe for the consumer.
2. Evaluation: How do we help customers evaluate our organization’s value proposition? Rohm and Swaminatha (2004) consider the comparison between offers to increase the variety seeking. This one is supported by the value propositions, which Booking.com underlines – “294,994 properties in 180 countries worldwide”. What is more, the offers are being displayed in more than 40 languages so customers can experience the variety of languages. Kenney’s objectives are also notified – there is a strong enhancement of comparisonshopping. Customers can easily compare Booking.com offers with other sites – immediately and with not too much of an extra effort.
Purchase meets most of Kenney’s objectives: Booking.com maximises better purchasing choices by providing the customers with the reviews and ratings, which convince the consumers in their right choice. In addition, the website is easy to use – the desired products are easily accessible by a simplified search method. Reservations are also easily made and the purchase goes smooth and fast. If the reservation is not suitable to the customer, it is easy to cancel it at no cost (restrictions may apply). Therefore, the site limits the impulsive buying and minimises “unwanted buying”. It is important to notice that the security of transactions is reliable and the chances of hacking the system are low, hence the system security is quite good. Unfortunately, the misuse of credit cards cannot be guaranteed, as unauthorized use in general cannot be prevented on the web sites.
4. Delivery: How do we deliver a value proposition to customers?
“Certain consumers will demand instantaneous delivery of products or services and will patronize those retailers able to provide immediate possession.” (Rohm & Swaminatha, 2004, p. 750). That is the case exactly with Booking.com – customers immediately receive confirmation for their reservation on their email that assures the reliability of the delivery. As soon as the booking process is completed there is a confirmation page. On it the consumer sees the reservation details, the booking number and a PIN code, which enables the customer to access the confirmation online. Moreover, product and shipping errors are minimized as well, due to the fact that customers receive services, which are having high accuracy of transaction. The most vital error that ought to be avoided is the charging error. This one Booking.com is preventing, by providing the option to check the price in different currencies as well. Furthermore, threat of fraud is also being minimized by the option of sending them feedback. Also they provide a frequently asked questions list, which allows customers to get acquainted
with the whole process. The biggest advantage of the website transactions is that the traveling distance and effort are minimized to zero. Booking.com provides fast and easy access from every computer or even smartphone.
5. After sale: How do we provide postpurchase customer support?
Kenney (1999) provides an objective of offering personal interaction. Consumer support is being provided by the online contact form, which every person can fill in. Moreover, customers can call from the country they are right at the very moment at any time receiving personal support. Most importantly, however, is the after sale experience which people will have when obtaining the services. If the whole booking process was fast, enjoyable and easy customers have very high levels of postpurchase satisfaction. This is the crucial objective which every web site has and which Booking.com has facilitated at a high level. 3.3.2 Channels and CSR Inclusion 3.4 Customer relationship
The customer relationship building block describes the type of relationships a company establishes with specific customer segments. These relations are managed and maintained with each of the customer segments. It is important for a company to clarify the relationship with each segment; these can range from personal to automated. Customer relationships deeply influence the overall experience of a customer. Customer relation can be driven by: customer acquisition, customer retention or boosting sales.
3.4.1 Existing Structure
Booking.com is an Internet business. When analysing the customer relations of Booking.com, one immediately notices that they have a multi lingual 24/7 customerservice hotline and also the option to email them, also it is easy to provide feedback on their website. The goals they state are customer efficiency and a user friendly interface on their website. From the Osterwalder and Pigneur (2009) book, we believe that the type of customer relations Booking.com uses is SelfService. With this type a company provides a customer with all the means to help themselves. Besides this Booking.com also uses Personal Assistance, as they have a 24/7 customerservice call centre in many different languages. For the corporate clients there is dedicated personal assistance, these (big) corporate clients have their own account manager. Users of Booking.com and indirectly of the hotels they book can give feedback regarding the hotels; this is a type of community. Concluding, Booking.com mainly uses selfservice. If consumers need help they can use the personal assistance type by calling the call centre. For special clients there is the dedicated personal assistance, and Booking.com maintains a community through user ratings of its offerings.
On the other hand, since Booking.com serves the supplyside of the hotel industry as well, it also builds relationships with its network of hotels. The contact with this customer block is most personally – through an account manager – in the acquisition phase. When a new hotel registers on the website, they are manually put into the system, as to ensure quality of the listings. After the acquisition and the setup, the contact is less personal and more automatized as selfservice for the hotel managers as well.
3.4.2 Customer relationship and CSR Inclusion
According to Osterwalder and Pigneur (2010), revenue streams result from value propositions successfully offered to customers. As a reminder, value propositions can be considered as a list of essential objectives that the ebusiness has identified, in response to the problems and needs occurred, as expressed by potential and existing customers. On the other side, a definition of business model itself can be expressed as the way of doing business by which a company can generate revenue. The authors suggest that in order for an ebusiness to generate one or more revenue streams from each customer segment, it has to ask the following question: For what value is each Customer Segment truly willing to pay? (Osterwalder & Pigneur, 2010, p.30).
A business model can involve two different types of Revenue Streams; transaction revenues resulting from onetime customer payments or recurring revenues resulting from ongoing payments to either deliver a value proposition to customers or provide postpurchase customer support (Osterwalder & Pigneur, 2010, p30). The authors identified 7 different revenue streams: asset sale, usage fee, subscription fees, lending/renting/leasing, licensing, brokerage fees and advertising.
3.5.1 Existing Structure
For the Booking.com case, based also on the building blocks customer segments and value propositions described earlier in the paper, we can recognize the “Brokerage fees” as its main revenue stream. In general, this revenue stream derives from intermediation services performed on behalf of two or more parties (Osterwalder & Pigneur, 2010, p.32). Booking.com earns all of its revenues by collecting a percentage of the value for each room night sold to guests from hotels via their website platform. Every time a customer makes a reservation via Booking’s webpage, the company will calculate a prefixed percentage of the total cost of booking for the hotel to pay as a commission.
An important parameter of this revenue model is the fact that the calculated commission will be considered as a collectable revenue, only after the actual guest’s stay is made and the hotel has been paid with the total amount of the reservation by the guest. Booking.com does not have any kind of revenue/cash transaction with the guest, when making the reservation via its website or later and will not charge commissions if the hotel has not first received the revenues earned by the Internet sale occurred. As for the commission percentage, this is already determined and remains fixed, as settled in contractual agreements signed by the hotel and the ebusiness.
A secondary revenue stream that Booking.com has is its Lending/Rending/Leasing operations. As Osterwalder and Pigneur (2010) explain, lending/renting/leasing revenue stream is a temporary permission for someone to have the right to use a particular asset for a fixed period in return for a fee, providing the lender with the advantage of recurring revenues (2010, p.32). In our case, this revenue stream is called by Booking the Affiliate partners program, that consists of 5000 affiliate partner websites (or else named as Strategic Partnerships). It may be of a smaller scale with regard to the total revenues earned but yet it contributes to its revenues. Even more importantly it protects Booking’s dominant market share and minimizes risks associated with secondary competitors arising, by expanding offering services in areas where otherwise a need for a new competitor to offer the demanded service would appear. More into detail, the company allows all third parties, from other travel websites and airlines to individual travel agents or car rental agencies and insurances, to use all of its web infrastructure, database, servers and administration, with exchange for a small prefixed commission. Of course all permissions and services offered follow binding contractual agreements. For example, Booking.com allows KLM Airlines to integrate Booking’s systems and services into its own website, offering that way the option to KLM customers to book hotel’s rooms for their travels. By following the same previously mentioned commission revenue flow for the brokerage fee
revenue model, after the actual stay is completed and paid by the guest to the hotel, Booking will collect a commission for this reservation. And afterwards, will pay back a percentage of this commission to the affiliate partner, for our example KLM.
An additional point to be mentioned with regards to the literature we examine here is the aspect of the fixed vs. dynamic pricing of the revenue streams. The authors highlight that a revenue stream may have different pricing mechanisms, such as fixed listprices, bargaining, auctioning, market dependent, volume dependent, or yield management (2010,p.33). Booking.com, as a standard, is using a fixed pricing model, based on static variables as the base of its principal collaboration with the hotels. The commission percentage is fixed as well as the pricing of the room nights, equal to the ones offered directly by the hotel to other guests and minimum room availability. But in addition to that, it offers to the hotel extra options to change that when desired. More specifically, the hotel can opt to offer a reduced price for a limited period of time due to increased or decreased demand, to increase room availability in the web page, request to be included in a newsletter or the order or appearance in the search results of the site to be altered. In all cases, the commission percentage will have to be adjusted after agreement with the sales department of Booking.com. This process and option can be compared to the Dynamic pricing model that authors described, with realtime market conditions and yield management principles determining the function of the revenue stream.
3.5.2 Revenue streams and CSR Inclusion
Having in mind the new intentions and interests of sustainable travellers segment presented in the recent research of Booking.com, we can underline that possible SCR activities would not have any major implications to the firm’s existing revenue streams, in the sense of new revenue generation at least. On the other hand, since Booking.com does not have any revenue/cash
transaction with the hotel guests directly, it is important to examine very carefully any possible changes to this element that could interupt the current business model and how it could disrupt other current core value propositions.
It is common for other major players in the travel industry, such as airlines industries, to offer an option to customers to monetarily contribute during the payment process for various causes, such as a charities, donations to special groups and institutions or to add an amount to the total purchase price so customers can contribute in reducing aviation emissions (this function can either appear temporarily or be a permanent part of the process). In the Booking.com business model though, the safest possible adjustment that could be made would be through the existing revenue streams, the hotels. In more detail, the firm could offer a similar function to the travellers by adding this in the process of collecting credit cards details, (currently solely used as a means of guarantee or payment for nonrefundable reservations), with the condition that any amounts would be collected by the hotels themselves, as part of the transaction process with their guests. Booking.com would only collect those donations/contributions from the hotels directly, an a new transaction element to the existing invoicing process followed. This way, it would create the minimum fraction to the established revenue streams of its business model.
Lastly, with regards to the fixed vs. dynamic pricing of Booking.com revenue streams, the inclusion of CSR activities and similar to the above suggested ways of collecting contributions from travellers could further reinforce its Dynamic pricing model. This could be done, for example, by promoting green hotels and sustainable practices above others or by giving extra discount/preferred order of appearance when participating in CSR initiatives supported by Booking.com. As a result, the firm, one of the most dominant players in the hotel industry, could distinguish itself as a major industry reinforcement power in the adoption of CSR
principles, practices and activities also for other other key players, such as hotels, agents and challenge consumers’ perceptions and awareness. 3.6 Key Resources and CSR Inclusion 3.6.1 Existing Structure 3.6.2 Key Resources and CSR Inclusion 3.7 Key Activities 3.7.1 Existing Structure 3.7.2 Key Activities and CSR Inclusion 3.8 Key partnerships 3.8.1 Existing Structure 3.8.2 Key partnerships and CSR Inclusion 3.9 Cost Structure 3.9.1 Existing Structure 3.9.2 Cost Structure and CSR Inclusion 4. Limitations
In this section of the paper, the aim is to highlight the various possible practical limitations that occurred, based on the chosen methodology, measurements and findings. We will also illustrate the research limitations found with regards to generalizability, bias and use of findings by other firms and researchers, some of which are already identifiable.
To begin with, it was clear already from the beginning of our managerial driven research that we focused only in one specific company, which operates solely in an online environment. Thus, when interpreting the content of this paper, we have to be cautious that any more generic
conclusions and advices, with regards to potential benefits from and processes for the adoption of CSR activities for ebusinesses, should be taken into serious consideration. This is an important limitation, especially since Booking.com has the characteristic of not only interacting with its customers at all times mostly online, but also because it follows the same principle at most levels of operations, internally and externally, such as among various departments widespread around the globe and with other partners, affiliates, stakeholders etc.
Secondly, given that our case company is a truly global company with 165 offices across 63 countries and the firm’s target market is simply all markets across globe, we have to address that the results of the research cannot be representative of all global market. This questionnaire is planned to be distributed mainly to existing/potentail customers and employees of Booking.com that are residing mostly in Europe. It is, therefore, safe to assume that in order to make more solid conclusions about the customer’s base of the company as a whole, further research needs to be done, in order to determine whether the way customers/employees in different markets approach the importance of CSR practices within a firm varies or not.
The most important limitation though was related to our inability to access the actual customer survey conducted by Booking.com itself, besides the relevant info provided by public press release. It may not have big significance with regards to the managerialdriven aspect of the paper, since it is safe to assume that management has access to the survey, nonetheless, the lack of access to the survey for the author should be considered as a critical limitation. In order for the author to be able to evaluate the scientific methods used and cross check the validity of the survey’s findings based on its scientific/academic standards, he should have gained access to the content, methodology followed, interpretations and primary data material collected.
Furthermore, the time restrictions attached to this research should be taken into account. Given the strict deadlines and fixed enddate of this research, significant time was spent on testing which research approach should be most comprehensive to the (possible) objectives of the management. In addition, time restrains made difficult to find extensive additional literature, more closely related to ebusinesses and CSR activities specifically.
Last but not least, the fact that the researcher is a years’ long exemployee of Booking.com should also be taken into account for possible elements of inevitable bias (despite all efforts to minimize those across the process of conducting the research).
5. Future Research Suggestions
Since this is a strongly practiceoriented type of research, focusing on managerial questions about a specific company, we could underline from the very beginning of this process the need for further research within the firm itself, in collaboration with internal parties and about the key components of the Booking.com businness model. This could be done by crossexamining if current results show consistency across all management levels or possible countryspecific differentiations, via both more thorough questionnaires and openended interviews about important variables, and insights supported by this research. The suggested further research is considered to be of a great importance in order to secure that any major changes in the core operations of the company and its mission, strategic choices and objectives will be able to be designed, communicated and implemented with the highest clarity in terms of expectations, goals, timeframes, limitations and resources needed to accomplish it smoothly and effectively.
Furthermore, it is also important to investigate to what extend customers perceive not only hotels initiatives and practices, but also how CSR activities could act as a new competitive advantage of the company in the eye of travellers. We expect that this type of collected data will more clearly confirm (or partly reject) the importance of adopting specific, product related CSR activities and validate our initial findings that CSR can indeed add significant value to the core competences of Booking.com and can strengthen the firm’s customer equity, from the customers’ perspective.
Lastly, the engagement of the firm’s employees to a new socialvalue creation process, via the adoption of social intrapreneuship motives and inclusion of valuebased organisational practices has to be examined separately. It was obvious from the findings of the literature review conducted for this paper that for any significant change to existing business models and innovative, transformational approaches to the current operations and business practices, we
must take employees’ resistance to change into account. In order to investigate this aspect and better predict what steps need to be taken, a detailed questionnaire for the employees could be made and more countries could be included, for example, and more in depth interviews with middle and senior management employees should be designed and conducted.
6. Concusion
To sum up, the aim of this paper was to provide the management of Booking.com with insights about the various implications, resources and adjustments needed so to reform their existing business model by establishing a CSR department within the company and to suggest a practical, scientifically supported roadmap towards the inclusion of social purposes to a new strategic vision and value proposition of Booking.com. In addition, the paper can also act as a scientificbased knowledge product to be used by the management as a supporting tool on how to identify new opportunities, potential risks and important resources needed in advance. In conclusion, the knowledge product of this managerially oriented thesis will evolve as a new, innovative business proposal that can strengthen further the leading position of Booking.com in the etourism industry and help management redefine their current strategy and operations, with both a unique competitive advantage and an impactful, positive social footprint.
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