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Read the following extract and answer the questions that follow

Economics

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Read the following extract and answer the questions that follow. [20 marks]

Joe Gebbia and Brian Chesky were sharing a loft apartment in San Francisco in 2007 when they realised that attendees to a major design conference in town were going to struggle to find a room for the night. With almost every hotel room in the city booked out, Gebbia and Chesky, who were struggling to pay their rent, seized their chance. They threw the doors open to their place, offering strangers the chance to sleep on two airbeds on the floor and eat a home-cooked breakfast. As the Airbnb website puts it: “Two air mattresses, a thousand dollars, three new friends, and many high fives later, the entrepreneurs realized an opportunity.” With the addition of tech wizard Nathan Blecharczyk, the team decided to change the accommodation model by allowing people to list their own places to stay online, with the new business, Airbedandbreakfast.com, gaining revenue through a fee of between 6% and 12%, depending on the price of the booking. Initially focusing on large-scale events where accommodation would be scarce, the trio raised cash for the venture in an unusual way – they sold $30,000-worth of special edition breakfast cereals they created, based on then-US presidential candidates Barack Obama and John McCain. In 2008 the name was shortened to Airbnb and users were able to book whole properties, boats and even private islands, rather than just a couch to crash for the night. In June last year, the business revealed it had booked its ten millionth night, with 75% of these bookings occurring outside its initial market of the US. MODULE ENTREPRENEURSHIP AND SMALL BUSINESS YEAR 2 INTAKE JANUARY 2020 SEMESTER 2 TOTAL MARKS 20 There have been hitches – such as the PR disaster of a woman writing on her blog that her apartment had been trashed by an Airbnb renter. Chesky wrote a contrite response, admitted the company had “dropped the ball” and introduced insurance and a 24-hour helpline to help solve future problems. Airbnb now features listings in 33,000 cities in 192 countries. It has also raised a very handy $120 million in venture capital and is valued at $1.3 billion. Chesky told CNN: “Sometimes it takes a fresh pair of eyes to look at a problem and see it as an opportunity, not just the way things are or have to be.” “I think that being a young entrepreneur is a great opportunity to challenge the status quo and build the world as you think it ought to be.

REQUIRED: 1. With reference to the extract, discuss two methods of generating business ideas that resulted in Airbnb. (10 marks)

2. Use the extract to discuss how a feasibility study can be used to ascertain whether a business idea is an opportunity.