Groupon Business Model - Case Study Example

Groupon’s business model is grounded on a mixture of “economies of networking” as well as “economies of scale.” Normally, economies of networking refer to all the benefits that linked with a bigger number of clients who buy specific good, the bigger the number of customers who use the good or the service, the more value will the good have to every user. Economies of networking in Groupon’s model rise, immediately when the threshold is achieved, in the arrangement of product discounts to the clients who take part in the system of the organization. Therefore, the bigger the threshold the greater the discount gets. This implies that economies of networking depend on the demand factor of the product market due to the establishment of the customer bargaining authority with product retailers. Groupon's business model is designed to make a fee for linking suppliers of products and services with clients by means of striking, discounted proposals. This is actually an old business model and manner of conducting business: suppliers have dispersed discounts for a lengthy period; the notion of a loss leader is antique to such an organization.