PRICELINE.

COM

E-BUSNIESS
ANALYSIS OF THE COMPANY
M.SADIQUE HAKIM L1S11BBAM2054

2013

ONLINE COMPANY

TABLE OF CONTENTS
1) About priceline.com 1) Introduction / executive summary 2) Company heritage (company history, background) 3) Company description 4) Recent developments 5) E-commerce (how company used the unique type e-commerce) 6) Mission and vision 7) Industry structure 2) E-business model of priceline.com 1. B2C business model (create digital environment where buyers and sellers can meet and transact) 2. Positive and negative points of Priceline (which can affect the competitors) 3) How the Priceline faces the 5 porter forces Threat of new competition Threat of substitute The bargaining power of consumer The bargaining power suppliers Rivalry of existing competitors 4) Market and competition Competition Competitors 5) SWOT ANALYSIS

Priceline

Priceline was founded by Jay S. Walker, who left the company in 2000.Priceline.com is an American company and a commercial website that claims to help users obtain discount rates for travel-related purchases such as airline tickets and hotel stays. The company is not a direct supplier of these services; instead it facilitates the provision of travel services by its suppliers to its customers. With the introduction of its innovative "Name Your Own Price" services program in April 1998, Priceline provides this unique transaction service allowing consumers and businesses to leverage the Internet for the buying and selling of leisure airline tickets, hotel rooms, rental cars, cruises, vacation packages and even home mortgages. Since launching its business, priceline.com has sold millions of airline tickets, hotel room nights, and rental car days.

EXECUTIVE SUMMARY
Priceline is not a current Henry Fund holding, and we are recommending NO ACTION at this time. Our valuation Models suggest only 0% to 2% in additional upside from the current price of $640.73. Priceline is up 33% since December31, 2011.Within the online travel industry, Priceline is a leader as well as a pure play in this market. It is projected to grow at 10.2% for next 7 years. It is currently very well positioned in the online travel market. However, the company faces fierce Competition with existing competitors, and is also threatened by the industry conglomerates such as Google and Microsoft, each of which may utilize diversified resources to directly compete with Priceline. The company does not pay a dividend, and has not announced any plan in paying one in the future.

COMPANY DESCRIPTION
Priceline.com Inc. (Priceline or the Company) is an online travel company that offers its customers hotel room Reservations and car rental services worldwide. In the U.S the company also offers reservations for airline tickets, vacation packages, destination services, and cruises bookings. These services are handled in both a price disclosed Retail manner, as well as a proprietary demand collection system known as Name Your Own Price the Company was incorporated in Connecticut in 1997. It is currently providing online travel services mainly through four brands: Booking.com, priceline.com, Agoda.com, andrentalcars.com. The booking.com brand is an international online hotel reservation website, which offers thousands of hotel bookings to its customers. The Priceline.com brand mainly focuses on the U.S. leisure travelers to give them multiple ways to save on their leisure trips. The brand is an Asia-based online hotel reservation website and the Rentalcars.com, a U.K.-based car-rental website, offers are tail price-disclosed car reservation service throughout the world.

Revenue
There are three revenue sources for the company: merchant revenues, agency revenues, and other revenues. The following chart shows the revenue decomposition in 2011, and merchant and agency revenues generated 99.73% of the total revenues.

From 2007 to 2011, the company saw the largest growth in the gross bookings in their international markets while growth domestically was much slower. The annual growth rate of its international markets for the past 5 years was 60% while that Of the U.S. market was 22.40%.

RECENT DEVELOPMENTS
2011 Performance and 2012 Outlook In 2011, Priceline has after-tax net earnings of $1.06B, or$23.97 per share. Gross bookings, a total dollar value measure of all travel services booked by the customers, increased 58.7%, as compared to the same period in 2010. We now estimate total revenue may grow by 15.35% year over year to $5.02Bin 2012, aided by 10% in Merchant revenues and 20% in agency revenues. The 2012 expected EBITA is $1.8B, leading to a GAAP Operating EPS of $27.34.

E-commerce
Priceline.com has pioneered a unique new type of e-commerce known as a "demand collection system" that enables consumers to use the Internet to save money on a wide range of products and services while enabling sellers to generate incremental revenue. Using a simple and compelling consumer proposition-"Name Your Own Price," we collect consumer demand for a particular product or service at a price set by the customer and communicate that demand directly to participating sellers or to their private databases.

E-commerce revolution

Few innovations in human history encompass as many benefits as e-commerce does. The global nature of the technology, the opportunity to reach hundreds of millions people, its interactive nature, the variety of possibilities for its use, and the resourcefulness and rapid growth of its supporting infrastructures, especially the Web, result in many potential benefits to organizations, individuals, and society. There are many factors influence to the success of EC companies. Customer is one of the most important factors. Companies should always listen to customers and satisfy them as possible. Highly satisfied customers produce several benefits for a company. Using customer relationship management service, customers may provide information overtly through surveys or contests in which they indicate customer preferences. Customer also provides valuable business information through many ways such as email, face-to-face, or indirect methods. From these collected results, company can provide the better products or services that can satisfy customers at the higher level. Priceline.com is a typical example of utilizing highly satisfied customers to get success. Priceline.com is a commercial website which helps users obtain discount rates for travel-related items such as airline tickets and hotel stays. The company is not a direct supplier of these services; it is similar to a web portal, providing comparative pricing from an assortment of service companies. Mission statement To be leading online travel business for value conscious leisure travelers in North America

Industry Analysis The declining economy has placed a burden on many peoples pocketbooks, but the travel industry has continued to stay strong. They have only had small declines since the downfall, but see continual increases in the future. In a research study conducted by Chen, Lee and Barnes, they report that The online travel business has been one of the few e-commerce sectors to really shine, and its growth continues.9 Online travel services continue to be popular because there are usually no excess fees for tickets and they are extremely convenient. Todays society wants

Advantages
We believe that the principal advantages of our system include the following: Cost Savings. Our Name Your Own Price demand collection system allows consumers to save money in a simple and compelling way. Buyers effectively trade off flexibility about brands, service features and/or sellers in return for prices that are generally lower than those that can be obtained at that time through traditional retail distribution channels. Incremental Revenue for Sellers Sellers use our Name Your Own Price demand collection system as a revenue management tool to generate incremental revenue without disrupting their existing distribution channels or retail pricing structures. We require consumers to be flexible with respect to brands and service features. Proprietary Seller Networks We have assembled proprietary networks of industry leading sellers that represent high quality brands. By establishing attractive networks of seller

participants with reputations for quality, scale and national presence, we believe that we foster increased participation by both buyers and sellers.

Priceline's business model

Priceline is a business-to-consumer (B2C) e-commerce in which online businesses seek to reach individual consumers. Its major business model is based on market creator because its a web-based business that uses a digital environment such as the Internet to create market by bringing buyers and sellers together. One of the fundamental core components of Pricelines business model lies in its relatively unique value proposition. At Priceline, consumers can use their reverse-auction pricing system Name Your Own Price which gives customer the ability to find and negotiate a discount price online. Priceline's business model is geared toward suppliers that can offer inventories such as hotels room reservations, airlines, car reservations and others to sell at much lower prices retail. B2C - Business to Consumer Model

B2C-Represents the vast majority of Ecommerce web sites online. It is based on its real world counterpart, your local store. Any business that sells directly to its customers online falls into this business model. The Business to Consumer ecommerce business model is one of the oldest on line. One of the first companies to open an online store was Pizza Hut back in 1994 at a cost of 50million.A little beyond the reach of your average retailer at the time.

Positive and negative points of Priceline

(+) Priceline is currently the best-positioned company in the online travel space and will continue to gain market share both in the domestic and international market (+)Priceline for a much lower overall tax rate than its U.S. based competitors.

 (+) Priceline has rapid growth at a CAGR of 25% for the past five years and continues to gain shares in the international market. We estimated that the company will continue to grow in the following seven years, but at a lower rate of 10.20%, given the economic Uncertainty worldwide (-) Priceline competes with both online and traditional sellers of travel services. The market for the services is highly competitive, as the cost for new entrants is relatively low. Priceline may not be able to effectively compete with industry conglomerates such as Google and Microsoft, each of which may have access to diversified resources to pressurize Pricelines margins. (-) the online travel market is highly sensitive to the macroeconomic environment. High unemployment rate above 8%, slowly rebound consumer confidence, and Significant volatility in the exchange rates may hinder economic recovery, thus negatively affecting the overall Online travel industry.

Porters Five Forces Analysis

The market for online travel service industry is intensely competitive, as current and new competitors can launch new sites at a relatively low cost. We use Porters Five Forces Model to analyze the current OTA (Online Travel Agency) Market: Threat of New Competition: The industry is in its growth stage, and the capital intensity to start new operations is relatively low. As a result, the threat of new competitors is very high. Priceline currently competes with a lot of companies with respect to each service it offers. Threat of Substitute: The main substitute for Pricelines online services is the traditional counter/phone bookings. As travelers now can easily find information available on the internet to book airline tickets and hotel rooms, the traditional way of booking does not become a major threat to the online travel industry. The Bargaining Power of Consumers: Buyers have limited bargaining power. They either book or not book the reservations. However, consumers start to engage in increased shopping behavior before making a travel purchase. Increased shopping behavior reduces the companys advertising efficiency because paid online channel traffic becomes less likely to result in a purchase through Pricelines websites. The Bargaining Power of Suppliers: The suppliers include hotels, airlines, and rental car companies. The companys bargaining power of the suppliers is very low. It has to be in continuous dialogue with major suppliers about the extent of their participation on the Pricelines platform. Rivalry of Existing Competitors: Competition in the industry is very high. Online travel companies have to create new promotions and consumer value features to gain competitive advantage.

MARKETS AND COMPETITION

Priceline is still a leader in the online travel market; it has to continue to compete in a maturing and highly competitive market with both local and foreign companies. To maintain the lowest prices among its competitors, Priceline has eliminated booking fees for hotel rooms, airline tickets, and booking cancellation penalty charges

Competition
Priceline.com competes with Expedia, Orbitz Worldwide, Sabre, Venre, Tui Travel, Gullivers, octopus travel, and Super break, and hotel.de, Hotel Reservation Service, Ctrip, Rakuten, Wotif, Google, Yahoo!, Bing, AOL, Mobissimo.com, FareChase.com, Kayak.com, SideStep.com, Trip Advisor, Travel zoo, Cheapflights.com, Galileo, Travel port and Amadeus.
We compete with both online and traditional sellers of the services we offer. The market for the services we offer is intensely competitive, and current and new competitors can launch new sites at a relatively low cost. In addition, the major online travel companies with which we compete have significantly greater financial resources and capital than we do. We currently or potentially compete with a variety of companies with respect to each service we offer. With respect to our travel services, these competitors include, but are not limited to: Internet travel services such as Expedia, Hotels.com and Hotwire, travel suppliers such as airlines, hotel companies and rental car companies, many of which have their own branded websites to which they drive business; large online portal and search companies, such as AOL (including AOL Travel), Yahoo! (including Yahoo! Travel) and Google;

Competitors Priceline has many competitors in the online travel industry. They directly compete with other online travel companies who also provide airfare tickets, hotel services, car rentals, and hotel packages.

Expedia, Inc., Sabre Holdings Corp., and Orbitz Worldwide, Inc. are some of Pricelines competitors in the airline tickets.

Marketing strategy
Its marketing strategy is the website's traffic skyrocketed after the success of its advertising campaign with William Shatter. This campaign accelerated Priceline.com growth. Priceline.com reputation for name your own price was quickly known by many online users.

SWOT ANALYSIS
An evaluation of Priceline.com strengths and weaknesses arises as an inspection of the company's internal mechanisms, which are relatively easier to control than outside factors. On the other hand, opportunities and threats were analyzed as part of an external environmental analysis; over which Priceline.com no control. Internal Analysis: Strengths As one of their biggest strength, Priceline.com not only benefits from having a first mover advantage, Priceline.com diversifies itself through six different products. Current travel products include airline tickets, hotel rooms, and vehicle rental.
Weaknesses

As mentioned earlier, Priceline.com is known for its "name your own price" strategy; however, it is now clear that this brand identity is no longer enough to sustain the business. With the arrival of five direct competitors, Priceline.com brand identity is no longer unique. They are not the only ones to offer very low prices on airline tickets. Priceline.com can no longer simply rely on their brand identity. They need to find a new strategy for their brand in order to differentiate themselves from competitors. Furthermore, Priceline.com weak financial performances have left investors feeling doubtful and hesitant. External Analysis: Opportunities Due to socio cultural trends, Priceline.com faces numerous growth opportunities. More and more consumers are shopping online. Technological advances have made online shopping secure, providing a greater sense of security for online transaction. With younger generations adhering to online purchases, Priceline.com customer base has room to grow over the years Threats Economically, Priceline.com faces many threats. Priceline.com is reliant upon the travel industry for its product and does not add any value other than providing a medium for transactions to take place. Priceline.com is very susceptible to market conditions and its financial situation could be brutally damaged if consumers settled on a more preferable or convenient way to conduct their purchases.