Question

Read the following extract and answer the questions that follow. [20 marks]
Joe Gebbia and Brian Chesky were sharing a loft apartment in San Francisco in 2007 when they realised that attendees to a major design conference in town were going to struggle to find a room for the night.
With almost every hotel room in the city booked out, Gebbia and Chesky, who were struggling to pay their rent, seized their chance.
They threw the doors open to their place, offering strangers the chance to sleep on two airbeds on the floor and eat a home-cooked breakfast.
As the Airbnb website puts it: “Two air mattresses, a thousand dollars, three new friends, and many high fives later, the entrepreneurs realized an opportunity.”
With the addition of tech wizard Nathan Blecharczyk, the team decided to change the accommodation model by allowing people to list their own places to stay online, with the new business, Airbedandbreakfast.com, gaining revenue through a fee of between 6% and 12%, depending on the price of the booking.
Initially focusing on large-scale events where accommodation would be scarce, the trio raised cash for the venture in an unusual way – they sold $30,000-worth of special edition breakfast cereals they created, based on then-US presidential candidates Barack Obama and John McCain.
In 2008 the name was shortened to Airbnb and users were able to book whole properties, boats and even private islands, rather than just a couch to crash for the night.
In June last year, the business revealed it had booked its ten millionth night, with 75% of these bookings occurring outside its initial market of the US.

There have been hitches – such as the PR disaster of a woman writing on her blog that her apartment had been trashed by an Airbnb renter. Chesky wrote a contrite response, admitted the company had “dropped the ball” and introduced insurance and a 24-hour helpline to help solve future problems.
Airbnb now features listings in 33,000 cities in 192 countries. It has also raised a very handy $120 million in venture capital and is valued at $1.3 billion.
Chesky told CNN: “Sometimes it takes a fresh pair of eyes to look at a problem and see it as an opportunity, not just the way things are or have to be.”
“I think that being a young entrepreneur is a great opportunity to challenge the status quo and build the world as you think it ought to be.”
Source: https://www.smartcompany.com.au/business-advice/innovation/five-top-business-ideas-that-made-millions/
Accessed: 02/10/19

REQUIRED:
1. With reference to the extract, discuss two methods of generating business ideas that resulted in Airbnb.
2. Use the extract to discuss how a feasibility study can be used to ascertain whether a business idea is an opportunity.

Answer 1

1. Two methods of generating business ideas that resulted in Airbnb:

a. One method was to seize the scarcity which they saw was likely to arise in the coming days due to the situation and make use of this situation to begin their business. The Airbnb founders Joe and Brian took their chance by utilizing the scarcity of accommodation that would be faced by the attendees of a major design conference in the town.

This is one of the methods how the business idea can be generated. Here they met new people, opened their door for strangers and marked the starting of their business with two airbeds and a home cooked breakfast. And then they saw their opportunity in the same.

b. The next method they took was to go online by adding a tech wizard to their team so as to help them open their own platform online where people can list their own properties for events and renting. They opened new doors of opportunities and expanded their market around the world.

And it was said that 75% of their bookings were outside their major or initial market which is US. Taking the business online again helped them open and reach more markets and add on various facilities and thereby expand their horizon. Once you start a business and you know people are and have accepted the same, you cannot sit back because in this tornado like world, everyday new opportunities are evolving. Being in a cyber-world, we are as fast as an internet and should be able to seize and accept the opportunities with this speed. They also concentrated and tried to convert the complaints or issues raised by their associates, or listing partners into their opportunity by adding on more features to the business which would later on serve as a boon to them.

2. Feasibility study usage in order to ascertain whether a business idea is an opportunity:

Conducting a feasibility study to analyses the potential of a business idea is equally important as finding an idea. This is because, only when we conduct a business study that we would be able to understand if the idea actually holds an opportunity.

A feasibility study generally tends to uncover the strength and weakness that a business idea holds, be it in a new venture or an already running or expanding business. And it would also help us understand the opportunities and threats that the environment holds and the resources that we would need so as to set our own business empire with this particular business idea.

Here, Airbnb and its founders in a way or other new that their opportunities lied where there big events and they did not mind if it was inside US or anywhere across the globe. They understood and took the necessary steps to raise the fund for this and go beyond the boundaries of their countries.

For all these, they should have a proper feasibility study being conducted so as to analyses and know where the actual opportunity is lying and where there is not.

If they have not conducted a feasibility study of their business idea, they would never know that their actual opportunity and potential is lying outside their initial market which was US.