VacationSpot.

com & Rent-A-Holiday: Negotiating a Trans-Atlantic

Merger of Start-Ups SWOT Analysis & Matrix / MBA Resources
VacationSpot.com & Rent-A-Holiday: Negotiating a Trans-Atlantic Merger of Start-Ups
/ Innovation & Entrepreneurship / MBA Resources

Definition of SWOT Analysis

What is SWOT Analysis & Matrix? How you can use SWOT Analysis for
VacationSpot.com & Rent-A-Holiday: Negotiating a Trans-Atlantic Merger of
Start-Ups
At EMBA PRO , we specialize at analyzing & providing comprehensive, corporate SWOT Analysis of VacationSpot.com & Rent-A-Holiday:
Negotiating a Trans-Atlantic Merger of Start-Ups case study. VacationSpot.com & Rent-A-Holiday: Negotiating a Trans-Atlantic Merger
of Start-Ups "referred as Vacationspot.com Merger in this analysis " is a Harvard Business Review (HBR) case study used for MBA &
EMBA programs. It is written by Walter Kuemmerle, William J. Coughlin and deals with topics in areas such as Innovation &
Entrepreneurship Financial analysis, Internet, Mergers & acquisitions, Negotiations

SWOT Analysis stands for – Strengths, Weaknesses, Opportunities, and Threats that Vacationspot.com Merger encounters both
internally and in macro environment that it operates in. Strengths and Weaknesses are often restricted to company’s internal -
resources, skills and limitations.

Opportunities and Threats are factors that are analyzed in view of the prevalent market forces and other factors such as legal &
environmental, technological, social, health & safety, political, and economic .

According to global executive survey done by Harvard Business Review & Brightline Initiative – Only 20% of the strategic targets set by
organizations are realized. Rest 80% of the strategic targets are not achieved because of incomprehensive planning, limited resource
allocation, and poor execution.

The successful organizations such as Vacationspot.com Merger are the one who able to predict market trends better than others,
provide resources to develop products and services to leverage those trends, able to counter competitors’ threats, and meet customers’
expected value proposition.

Case Description of VacationSpot.com & Rent-A-Holiday: Negotiating a Trans-

Atlantic Merger of Start-Ups Case Study

Describes a potential trans-Atlantic merger between two young companies in the Internet space. VacationSpot.com, based in Seattle,
and Rent-A-Holiday, based in Brussels, both offer online listings and reservations for independent leisure lodging (i.e., villas, apartments,
and bed and breakfast places) around the world. Both companies were started in 1997. At the time of the case (April 1999), the two
companies are world-market co-leaders and discussing a merger. While the lodging inventory of both companies is very similar, their
most recent post-money valuations have a ratio of approximately 9:1. Merger negotiations have come to a standstill over the valuation
issue. Both sides need to decide whether to restart negotiations and what terms to propose.

Case Authors : Walter Kuemmerle, William J. Coughlin

Topic : Innovation & Entrepreneurship

Related Areas : Financial analysis, Internet, Mergers & acquisitions, Negotiations

Case Study Solution & Analysis of VacationSpot.com & Rent-A-Holiday: Negotiating a Trans-Atlantic
Merger of Start-Ups

PESTEL / PEST / STEP Analysis of VacationSpot.com & Rent-A-Holiday: Negotiating a Trans-Atlantic

Merger of Start-Ups Case Study

What are the Four Elements of SWOT Analysis? How to use them for
VacationSpot.com & Rent-A-Holiday: Negotiating a Trans-Atlantic Merger of
Start-Ups case study?

The four key elements of SWOT analysis are - Strengths, Weaknesses, Opportunities & Threats. Vacationspot.com Merger can use
strengths to create niche positioning in the market, can strive to reduce & remove weaknesses so that it can better compete with
competitors, look out to leverage opportunities provided by industry structure, regulations and other development in external
environment, and finally make provisions and develop strategies to mitigate threats that can undermine the business model of
Vacationspot.com Merger.

Opportunities Threats

Strengths Strength Opportunities (SO) Strength Threats (ST) Strategies

Strategies Vacationspot.com Merger can use two approaches - building on present
Using Vacationspot.com Merger strengths, or analyze the trend and build processes to two pronged
strengths to consolidate and expand market penetration approach.
the market position.

Weaknesses Weakness Opportunities (WO) Weaknesses Threats (WT) Strategies

Strategies Vacationspot.com Merger should just get out of these business areas
Building strategies based on consumer and focus on strength and threats box , or on weakness and
oriented product development and opportunities box.
marketing approach.

For more detailed SWOT Matrix strategy please go through the detailed analysis of strengths, weaknesses, opportunities, and threats in
next section.

What are Strengths in SWOT Analysis

Strengths - VacationSpot.com & Rent-A-Holiday: Negotiating a Trans-Atlantic

Merger of Start-Ups

Strengths are the Vacationspot.com Merger capabilities and resources that it can leverage to build a sustainable competitive advantage
in the marketplace. Strengths come from positive aspects of five key resources & capabilities - financial resources, human resources,
activities & processes, physical resources such as land, building, and past experiences and successes .

- Superior product and services quality can help Vacationspot.com Merger to further increase its market share as the current customer
are extremely loyal to it. According to Walter Kuemmerle, William J. Coughlin in VacationSpot.com & Rent-A-Holiday: Negotiating a
Trans-Atlantic Merger of Start-Ups study – there are enough evidences that with such a high quality of products and services,
Vacationspot.com Merger can compete with other global players in international market.
- Robust Domestic Market that Vacationspot.com Merger Operates in - The domestic market in which Vacationspot.com Merger is
operating is both a source of strength and roadblock to the growth and innovation of the company. Based on details provided in the
VacationSpot.com & Rent-A-Holiday: Negotiating a Trans-Atlantic Merger of Start-Ups case study – Vacationspot.com Merger can easily
grow in its domestic market without much innovation but will require further investment into research and development to enter
international market. The temptation so far for the managers at Vacationspot.com Merger is to focus on the domestic market only.

- Managing Regulations and Business Environment – Vacationspot.com Merger operates in an environment where it faces numerous
regulations and government diktats. In Financial analysis, Internet, Mergers & acquisitions, Negotiations areas, the firm needs to
navigate environment by building strong relationship with lobby groups and political network.

- High Margins – Vacationspot.com Merger charges a premium compare to its competitors. According to Walter Kuemmerle, William J.
Coughlin of VacationSpot.com & Rent-A-Holiday: Negotiating a Trans-Atlantic Merger of Start-Ups case study, this has provided
Vacationspot.com Merger resources to not only thwart competitive pressures but also to invest into research and development.

- Intellectual Property Rights – Vacationspot.com Merger has garnered a wide array of patents and copyrights through innovation and
buying those rights from the creators. This can help Vacationspot.com Merger in thwarting the challenges of competitors in various
industries Financial analysis, Internet, Mergers & acquisitions, Negotiations.

- Strong relationship with existing suppliers – As an incumbent in the industry, Vacationspot.com Merger has strong relationship with its
suppliers and other members of the supply chain. According to Walter Kuemmerle, William J. Coughlin , the organization can increase
products and services by leveraging the skills of its suppliers and supply chain partners.

- Diverse Product Portfolio of Vacationspot.com Merger – The products and brand portfolio of Vacationspot.com Merger is enabling it
to target various segments in the domestic market at the same time. This has enabled Vacationspot.com Merger to build diverse
revenue source and profit mix.

What are Weakness in SWOT Analysis

Weakness- VacationSpot.com & Rent-A-Holiday: Negotiating a Trans-Atlantic

Merger of Start-Ups

Weaknesses are the areas, capabilities or skills in which Vacationspot.com Merger lacks. It limits the ability of the firm to build a
sustainable competitive advantage. Weaknesses come from lack or absence of five key resources & capabilities - past experiences and
successes, financial resources, human resources, physical resources such as land, building, and activities & processes .

- Organization Culture – It seems that organization culture of Vacationspot.com Merger is still dominated by turf wars within various
divisions, leading to managers keeping information close to their chests. According to Walter Kuemmerle, William J. Coughlin of
VacationSpot.com & Rent-A-Holiday: Negotiating a Trans-Atlantic Merger of Start-Ups case study, this can lead to serious road blocks
in future growth as information in silos can result can lead to missed opportunities in market place.

- Inventory Management – Based on the details provided in the VacationSpot.com & Rent-A-Holiday: Negotiating a Trans-Atlantic
Merger of Start-Ups case study, we can conclude that Vacationspot.com Merger is not efficiently managing the inventory and cash cycle.
According to Walter Kuemmerle, William J. Coughlin , there is huge scope of improvement in inventory management.

- Low Return on Investment – Even though Vacationspot.com Merger is having a stable balance sheet, one metrics that needs reflection
is “Return on Invested Capital”. According to Walter Kuemmerle, William J. Coughlin in areas Financial analysis, Internet, Mergers &
acquisitions, Negotiations that Vacationspot.com Merger operates in the most reliable measure of profitability is Return on Invested
Capital rather than one favored by financial analysts such as – Return on Equity & Return on Assets.

- Vacationspot.com Merger business model can be easily replicated even with the number of patents and copyrights the company
possess. The intellectual property rights are very difficult to implement in the industry that Vacationspot.com Merger operates in.
According to Walter Kuemmerle, William J. Coughlin , Intellectual Property Rights are effective in thwarting same size competition but it
is difficult to stop start ups disrupting markets at various other levels.

- Lack of critical talent – I believe that Vacationspot.com Merger is suffering from lack of critical talent especially in the field of
technology & digital transformation. Vacationspot.com Merger is struggling to restructure processes in light of developments in the
field of Artificial Intelligence (AI) and machine learning.
- Project Management is too focused on internal delivery rather than considering all the interests of external stakeholders. This approach
can lead to poor public relation and customer backlash.

What are Opportunities in SWOT Analysis

Opportunities- VacationSpot.com & Rent-A-Holiday: Negotiating a Trans-

Atlantic Merger of Start-Ups

Opportunities are macro environment factors and developments that Vacationspot.com Merger can leverage either to consolidate
existing market position or use them for further expansion. Opportunities can emerge from various factors such as - increase in
consumer disposable income, political developments & policy changes, economic growth, changes in consumer preferences, and
technological innovations .

- Opportunities in Adjacent Markets – Vacationspot.com Merger can explore adjacent industries Financial analysis, Internet, Mergers &
acquisitions, Negotiations to further market growth especially by extending the features of present products and services.

- Growing Market Size and Evolving Preferences of Consumers – Over the last decade and half the market size has grown at brisk pace.
The influx of new customers has also led to evolution of consumer preferences and tastes. This presents Vacationspot.com Merger two
big challenges – how to maintain loyal customers and how to cater to the new customers. Vacationspot.com Merger has tried to
diversify first using different brands and then by adding various features based on customer preferences.

- E-Commerce and Social Media Oriented Business Models – E-commerce business model can help Vacationspot.com Merger to tie up
with local suppliers and logistics provider in international market. Social media growth can help Vacationspot.com Merger to reduce the
cost of entering new market and reaching to customers at a significantly lower marketing budget. It can also lead to crowd sourcing
various services and consumer oriented marketing based on the data and purchase behavior.

- Increasing Standardization – Vacationspot.com Merger can leverage this trend to reduce the number of offerings in the market and
focus the marketing efforts on only the most successful products.

- Reducing Cost of Market Entry and Marketing into International Markets – According to Walter Kuemmerle, William J. Coughlin,
globalization along with boom in digital marketing and social media has considerably reduced the risks of market entry and marketing
in international market.

- Increase in Consumer Disposable Income – Vacationspot.com Merger can use the increasing disposable income to build a new
business model where customers start paying progressively for using its products. According to Walter Kuemmerle, William J. Coughlin
of VacationSpot.com & Rent-A-Holiday: Negotiating a Trans-Atlantic Merger of Start-Ups case study, Vacationspot.com Merger can use
this trend to expand in adjacent areas Financial analysis, Internet, Mergers & acquisitions, Negotiations.

What are Threats in SWOT Analysis

Threats- VacationSpot.com & Rent-A-Holiday: Negotiating a Trans-Atlantic

Merger of Start-Ups

Threats are macro environment factors and developments that can derail business model of Vacationspot.com Merger. Threats can
emerge from various factors such as - economic growth, changes in consumer preferences, technological innovations, political
developments & policy changes, and increase in consumer disposable income .

- Culture of sticky prices in the industry – Vacationspot.com Merger operates in an industry where there is a culture of sticky prices.
According to Walter Kuemmerle, William J. Coughlin of VacationSpot.com & Rent-A-Holiday: Negotiating a Trans-Atlantic Merger of
Start-Ups case study, this can lead to inability on part of the organization to increase prices that its premium prices deserve.
- International Geo-Political Factors – Since the Trump election, geo-political factors have taken a turn for growing protectionism.
Developments such as Brexit, Russian sanctions, foreign exchange crisis & inflation in Venezuela, lower oil prices etc are impacting
international business environment. Vacationspot.com Merger should closely focus on these events and make them integral to strategy
making.

- US China Trade Relations – Vacationspot.com Merger has focused on China for its next phase of growth. But there is growing tension
between US China trade relations and it can lead to protectionism, more friction into international trade, rising costs both in terms of
labor cost and cost of doing business.

- Growing Protectionism - Vacationspot.com Merger should hedge the risk against growing protectionism ranging from – storing data
into international market to diversifying risk by operating into countries at different economic cycle.

- Squeezing Middle Class in Developed and Developing World – The growing inequality is one of the biggest threat to not only
globalization but also to capitalism. Vacationspot.com Merger first hand witnessed the impact of it where it has seen lower demand of
its products from middle class customers in US and EU market.

- Credit Binge post 2008 Recession – Easy access to credit can be over any time, so Vacationspot.com Merger should focus on reducing
its dependence on debt to expand. The party has lasted for more than a decade and rollback from Fed can result in huge interest costs
for Vacationspot.com Merger.

References & Further Readings

Walter Kuemmerle, William J. Coughlin (2018), "VacationSpot.com & Rent-A-Holiday: Negotiating a Trans-Atlantic Merger of Start-
Ups Harvard Business Review Case Study. Published by HBR Publications.

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