The seven Ps of the

CASE STUDY 2.2

Airbnb ‘Goes Public’

Airbnb went public in December 2020, amid conditions of reduced demand for travelling due to the public health crisis. The initial public offering (IPO) was very successful and Airbnb shares traded at $146, more than doubling the price of $68 per share set for the IPO one day earlier. The decision of Airbnb to become a public limited company offered a great financial return to its investors. The financial resources raised from the stock market will help Airbnb’s management to invest in more innovation around its cloud-based application, offering advanced services for vacation rentals and tourism activities to its users in a market which is becoming increasingly competitive. 1 Define the term ‘publicly held company’. [2] 2 Analyse two potential advantages to Airbnb of becoming a publicly held company. [4] 3 Analyse two potential disadvantages to Airbnb of becoming a publicly held company. [4]

THEORY OF KNOWLEDGE Knowledge question: How can we decide whether a type of business activity is ethical or not? For example, can the price of the product be a criterion? The personal loan market in many economies has seen the emergence of a huge number of so-called ‘payday’ lenders. These organisations provide very short-term loans (up to 30–40 days) to borrowers who urgently need cash to cover their living costs or a particular expense until, in theory, they get paid. Research conducted in the US suggests that 12 million Americans take out payday loans each year, with interest rates ranging from 300% to 500%, which are commonly disguised as ‘fees’. Compare this with 15–30% interest rates on credit cards and it is easy to see how customers are financially drained by payday lenders. The main targeted consumers are low- to mediumincome workers who do not qualify for credit cards or personal loans due to financial problems.

A typical reason that consumers use payday loans is to pay utility bills and rent. ‘Payday’ loans are legal in 32 states in the US. Payday lenders claim that the very high rates are justified by the very high risk of borrowers eventually not being able to repay the loans. Moreover, lenders say that payday loans are a valuable service for US society. Numerous lowincome consumers have avoided eviction and homelessness because they have received payday loans while they were being denied access to the traditional banking system. Discuss in class: 1 Is it unethical to charge high interest to consumers if they are willing to accept it? 2 Is it ethical for ‘payday’ businesses to trap consumers in loans that are very expensive and hard to repay, to save them from huge SAMPLE problems such as homelessness?