Case Analysis of Yelp’s Strategic Position

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YELP CASE REVIEW

CaseAnalysis of Yelp’s Strategic Position

Yelpis a crowd-sourced local business review andmarketing site, which also offers functionalities of a social networksite. However, Yelp`s primary source of revenues is advertising(Yelp, 2015).

Thehistory of Yelp traces to 2004, when Jeremy Stoppleman and RusselSimmons, the employees of PayPal at that time founded it. Since itsestablishment, Yelp managed to grow fast, and as of 2010, the companyrevenue had reached 30 million dollars, while the number of website`scrowd-sourced reviews was over 4.5 million. The unprecedented growthof Yelp is attributable to its expansion to Europe, Asia, andAustralia market. By the close of 2015, the average monthly trafficof visitors to Yelp was 135 million users, while the average monthlynumber of reviews was over 95 million. Yelp projects that the numberof visitors and reviews would continue growing and is likely to reach200 million users and over 140 million reviews by the end of 2016(Yelp, 2016).

Despitethis growth, Yelp has to contend with various market challenges. Forinstance, Yelp has beencriticizedfor excluding small businesses. It has also been criticized formanipulating and blocking some reviews from the users to increasespending (Fairless, 2015). Nevertheless, Yelp prides itself onproviding top-notch services to its communities and insists it isstill dedicatedto expanding and improving its capacity to meet user demands (Yelp,2016). The question of intrigue is whether Yelp is well placed toshun market challenges and leverage competitiveness.

TheBenefits of Yelp to Customers

Yelpprimarilyoffers two categories services to the users provision of informationon services and goods accessible within certain locations, and socialnetworking (Graham, 2012).

Bilton(2011) provides perhaps the most comprehensive list of benefits thatcustomers get from Yelp. The first benefit is that it containsinformation about great businesses within specified locality, forexample, those offering luxury services, low-priced or high-qualitygoods and services that may interest customers. Secondly, Yelpenables consumers to search for the most nearby services,restaurants, and shops, for which they might need to access withoutcovering long distances. Thirdly, Yelp enables customers to filterthe results by specifying what they need by keying in certain detailssuch as neighborhood, customer ratings, and prices. Fourthly,customers can read various reviews written by other clients orexperts, and bewell informedon purchase decisions. Fifthly, Yelp also features photos ofbusinesses, which enable customers to have a clear impression of thefeatured services and products. Moreover, customers can also findcontact addresses, make reservations remotely, as well as contactbusinesses (Yelp, 2015). Therefore, the main reason why customersshould use Yelp is that it has various functions that can enableconsumers to make informed choices, yet it also allows them toparticipate in improving the user experiences by providing reviews.

Yelp`sTarget Market and Operations Strategy

AlthoughYelp is yet to expand to all countries, its target market comprisesof large and small businesses across the globe. According to Chonfeld(2012), Yelp has remained dedicated to pursuing its expansion toreach many countries acrossthe world.In 2009, for instance, Yelp introduced its website in the UnitedKingdom. Several months later, it launchedthesite inCanada. Yelp has also succeeded in extending its services tonon-English speaking communities. In 2010, for instance, the companylaunched its website to the French community, becoming the first Yelpsite to serve the non-English speaking communities. As from 2011 to2014, Yelp expanded and established the presence in various countriesacross the continents. For example, Yelp launched its sites indifferent European including Spain, Germany, Austria, and Netherlandsin 2011, and Turkey and Denmark in 2012. In 2012, Yelp also launchedits site in Singapore, becoming its first site to be launched inAsia, and this wasfollowedby starting another sitein Japan in 2014. In Australia, Yelp site wasinitiatedin 2011, in collaboration of Yelp with Telstra (Whitehouse, 2012).Nevertheless, it is worth noting that while Yelp`s market is noted toinclude small business, the services have beencriticizedfor excluding small businesses (Chonfeld, 2012).

Yelp`sBusiness model

Yelpbusiness model ismainly orientedtowards direct selling. Yelp sells its products and services directlyto its customers, facilitated by the presence of the internetdistribution and communication channel that enables it to interactdirectly with the consumers. Indeed, with the availability ofsophisticated technologies, Yelp can deploy customer relationshipmanagement (CRM) tools to perform various functions remotely, such asmanaging relationships withits customersand information that concerns it. The CRM tools aredesignedin the manner that allows Yelp to store information of clients,and to identify business leads, and opportunities. The CRM tools alsoallow Yelp to interact with its customersseamlessly, automate sales, provide customer support, performmarketing tasks, and manage relationships with partners. Therefore,Yelp`s business model is ideally cost-effective.

Thebenefits of Yelp Businesses

Yelpprovides various benefits to businesses in many ways. As documentedby Rubin (2012), first is that Yelp has a feature that enablescompanies to publish information about their businesses,such as locations and their pricing and quality offers. Yelp alsobusiness to upload photos of their services and products, whichcreates the allowance for customers to have a clear impression of thefeatured trades.Once published, such information leads customers to the firm.Indeed, Yelp has features that enable customers to filter the resultsby specifying what they need by keying in attributes of the productsthey need.

Secondis that Yelp allows businesses to benefit from the reviews. Yelpfeature allows customers to read and write reviews, and rate thegoods and services. On one hand, companiescan use the reviewsubmitted information to make decisions onthe way of improving their standards to meet the customer demands.Indeed, this is possible because reviews include comments aboutareas of weaknesses that may need improvement and areas of strengththat businesses can capitalize. On the other hand, businesses canalso benefit from the reviews by earning a good reputation, andthis is especially true when thereviews are positive enough to attract new customers.

Thethird way that businesses can benefit from Yelp is advertising. Byusing Yelp, businesses can advertise goods and services they offer tothe customers on the pay-per-click basis. Businessescan also pay to have them appear at the top of competitors regardingsearch results. Considering Yelp has many visitors, the companiescan earn recognition through advertisement (Nutley, 2011). Lastly,Yelp also allows companies to sell their products directly. Customerscan make reservations for goods and services online.

Inthis regard, the main reason why companies should use Yelp is itsupports business promotion activities. While there are other sitessuch as booking.com, and Trip Adviser, Yelp is advantageous becauseit is a popular site with a large traffic of users that makebusinesses easily recognizable (Marx, 2014).

Risksand Recommendations

Thebusiness environment in which Yelp operates can be assessed based onthe Porters Five Force analysis, whose components of interest includethe threat from existent competitors, the threat of new businessentries, customers` bargaining powers, the suppliers` bargainingpowers and the threat of substitute product threats (Porter, 2012).

Firstly,Yelp faces competition from other businesses offering similarproducts. These competitors include Booking.com, Trip adviser, amongothers (Kucera, 2012). Furthermore, the competitors are adopting moreor less same operation strategies. Like Yelp, for instance,competitors are also seeking internationalization to exploit marketsacross the globe. The presence of these competitors implies thatYelp`s market share and profitability are under threat of theoccupation of these competitors, considering its potential customerscan also opt for any other products offered by the competitors.Therefore, the ability of Yelp to survive, grow, and expand largelydepends on the strategies that it willing to adopt to leverage anedging competitive advantage.

Secondly,it is indisputable that Yelp also faces threats from new entrants.The possibility of new entrants follows from the fact that onlineenvironment is an open one, which allows new, young business to adoptinnovative and creative strategies to enter the market, penetrate,and even subdue the established companies (Winkler, 2015). In thisregard, Yelp is not immune to threats posed by new competitors.Therefore, like the case of existing competitors, the ability of Yelpto survive, grow, and expand largely depends on the strategies thatit willing to adopt to leverage an edging competitive advantage.

Thirdly,the business environment that Yelp operates accords consumers a highbargaining power. The high bargaining power follows the presence ofmany competing services and products, for which usersarepresentedwith many alternatives to choose from (Chang, 2013). Therefore, thedecisions that consumers make, such as opting for high quality andless price, tend to be influential. In a bid to exploit theopportunities within the market, firms will be compelled to playalong the consumer demands. Companies that are inflexible to respondto customer demandsrisk the losing customers to other quick and flexible competitors.

Fourthly,considering the attributes of Yelp business, the issue bargainingpower of suppliers do not arise. For instance, Yelp is anonline-based companywith direct selling business model, which does not heavily rely onthe intervention of suppliers.Therefore, it can bearguedthat supplier bargaining, if it exists, is lowand does not pose any significant threat to Yelp market occupations.

Lastly,the market environment offers various alternative products that canact as substitutes to what Yelp offers. For instance, the fact thatYelp income isderivedfrom advertisement makes it susceptible to risks of alternativeadvertisementservices such as Televisions, radio, newspapers and magazines. Also,its crowd-sourced local business review services can besubstitutedbyfree services offered by social media such as Tweeter, Facebook,Google (O`Brien, 2015). Therefore, the threat of alternative productsis present and requires Yelp to adopt informed strategies to leveragecompetitive advantage.

Therefore,Porter`s Five Forces analysis mainlyshows that Yelp faces various threats, and this is especially threatfrom existent competitors, the threat of new business entrants,customers` bargaining powers, and the threat of substitute productthreats. Since the market environment is a war of technologies(Doherty &amp Ellis-Chadwick, 2013), the most appropriate approachfor Yelp to seek creativity and innovativeness in all its processes.In a bid to achieve this, Yelp will need to manage the talent pool inhuman resource, encouraging and motivating innovativeness, andcreativity (Grant, 2012). Even as this isdone,it will also be crucial for Yelp to focus on improving its image. Inparticular, Yelp will need to begin by addressing the concerns ofnegative publicity such as the accusations of failing to be inclusiveto small businesses and manipulating reviews to attract sales.Undoubtedly, these steps will go a long way in enabling Yelp tosafeguard a competitive advantage.

Conclusion

Inconclusion, the aim of this paper has been to conduct the marketanalysis of Yelp, a crowd-sourced local business review and marketingsite with social network attributes. It isestablishedthat Yelp is beneficial to users. In fact, the main reason whycustomers should use Yelp is that it has various functions that canenable consumers to make informed choices by reading reviews andadvertisements, as well as participate in improving the customerexperiences by providing reviews.It isalso establishedthat Yelp is beneficial to businesses. In contrast toother competitors such as Booking.com and Trip Adviser, Yelp Yelp isa popular site with a large traffic of users that make companieseasily recognizable. It also markets, and provides basic CRM support.

AlthoughYelp is yet to expand to all countries, its target market comprisesof large and small businesses across the globe. Although Yelp`smarket is noted to include small business, the services have beencriticizedfor excluding small businesses. Yelp business model ismainly orientedtowards direct selling. Yelp sells its products and services directlyto its customers and this particularly driven by the presence of theinternet distribution and communication channels that enable it tointeract directly with the consumers. Porter`s Five Force analysismostlyshows that Yelp faces various threats, which include the threat fromexistent competitors, the threat of new business entries, customers`bargaining powers, and the threat of substitute product threats. Toremain on top of the market, Yelp is recommended to pursue creativityand innovativeness because the business segment is typically aboutthe war of technologies. Yelp also needs to address the concerns ofadverse publicity and be inclusive to small businesses.

References

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