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International Business

Essay by   •  July 1, 2011  •  Essay  •  446 Words (2 Pages)  •  1,447 Views

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rter's theory of national competetive advantage addresses the following components of international business - production factor and demand conditions; supporting and related industries as well as firms strategy, structure and rivalry. American enterprenuers Greg Slyngstad and Steve Murch established their business dealing with online travel VacationSpot.com in September 1997. They focused on the independent leisure lodging segment of travel market. Before jumping to VacationSpot Steve Murch worked in Microsoft starting from limited group of creative people. Later Microsoft increased dramatically and Steve discovered an opportunity of his own family company engaged in Internet which is "large enough to build a nice business but not so large as to attract imediate interest from established firm" (W. Kuemmerle. VacationSpot.com & Rent-a-Holiday: negotiating a transatlantic merger of start-ups").

The following factors were benefitial for the business due to American location:

Demand factor. From Microsoft experience Steve Murch found out that the selected travel segment was not covered by Expedia and other online offerings. Nevertheless this direction was estimated by Forrester Reasearch to have generated over $126 billion in revenues in 1998, but was quite fragmented and not well served by the existing reservation networks (W. Kuemmerle),

Production factor conditions. Experience was provided due to Microsoft involvement of both enterprenuers. Greg Slyngstad sold Bill Gates on online travel while was general manager for Expedia. The same resource provided necessary capital and related service. After using angel financing and own money they approached Microsoft in April 1998. They entered a long-term distribution deal that gave the premier place on Expedia in the accomodations segment for two years and lots of banner advirtising for a modest amount 20% of equity valued at $3 million pre-money (W. Kuemmerle).

Strategy. VacationSpot was aimed to have a comprehensive property offering, a superior reservation technology and strong distribution system. Execution of strategy was through aggresive acquisition program and several distribution agreements. Three acquisitions for the first six months aimed to adress strategy weaknesses: one was a company that developed software for reservation, and two other are property listings. While listings were growing the revenue model was changed from flat listing fee to commission-based system on each transaction.

Other positive factors providing succesful development of VacationSpot were:

recruitment is USA is effective due to enough number of qualified technicians while wages are lower;

advertising is improved through wide penetration of Internet, free and cheap publicity and sponsorship;

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