Gobal_Event_and_Leadership

Global Events and Leadership Groupon – The Fastest Growing Company Ever Nowadays, a variety of web sites sell discount vouchers for different products and services. To customers, discount vouchers promise substantial savings – often more than 50% or more. To merchants, it offers opportunities for price discrimination as well as adverting. Best known among voucher vendors is Chicago-based Groupon (blending “groups” and “coupon”), a two years old startup that purportedly rejected a USD6bn acquisition offer from Google in 2010 in favor of an IPO at yet-higher valuation. Map-reading Groupon is a deal-of-the-day website that features discounted gift certificates. The vision of the company is simple – “Treat customers the way they like to be treated”. Groupon was launched in 2008 in Chicago and now serves 250 markets around the world with over 7000 staff and has amassed 35 million registered users. Groupon acts as ‘assurance” – the offer only available if it achieves certain number of people who purchase the deal. It usually shares 50% of the revenue that charged to customers. The company also sends promotion items via email to its registered members. Groupon’s market primarily composes of female customers (age between 18 and 34), thus the deals are often focused on the health, fitness and beauty markets. The fast expansion of the company can also be explained by its active acquisition strategy over different countries thus successfully increase the penetration rate. Andrew Mason (30 years old) is the founder / CEO of Groupon. Others members of senior management are very experienced and most of them are from IT related industry (e.g Amazon, Google, Yahoo, and Silicon Valley etc). However, two senior executives had resigned recently (Ms. Margo Georgiadis after six months services and Rob Solomon after one and half year service) after the deferring of the IPO. Map-testing Given this business model and the low barriers to entry on the Internet, anyone can replicate it. More than 200 copycat sites in US with another 500 overseas, including China. Living Social is identified as closest rival against Groupon which servers more than 580 markets in 25 countries with almost the same business model. Big players, including Twitter, Amazon.com and Google are also interested in this market. Thus the future growth to Groupon is questionable with such big competitions in an open market. Further, Groupon’s expansion is by acquisition which may require a lot of capital / funding. With the revised accounting method, Groupon’s 2010 revenue reduced substantially from USD713.4 million to USD312.9 million. This may affect creditability of the company for raising funds in future, amid the deferring of IPO. With regard to the leadership style, did Andrew Mason prepare further expansion' People described Mr. Mason made decision more instinctively. It seems that he had problem for working with two senior executives who only joined Groupon for a very short period of time (Ms. Margo Georgiadis and Rob Solomon). One colleague told the Financial Times that “Ms Georgiais was brought in to implement strategy and operational discipline and she did it, but Andrew was fighting her every step of the way”. After that, Mr. Mason decided the sales, channels, international and marketing will now report to him directly. One the business side, the discount vouchers actually reduces profits for some of the merchants (32% said unprofitable by one business survey). One of the examples is the Gap-Groupon deal which was selling at a rate of 10 per second, selling 300,000. However, Gap lost USD7.5 million in revenue on the deal. It only moves the products but not acquires profitable customers. More than 40% of the respondents indicated they would not run such a promotion again. However, some of the merits of this fast growing business should not be neglected. The question is how we can make use of it. Groupon is very successful in advertising the NEW products which informing customers of new merchant’s existence. It is also good for experience goods (i.e. goods for which some characteristics cannot be observed prior to consumption). Price discrimination can attract more customers to try the products and explore the market. Seasonal goods can also use discount vouchers in order to reduce the sunk costs for the unsold products. Map making Will Groupon sustain its fast growth in the near future' The large fee charge by Groupon may impede firms’ usage of discount vouchers. Competition may drive down these fees in the future. Using discount coupons should be promoted as “advertising” rather than “price discrimination” strategy to the merchants in the future as pricing discount is not value add and harmful to the profitability. Should the firm used discount coupons as promotion tools with added value will be willing to re-join Groupon’s promotion campaign again. Further, Groupon should explore the non-female target market in order to sustain the growth. Groupon should make use of its big customer base to convey information that is value to the merchants, such as customers’ purchasing habit, frequency of on-line shopping etc. This will value add to the merchant and distinguish its market niche with other competitors. Conclusion In a nutshell, current voucher services’ profits and recent growth may therefore not be good predictors of those services’ future values. It really all depends on how they position themselves in the market and sustain the growth through various by tie up the long-term relationship with existing merchants. Reference 1. Wikipedia. (2011). Groupon [online]. Available from: http://en.wikipedia.org/wiki/Groupon [assessed 26 September 2011]. 2. Forbes by Christopher Steiner. (30 August 2010). Meet The Fastest Growing Company Ever [online]. Available from: http://www.forbes.com/forbes/2010/0830/entrepreneurs-groupon-facebook-twitter-next-web-phenom.html [accessed 26 September 2011]. 3. Benjamin Edelman, Sonia Jaffe, and Scott Duke Kominers. (2011). To Groupon or Not to Groupon: The Profitability of Deep Discounts. Harvard Business School. 4. Groupon About. (2011). Groupon: Collective Buying Power [online]. Available from: http://www.groupon.com/about [assessed 26 September 2011]. 5. Countney Rubin. (20 August 2010). Groupon Goes National With Gap Deal [online]. Available from: http://www.inc.com/news/articles/2010/08/groupon-goes-national-with-gap-deal... [assessed 26 September 2011]. 6. Ryhsorg. (29 September 2010). Study finds Groupon is more beneficial for consumers than businesses [online]. Available from: http://www.physorg.com/news204987081.html [accessed 30 September 2011]. 7. Chicago Magazine by Marcia Froelke Coburn. (August 2010). On Groupon and its founder, Andrew Mason [online]. Available from: http://www.chicagomag.com/Chicago-Magazine/August-2010/On-Groupon-and-its-founder-Andrew-Mason/ [accessed 26 September 2011). 8. Financial Times by Joseph Menn and Richard Waters in San Francisco. (24 September 2011). Groupon filing halves sales as executive goes [online]. Available from: http://www.ft.com/cms/s/0/9a33dcba-e636-11e0-960-00144feabdc0.html [accessed 26 September 2011]. 9. The Wall Street Journal by Shayndi Raice. (24 September 2011). More Trouble for Groupon IPO [online]. Available from: http://online.wsj.com/article/SB10001424053111903791504576589211214409214.html [accessed 26 September 2011].