Functional AnalysisTo analyze the functional value chain of Expedia, Inc., the major functions include R&D, Marketing, Service, and Information Technology and Operation. The functional analysis uses four criteria to evaluate the performance of each function. The measures of criteria are efficiency, quality, innovation and customer response. The following table is the result of the functional analysis with a rating scale of High, Medium, and Low.

Table: Functional Analysis

R&D Marketing IT & Operation Service

Efficiency High High High High

Quality High High High High

Innovation Med. Med High Med

Customer Response N/A High N/A High

R&D

Expedia, Inc. is an online traveling company that provides traveling information and reservation tools to its customers. Therefore, the first priority of R&D function within Expedia, Inc. is seeking the variety of traveling products and services and obtaining a wide range of travel brands.

Overall, the performances of R&D within Expedia, Inc. are high because Expedia, Inc. strives to obtain maximum customers, partners and suppliers through frame wide-ranging brands collection. In order to be the leading brand in this industry, Expedia, Inc. believes relying on widespread brands collection would get maximum value and market shares. Therefore, Expedia, Inc. mentions that “Expedia, Inc. believes its flagship Expedia brand appeals to the broadest range of travelers, with its extensive product offering ranging from single item bookings of discounted product to complex bundling of higher-end travel packages” (Expedia, Inc., Annual Report, 2007, pg. 5).

In order to enhance its suppliers, Expedia, Inc. uses the extent brands collection and international points of sales. This can help Expedia, Inc. offer a variety of products and services. According to the annual report of Expedia, Inc., Expedia will keep investing in R&D to maintain the best brand portfolio and create maximum value to its suppliers, partners and customers (Expedia, Inc., Annual Report, 2007, pg. 5).

Marketing

The marketing strategy of Expedia, Inc. is to construct an effective, profitable channel by raising awareness of the consumers who are sensitive to price and to enhance the benefit of its subsidiary companies and itself. Furthermore, the media strategy of Expedia, Inc. includes TV commercials, print media, direct-mail, and Internet such as portal website, Expedia.com, and other co-operative enterprises. By using these types of media, Expedia, Inc. has a straight channel to communicate with its target market.

Furthermore, Expedia, Inc. has cooperated with other hotels, transportations, and travel agencies. The company and the co-operative enterprises posted their commercials on each other’s company website while also setting the commission for each website which has online booking from each strategy alliance partners. In addition, Expedia, Inc.’s “affiliate partners can make travel products and services available through an Expedia-branded website, a co-branded website, or their own private label website. Expedia, Inc. also provides its affiliates with technology and access to a wide range of products and services” (Expedia, Inc., Annual Report, 2007, pg. 8). In conclusion, Expedia, Inc. uses its variety of marketing channels and the affiliate partners to maximize the value of its various brands to obtain more consumers. In general, the performance of the marketing is high.

Information Technology & Operations

Expedia, Inc. constantly continues to aggressively innovate its Information Technology and Operating system. For instance, Expedia, Inc. introduced “TravelAds sponsored search product for hotel advertisers, Hotwire’s Airfare Savings Hub and Hotels.com’s slider tools to improve search results and the TripAdvisor Media Network to offer travel applications for download on Facebook.com” (Expedia, Inc., Annual Report, 2007, pg. 5).

In general, Expedia, Inc. keeps innovating to its suppliers, advertisers and customers by providing a service-oriented technology platform on its websites across its broadest brands collection. Expedia, Inc. believes this will make its IT innovation more flexible and faster. And Expedia, Inc. believes this changeover will help it to improve its “site merchandising, browse and search functionality” and also improve “search engine indexing” which will add noteworthy personalization features (Expedia, Inc., Annual Report, 2007, pg. 5).

For its suppliers, Expedia, Inc. develops “proprietary technology” which will make more efficient communication between its websites and hotel central reservation systems. This process will also help the hotels manage its reservations easier through Expedia, Inc.’s websites. This “direct connect technology” can help hotels upload the information of their products and services from hotels’ central reservation systems to Expedia, Inc.’s websites. At the same time, when the customers book the hotels on Expedia, Inc’s websites, the system will automatically confirm hotel reservations. Before the “direct connect system” are introduced, all the process are made manually via proprietary extranet (Expedia, Inc., Annual Report, 2007, pg. 5). Expedia, Inc. also makes efforts in data handling. In order to improve data handling, Expedia, Inc. built the “enterprise data warehouse” that will increase segmentation and merchandising on its’ websites and also improve its e-mail communications with its travelers (Expedia, Inc., Annual Report, 2007, pg. 5).

In order to make its operation and service more flexible, Expedia, Inc. provides 24-hour-a-day, seven-days-a-week service by telephone or via e-mail through a combination of outsourced and in-house call centers. Expedia, Inc. mentions that it “plans to make significant investments in its call center technologies in 2008 and beyond” (Expedia, Inc., Annual Report, 2007, pg 8-9). In the IT& Operation function, the rate of Expedia, Inc.’s performance is high. This is because Expedia, Inc. invests aggressively on its IT and operation functions in order to provide a better service for its consumers, suppliers, and partners.

Service

In the service function, Expedia, Inc. mainly focuses on the partner service because all of its operations will rely heavily on its suppliers and partners and its overall performance in this function area is high. In order to succeed in this industry, Expedia, Inc. heavily depends on its capability to expand or maintain the relationships with its suppliers and GDS partners. Expedia, Inc. also mentions that if Expedia, Inc. could not improve its existing relationship with suppliers or partners and could not change its lack of ability to get new arrangements with its new partners on favorable terms, it will reduce Expedia, Inc.’s quality, amount and breadth of attractively priced travel products and services that it provides to its customers (Expedia, Inc., Annual Report, 2007, pg. 11). In fact, this situation will affect Expedia, Inc.’s financial performance and this is why Expedia, Inc. heavily focuses on the partner service (Expedia, Inc., Annual Report, 2007, pg. 11).