Groupon, a website founded by CEO Andrew Mason offering impressive special discounts through mass purchase. His team launched Groupon in November 2008 in Chicago to concentrate on collective buying electricity.
During 2009 and 2010, Groupon experienced fast development and was soon serving over 150 marketplaces domestically and over 100 additional markets internationally. Just 3 years after launch Groupon hosts more than 900 discounts every day, has 70 million clients in 46 countries, and employs over 7, 000 people.
In December 2010, the progress and rising success of Groupon became even more obvious when they declined a $6 billion acquisition offer from Google Inc.
Their system works like; when a certain number of people join the deal, then the deal becomes open to everyone on the system. However if the predetermined least is not fulfilled, no one obtains the deal that day.
Groupon's mission is easy: to offer stuff we want to do, see, buy and eat at an incredible price with "no BS. "
They have three key concepts support this customer centric idea. First, Groupon maintains that this only sells the items that its own employees would be interested to buy. Second, the "No BS" identifies the idea that for customers to seriously love the company and its offering, there can be no hidden conditions or conditions that may sour the experience. Finally, the previous tenet is unbelievable customer service, that your company defines plainly, "If you e mail us, we'll do what must be done to make things right - and we'll get it done fast. "
They exhibit entrepreneurship and continuous learning through regular product upgrades, most recently in upgrading the delivery method from email subscriptions to Groupon 2. 0, mobile, and real-time technology which offers ultra-localized services based on your Gps unit.
While Groupon's product is hyper-local, they know special discounts have mass appeal to a broad worldwide audience, therefore they operate on a global range, expanding swiftly and strategically.
They thought we would develop through acquisitions of already existing local deal sites (following an inorganic progress strategy, indeed). The existing sites were already familiar with the cultural preferences and purchasing behaviors of the neighborhood people, so they simply needed to be rebranded under the Groupon umbrella. They bought CityDeal, Darberry. ru, Qpod, ClanDescuento, SoSasta. com, UBuyiBuy, GroupsMore etc. giving them a stake in essentially every major market and making them an enormous multinational organization.
ANALYSIS
Blue Sea Strategy - A Key to Early Success
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"Competing in overcrowded business is no chance to sustain high performance. The true opportunity is to build blue oceans of uncontested market space. " Rather than developing a product extension or parity good, Groupon re-invented the coupon industry, creating a new market space from an already existing one. At its inception, Groupon created demand because of its product and the firm's progress was rapid, sufficient, and without competitive hazards.
- One of the key distinctions of the blue ocean is they allow a company to go after both a differentiated and cost head strategy at exactly the same time. Groupon improved the coupon code industry, removing many of the pointless elements, while substituting value components such as collective buying to reach a deeper deal through offering stores attractive volumes.
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- Blue sea companies create value for both the buyers and the company. Groupon has created value for not only the purchasers that are receiving a great deal, but also for local merchants that can attract new customers to their business. Groupon has naturally created value for itself as well.
- Another characteristic normal with a blue ocean strategy is the fact that know-how is not at the firm's core. This is partly true also at Groupon as their fundamental technology (website, email, and sociable marketing) were already popular in 2008.
A blue sea firm will web page link technology from what a buyer principles, which was done by Groupon through providing a good deal in the tough economy. Groupon's capacity to pull clients in who traditionally would not care about savings is also another distinctive Blue Ocean characteristic. Its customers are described as "hip, productive singles that venture out two or more times weekly. It's not about saving cash but instead spending it with friends. "
-Another ideology of the blue sea is to understand that 'company & industry' will be the traditional products of strategic analysis and are the wrong models to concentrate on when establishing a business design. Andrew Mason will not use competition as a metric, but instead places more value on the activities, decisions, and product understanding of the firm to find out health. Mason honestly feels that if you lose perception of why is customers happy, then the company will fail.
- Another common aspect of blue ocean companies is they are powerful brands that build brand collateral lasting for decades. James Slavet, a partner at Greylock Lovers, a venture-capital company in Silicon Valley, thinks that "being the speediest growing company ever, in long term, Groupon can do for retail what Google's done to find and search advertising. "
INTERNAL ANALYSIS
Value Chain Management Analysis
Groupon's value string management (VCM) can be an extensive process that starts with the negotiations with buyers to delivery of purchased vouchers to customers.
Inbound logistics for the organization are very simplistic. Leads are produced by the marketing department and transferred to the sales representative for the respected city where the potential vendor is located. The sales reps often work in clubs of two to five people depending on size of the marketplace the city is located in. When a package is made with a seller, the merchant works straight with the business to finalize the conditions of the offering and places the deal in the offing. Since most of the sales process is completed in the computer, there is no physical warehouse had a need to house inventory. However, the large sales force of the organization has led to Groupon occupying two large office places in downtown Chicago.
The next step in the VCM process is procedures. The core of the operations is run online through Groupon. com. The principal activities are directly intertwined with the inbound logistics as the deal goes from the marketing team to production. The business relies intensely on real-time data and responses since the package operates for a set time limit each day.
Each time a deal is posted; the merchant regularly updates the vendor on the position of the deal. A talk room is available for customers to create questions, and the sales rep often goes by on these questions directly to the vendor in order to answer timely within the chat. This close communication between your vendor, sales rep and customer creates a close knit community and creates a natural value for consumers. The client service team is tightly involved with the ultimate sale of product and aids customers which may have issues finalizing their purchase. Additionally, if a person encounters a problem in redemption, these employees do everything in their capacity to resolve the problem timely.
With genuine demand much exceeding the projected amount, Groupon performed to provide refunds to dissatisfied-customers. This flexibility is vital to preserve customer and customer connections, and this higher level of service has not come at a cheap price for Groupon.
New sales reps are been trained in smaller markets. Although there are fewer opportunities in these markets, reps gain experience retailing the product and are compelled to work harder to come up with deals. The very best sales repetitions are relocated to larger marketplaces when opportunities happen, which is effective to both the rep and the business, because the highest performing reps get an opportunity to earn more money in a brighter spotlight. Component of what motivates the Groupon sales force to be hostile in their merchant negotiations is the large commission they get from each deal. The more popular a business, the more sales and profits it'll generate the business and the merchant.
An additional motivation program which supports the VCM for those employees is the issuance of commodity. For employees that contain been there since the beginning, these shares can be numerous after the IPO is finalized and can give a great commence to a old age nest egg for most young specialists.
An additional information - Resource Based mostly View Analysis
EXTERNAL ANALYSIS
Porter's 5 Forces
New Entrants- There is incredibly low obstacles to entry in the daily package market and even lower costs of turning providers. With technology that is simple to develop and it's really easy to copy. There is nearly zero brand commitment to Groupon since its product is a price-based service. Together with the sheer level of sites now moving daily deals on consumers, you have to wonder how much time this fashion will keep up momentum. Companies that use daily package promotions have previously learned they come at a price. Typically, promotions are not successful unless the offer offers 50 percent or more off the standard price of goods and services, which few companies can regularly support a income with.
Rivalry- There are currently five direct rivals in the daily deal market alone with more showing every day, taking the space from a blue ocean to a shark fish tank. Over 400 sites have launched since Groupon. At this time, Google Offers, Amazon Local and Facebook deals are only available in limited areas, but with around 600 to 700 million Facebook users and Yahoo along the way of tests its new public marketing product "Google+". Groupon made $64. 7 million in sales in-may 2011, a shape that was still more than double what LivingSocial produced with $31. 6 million in sales. Just how long can Groupon protect their market share which has already been slipping?
Substitutes- Replacement products always been around in the form of the traditional newspaper coupon. Manufacturer's discounts with local store rebates to end up with the biggest savings possible. Other deep discount websites like Amazon and Overstock are known substitutes, as well as online auctions sites like Ebay, online promo/QR rules, and of course the option to pay a high price or not participate in an activity that costs money (the beach, biking, etc).
Bargaining Ability of Suppliers- At the beginning, being the only player in the area, Groupon had been commanding large margins- 50% of most sales generated. Stores' talk about of the proceeds, which averages about 60% world-wide, is remitted later-sometimes much later. Collecting repayments far in advance is what acquired mainly funded their intensive marketing and functional efforts.
Groupon currently gives stores in three identical payments over 60 times. Google Offers will pay sellers in 4 times, throwing an enormous wretch in their earnings model and cash flow. Top competitor LivingSocial pays merchants their full talk about within 15 days. Groupon is undoubtedly going to have to renegotiate their terms down to the industry standard and have a good hard take a look at their cash flow or businesses will likely go anywhere else. Will they continue to be headstrong and assume that since they had first mover edge, they may be owed the business?
Bargaining Electric power of Customers- Now that there are so many providers, customers are challenging even better deals and improved customer support. Consumers generally don't get their cash back from unredeemed vouchers even though Groupon gives merchants their share of unredeemed vouchers, it will keep all such proceeds overseas. In a few countries, Living Public also keeps proceeds for unredeemed vouchers, but it doesn't for most of Europe. As the number of competitors is constantly on the increase, people that have more forgiving conditions to cope for buyer's remorse could show victorious in getting favourable public view.
NEW ENTRANTS (high)
Low obstacles to entry credited to less regulations
No transitioning cost for entrants
Low technology barriers and therefore you can develop and duplicate technology
Low capital requirement
Groupon is dropping its position from the Blue Ocean
THE COMPETITION OR RIVALRY (mid-high)
Oncoming competition from start-ups and copycats
Minimum regulatory requirement
Little brand devotion in couponing
Groupon still gets the largest subscriber base and the best sales (they doubled their sales according to the closest rival "LivingSocial"
SUBSTITUTES (high)
Replacement products are still available. Dangers from alternative package format providers.
Traditional paper coupons still exist. (local supermarkets, manufacturers, promo rules)
Discount sites like Amazon, Facebook etc.
There are a lot of copy feline firms
BARGAINING POWER OF SUPLIERS (low)
Groupon`s margin is too high (50%)
Unforgiving payment terms (60 days or later remit)
Large customer base and possibility to increase awareness reduce their bargaining power
Low switching costs for merchants
BARGAINING Electricity OF Purchasers (mid)
Low transitioning cost for buyers
Consumers are price hypersensitive because they require more cheaper discounts which results in low loyalty
Buyers require better customer services for unredeemed vouchers
SWOT Examination (As an results of inside and exterior factors)
Strengths
Unprecedented scale (blue sea)
First mover advantage
Significant value increase buyers (personal savings to consumers, low in advance marketing costs to businesses)
Sophisticated management team with depth of knowledge of the market
Strong e-commerce market
Growing customer and merchant base
Brand name recognition and international presence
Strong partnerships with local businesses
Largest subscriber basic in the industry
Significant income growth
Weaknesses
Not financially profitable
Working capital deficit
High customer acquisition cost
No switching charges for merchants or customers
High operating expenditures
Continuous bad press and negative events
Opportunities
Emerging market segments and expansion abroad
Europe
Asia
South America
Growing e-commerce market
Mobile request market
Local business review and search service
Creativity in marketing
Pending cash inflow from IPO
Threats
Potential competition from Yahoo, Facebook and Amazon
Competitive pressure on income margins
Market saturation, growth would slow down
Groupon's 40-50% revenue sharing agreement with local businesses might not exactly be sustainable
Potential legal hurdles to vouchers
Consumer apathy
