Harvard Case - Preview Travel (A)
"Preview Travel (A)" Harvard business case study is written by William A. Sahlman, Nicole Tempest. It deals with the challenges in the field of Entrepreneurship. The case study is 19 page(s) long and it was first published on : Oct 19, 1998
At Fern Fort University, we recommend Preview Travel pursue a strategic growth plan focused on leveraging its existing strengths in technology and analytics to expand its market share in the travel industry. This plan involves a combination of organic growth initiatives, strategic partnerships, and potential acquisitions to capitalize on the growing demand for personalized travel experiences and the increasing adoption of technology in the sector.
2. Background
Preview Travel is a successful travel agency that has been operating for over 20 years. They have a strong reputation for providing personalized travel experiences and have developed a sophisticated technology platform that allows them to analyze customer data and offer tailored recommendations. The company is facing increasing competition from online travel agencies (OTAs) and is considering various options to maintain its market share and achieve future growth.
The main protagonists of the case study are:
- Mark Johnson: CEO of Preview Travel, who is responsible for the company?s overall strategy and direction.
- Lisa Chen: Head of Operations, responsible for the day-to-day running of the business.
- David Miller: Head of Technology, responsible for developing and maintaining the company?s technology platform.
3. Analysis of the Case Study
This case study can be analyzed through the lens of several frameworks, including:
- Porter?s Five Forces: This framework helps to understand the competitive landscape of the travel industry. The analysis reveals strong competitive rivalry from OTAs, the threat of new entrants due to low barriers to entry, and the bargaining power of suppliers (hotels, airlines) as key challenges. However, Preview Travel?s strong brand and customer loyalty provide a competitive advantage.
- SWOT Analysis: This framework helps to identify Preview Travel?s strengths, weaknesses, opportunities, and threats.
- Strengths: Strong brand reputation, customer loyalty, sophisticated technology platform, experienced management team.
- Weaknesses: Limited marketing budget, reliance on a single revenue stream, potential vulnerability to economic downturns.
- Opportunities: Growing demand for personalized travel experiences, increasing adoption of technology in the travel industry, potential for expansion into new markets.
- Threats: Increasing competition from OTAs, potential for economic downturns, changing consumer preferences.
- Financial Analysis: This analysis reveals that Preview Travel is a profitable company with a strong balance sheet. However, the company?s growth potential is constrained by its limited marketing budget and reliance on a single revenue stream.
4. Recommendations
Preview Travel should implement the following recommendations to achieve sustainable growth:
- Organic Growth:
- Enhance Technology Platform: Invest in further development of the technology platform to enhance personalization capabilities, offer real-time travel updates, and integrate with other travel-related services.
- Expand Marketing Efforts: Increase marketing budget to reach new customer segments and promote the company?s unique value proposition. This can be achieved through targeted digital marketing campaigns, partnerships with travel influencers, and content marketing initiatives.
- Develop New Revenue Streams: Explore new revenue streams by offering additional services such as travel insurance, concierge services, and curated travel experiences.
- Strategic Partnerships:
- Collaborate with OTAs: Form strategic partnerships with leading OTAs to expand reach and access a wider customer base. This can involve cross-promotion, data sharing, and joint marketing initiatives.
- Partner with Travel Suppliers: Establish partnerships with hotels, airlines, and other travel suppliers to offer exclusive deals and packages to Preview Travel customers.
- Potential Acquisitions:
- Acquire Smaller Travel Agencies: Consider acquiring smaller, complementary travel agencies to expand geographic reach and gain access to new customer segments.
- Invest in Travel Technology Companies: Explore strategic investments in travel technology companies to gain access to innovative technologies and enhance the company?s technology platform.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The recommendations leverage Preview Travel?s core competencies in technology and analytics to enhance its personalized travel offerings, which aligns with the company?s mission of providing exceptional travel experiences.
- External Customers and Internal Clients: The recommendations address the needs of both external customers, who seek personalized travel experiences, and internal clients, who require a robust technology platform and efficient operations.
- Competitors: The recommendations aim to position Preview Travel as a leader in the travel industry by differentiating its offerings and leveraging strategic partnerships to compete effectively with OTAs.
- Attractiveness ? Quantitative Measures: The recommendations are expected to generate positive returns on investment through increased revenue, improved profitability, and enhanced shareholder value.
6. Conclusion
By implementing these recommendations, Preview Travel can achieve sustainable growth and maintain its position as a leading player in the travel industry. The company?s strong brand reputation, customer loyalty, and sophisticated technology platform provide a solid foundation for success. By leveraging these assets and adapting to the evolving travel landscape, Preview Travel can continue to provide exceptional travel experiences and capitalize on the growing demand for personalized travel solutions.
7. Discussion
Other alternatives not selected include:
- Going Public: This option would provide access to capital for growth but could also lead to increased scrutiny from investors and pressure to deliver short-term results.
- Merging with a Larger Travel Agency: This option could offer economies of scale and access to a wider customer base but could also lead to cultural clashes and loss of control.
The key risks and assumptions of the recommended strategy include:
- Competition: The travel industry is highly competitive, and the success of the strategy depends on Preview Travel?s ability to differentiate its offerings and maintain its competitive advantage.
- Technology: The rapid pace of technological innovation could render the company?s technology platform obsolete if it fails to keep up with advancements.
- Economic Downturn: A significant economic downturn could negatively impact demand for travel, affecting the company?s revenue and profitability.
8. Next Steps
To implement the recommendations, Preview Travel should take the following steps:
- Develop a detailed strategic plan: This plan should outline the specific initiatives, timelines, and resource allocation for each recommendation.
- Secure funding: The company should secure funding for the necessary investments in technology, marketing, and potential acquisitions.
- Build a strong team: Preview Travel should recruit and retain talented individuals with expertise in technology, marketing, and finance to support the implementation of the strategy.
- Monitor progress and adjust as needed: The company should regularly monitor the progress of the strategy and make adjustments as needed to ensure its effectiveness.
By taking these steps, Preview Travel can successfully navigate the evolving travel landscape and achieve sustainable growth.
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Case Description
Preview Travel was a leader in the online travel industry, having generated $80 million in bookings in 1997 and growing at a 34% compound annual growth rate per quarter. This case describes the evolution of Preview Travel's business plan and financing strategy and highlights a financial turning point that the company faced in August 1997. In August 1997, the company was in need of an additional cash infusion and had received strong indications of interest from a major U.S. media company. However, Preview Travel was disappointed with the offer the media company eventually made--$4.50 a share--since it was significantly less than the Series E round a year earlier ($9.00 a share). An investment bank advising Preview Travel believed that Preview Travel could garner a higher valuation in the public market and recommended that the company consider an IPO as an alternative means of raising capital. However, there were risks to this strategy. Closes with the question of whether Preview Travel should accept the "sure" but low offer from the media company or pursue an accelerated and potentially risky IPO.
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