Groupon: What a Deal. Prepared by: Doug Buchler J.M. Downey Aaron Goldstein Alana Kheyfets Lauren Monitz Tuong-Minh Truong Table of Contents I. Situation..................................................................................................................3-5 Timeline..........................................................................................................................3 Business & Corporate Level Planning: Company Strategy, Mission, Vision, and Values............................................................................................................................. 4Company Situation...................................................................................................... 4-5 II. Analysis...............................................................................................................5-23 Leaders and Leadership...............................................................................................5-6 Types of Innovation and Evidence of Entrepreneurship................................................6 Globalization Presence and Effects.............................................................................6-7 Ethics...........................................................................................................................8-9 Responsible Wealth Creation....................................................................................9-10 Engagement, Plan Alignment & Corporate Culture................................................10-12 Wild Card: Blue Ocean Strategy………………………………………………….12-13 Internal Analysis.....................................................................................................14-17 External Analysis....................................................................................................18-22 SWOT......................................................................................................................22-23 III. Recommendations...........................................................................................24-28 IV. References........................................................................................................29-33 V. Appendices........................................................................................................34-54 2 I. Situation Timeline Groupon, a website offering deep discounts through mass purchase, evolved from Founder and CEO Andrew Mason’s first website, “The Point,” which was launched in November 2007. Deploying a similar concept of group persuasion, The Point was about social action and stressing the idea that “…every problem has a tipping point of public frustration that will force a solution. If enough people want a problem to be solved, they will solve it.” (47) People were asked to give money as a group once a ‘tipping point’ had been reached showing that they were taking a stand. The Point failed to attract enough advertising revenues to stay in business, but it reinforced for Mason and his investors how powerful group action can be. (47) Andrew Mason and his team launched Groupon in November 2008 in Chicago to focus on collective buying power. (18) They saw that by using the framework of The Point, they could help other city-dwellers obtain affordable access to goods and services without overwhelming them by the sheer number of choices. Groupon started out offering one deal per day. During 2009 and 2010, Groupon experienced rapid growth and was soon serving over 150 markets domestically and over 100 additional markets internationally. (47) The seemingly overnight success of Groupon drew attention from many different industries and those that wanted a piece of the daily-discount-deal pie. During the same period of 2009-2010, Groupon saw several competitors and copycat firms appear including LivingSocial, BuyWithMe, and the new “Deals” section on Facebook. (47) Groupon began to attract interest from investors and others in the business world. In April 2010, Groupon together with Digital Sky Technologies, a Russian investment firm, raised $135 million in new capital to help solidify “that social buying has rapidly matured into a real business.” (47) Groupon used the new capital to acquire its German clone, CityDeal, which doubled Groupon’s global reach. (47) By August 2010, Groupon was valued at $1.5 billion and it had become the fastest company in history to reach $1 billion in sales. (47) In December 2010, 3 the growth and rising success of Groupon became even more apparent when they rejected a $6 billion acquisition offer from Google Inc. This led to increased speculation that the company was preparing to seek an Initial Public Offering (IPO). (30) Speculation turned into reality in June 2011 when Groupon filed paperwork to issue an IPO. The filing disclosed that the company intended to raise $750 million in the offering. However, industry experts believe that Groupon could attain a valuation in the range of $20-30 billion. (51) Please refer to Exhibit 1 for a summary of the timeline. Business & Corporate Level Planning Groupon was the first major daily deal provider, which has given it a great advantage over emerging competition. It has been able to leverage its first-mover advantage and cost leader strategic management. Groupon uses its cost advantage in the market to act as the central voice for people, driving bargains using economies of scale in local markets that would otherwise be unavailable to the average person. Also, Groupon is well positioned to benefit from the proliferation of technology and mobile communications, and so far has expanded its technology presence in a tone and manner that appeals to a younger customer base that is ripe and eager for Groupon’s offering. Groupon’s mission is simple: to offer stuff we want to do, see, buy and eat at an amazing price with “no BS.” The vision is to help alleviate the stress that comes with having too many choices by offering city-dwellers one really cool new thing a day to try. Keeping with the youthful and jovial nature of its brand, Groupon maintains a simple philosophy of treating its customers the way they like to be treated. Three key tenets support this customer centric philosophy. First, Groupon maintains that it only sells the stuff that its own employees would be interested to buy. The careful vetting of new merchants means that users should feel comfortable venturing out and trying something in their city, simply because it was featured on Groupon. (18) The “No BS” refers to the idea that in order for customers to truly love the company and its offering, there can be no hidden terms or conditions that might sour the experience. (18) Finally, the last tenet is unbelievable customer service, which the company defines clearly, “If you contact us, we’ll do what it takes to make things right – and we’ll do it fast.” (18) 4 Company Situation Groupon has a unique place as the leader of the daily deal market. Repeatedly called “the fastest growing company ever,” just three years after launch Groupon hosts more than 900 deals every day, has 70 million subscribers in 46 countries, and employs over 7,000 people. (20) Although it has established a strong international brand and created an estimated 10 billion dollar market out of nothing, the low barriers to entry have allowed for the quick creation of numerous competitors.(8) Groupon is now struggling to identify how it can differentiate its offering beyond just having a large volume of subscribers and global reach. Mason’s carefree attitude and nontraditional business style are a major concern as the company has yet to convince potential investors and skeptics that it takes becoming a profitable business seriously. The industry is so new that research is still incomplete as to how customers and businesses respond to companies like Groupon in the long run, and how long geographical markets can provide attractive discounts without reaching a saturation point. Another hurdle for the company to consider is how the brand can stay relevant and ‘cool’, while being easy to use for both the merchants and the end consumer. As Groupon looks to go public in the near future, it needs to prove to investors that its business model is sustainable and that it still enjoys a unique competitive advantage in the marketplace. II. Analysis Leaders and Leadership Groupon is guided by founder and CEO Andrew Mason (who was also the creator of The Point, the original collective action platform). (36) Mason has an unconventional background with an undergraduate degree from Northwestern in music. After graduation, he became enthralled with computers and technology and went to work as a software engineer. (36) In 2006, he developed “Policy Tree”, a policy debate visualization tool that won him a scholarship to the University of Chicago Harris School of Public Policy. After three short months, he dropped out 5 to pursue The Point, and the rest is history. (36) Known for his kitschy, big kid mentality, serious board meetings are actually held in tent forts, much like the childhood secret clubhouse. (36) As Groupon began to grow, Mason did a stellar job of attracting an experienced group of senior management who shared his vision, ambition and jovial corporate culture. Margo Georgiadls, COO, brings broad and invaluable experience from serving as the Executive Vice President of Card Services and CMO for Discover Financial Services and more recently as the Vice President of Global Sales Operations for Google. She holds a bachelors degree and MBA from Harvard. (36) Jason Child was selected as the CFO, leaving his role as CFO and VP of Finance of Amazon.com’s international division. (36) The Vice President of Product is David Jesse, who brings to the team his experience as a County Manager for eBay and Vice President of Product Management and Business Analytics for Gaia Interactive. (36) It is essential for a technology company to have the right technical minds to handle the engineering that makes the website run; Groupon’s lead “technical mind” is Brian Totty. He has a PhD in computer sciences and he literally wrote the book on HTTP and has extensive senior management experience with several different technology firms. (36) Groupon also attracted Skip Schipper to be the Head of Global Human Resources. He has worked for Compaq, Microsoft, Cisco and PepsiCo, and he serves on the frontline of extending Groupon’s unique corporate culture to offices around the world. (36) (Please refer to Exhibit 2 for Organization chart) An equally impressive, yet humble, team of Groupon senior vice presidents supports these key players. While reading through their biographies you get a sense of the accomplishments – both academic and professional – that this team collectively has, but you also get a sense of the dedication, passion, and work-life balance that seems to be important at Groupon, which is shared by many contemporary web-based startups. One of the common bonds that seem to unite this relatively young group of professionals is their experience with start-up companies. That is, they all seem to share the drive and willingness to take risks. Types of Innovation and Evidence of Entrepreneurship “Innovation is the initial commercialization of invention by producing and selling a new product, service, or process.” (40) By definition, Groupon is an innovative company, not 6 through development of a “me-too” product, but by forming an entire new market space. The company won a Chicago innovation award in 2009 when they were less than a year old. Additionally, Fast Company has called them "a savior for small businesses" and "the most exciting thing to happen to retail since eBay". (16, 39) Groupon pioneered the online group purchasing power concept, but they are not content with stopping their innovation pipeline. They demonstrate entrepreneurship and continuous learning through regular product updates, 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. Instead of merely expanding to new markets and to new customers who may have a one-time purchase, they focus on improving the personalization and offering more relevant offers to current subscribers. Globalization Presence and Effects While Groupon’s product is hyper-local, they know discounts have mass appeal to a broad worldwide audience, thus they operate on a global scale, expanding rapidly and strategically. (41) After launching the website in native Chicago, they followed with offering for Boston and New York City. By 2009, just one year after launch, they were operating in 30 major American cities with 120 employees, two million subscribers, and $33 million in revenues. Today, they have more than 7,000 employees and deliver more than 900 deals daily to 550 markets around the world. (41, 42) Competing in a global market is always challenging as the degree of complexity in each foreign market is often underestimated. Instead of trying to create a cookie-cutter formula and deploying it across continents to potential resistance from an outside force, they chose to expand through acquisitions of already existing local deal sites (in essence, following an inorganic growth strategy). The existing sites were already familiar with the cultural preferences and purchasing habits of the local population, so they simply had to be rebranded under the Groupon umbrella. (27) “This overall strategy allows Groupon to capitalize on already strong local merchant relationships in these new territories by folding smaller, existing competitors into their own model, as well as gaining instant access to their preexisting customer bases.” (24) 7 The following represents major acquisitions Groupon has made since inception (24, 34, 54, 59): In 2010, Groupon purchased CityDeal, a large European clone based in Berlin. The acquisition immediately added 600 employees to Groupon's payroll (which had been 300 before the deal.) CityDeal is active in 80 markets in 16 countries, including the United Kingdom, Germany, and France. (24, 54) Four months after raising millions of dollars from a Russian investment fund, Groupon acquired a majority stake in Darberry.ru, a similar site based in Moscow. With the investment, Darberry was renamed Groupon Russia. The site, which currently serves seven cities with 180,000 subscribers, is flush with Groupon's capital and intends to expand throughout the country and into neighboring Ukraine. (24) Also in 2010, Groupon put up $10 million to buy a majority stake in Qpod, a Tokyobased start-up that was set up as a joint venture between a direct sales company and a venture capital firm. The site has since been re-branded Groupon Japan. Groupon also entered Latin America, buying one of its imitators in Chile, a site called ClanDescuento. According to founder Andrew Mason, the expansion of Groupon Latin America is an important step in their evolution as a leading global Internet brand. Most recently, they bought the Indian deal-of-the-day website SoSasta.com, uBuyiBuy in Hong Kong, Singapore, the Philippines, and Taiwan, and GroupsMore.com in Malaysia, giving them a stake in essentially every major market and making them a huge multinational enterprise. (34) Please refer to Exhibit 4 for a map depicting all the areas where Groupon has a presence (24) and Exhibit 5 for the percentage of global website visitors by region (57). Ethics The Point was founded on the idea of serving the greater good, therefore it is no surprise that most of the same principles of social responsibility have found their way into Groupon’s core values, as well. Groupon’s roots in social activism and its desire to support local causes are initiated through the “G-Team,” a collective group of subscribers and staff who run large-scale campaigns to support the community that can include anything from a flashmob to fundraiser. 8 (58) They raised millions of dollars for national charities like Donors Choose and Kiva through social action and civic engagement. (58) Fun examples of Groupon-led initiatives include deals like if the “G-Team raises $1,000, a local bike cooperative will fix up 100 broken bikes to donate to disadvantaged youth center” or “if 5 people who purchase today’s Groupon join, they’ll come for 4 Saturdays to help clean up a local river.” (58) Despite the explosion of negative press following their perceived insensitivity in a recent Super Bowl ad poking fun at the conflict in Tibet, on the company blog, Andrew Mason points out that Groupon regularly donates money to all the causes in those commercials and no harm was meant by it. (1) Overall, Groupon does appear to engage in charitable activities, it cares about making a positive impact on the world, and tries to use its power for good practices. Corporate social responsibility (CSR) is the idea that business has a duty to serve society, as well as the financial interests of stockholders. According to founder and CEO Andrew Mason, what Groupon is trying to do is to change the way that people buy from local businesses in two ways. First, they focus on support for local businesses so that they can sell more products. Second, they have an innovative policy of only allowing a coupon to be used once a certain number of people have committed to purchase. As such, Groupon represents an interesting experiment in the idea of the social mobilization of consumers, made possible by the free flow of information that has emerged from the revolution in communication technology in recent years. (52) This helps to contribute to the welfare and interests of both society and the organization. Responsible Wealth Creation Groupon was founded by Andrew Mason and Executive of the Board Eric Lefkofsky in November 2008 using venture capital funding. (43) In January 2009, they received $30 million in cash from Accel Partners, a private equity fund, which valued the business at $280 million. (43) The company was able to successfully raise $135 million from Digital Sky Technologies (DST), a Russian private equity fund, in April 2010. (4) Just a month later, Groupon used its booming valuation to make its first international acquisition of CityDeal in exchange for 10% ownership of Groupon. (43) Several months later in December 2010, Groupon expanded its 9 footprint to the Asian continent when it purchased 3 discount sites in deals for which terms have not been disclosed to the public. (36) In examining these trends and events, it is clear that Groupon has relied heavily on the use of venture capital and private equity to fund acquisitions and growth as a primary strategy to become a global force. Additionally, management is highly selective in determining whom they will accept funding from, and has chosen to work with other investors that have had proven success in the social media space. DST is a major investor in Facebook, which has received the highest valuation of all time for a website. (4) Although this strategy of working with private investors has been successful thus far, the freedom the company has had in terms of the manner it operates will likely change once they go public. Groupon has recently filed a well publicized and highly anticipated IPO that is projected to value the business between $20 and $30 billion. (51) One would anticipate that such a valuable business would be highly profitable and attractive to investors. As Vivek Wadhwa, a visiting scholar at the UC Berkeley School of Information and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University, has noted, “this is simply not the case.” According to Wadhwa, “the company does not have a proven business model that will take them to long-term profitability, insiders are already reaping millions, and the price is out of proportion with reality.” (32) This statement is based on events following a $950 million cash influx by Kleiner Perkins, a private equity outfit, in January 2011. (32, 43) This transaction valued Groupon at an astonishing $4.75 billion. (43) In these instances, management is typically rewarded for increasing profitability, and a significant portion of the cash infusion is used for infrastructure to support future growth. Instead, Groupon paid out $810 million to top executives of the firm, including payments to “CEO Andrew Mason ($10 million), Lefkofsky ($60 million), early-stage venture backer NEA ($70 million) and Accel Partners ($19 million).” (32) These individuals and groups have been with Groupon since the beginning, and to see them pulling out such vast amounts of cash is a huge cause for concern and question. Are they cashing out now because they anticipate a decrease in the holding value? The other worry is that they are sharply curtailing Groupon’s ability to grow by limiting the amount of cash the business 10 has to make acquisitions. For a company set on rapid expansion, if they do not continue the momentum, what will happen to their strategy? Whatever the motive, this was not a positive for the stakeholders of Groupon who were unable to cash out during the transaction, and it was not a healthy financial decision for the company. Engagement and Plan Alignment & Corporate Culture It is often said that words alone do not matter as much as action, which is often the case in business. Groupon must execute its strategy in such a way that will create value for all stakeholders involved. Successful strategy execution depends on management of people and capital, continuous improvement, and delivering results. Management must continually push the organization towards operating excellence while always concentrating on the core vision, mission, and goals of the firm. As Darren Schwartz, the SVP of Sales at Groupon, says: “Instead of just sending a lot of customers to a business, we want to send the right amount of customers, and the right kind, to our clients.” (10) It is evident by this quote that management at Groupon is cares more about acquiring the right customers to have an impact on the business than just increasing the volume of sales. It is also essential for key leaders to be actively involved change management when any new strategy is rolled out. Management must build consensus and enthusiasm for any new initiative with its employees so that a smooth and successful transition occurs. Another crucial aspect of plan alignment is proper training. At Groupon, there are about 150-200 new hires a month in Chicago alone (44), which presents challenges to time and resources. Groupon is extremely caring about its people and believes in the concept of human capital adding value to their firm and thus puts the necessary time into educating everyone on the corporate culture, mission and values. As Andrew Mason explicitly states, “We believe that to have truly ubiquitous coverage with local merchants, human beings are an important part of the equation.” (49) When Groupon expands, nationally or globally (organically or through M&A), they strongly consider the local practices, competitive situations, cultures and personalities in order to sustain strategic success. Groupon seems to comprehend this aspect well: “Further expansion into international markets requires management attention and resources and requires 11 us to localize our services to conform to a wide variety of local cultures, business practices, laws and policies.” (38) Growth is not an easy strategic choice to manage, but a necessary growth measure. From the SEC filing document for Groupon’s IPO, it is clearly evident that Groupon hopes to be able to align their growth plan with their strategic vision: “To effectively manage our growth, we must continue to implement operational plans and strategies, improve and expand our infrastructure of people and information systems, and train and manage our employee base.” (38) Resources at Groupon must be evaluated through information control that supports strategy execution. Groupon engages in a contemporary control system in which they continually monitor the environment and identify trends that may signal any need to revise a strategic objective. Groupon 2.0 plans to leverage those strengths in a way that improves the deals subscribers see to make them more relevant to them based on location and preference. The corporate culture in Groupon is unique as it exemplifies their mission and values. Dan Jessup, Executive VP of HR, explains it as "everyone here takes their job seriously, but they don't take themselves too seriously." (29) Many of Mason’s defining characteristics are embodied in the corporate culture- youth, exuberance, and free spirited. “Employees say the culture at Groupon prioritizes openness and collaboration, with a refreshing lack of micromanagement and corporate bureaucracy.” (29) The fun, silly, and easy going atmosphere can be seen the moment someone walks into the office with whiteboards lining the walls covered in cartoons and inside jokes. The conference room houses a bed, shag carpeting and chocolate coins, and is home to Michael, the company ghost, an adventurer who embodies of the Groupon spirit. Their corporate culture defines their personality and is evident in every deal they produce. “Groupon's daily emails are noted for their wry humor and occasional weirdness.” (10) These emails have been seen as a sign of Groupon’s success, as they are fun to read just like the company is fun in general. Mason describes as: “If this is all starting to sound like an elaborate prank, that’s only because it is. That’s what’s special about Groupon. We create these…little events. So much of what we do is about surprise—‘What’s the daily deal?’ And who would imagine a room like that 12 inside an office? As an employee, it shocks your system out of the monotony and says, ‘This isn’t like any job you’ve had before.’” (51) To remind himself everyday of this vision, Mason has posters of failed internet start up CEO’s on his wall. As a joke, or reality check, he has his own picture right next to theirs. (44) His actions truly exhibit how close culture can be aligned with a company’s basic vision and strategic objectives. In order to facilitate an objective to generate the best platform to share common collective buying power, Groupon facilities open lines of communication between the technology, sales, and customer service employees. (29) The entrepreneurial spirit of the firm is evident at all times, which is seen as an exciting yet serious place to work. “There's a pronounced tech start-up vibe to Groupon's work environment, with its young workforce, flexible hours and casual dress code.” (29) Mason often sits with his employees at different functions to help them, learn from them, or simply show his employees that he is one of them. (48) “From the top down, Grouponistas are expected to adopt the ethic of being transparent, collaborative and—thanks in large part to the jokey-yet-wellresearched Deal of the Day write-ups Mason calls ‘the heartbeat of the company—absurd humor.’” (48) Employees at Groupon say that they feel the culture allows them to be listened to, inspired by others, and supported by their peers. Wild Card: Blue Ocean Strategy – A Key to Early Success “Competing in overcrowded industries is no way to sustain high performance. The real opportunity is to create blue oceans of uncontested market space.” (5) This is the sentiment on which Groupon has built its foundation. Instead of developing a product extension or parity good, Groupon re-invented the coupon industry, creating a new market space from an already existing one – which is precisely what a blue ocean is defined as. At its inception, Groupon created demand for its product and the firm’s growth was rapid, ample, and without competitive threats. (5) One of the key distinctions of a blue ocean is they allow a firm to pursue both a differentiated and cost leader strategy at the same time. (5) Differentiation is achieved by the sheer definition of Blue Ocean: creating a new market space. Groupon changed the coupon industry, removing many of the unnecessary elements, while substituting value components such 13 as collective buying to reach a deeper deal through offering merchants attractive volumes. Blue ocean companies create value for both the buyers and the company. (5) Groupon has created value for not only the buyers that are getting a great deal, but also for local merchants that are able to attract new customers to their business. (35) Groupon has also obviously created value for itself as: “the business had gone from zero to $500 million in sales in 18 months.” (21). Another characteristic common with a blue ocean strategy is that technological innovation is not at the firm’s core. (5) This is true also at Groupon as their underlying technology (website, email, and social media) were already popular in 2008. A blue ocean firm will link technology to what a buyer values, which Groupon did through providing a good deal in the recession. (44) Groupon’s ability to pull in new customers who traditionally would not care about discounts is also a distinctive Blue Ocean trait. Its customers are described as “hip, active singles who go out two or more times a week. They are college-educated users of social media and while the demographics slant slightly toward single females, it's not about saving money but rather spending it with friends.” (22) Another ideology of a blue ocean is to realize that ‘company & industry’ are the traditional units of strategic analysis and are the wrong units to focus on when establishing a business model. “The most appropriate unit of analysis for explaining the creation of blue oceans is the strategic move - the set of managerial actions and decisions involved in making a major market-creating business offering.” (5) Groupon exemplifies this when Andrew Mason was quoted saying, “It's not competitors that beat them. If you look at Myspace, Facebook was a better product. It's as simple as that." (21) This showcases that Mason does not use competition as a metric, but instead places more value on the actions, decisions, and product knowledge of the firm to determine health. Mason honestly feels that if you lose sight of what makes customers happy, then the company will fail. It has been observed that another common aspect of blue ocean companies is that they are powerful brands that build brand equity lasting for decades. (5) With Groupon being the fastest growing company of all time, James Slavet, a partner at Greylock Partners, a venture-capital firm in Silicon Valley, believes that, "Long term, this is a business that will do for retail what Google's done to search and search advertising." (21) 14 Internal Analysis Value Chain Management Analysis Groupon’s value chain management (VCM) is an extensive process that begins with the negotiations with buyers to delivery of purchased vouchers to customers. Inbound logistics for the firm are quite simplistic. Leads are generated by the marketing department and passed to the sales representative for the respective city in which the potential vendor is located. (26) The sales reps often work in teams of two to five people depending on the size of the market the city is located in. (26) When a deal is made with a vendor, the sales rep works directly with the business to finalize the terms of the offering and places the deal in the pipeline. (26) While in the pipeline, the editorial department crafts catchy descriptions that are witty and enticing. (49) They are also relatively easy to prepare as evidenced by Groupon’s recent involvement with a group of 6th graders in the Chicagoland area. As part of Groupon’s commitment to partnering with local not-for-profit organizations, these students were invited to write the descriptions of a few daily deals to help them understand how important it is to develop their writing skills.(49) Next, the web development team uploads this content to the page that will house the deal and puts the finishing touches on the product chat room. Since most of the sales process is completed over the computer, there is no physical warehouse needed to house inventory. However, the massive sales force of the firm has resulted in Groupon occupying two large office spaces in downtown Chicago. (18) The next step in the VCM process is operations. As noted previously, the company relies heavily on the use of technology since the core of their operations is run online through Groupon.com. (26) The primary activities are closely intertwined with the inbound logistics as the deal moves from the marketing department to production. The company relies heavily on real-time data and feedback since the deal runs for a set time limit each day. The sales representatives and customer service departments are the primary touch points in dealing with businesses or customers, respectively, in the outbound logistics and service sectors of Groupon’s VCM. Each time a deal is posted, the sales rep regularly updates the vendor on the status of the deal. A chat room is available for customers to post questions, and 15 the sales rep often passes on these inquiries directly to the vendor in order to respond timely within the chat. This close communication between the vendor, sales rep and customer creates a close knit community and creates an added intrinsic value for consumers. (18) The customer service team is closely involved with the final sale of product and assists customers that have issues finalizing their purchase. Additionally, if a customer encounters a problem in redemption, these employees do everything in their power to resolve the issue timely. (18) Recently, “a nail salon in Northern Vancouver sold more than 6,000 Groupons for halfprice manicure pedicures” and only allocated 16 slots per day for Groupon customers. This meant that some customers could conceivably have to wait over a year before they are able to redeem their voucher. (12) With actual demand far exceeding the projected amount, Groupon worked to provide refunds to dissatisfied customers. This flexibility is crucial to preserve client and customer relationships, and this high level of service has not come at a cheap pricetag for Groupon. Selling, general and administrative costs have increased from $4 million in the first quarter of 2010 to $178.9 million in the first quarter of 2011, which is approximately 28% of revenues received. (50) New sales reps are trained in smaller markets like Long Island, New York or Wichita, Kansas. (26) Although there are fewer opportunities in these markets, reps gain experience selling the product and are forced to work harder to come up with deals. (26) The best sales reps are moved to larger markets when opportunities arise, which is beneficial to both the rep and the company, since the highest performing reps get an opportunity to earn more money in a brighter spotlight. Part of what motivates the Groupon sales team to be aggressive in their vendor negotiations is the large commission they receive from each deal. The more popular a business, the more sales and profits it will generate the company and the sales rep. (26) An additional incentive program which supports the VCM for all employees is the issuance of stock options which vest over a period of several years. For employees that have been there since the beginning, these shares can be numerous once the IPO is finalized and will provide a great start to a retirement nest egg for many young professionals. (51) RESOURCE BASED VIEW ANALYSIS 16 A resource based examination of Groupon yields several trends identified through the VCM model; however there are numerous additional points of discussion. (Please refer to Exhibit 8 for Groupon Resource based View Analysis) From a financial perspective, Groupon has the highest revenues in the industry. In the first quarter of 2011, the firm grossed $644.7 million compared with $44.2 million in the same quarter of 2010, which equates to an astonishing 1,359% increase. (50) Unfortunately, this growth in revenues has not equated to profitability. The company has expanded at such a rapid rate through hiring of additional employees, marketing costs and infrastructure that Groupon lost $146.5 million in the first quarter of 2011. (50) This trend of losses dates back to fiscal year 2009, with only one slightly profitable quarter. (50) Groupon previously posted revenues per subscriber at $21.69 as of June 30, 2009. (33) This number has decreased approximately 64% to $7.76 as of March 31, 2011. (33) Part of this decrease is the massive growth of their subscriber base, however it also shows that fewer people are actually buying the daily deals. (33) These decreases have not hurt Groupon’s ability to grow yet since their cash flow is so strong and allows the company to fund current operations. The physical resources owned by Groupon consist primarily of their sales force, which is housed in two main locations in Chicago. (18) Their dramatic growth has resulted in large investments in physical space and technology, since each employee needs their own computer. The human portion of this analysis is focused on two groups within the firm, the sales team and the executives. Both of these clusters are filled with top performers in their class. As noted in the VCM analysis, the best sales reps quickly move through the system and have opportunities to represent Groupon in the larger markets. Additionally, Andrew Mason, CEO of Groupon and Eric Lefkowsky, Chairman and Co-Founder, both have experience in growing technology companies to profitability. See the strengths section of the SWOT analysis for further discussion of their background. Finally, the organizational structure of Groupon cannot be understated in terms of how it has contributed to the success and growth of the company. As noted in the timeline, the company has grown from 37 employees in 2009 to over 7,000 merely two years later. (18,33) This rate of increase is literally unprecedented, and thus the organization as a whole has had to 17 remain very flexible in order to adapt. New programs and departments have appeared on the fly over the past two years as different needs developed. (26) Qualified staff have been hired without a specific role, just to fill anticipated demand in various areas. (26) Most of the workforce is under 30, and are therefore more easily able to accept rapid change than a labor force used to doing things ‘the same as last year’ for the past few decades. An additional benefit of having a young workforce is their comfort with technology and social media. Much of the business becomes second nature to the employees, who are encouraged to share their ideas with management to improve the operations when applicable. VRIO The final concept used to analyze Groupon’s internal business practices is the VRIO framework, which examines the company’s value, rarity, susceptibility to imitation, and how organized they are to exploit resources. (Please refer to Exhibit 9 for VRIO Analysis) As has been touched in the aforementioned analysis, Groupon’s first mover status makes them a highly valuable company within their industry. Their brand and distribution channels are relatively unique and far exceed the competition. Since the competition within the industry is so great, it is obvious that the group buying mechanism is not a rare commodity. As of June 2011, over 345 sites compete in a space that did not exist merely three years ago. Any tech-savvy individual can launch their own site and work to build up a subscriber base comparable to Groupon. (3) All it takes is businesses willing to sell their product for cheaper than face value, and customers that want to save money. According to Yipit, in May 2011 almost 18,000 unique online deals were offered through Groupon and similar companies in just North America. (3) This is an astonishing number and shows no signs of slowing down anytime soon, meaning even more companies will want in on the pie. Groupon’s largest competitor, LivingSocial has been slowly chipping away at Groupon’s dominance in the industry. In May 2011, Groupon’s market share of online daily deal sales decreased from 52 percent to 48 percent, while LivingSocial increased their sales to 24 percent of the industry compared to 20 percent in the prior month. (3) This downward trend for Groupon is similar to many other negative metrics identified and does not bode well for the long term prospects of 18 Groupon. Within the VRIO framework, ownership of value, but lack of rarity in the business concludes that Groupon has competitive parity within the industry. Finally, Groupon is an extremely organized business, which closely manages its resources and exploits opportunities presented to them. This is evidenced by the executive management’s incredible career experiences within the industry. External Analysis Though Groupon may seem like an unstoppable force, the idea behind an external analysis helps a company to understand their place in their market and map their position in the larger business realm. It helps identify threats and opportunities, and assess their level of potential profitability based on the industry health and maturity. Organizational Environmental Model Through the Organizational Environment Model depicted in exhibit 12, Groupon, the organization, is the epicenter of their task environment comprising of competitors, distributors, customers, and suppliers. Outside of that, the general market environment is made up of technological, economic, global, political, demographic and socio-cultural forces. At the center of their organization, Groupon provides a service that solves a fundamental business problemawareness and accessibility. “We get them in the door, and the merchants take it from there, delivering the services to get them back. The Groupon model works in any market, it can easily be scaled up.” (34) The environment in which they operate is what makes them so successfuleveryone loves a deal and the site came at the right place and right time to take off during the period of economic recovery- global forces were working in their favor. They make the endusers - their customers - happy by offering an awesome experience at a fraction of the cost, and go above and beyond to bring their suppliers (the stores providing the discounts) new business. However, customer service during redemption has undoubtedly been an issue for them, with some stores being overwhelmed by the demand leading some customers to experienced less than stellar service. While Groupon works hard to resolve customer service issues involving redemption, responsibility mainly falls on the distributor to provide the service 19 offered in an exceptional manner so they earn repeat business. The negative experience does ultimately reflect back on Groupon though and my affect future purchasing decisions. Nonetheless, Groupon single-handedly changed the stigmata and culture associated with coupons. While discounts had formerly been a taboo, embarrassing subject (who wants to admit they like saving money?), the audience was no longer the little old lady scouring the weekend paper for a deal. Their demographic was now the educated young professional, as Groupon made the discount socially acceptable and rewarding by requiring a certain number of participants to reap the rewards of collective buying power. With people wanting to maintain the same level of lifestyle and disposable income they had before the economic crash of 2008, Groupon allowed them to still indulge in a spa day or nice meal out without feeling guilty or breaking the bankmaking both the socioeconomic and economic factors work in their favor. Also, technology like real-time cell phone apps made purchasing easier than ever and they take advantage of all online marketing channels to deliver content (email, social, web). The group coupon idea took off like wildfire and spawned numerous copycat sites, most notably Living Social. While Groupon still has first mover advantage to some degree with their large subscriber base, the competition is undoubtedly biting at their heels for a piece of the pie. One of Groupon’s strategic advantages is their massive local sales force of over 3,500 people who know the markets inside and out, which serves as their distribution team. If they didn’t have these people to source the deals, they’d be a much more accessible to competition immediately, but it will understandably take the other big players time to build up these relationships. The sales force could potentially become an even bigger moat if Groupon Now, their real-time mobile app takes off, which needs thousands of active deals at a time to be successful. (55) The mobile technology with a built in subscriber-base is one of their biggest advantages, as that’s much harder to copy than a website and better for determining ROI data for businesses. “Apps with a location layer can help close the loop between a deals consumer and a repeat customer by observing a consumer's interactions with a business and a neighborhood over time.” (11) In summation, the initial environment factors were ripe for Groupon’s exponential growth, but now they must regroup and to evaluate and capitalize on their strengths if they intend to maintain an industry leadership position. 20 Porter’s 5 Forces Porter’s 5 Forces provides a framework for evaluating a sound business strategy. The following is an analysis of Groupon based on the five economic forces that determine the attractiveness of a market. (Please refer to Exhibit 11 for a summary of Porter’s Five Forces analysis) New Entrants- There are extremely low barriers to entry in the daily deal market and even lower costs of switching providers. With technology that is easy to develop and a kitschy style easy to copy, there is almost zero brand loyalty to Groupon since its product is a price-based service. With the sheer volume of sites now pushing daily deals on consumers, one has to wonder how long the fad can keep up momentum. Companies that use daily deal promotions have already learned they come at a price. Typically, promotions are not successful unless the deal offers 50 percent or more off the normal price of goods and services, which few companies can regularly sustain a profit with. (25) Rivalry- There are currently five direct rivals in the daily deal market in the United States alone with more appearing everyday, taking the space from a blue ocean to a shark tank. Over 400 sites have launched since Groupon, but the worthy competitors have significant reach and deep pockets- Google Offers, Amazon Local, and Facebook Deals in addition to the largest twoGroupon and LivingSocial. Right now, Google Deals, Amazon Local and Facebook deals are only available in limited areas, but with an estimated 600 to 700 million Facebook users and Google in the process of testing its new social media product, Google+ how long can Groupon protect their market share which has already been slipping? “Yipit's researchers, according to Bloomberg, estimate Groupon made $64.7 million in sales in May, a figure that was still more than double what LivingSocial produced with $31.6 million in sales.” (25) With so many players in the space though, they need to constantly be forward thinking and innovative in terms of product development to stay on their “A” game. (Please refer to Exhibit 14, 15 and 17 to understand more about the competition between Groupon and LivingSocial) Substitutes- Replacement products always existed in the form of the traditional paper coupon. Extreme Couponing on TLC has actually revived bargain hunting to make it relevant 21 and almost game-like to discover ways to combine manufacturer's discounts with local store rebates to come away 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 codes, and of course the option to pay full price or not participate in an activity that costs money (the beach, biking, etc). Bargaining Power of Suppliers- As the only player in the space, Groupon had been commanding massive margins- 50% of all sales generated. Each time Groupon sold a voucher to a user, it collected cash up front. Merchants' share of the proceeds, which averages about 60% world-wide, is remitted later—sometimes much later. (46) Collecting payments far in advance is what had primarily funded their intensive marketing and operational efforts. What had once seemed like a brilliant way to grow the business faster than the competition could catch up may now be their Achille’s heel. Much backlash has surfaced that price is too high to justify the cost and little mom and pop shops are losing money or barely breaking even on their efforts. Groupon currently pays US merchants in three equal payments over 60 days. This model, according to Groupon’s S1 filing, allowed it to generate more than $120 million in cash in the first quarter. As recently reported by Business Insider, Google Offers pays merchants in 4 days, throwing a huge wretch in their revenue model and cash flow. (17) Top competitor LivingSocial pays merchants their full share within 15 days. (46) Groupon is inevitably going to have to renegotiate their terms down to the industry standard and take a good hard look at their cash flow or businesses will likely go elsewhere. But are they proactive enough to foresee the necessary changes and move with the times? Or will they remain headstrong and believe that since they had first mover advantage, they are owed the business? Bargaining Power of Buyers- Now that there are so many providers, customers are demanding even better deals and improved customer service. Consumers generally don't get their money back from unredeemed vouchers and while Groupon gives U.S. merchants their share of unredeemed vouchers, it keeps all such proceeds abroad. In some countries, LivingSocial also keeps proceeds for unredeemed vouchers, but it doesn't for most of Europe. (46) As the number of competitors continues to increase, those with more forgiving terms to cope for buyer’s remorse could prove victorious in gaining favorable public opinion. 22 Industry Lifecycle The point Groupon is at in the industry lifecycle (exhibit 13) is a crucial time to redefining their business in order to set them apart from the competition. As they near the end of the growth period and phase into maturity, their strategy and priorities need to change and develop to ensure long term success. With the growth rate of the market at its highest and intensity of competition ramping up, changing the emphasis to sales and marketing, product design and consistent consumer demand is critical. After the Super Bowl marketing flop, Groupon pulled it’s distasteful TV ads, focusing its attention in the online space and working to restore a positive brand image after the negative PR by donating to the charities they spoofed. (45) Since then, they have shifted efforts to action driven marketing looking to grow their sales and subscriber-base through broad-scale pop-under retargeting campaigns and search engine marketing, tactics more ample for conversions. The company spent $263.2 million on advertising and subscriber e-mails in 2010, compared with just $4.5 million one year earlier. (13) They have also been looking to improve their product, Groupon Now, which they ambitiously hope will change the way we eat, shop and play. A radical departure from the once a day email deal, Groupon Now is time sensitive, finally giving businesses a chance to fill seats during slow times throughout the day. It’s a simple way for local businesses to manage their perishable inventory, especially labor and food. “Groupon clearly believes Groupon Now is the future, so much so that its employees call the current iteration of its daily deals service ‘Groupon 1.0.’” (31) Living Social also has a similar mobile feature called Instant Deals. SWOT Analysis A SWOT analysis of Groupon’s internal business shows that while several strengths exist in their business model, the threats to their long-term profitability and sustainability are numerable and must be addressed in order to prove differentiated. (Please refer to Exhibit 10 for SWOT analysis) Groupon was the first company to make the group purchasing-power model popular through use of the internet. This first mover advantage has provided them with the most recognized brand in the industry. Additionally, this has allowed them more time than their 23 competitors to build a subscriber base that now reaches from South Africa to Japan and includes all 50 states. (9) As of March 31, 2011, this list had 1.5 million contacts in Chicago alone, equivalent to over 15 percent of the total people in the city. (2,53) Their duration of operations has further allowed them to drill down within the United States and market their product to over 125 U.S. cities. (9) The plethora of opportunities resulting from this growth in distribution channels has correlated with an insatiable demand for young professionals looking to gain experience as sales representatives in a highly competitive marketplace. Boasting over 7,000 employees currently, Groupon still attracts the top talent through profitable salary packages that include a percentage earned on each daily deal. Also, employees receive stock options in the company that vest over a period of several years. (26) Furthermore, the top leadership in the firm has extensive experience helping start-up websites grow, and ultimately go public, resulting in significant wealth creation for employees. Eric Lefkofsky, the co-founder and Executive Chairman of the Board has founded two other websites in his career that are both publicly traded. (18) His contacts in the private equity industry have helped Groupon raise funding for several acquisitions and the capital expenditures necessary to facilitate the extreme growth of the company’s operations. (18) Currently, Lefkosky is leading Groupon through its IPO, which will provide a further influx of capital, and a safety net for the founding members of the company. (51) It is true that the tone for a company is set at the top, and Groupon’s greatest strength is its human capital’s ability to react deftly to changes in the marketplace and its corporate attitude which values and rewards a fun, productive work environment for employees. A major weakness of the organization is negative press that seemingly halts the company’s progress every few weeks. A recent example is the public’s reaction to the Groupon commercials that were shown during the 2011 Super Bowl. One of the 30 second spots showed the peaceful mountains of Tibet, which transitioned into a promotion featuring half off at Tibetan cuisine. (1) Critics condemned the move as insensitive, but Mason was quick to defend the company as an active donor and supporter of the Free Tibet movement. (1) In June 2011, SoSasta, the Indian subsidiary of Groupon accidentally posted the personal information of 300,000 subscribers online. (28) 24 While the data was not available for an extraordinary amount of time, it was online long enough for it to be “indexed by Google’s search database.” (28) Although Groupon was quick to pull the content down, this event showcased the risks and potential privacy problems of fast internet expansion. While Groupon has had several instances of bad publicity, one of their opportunities is in the creativity shown thus far in marketing. At their core, Groupon is a social media company and has proven adept at reaching a young generation of consumers through popular outlets like Twitter and Iphone apps. Their commercials are often played during music breaks on Pandora and the live blog of one fellow living off Groupons for an entire year received quite a bit of viral buzz. Although the Super Bowl ad didn’t go over well with the intended audience, it still managed to reach the largest audience in television and got people talking about their company. (1) With marketing expenses of $208.2 million in the first quarter of 2011, Groupon has shown that they are able to outspend their competition to maintain their leadership position.(50) Their willingness to show creativity to attract new customers provides them with a platform for continued growth. The key threat that Groupon must address is its reported cash flow issues. (6) Although the company is currently private and therefore most financial data is confidential, the IPO filing has made certain documents public that have market analysts concerned about the company’s spending habits. Groupon’s explosive growth has been fueled by the constant cash flow that is churned by the daily deals. Groupon’s continued development in new markets has provided the ability for the firm to increase revenues, however most of the major markets in the U.S. have been tapped and the competition is now moving in. Additionally, many customers are growing tired of the influx of options and stopped looking at deals waiting in their inbox each morning. Repeat customers have shown little loyalty to the company, as they are simply interested in purchasing a deal they like from whoever is supplying. Conversely, vendors have grown weary of the group-buying crowd, particularly in the restaurant and service industry as they have not been proven sustainable to developing repeat customers. (6) Another major threat facing Groupon is the potential legal hazards that could engulf the core of their business operations. A recent article in The Register described several different issues that are at odds with the group purchasing mechanism including; “certain state’s ban on 25 discounted alcoholic beverages, the length of time that a voucher remains valid often exceeds the life of a Groupon, and unused portions of vouchers must be redeemable for cash.” (35) The article notes that many states have their own set of unique rules, which could further confuse the legality of the Groupon. Since their inception, Groupon has already changed their policy pertaining to vouchers that expires, and in ‘the fine print’, it is noted that the purchaser of the Groupon has the right to apply the expired Groupon for services equal to the cash paid for the voucher. (19) III. Recommendation Source of their Success With the amount of competition moving in, Andrew Mason is realistic in the fact that the website won’t last forever and that their core strength and differentiation is not in their physical technology or the delivery of the email offers, but in the problem they solve for customerschoice of a fun activity at a discount- and the benefit they provide to retailers and new customers. They may not know exactly what the next iteration of their site may looks like- Groupon Stores, a mobile app, or something we can’t even visualize yet, but Mason does understand the core of his business, aptly describing “Groupon as the emerging Amazon of services, creating an incredibly efficient way for merchants to reach new customers. But the 2.0 version’s socialmedia focus may end up making Groupon the Facebook of shopping as well.”(44) The new Groupon grew out of a question Mason posed to his team: If the company were able to launch with the advantages it has now—“a huge merchant community, operational machine and customer base—would we build the same thing today?” The answer: “Maybe not.” (44) Their current success lies in the benefit they provide to both their endusers and vendors, not necessarily in the physical product or delivery of the offer. Alternate Solutions To sum up the main problem, Groupon must continue to differentiate its offering, or it will gradually cede market share to the other daily deal sites as the market matures to become more standardized in terms of pricing and payment terms. If Groupon has to pay more and faster 26 to keep merchants happy, it will see a reduction in the excess cash flow that has been its fuel for rapid growth. Alongside this issue is the recent push toward an IPO as public equity investors will need to see a plan for how the company intends to achieve sustainable profitability. Growth simply for the sake of it will not appeal to investors for long, especially now that experts are whispering about a new “bubble” in technology stocks. Andrew Mason and his team can only hope to evolve the business to meet these challenges. Below are some creative alternatives Andrew Mason and his team can employ to build a sustainable competitive advantage and preserve the premium pricing enjoyed by Groupon. One potential idea could be to expand Groupon into more of an online marketplace, similar to an EBay or Craigslist, but with a first class interactive element more reminiscent of a social networking site (e.g. Facebook). Right now, there is very little interaction between users and merchants on Groupon; as all interaction is facilitated by a middleman- the groupon sales team funneling end user questions to the merchant while the deal is running. What if that changed, and Groupon became an interface for retail commerce in local markets? For example, if a local winery wanted to advertise a promotion to the community, it could simply log on and followers would receive a status update. As Groupon would likely charge a fee for this type of posting, the ability to target the most likely buyers would be valuable to the winery. Likewise, a business or home in need of major roof repairs could put out an RFP through Groupon’s service, and local contractors could respond with bids. All of this would operate alongside the daily deal offers, creating a one-stop site for merchants and local customers to meet, learn more about each other, offer/request services, and conduct targeted marketing and promotional activities. A more likely next step is to find ways to capitalize on Groupon’s mobile application, Groupon Now, as consumers gravitate more and more toward the use of smart phones, tablets and other data devices. A simple example is the use of geographic positioning technology to choose deals based on a user’s current proximity to a merchant. However, this is just the start. As users increasingly share real-time information over mobile devices, applications such as Groupon Now can become valuable stores of consumer information. Since Groupon already has the largest database of daily deal users, it is best positioned to profit from a strategy of collecting 27 and analyzing market data. Groupon customers transmit information over mobile devices related to preferences, location, purchasing behavior, response to advertisements, etc. In addition to driving increased customer traffic, the data captured by Groupon Now would be very useful to merchants trying to better understand their ideal consumer demographic. This can help Groupon maintain merchants’ attention and interest in their product over competitors. Recommendation Groupon’s future success will lie in the ability to prove to businesses that their model is profitable through the ROI capabilities offered in the mobile app. With so many businesses questioning the value of running a Groupon at such a high acquisition, if Groupon can prove that in fact customers are returning to experiences they like outside of the one-off deals, they will have proven their marketing value. In addition, they will need to prove to their subscribers they can offer deals even more relevant to them (customized and personal) to avoid burnout. What Should Be Done With data being king and so much being available in real-time via mobile technology, the more the vendors know about their customer preferences- what they like, why they become repeat users and where they’re located, the more likely they are to run Groupons continuously for more than a quick boost in sales, but for the more valuable information of market research. “Groupon 2.0 plans to leverage those strengths in a way that gets more merchants through the queue and extends the service,” Mason says. “We’re not dramatically increasing the number of deals a customer sees, but we are giving them something more relevant.” (44) If Groupon can pass some of this usability data onto it’s vendors, they stand to gain invaluable customer information. How Should it Be Done “As a Groupon user, you will have a personal opt-in “deal feed” that includes the daily feature offer selected for you by an algorithm using your location, age, past buying habits and other data to understand what bargains will make you itchy to spend. In addition to that Deal of 28 the Day, which was the core of Groupon 1.0, the upgraded feed will include recommended selfserve deals and messages from merchants you’ve bought from, as well as from others you’ve chosen to follow.” (44) You’ll be able to share this info via facebook and twitter. “By having people get different offers, they will have a bigger incentive to share,” Mason says. (44) Who’s Going to Do It and Why As discussed earlier, Groupon is already pursuing its Version 2.0 which includes increased utilization of mobile technology. Groupon has a very good chance of continuing to lead the daily deal market into the next phase, as it’s pool of subscribers and active merchants (including a wait-list) is larger than anyone else in the industry. However, Groupon is not without a worthy challenger; aside from other daily deal sites like LivingSocial, Google stands out as a potential threat and is likely better positioned as the daily deal market expands to include a component of market research as Google’s search algorithms are unmatched. If Google can capitalize on their technical expertise to create a best-in-class algorithm for targeting daily deal shoppers, it could steal merchants and present a major challenge to Groupon’s supremacy. Google may also benefit from knowledge gained through its significant involvement with and development of Android technology for smart phones. These are tools that Groupon does not possess, yet they can be competitive advantages when trying to capitalize on the mobile market. Andrew Mason and his team will be charged with writing the next chapter at Groupon. In order to maintain their “first-mover” advantage, they must introduce a new component to blind offers. As successful change is directed from the top down, Mason must lead his team to move with the times. He states openly that Groupon only has to focus on itself to be successful. As other players in the market grow and evolve, the leaders of Groupon have to anticipate those moves or they could potentially be blind-sided. Product development and sales teams have to be aligned, pushed and encouraged to think outside the box to predict competitors’ actions so that Groupon can beat them at their own game, or make their move obsolete. This will be crucial to establishing a truly differentiated and profitable business for the long-run. 29 IV. References 1. ABC News. (2011). Groupon's Controversial TV Commercials. 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Retrieved Jul 7, 2011, from http://www.groupon.com/all-press-releases 35 Appendix Exhibit 1: Timeline Exhibit 2: Organizational Chart Exhibit 3: Daily Deals Market Size Exhibit 4: Groupon Global Presence (Source 24) Exhibit 5: Global Groupon website visitors by region (Source 57) Exhibit 6: Plant Alignment & Strategy Execution Exhibit 7: Contemporary Approach to Strategic Control Exhibit 8: Resource Based View Exhibit 9: VRIO Framework Exhibit 10: SWOT Exhibit 11: Porter’s Five Forces Exhibit 12: Organizational Environment Model Exhibit 13: Industry Lifecycle Exhibit 14: Regional Footprint by Region: Groupon vs. Living Social (Source 55) Exhibit 15: Share of Display Advertising: Groupon vs. Living Social (Source 55) Exhibit 16: Revenue vs. Net Loss (Source 56) Exhibit 17: Market Share of Visits, Groupon vs. Living Social Exhibit 18: Groupon Market Valuation Exhibit 19: Groupon Infographic Exhibit 20: Groupon Subscriber Base & Groupon’s Sold 36 Exhibit 1: Timeline 37 Exhibit 2: Organizational Chart 38 Exhibit 3: Daily Deals Market Size (Source 54) 39 Exhibit 4: Groupon Global Presence (Source 24) 40 Exhibit 5: Global Groupon website visitors by region (Oct 2010) (Source 57) 41 Exhibit 6: Plant Alignment & Strategy Execution 42 Exhibit 7: Contemporary Approach to Strategic Control 43 Exhibit 8: Resource Based View 44 Exhibit 9: VRIO Framework 45 Exhibit 10: SWOT 46 Exhibit 11: Porter’s Five Forces 47 Exhibit 12: Organizational Environment Model 48 Exhibit 13: Industry Lifecycle 49 Exhibit 14: Regional Footprint by Region: Groupon vs. Living Social (Source 55) 50 Exhibit 15: Share of Display Advertising: Groupon vs. Living Social (Source 55) 51 Exhibit 16: Revenue vs. Net Loss (Source 56) 52 Exhibit 17: Market Share of Visits, Groupon vs. Living Social (Source: http://www.webpronews.com/hitwise-livingsocial-gaining-ground-on-groupon-2011-01) 53 Exhibit 18: Groupon Market Valuation (Source: http://www.businessinsider.com/chart-of-the-day-groupon-valuation-2011-3) 54 Exhibit 19: Groupon Infographic (Source http://www.axleration.com/the-amazing-rise-of-groupon-infographic/) 55 56 Exhibit 20: Groupon Subscriber Base & Groupon’s Sold Source: http://www.npr.org/blogs/money/2011/06/03/136896797/groupons-astonishing-growth-in-1-chart#more 57
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