Travel Industry in Plain English

Amadeus' Revenue Streams and Channel Phases

As one can see, Amadeus has several sources of revenues (almost all of the streams discussed in the course).

But mainly, Amadeus' revenues come from its Transaction-Based Solutions, in particularly from its GDS (Global Distribution System), and it might combine pricing mechanisms according to the segment targetted. For example, it requires Travel Agencies (mainly) a subscription fee for usage of their GDS solution whilst still applying Transaction fees for every operation performed in their solution.
When acting as an Agent, it gets brokerage fees and when distributing its IT Solutions might get Selling, Leasing or Licensing revenues.

Travel Industry and Internet - Interviews

Three persons have been interviewed about the change that occurred in the travel industry since the availability of the Internet.

The interviewees are from different backgrounds. We have an employee in the IT field, an environmental manager of a foreign country and a student at EPFL. To preserve their anonymity, the information about them are short, but we know, anyway, they all share the pleasure of traveling.

Amadeus' Business Model

This is the first Business Model we created for Amadeus. Our understanding of the company was not as deep as it is today, and this is reflected on the evolution of the model of our lasts blogs.

Amadeus Value Proposition

In this section we analyze the 'what' of a business model. By this, we focus on the center of the business model canvas, more precisely on the value proposition. For this, we choose the biggest customer segment of our company Amadeus: the travel agencies. This one is interesting not only because it's the biggest but also because it is the intermediate segment between travel providers and travel buyers, the other two customer segments of Amadeus.

First, we made an empathy map of Bob, CEO of a travel agency, to understand the customer profile before starting with the analysis of Amadeus' value proposition. To see the empathy map click here or watch the video to build it.

This first approach brings us to reconsider the Amadeus’ values propositions. By questioning ourselves on the profile of a customer segment, we could be able to build a better design for the value proposition. It becomes clearer that this company provides solutions before everything. That's the main VP. Then we found the network as a first need for all the travel's companies. Amadeus have it, knows how to use it and therefore have the key-pass for it. This two VP are related with B2B or B2b business that represent the biggest part of the company activities. The other part is the direct business between the costumer and the company. In this section the VP is a wide offer of travel around the world.

Strategy Canvas based on the Blue Ocean's Analysis

Sabre is the main competitor of Amadeus, in fact, Amadeus was intended to offer a European Alternative to Sabre. These are the reasons why we focused our strategy canvas on this competitor. Besides, the services and products offered by both giants are very often the same.

Surprisingly, despite being created after it, Amadeus overpassed Sabre on many aspects, except that Sabre keeps its leadership in NorthAmerica as a GDS and Solutions provider.

Travel Industry Environment - Mapping

Travel Industry

This industry has been particularly transformed by web-based technology.

The changes that the industry has been through range from the transaction /information exchange between traveling companies, the emerging of dot com (specially ticketing) companies to the introduction of sophisticated applications and devices to enhance the traveling experience ( like Smart Phone applications).

Today, the traveling industry is a different one than 10 years ago.

Travel Industry Mapping Exercise

Being a wide industry, it touches many sectors: tourism, business traveling, transportation (airlines, rail services, bus services, shipping, commuting), hotels, luxury resorts, etc. Therefore, a mapping of its environment resulted multifaceted and somehow imprecise. We therefore decided to highlight some features of the company we particularly wanted to study for the E-Business Course.

Our company of study: AMADEUS!

Then, we added different color post-it’s (pink, blue, green) to our industry mapping (yellow), to indicate the particular features of this company.

INDUSTRY Forces

- Ubiquitous in nature, but with a strong and fierce competition among the participants within the industry.

- Worldwide Market and Operations

- 24/24 hours availability but it also applies to competitors and substitute services

KEY Trends

- Social and demographic phenomenon: immigration

- Traveling trend = the world becomes smaller

MARKET Forces

- Fierce competition for market share due to the Low-Cost emerging services

- B2B, B2C, B2b business models

MACRO ECONOMIC Forces

- General recovery after the financial crisis

- Market and Economic conditions are often country-dependent

AMADEUS

Amadeus is a leading supplier of transaction based solutions within the global travel and tourism industry. It provides transaction processing power and technology solutions to both travel providers (including full service carriers and low-cost airlines, hotels, rail operators, cruise and ferry operators, car rental companies and tour operators) and travel agencies (both online and offline).

Amadeus Business Model

Case Study MS Office Business Model Environment

INDUSTRY Forces

MS Office is the dominant player in its sector. However, competitors are offering substitute products that are free and easy to get either by downloading like Open Office or by free access on-line to web based applications like Google Docs and Zoho.

The force of these substitute products rely on their availability and multi-platform adaptability, in some cases, and mainly of course on their free cost for the final user.

Nevertheless, the change resistance experienced by most users has allowed MS Office to remain the leader in its sector. According to different surveys (i.e. Forrester), most companies are planning to upgrade to the newest versions of Office and do not plan to move to an alternative application fearing, among others, lack of seamless interoperability with other applications and user’s resistance.

MS Office’s partners OEM, play an important role in the business model installing and distributing MS Office software. By doing this, they initially capture users that later will highly probably stick to the product. The same will probably happen with users of Office Web Apps for Facebook.

KEY Trends

MS Office’s market is world wide.

When regulations are created and applied to protect the brand and limit the use of the software to legal customers, it influences the business model by increasing the company’s control over the use of the product and hence increasing revenues. In the same way, by increasing or decreasing taxes on the buying of the product, there will potentially be more or less customers.

Higher revenues in a country will give as a result a higher legal use of the product. The demographic distribution between urban and rural areas also impacts the sales of the product.

Piracy is a trend that strongly influences MS Office’s market. People’s tendency to use the product illegally has extended to all societies and all income levels, because of the easy access to it, restricting then the control on the use of the product.

Tactile and online tools are invading the technology market. People don’t necessarily have to use MS Office suite to produce a beautifully-designed presentation. That threatens MS Office market.

MARKET Forces

The main market issues are that competitors will offer cheaper products with similar quality, or offer it with a higher quality at the same price like Live Document. Another issue is that customers are constantly demanding lower prices.

Microsoft Office users are mainly business and individuals. But revenues largely come from business, and even though most business presently using MS Office prefer not to move to an alternative product, Microsoft needs to be aware of competitors, who are constantly trying to conquer a bite of the market.

We find that there is a growing segment of elderly people that are starting to work with computers, so in the future, Microsoft might want to develop a strategy to target this do not segment by creating a simplified version of the Microsoft Office package.

Even though some geographical regions such as Latin-America or Africa are experiencing a big growth, there are also some areas such as China, where sales do not necessarily increase, due to the illegal software download market.

Customers want to increase the efficiency and maximize their productivity. In order to achieve that, customers need to have a more user-friendly version of the MS Office package with an extended problem solving tool.

Moreover, they want a program in which they can have all the information, their agenda, etc.
There are rather switching efforts than switching costs because a lot of people are used to work with the Microsoft operating system.

Microsoft also has a strong brand, enough reason for the customers to stick to MS Office. However, the company needs to be aware of the illegal downloading trend and free software from competitors. Revenues mainly come from high margins of licenses, because right now the customers have no influence on the software price. In the future, Microsoft will have to take into account that customer's power might increase.

MACRO ECONOMIC Forces

Due to the global recession that hit the market two years ago, the market, in general, is starting to slowly recover. However, market conditions (GDP, unemployment rate, etc.) strongly depend on the geographical region. An example of this fact is that the USA has a lower unemployment rate and is more rapidly recovering from the recession than other countries, such as Spain, Italy, Greece or Latin-America.

The economic infrastructure also depends on the region Microsoft is selling their products to. There are wealthier areas with good public services, good supplier access, high life quality, high taxes, etc. that can have easier access to MS Office, but there are also poorer regions that experience difficulties in reaching it.

As a consequence of the global recession, banks have limited the credit availability. Because of this, companies have had difficulties to obtain funds. However, Microsoft as an established brand, and has managed to survive.

The main resource of MS Office is software developers. Therefore, the main costs are labor and intellectual property costs. These costs can be reduced by outsourcing.

INFLUENCE ON THE BUSINESS MODEL in the Future


Activities:

• enhance marketing activities, to maintain the market share
• extend the customer support
• integrate new technology trends into the product development, in order not to lose segments of the market

Value proposition:

• Lower prices and higher quality software

Resources:

• Software developers that are skilled at the new technologies (headhunting + training)

Partners:

• More alliances with strong technology leaders (as with Facebook)
• Reinforce relationships with governments in order to world widely approve laws against illegal downloading

Segments:

• target a new customer segment: the elderly people
• less developed geographical areas