What is Groupon and how does it work?
A flood of business came from this sector of the people with long working hours. Those people almost are the e-mail users. They need eating outside as they do not have much time to prepare food at home. They also need much more entertainment to release working pressure. So. the entertainment and restaurant sectors contributed the most typical deals to the Groupom Groupon make money by taking a 40 to 50% cut of all revenues generated from the daily deal. Groupon pay to the business after a deal and the business will not expend any money until customers redeem the groupon.
If subscribers who purchased d deal that failed to each the minimum, their credit cards were not charged. Thus encourage subscribers to share a deal with friends. Once a formula works, Groupon attracts funds to entry. Then, Groupon copy it to other cities, then to other countries and now is all over the world. Question 2 What does Groupon do that makes businesses willing to pay for its services? Why are consumers attracted to Groupon offers? Communications with both subscribers and buyers It has software to check which deals are popular, sometimes the businesses will continue to otter a tanning Groupon when the deal was so successful.
And teedback tool is made to encourage both subscribers and buyers to report back their experience in Groupon. Deep discount Businesses are willing to offer deep discount rate on products or services to attract new clients. When the deal is popular, Groupon can drive a large number of visitors to a store. Consumers have Interests in buying new products with a lower price. Groupon is helping people and thus developed Into a veritable city guide for customers to try something new and Interesting which hidden In clues. Tlmlng & convenience Groupon expose or offer the limited time deals to consumers.
Peer pressure has been a key factor in order to achieve the ultimate purchase of the deal. And get the customers to make a purchase quickly. And added convenience of location or place will inspire consumer buying. Referee bonus Groupon well use social e-mail meala groups Ilke lwltter ana FaceDooK to market itself to both businesses and consumers. The deal will be cancelled if it does not reach the minimum orders. And dollars will be rewarded if customers refer friends to purchase in Groupon. Thus encourage customers to share the deals by word of mouth to other potential consumers.
Service grantee Groupon ensure that the restrictions (like 24 hours cancellation policy or fee or limit one per visit) put in place by the vending business would not interfere with their use of the Groupon. The most important point is Groupon promise to return the purchase, it is an escape clause help consumers out of situation where they feel the deal is not good. Skilled Sales Teams Generous commission is offered to the sales term. Face to face selling makes businesses willing to Join Groupon, especially during poor economy.
Sales culture is by its sales-oriented project funded: Lefkofskys Lightbank VC firm and Echo Global Logistics and Innerworkings. No Financially Burden Businesses receive money from Groupon after the deals; businesses will not have any financial burden until the consumers redeem the Groupon. Consumers only pay by visa card and need not to pay immediately. Payment method is easy and convenient. Question 3 (300) At what stage of the industry life cycle is the collective buying market currently in? Please support your argument.
The Industry life cycle helps us to analyze the effects of industry evolution on competitive forces. And there are five sequential stages, they are 1) embryonic, 2) growth, 3) shakeout, 4) mature and 5) decline. In the stage of mature, demand growth is low or zero while in the stage of mature, keen competition for market share and price-cutting and firms turn to cost-cutting and brand loyalty building. The collective buying industry is at the early stage of mature of the industry life cycle. Earnings and sales grow slower in mature industries than in growth and embryonic industries.
A mature industry may be at its peak or Just past it. The collective buying market’s growth has been massive over the past few years, is starting to mature, with merchants and group buying sites understanding that they eed to be more selective in the types of deals offered. And creating longer term relationships with successful merchants. And, competition is keen and narrowed the market share of the collective buying. The business model is simple, easy to copy and the collective buying become very popular that for it is an easy to entry business.
The are many competitors, like DealOn, HomeRun, KGB deals, Tipper, Twangoo, BuyWithMe, Google Offers, and even the top five players in the market – Groupon, Scoopon, LivingSocial, Cudo, and OurDeal – generate over 80 per cent of the market revenue. It is being expected this trend to continue in 2013 with the disappearance of many smaller group buying sites. Apart from the US, though in the China once upon a time, booming with new collective buying companies, nearly half of collective buying sites closed now.
The king of collective buying site – Groupon, once was a growth stock, and its revenue rose Just 6% during the first nine months of 2013. The onllne coupon sellers Tunaamental posltlon Is clearly weak. Its net loss wlaenea, operating income fell and operations cash spending had been raised. Even Groupon turns to costing cutting due to profit lost. Question 4 (600) Using Porter’s five-force framework, describe the competitive environment of the collective buying industry. Do the industry profitability and the competitive environment change much between the period pre-Groupon and post-Groupon?
Please discuss. There are some tendency for the five forces, they are: the more competition among firms in the industry; the lower the average profitability, the closer the substitutes for products, the lower the average profitability; the greater the bargaining power of buyers, the lower the average profitability for firms in an industry; if suppliers can ontrol supply and prices, they enjoy strong bargaining power over their customers; high profitability in an industry normally attracts new firms to enter.
Pre-Groupon – Porter’s five forces model Porter Force 1: Low Intensity of competition Sales grow is slow in this stage and distribution channels are not widespread. The competition is not keen. Some early collective buying sites like MobShop and Mercata attempted to use collective buying for consumer goods but they could not offer deep discount and then failed. Porter Force 2: Low Presence of substitute products Porter Force 3: Low Bargaining Power of buyer Porter Force 4: High Bargaining Power of suppliers Many businesses are too overwhelmed with the Groupon success stories.
In additions, these local and small businesses do not understand the technology of the online deal market. Therefore, many small and local businesses, like restaurants, beauties, spa, health & learning classes, are Just not in a position to bargain with Groupon. Porter Force 5: Ease of entry into an industry Post-Groupon – Porter’s five forces model Porter Force 1: Intensity of Competition The keen competitors already have significant R&D budget, customer base and user ehavior statistic data that they can easily leverage and compete aggressively.
For instance Google, Facebook, Yahoo and Microsoft, who have already launched similar offerings. Even many small niche players know the niche very well like gluten free deals provider. The barriers to entry are so low in this market and any one can start a deals business. Porter Force 2: High Threat of substitute products Many channels can be players in the collective buying market apart from the emailing of coupons. For example a new model by Loopt Flips puts a complete U-turn from the Groupon model. First consumers get to pick the offer in and then Loopt reaches out to the business to sign the deal.
Due to unlimited opportunity in this market so unlimited models will emerge. Porter Force 3: High Bargaining Power of Buyer There are tons of daily deal providers and consumers need to pay in advance of actual consumption of product or service thus there is no reason for consumers to purchase from Groupon. Porter Force 4: Low Bargaining Power of Suppliers As the market matures and many new entries come, more than likely the local merchants will have some says in the payment terms, the deal size and terms and he revenue share.
Porter Force 5: Ease of Entry into an Industry High Threat of New Entrants Groupon, Living Social, Eversave and many others have almost identical web sites. With low capital requirements, minimal regulatory restrictions, no patents or intellectual property rights restrictions it is easy to enter the market. There are already more than 50 sites like Groupon. It seems like an easy to copy business model. Question 5 (600) Perform a SWOT analysis of Groupon. From the analysis (Q3-5), how viable is Groupon? Will this business survive in the long run or will it fade away?
Why and why not? Please discuss. To identify major factors affecting Groupon, the following we will also to align organizational strengths and weaknesses with external opportunities and threats, in order to formulate suitable corporate strategy. Strengths refer that Groupon’s advantages over others and weaknesses refer that Groupon’s disadvantages relative to others. While opportunities mean elements that Groupon could exploit to its advantage, and threats, are elements in the environment that could lead trouble for Groupon.
Strengths- selling points of Groupon A strong brand name and management A public listed company in NASDAQ, USA, Groupon is launched in 2008 by Andrew Mason and the well known Chicago entrepreneur Eric Lefkofsk. And now Groupon is a global leader in local commerce, making it easy for people in more than 48 countries to search and discover great businesses at unbeatable prices. Groupon’s mission and promise Groupon’s mission is simple: to offer what customers want to do, see, buy and eat at an amazing price.
Groupon promises to return the purchase if customers feel not good enough, thus customers feel safe and confident in buying from the Groupon. Effective communication and fast transaction Superior technology allows Groupon to better meet the needs of their customers. It has software to check which deals are popular, and feedback tool is made to encourage both subscribers and buyers to report back their experience in Groupon. Technology help the company manages over 7000 people and host more than 900 deals every day with 70 million subscribers in 46 countries.
Convenience. Social media, the company core competencies, which are Hyper Local Marketing, E- commerce, and social networking. Growth rate Demand builds up and expands rapidly, market thus getting bigger Ralse Yuna $30 million in investment funds from ACCEL Partners Weaknesses Groupon’s daily-deals growth is largely played out in its most-established markets in the U. S. and Europe, and whatever growth it manages to acquire overseas will most likely widen its persistent losses. Opportunities The online market offers Groupon the ability to greatly expand their business.
Groupon can market to a much wider audience for relatively little expense Greater innovation can help Groupon to produce unique products and services that meet customer’s needs Emerging markets are fast growing regions of the world that enable Groupon to quickly expand… “Emerging Markets (Groupon)” has a significant mpact, so an analyst should put more weight into it. “Emerging Markets (Groupon)” will have a long-term positive impact on this entity, which adds to its value. International Expansion (Groupon)” will have a long-term positive impact on the entity, which adds to its value.
Threads Intensifying rivalries It indentify Groupon current problem. Groupon faces a quantitative and qualitative problem in its market. Currently, more competitors are arising. There is strong competition in the market from many big or small, imitator sites. The main competitors of Groupon are living social (backed by Amazon), Google offer, buy with e and the deal map. Due to this sales and profit will decrease. Grouopon need to find some different services with its competitors in order to enhance its competition ability.
The demand reaches saturation Therefore, the industry is in necessary of ripe for the next wave of growth. Sustain, References: -Course guide, ppt notes, Wikipedia, Groupon formal website 1) In the stage of growth. Of the “eat, drink and play’ – the center of the market development Keeping with the youthful and happy nature of its brand, Groupon maintains a simple philosophy of treating its customers the way they like to be treated. When given a choice, customers are loyal to Groupon.
Instead of targeting all customers, Groupon only needs to target new customers in order to grow their business rs Talllng to come up wltn compelling ways to earn a return on spenalng to turn those consumers into repeat customers. But Groupon’s biggest victims are the small businesses that get suckered in to accepting Groupons. Restaurants lose money on them because consumers flood the restaurants, order very low priced meals, strain waiters and cooks, get lousy service, and never return. had to take out a loan to cover its Groupon losses. will never, ever do it again. “