Company Profile - Coursework Example

?Groupon.com company analysis Groupon.com is the market leader in the relatively new coupon industry. It operates as an online platform that uses crowd-sourcing to offer consumers products and services at unbeatable prices with discounts ranging from 50% to 90% for those products and/or services that are featured on that particular day as a deal-of-the-day. The company offers these localized coupons in about 500 markets and 44 countries worldwide (“About Us - Groupon.com” 1). From its online presence and presentation Groupon’s typical customer would be an internet savvy individual anywhere in the globe where the company has local partners. This individual would be old enough to own a credit card that is mandatory for making the purchases and is adventurous to try out new products/services because these make up most of the discounted offers. Groupons’ success so far Groupon.com has carved out a unique market space, considering that it offers diverse products and services, which differentiates it from traditional retailers: both brick-and-mortar and pure-play. Its major strengths are its brand as the trailblazer, its huge market presence, and its large financial backing of about US$ 1.2 billion. Groupon’s greatest opportunity is in the ease with which it can extend its service to more cities throughout the world. In fact, the company is currently leveraging its brand by extending its offering to willing collaborators through its Groupon Affiliate Program. The macro-environmental climate appears favorable for Groupon.com. The possible difficulties that it may have encountered due to political, legal, social, cultural and technological issues have for a greater part been addressed by other major online retailers such as Amazon.com and E-bay. Secondly, the fact that the world is emerging from an economic recession, consumers are more keen to watch on their expenses and as such it would not be foolhardy to anticipate an increased market for coupon / discount / bargain shoppers who would appreciate Groupon’s value proposition. However, as Gans (2) points out, Groupon’s prospects for long-term success are not guaranteed. Groupon’s unsecure future Groupon.com’s success has spawned numerous clones across the globe which Gans (2) estimates to be 400 competitors so far. The organization’s greatest weakness is that its business model is easy to replicate and even perfect. This makes Groupon’s first-mover competitive advantage difficult to sustain. Moreover, the low barriers to entry may make it tempting for some of the company’s suppliers to contemplate integrating forwards. We cannot also neglect the threat posed by the big Internet companies such as Google, Facebook, and Amazon that have the resources necessary to acquire rival coupon companies and enter the industry. One of Groupon’s major strategic blunders was not to have taken the purported $6 billion bid from Google when it had the chance (Gans 2). Other than its leadership in having a big solid base of accounts, every other aspect of Groupon’s business is easily replicable. Furthermore, the company’s US$ 1.2 billion current financial base is meager in comparison to, say, Facebook or Amazon, if they decided to acquire one of Groupon’s rivals and enter this new industry. The coupon industry is at a point where the early Internet companies where before the shakeout in the early 1990s. Groupon’s rejection of the Google offer could be viewed as a strategic blunder because Groupon.com could have utilized not only the cash injection but other resources available to Google to explore, discover and build a sustainable competitive advantage. Groupon.com’s current strategy may not be able to ensure that the organization retains its current industry leadership status. For starters, with 400 competitors, most of who are beginning to focus on niches such as city or through their offerings, consumer power continues to increase. Moreover, the information-rich Internet gives customers an edge when it boils down to selecting a coupon provider and this may lead savvy customers to pit Groupon.com against its rivals (Porter, “The Five Competitive Forces That Shape Strategy” 2). Secondly, the online coupon industry is still in its early stages and as such the market behavior is still distorted due to rampant experimentation by customers (Porter, “Strategy and the Internet” 64). This implies that the sustainability of the market itself could be questionable. Nevertheless, there are certain strategies that Groupon.com could take to enhance its competitiveness and ensure its long-term success. Proposed strategies for Groupon.com Aaker (3) says that there are 12 ways that an organization could use to create barriers to their rivals: (1) proprietary technology; (2) ongoing innovation; (3) scale; (4) investment; (5) execution; (6) brand networks; (7) customer involvement; (8) self-expressive benefits; (9) brand equity; (10) brand loyalty; (11) branded differentiators; and (12) exemplar status. According to Aaker (3) these strategies have been used by the firms that have enjoyed decades of life after utilizing a combination of the above strategies to ensure that their competitors remain weak. Strategies 6 to 10 involve the brand and therefore we would advise Groupon.com to first concentrate on implementing any of the first five strategies before moving on to any of the last seven (from numbers 6 to 12). To begin with Groupon needs to seek for and court a bigger Internet market player such as Facebook or Microsoft so that it can have the finance required for investing in ongoing innovation. The benefit of having continuous innovation is that it transforms the organization’s competitive advantage into a moving target. This will ensure that competitors are always a step behind. Ongoing innovation is better for Groupon than seeking to develop proprietary technology, which in Internet technologies tends to be difficult to sustain. Scaling will also not work because Groupon’s business model is not based on the low marginal costs of an Internet business but on a business-by-business costly sales effort. This implies that there does not appear to be scale economies that could keep competitors at bay (Gans 10). In conclusion, Groupon.com’s success so far can almost be singled out to its first-mover advantage which is not sustainable using its current business strategy. The first course of action that Groupon should take is to seek a strategic partner or investor to shield it from the threat of entry posed by the large Internet companies. After that Groupon should then focus on implementing an innovation strategy that shall enable it perfect the execution of its services and most importantly increase the reliability dimension of its service. The coupon industry may be heading towards a shakeout but if Groupon.com lays its strategy well, it could survive like Amazon and eBay survived the dotcom debacle of early 1990s. Works cited Aaker, David. “Twelve Ways to Create Barriers to Competitors.” The Conversation - Harvard Business Review 20 May 2011. Web. 23 May 2011. “About Us - Groupon.com.” Groupon.com 23 May 2011. Web. 23 May 2011. Gans, Joshua. “Agreeing on Groupon.” The Conversation - Harvard Business Review 20 May 2011. Web. 23 May 2011. Porter, Michael E. “Strategy and the Internet.” Harvard Business Review Mar 2001 : 62-78. Print. ---. “The Five Competitive Forces That Shape Strategy.” Harvard Business Review Online 2008 : 1-18. Print.  Read More