Open Table.com the Online Restaurant Case Study

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OpenTable has a number of strengths from which it derives its success. These include its brand, its marketing capabilities and its large base of restaurant customers. OpenTable does have some weaknesses, however. The company has a bad reputation among its customers, leaving its industry open to exploitation from a new rival. Another potential weakness for OpenTable is its customer service -- the company appears genuinely unconcerned about meeting the needs of its customers, something that creates risk. There are a few opportunities in the market for OpenTable. The first is continued organic expansion, as there are always new restaurants to sign up. Geographic expansion is another possibility, as the OpenTable concept can be used anywhere in the world. The third opportunity is to develop value-added services. An improvement in its service offerings would give OpenTable the ability to build an even larger market for itself. There are a few threats, however. The first is open revolt from its customers. While many customers see themselves as dependent on OpenTable, just as many only grudgingly use the service. A movement to walk away from OpenTable could cause the company considerable harm. Another threat is the threat of a new entrant. While the costs of setting up a rival are high, firms like Google, Yahoo, Amazon or others have more than enough money to build a rival to OpenTable and eat into the company's substantial revenue streams.

Using Hambrick's Business Strategy Diamond, we can see that OpenTable is a company focused on the Internet and on U.S. customers in terms of its arenas. Growth could be achieved by expanding arenas or adding new products for its existing arenas.

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The company is differentiated by its market dominance, strong brand and its other strengths. Its ability to keep competitors out of the market is a differentiator that allows it to succeed -- without this ability the company might struggle. The vehicles that drive success at OpenTable include its technology and its marketing expertise. The customer loyalty programs that it uses with consumers are also an essential facet of OpenTable's success.

The economic logic of OpenTable works mainly because it has a monopoly position. At present, it offers customers to restaurants, who are willing to pay for those customers. The price that they pay for the customers is very high, however. OpenTable pays consumers to join its service and this cost plus the cost of running the website and of sales must be built into the price it charges its restaurant customers. By doing all of the other things mentioned above, OpenTable seeks to derive its profits. The system does not work unless all of the different facets of the organization work well. However, the Five Forces analysis also reveals that pricing power is a critical component of OpenTable's success. Any new competitor would remove some of the company's pricing power. This might make it more appealing to customers, but it also would reduce contribution margins. It is likely, therefore, that as long as the status quo is maintained, OpenTable will continue to be a successful, profitable company. However, any erosion of the customer base for any reason will significantly compromise the company's ability to earn the types of profits and revenues to which it has become accustomed......

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