Question

Chicago-based Groupon was launched in 2008 by Andrew Mason with the idea to email subscribers daily deals of heavily discounted coupons for local restaurants, theatres, spas, etc. Via the emails or by visiting the Groupon website customers purchase these substantially discounted deals in the form of electronic coupons which can be redeemed at the local merchant. Groupon brings exposure and more customers to the merchants and charges them commissions for the same. The venture rapidly grew into a daily deal giant and became the fastest-growing internet business ever to reach a $1bn valuation milestone and, thus, became a 'unicorn' (name for start-ups with valuations over $1bn). In 2010 Groupon rejected a $6bn (€4.5bn) takeover bid by Google and instead went public at $10bn in 2011.

While Groupon's daily deals were valued by customers - the company quickly spread to over 40 countries - they also attracted thousands of copycats worldwide. Investors questioned Groupon's business and to what extent it had rare and inimitable resources and capabilities. CEO Andrew Mason denied in the Wall Street Journal (WSJ) that the model was too easy to replicate:

'There's proof. There are over 2000 direct clones of the Groupon business model. However, there's an equal amount of proof that the barriers to success are enormous. In spite of all those competitors, only a handful is remotely relevant.

This, however, did not calm investors and Groupon shares fell by 80 per cent at its all-time low in 2012. One rare asset Groupon had was its customer base of more than 50 million customers, which could possibly be difficult to imitate. The more customers, the better deals and this would make customers come to Groupon rather than the competitors and the cost for competitors to acquire customers would go up. Further defending Groupon's competitiveness, the CEO emphasised in WS) that it is not as simple as providing daily deals, but that a whole series of things have to work together, and competitors would have to replicate everything in its operational complexity":

'People overlook the operational complexity. We have 10,000 employees across 46 countries. We have thousands of salespeople talking to tens of thousands of merchants every single day. It's not an easy thing to build.

Mason also emphasised Groupon's advanced technology platform that allowed the company to 'provide better targeting to customers and give them deals that are more relevant to them'. Part of this platform, however, was built via acquisitions - a route competitors possibly also could take.

If imitation is the highest form of flattery Groupon has been highly complimented, but investors have not been flattered. Consequently, Andrew Mason was forced out in 2013, succeeded by the chairman Eric Lefkofsky. Even though Amazon and other copycats left the daily-deals business he struggled to explain how Groupon would fight off imitators. The company was forced to exit over 30 international markets. Lefkofsky later returned to his chairman role and was followed by Rich Williams in 2015. He managed to turn Groupon profitable for the first time ever in 2017, but still did not regain investors' confidence with the share price still below $4, far from the $20 IPO price. Williams, however, was optimistic:

'[Groupon) is one of the first unicorns. It got a lot of praise and attention it didn't deserve at the beginning. We've not recovered from that. Over time, the numbers will speak for themselves.'


NOTE " ANSWER IN SRTATEGIC MANAGEMENT WAY "

1. Carry out a PESTEL analysis at the time of Coved 19.

Answer 1

PESTEL analysis stands for - Political, Economic, Social, Technological, Environmental and Legal.

To understand the PESTEL analysis of Groupon at the time of covid 19, let us go one by one -

Political -
Groupon’s offerings are affected by trade laws in each country where they operate. Government policies are shaped by consumer behavior, demands, opinions of financial experts and the economic conditions of the country. Also, considering the covid 19 impact, since the economies of most of the countries have taken a hit, it is highly probable that the governement policies may not be in favour of multinational/foreign companies, in order to support the local companies and business' so as to boost the economy.

Economic -
Group on will have to take into account the interest rates, exchange rates, purchasing power of consumers, tax implication and labour turnover that will surely be impacted by the covid 19 crisis. For example, the purchasing power has obviously gone down in many parts of the world as a result of decrease in operations leading to lay-off of employees.

Social -
Groupon will have to understand the various demographics of the countries they operate in and analyse, the customer taste, preferences and demands in order to cater to the specific requirements of the consumers of those countries. Covid 19 impact will also have to be taken into consideration as the customer preferences would be impacted due to change in financial status and other similar parameters. For example, people might shift from purchasing coupons for meals at fine dine restuarants, to coupons for fast food.
Since Groupon has a hge customer base, they could use it to their advantage in order to get to know the change in preferences, if any.

Technological -
Groupon has a strong foundation due to its advanced technology. Since, the same were acquired from outside and not developed in-house, the strategy could be imitated by the competitors. Groupon should consider tweaking their technology in order to create a differentiating charateristic or functionality which cannot be copied easily. This will help them to stay ahead in terms of technology and gain a better market share.

Environmental -
Groupon uses online methods (i.e. via webiste and email) and reduces any need for paper or physical print outs.
So we can say that the company is concious about the environment because customers buy products online on their website and the details are sent to the customers via email. Thereby reducing the paper used otherwise. Also, CO2 emitted from vehicles driving to and from stores is reduced. As a result, physical waste is reduced, compared to offline businesses. This can be further improved by partnering with cloud kitchens and door step delivery services in order to cater to the people who are not willing to step out of their homes due to covid19.

Legal -
Groupon has to ensure that all legal aspects are covered in each of the countries where they are operating. Legally binding contracts must be made with their partners in order to ensure compliance with the legal norms, ethical and staturoty requirements. Measures has to be taken to ensure that the covid 19 standard operating procedures are adhered to to avoid any legal repurcussions.