CTRIP CASE ANALYSIS
During Ctrip’s early years, the Chinese travel market consisted of small, independent agencies scattered across the country. Many were state-owned and offered poor service to their customers, such as travel packages that consisted of overnight flights, mandatory shopping outings, and low-quality cuisine. According to Ctrip’s CEO Min Fan, “few people cared about service quality.”1 A national hotel inventory did not exist. Hotel chains made up less than 5% of the market and, since the Internet was in its infancy, travelers had to rely on newspapers to know which hotels were available in which cities. Customers that did have Internet could not book airfare online. They had to go to a local travel agent, who used a state-owned website to check availability/price and book on their behalf. These travel agents could not keep national data about airline flights on file, so they could only assist with local routes.
Ctrip’s success was fueled by a number of forces, which can be better understood by viewing them through the PESTEL framework (see Exhibit 1 below). For example, Ctrip capitalized on the Chinese Internet boom by offering travelers a website with “superior content, [an] extensive online community, and user-friendly design.”2 This website, Ctrip.com, gave the company a competitive advantage over offline competitors, who were still soliciting customers over the phone. This competitive advantage has proven sustainable for Ctrip, as the website continues to attract customers with new, unique features. For example, the recent addition of “one-hour express ticketing,” allows travelers to book flights as little as one hour prior to departure. As long as Ctrip continues to add innovative online features and capabilities, its website will surely give the firm a sustainable competitive advantage. Ctrip also took advantage of technological innovations, such as the invention of the PDA, to gain a competitive advantage. Since the company knew that the sales strategy of handing out brochures and membership cards was easily imitable, it equipped its sales force with PDAs. These devices allowed salesmen to approach a customer, “access his record, identify the customer segments to which he belonged, and provide tips on how the sales staff should focus the conversation.”3 Most importantly, Ctrip leveraged advancements in technology to improve its IT system. The company was able to develop the IT system to modularize information from the state-owned platform TravelSky “so that even young, inexperienced call center staff could immediately quote an accurate price.”4 This gave Ctrip a competitive advantage over other travel companies, who needed experienced employees to navigate the complexities of TravelSky. Liang said, “We realized that if we could use technology, there was not much competition.”5 Therefore, as long as Ctrip continues to invest in technological innovation and make it a priority, it should be able to sustain a competitive advantage over more traditional travel companies. A positive sign that this is occurring is the Business Intelligence Department’s “data mining and analysis to support scientific decision-making.”6 Possessing such sophisticated systems to measure and understand consumer behavior will help Ctrip remain the industry leader. Analyzing Ctrip according to the resource-based view helps give us a better understanding of additional areas where the firm has a competitive advantage. According to Rothaermel, “this model sees resources as key to superior firm performance.”7 Ctrip’s most important tangible resource is its call center, which is the largest in the industry. The call center gives Ctrip a competitive advantage because, as CEO James Liang points out, “it is difficult to imitate” and “nobody knows what’s behind it.”8 Indeed, Jay Barney, pioneer of the resource-based view, posits that, in order for a resource to give a firm a competitive advantage, it must be “costly to imitate.”9...
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