Chapter 15 Article: "Issue: Getting Along with Suppliers" from Business Week (2 September 2008)

Travel agencies have done well with developing internet travel sites such as Expedia.com to allow customers to book their leisure or business travel at a great price anywhere in the world. However, this advancement for the travel industry did come about without a reformed centralized global business strategy. InterActive Corporation, Chairman Barry Diller, acquired Expedia.com and became successful along with other travel discounters like Hotels.com and Hotwire in the post 9/11 travel slump where hotels needed to unload their empty rooms at low prices.

However, by 2005, the travel industry became more prominent and hotels were less inclined to offer low deals. The new company Expedia started their business without the best relations with its suppliers. About this time, Hotels.com had taken an aggressive approach with their hotel suppliers. Expedia adopted these practices too. If the hotel companies refrained from paying higher margins, then they would not get equal treatment on the travel sites. This approach to doing business strained supplier relationships.

Besides the strained relationship, Expedia had 15 different groups that worked externally with suppliers. Each group performed their own independent negotiations or contracts that fit the needs of that unit. Thus, large global hotel chains would need to work with 15 different Expedias. The hotels viewed these groups with uncertainty because of the chaotic nature in which to conduct business.

By the end of 2005, several hotel suppliers threatened to withdraw from Expedia. The hotels said that they would rather take the risk of losing revenue rather than doing business with Expedia.

Investors were hearing the frustrations from suppliers so Paul Brown, president of Expedia North America met with his senior managers and stated clearly they need to take a new business strategy to their current operations if the company is to survive in the long term. He said, "If we don't have good inventory and great prices on our shelves, our customers proposition will erode over time."

Expedia decided to form a central group that could smooth out relationships wit suppliers so as to alleviate the negative perceptions. The company formed a single entity that allowed for Expedia to present one face to hotel chains that complained about having to deal with 15 different Expedias. This new approach gave Expedia an overall view of the each hotel chain's total business. Thus, to make the new central "partner services group" work, the tame had to spend a lot of time meeting with Expedia country heads, account managers, and hotel representatives in different global markets to acquire concerns. New experts from the airline and hotel industry were brought in to identify standard metrics and policies that could be implemented across the company. Thus, all of the employees working in different parts of the business were accountable to the same performance standards.

Three years after implementing a centralized business group for Expedia, supplier relationships have certainly strengthened based on mutual trust that allowed the company to grow. About 11,000 new merchant hotels have been added to Expedia's inventory and its price competitiveness has remained strong. Paul Brown is pleased that the company offers the broadest selections and the best inventory. The outcome of a new global systems strategy has allowed the company to become more competitive in the global market and it happened with having the right relationships with suppliers as mentioned in Chapter 15 of the where the core business processes need to be clearly defined.

Reference: Jena McGregor (2008, September 2). Issue: Getting Along with Suppliers. Business Week. Retrieved from: http://www.businessweek.com/managing/content/sep2008/ca2008092_371191.htm