Essay About Priceline Expands China Options And Ctrip Investmentthe

Priceline Expands China Options with Ctrip Investment
Zach BalaskaMKG 410-210/30/2014Distribution Diary: Priceline Expands China Options With Ctrip InvestmentThe leading largest online travel agency, Priceline, in an acquisition in June of 2013, purchased Kayak Software Corporation.  This brought Kayak in under the wing of the now parent company of Priceline.  Now Priceline intends to expand its horizons as it will invest $500 million in Ctrip.com, a Shanghai based company that is now China’s biggest travel website.  Ctrip and Priceline have had a commercial partnership since 2012, and the value of Ctrip has risen drastically within recent years.  According to a statement from July 30th Ctrip’s total sales climbed 38 percent in the second business quarter.     So why expand into China? “It’s like putting products on the shelf. If you put more products on the shelf, it enhances the value of the store,” said Priceline Chief Executive Officer Darren Huston.  China is a dynamically growing market and there is a very large middle class that has a fair amount of disposable income.  This in turn has led to a large increase in the number of Chinese travelers who not only desire to see the China, but the world as well.   The majority of these Chinese travelers are now shifting to online travel agencies, which is a market that Priceline is eager to tap into.  Priceline has used acquisitions to drive their overall growth and surpass their main competitor, Expedia Inc., in revenue.  This includes last year’s acquisition of Kayak Software Corp. for $1.7 billion.  With Priceline’s investment of Ctrip, Priceline will purchase Ctrip shares and may own as much as 10 percent of Ctrip by next year.  In addition, Priceline has the right to name an observer to Ctrip’s board.     This investment by Priceline covers three main concepts that we have discussed in class; selecting a target market, selecting channel members, channel design strategy, and competitive advantage.  By witnessing quick economic development in China with regard to the increasing middle class, Priceline saw a target market and selected a critical channel member by partnering with Ctrip.  By using acquisitions and merging smaller companies into the Priceline group, Priceline has created a competitive advantage in China against their competitor, Expedia.  All in all Priceline has made a great move in terms of their channels of distribution by taping into the Chinese market.