Groupon: Current and Future Strategies - Case Study Example

GROUPON CASE STUDY
Introduction
Contemporary market environments are increasingly competitive and unstable owing to the changing social, legal, political, environmental, economic, financial, technological, and global forces that are accompanied by increased access to information and changing consumer needs and expectations as indicated by Douglas et al. (2011). Therefore, it has become imperative for organizations large and small, public and private, profit and non-profit making to carry out analysis of their internal and external environments in order to develop and implement strategies that aligned to the needs and expectations of these environments and in so doing, enhance their sustainable competitive advantage as supported by Johnson & Scholes (2011).

According to Kazmi (2008), analysis of the internal and external environments entails examining the organization’s strengths, weaknesses, opportunities, and threats and evaluating the industry environment respectively.

Background of Groupon
Groupon Company was an online company that used Groupon, which was an online coupon, which permitted a consumer upon subscribing to Groupon.com, to buy a particular service from a local business at discounted rates of 50% to 90% of the regular price of services. In two years since it was established, Groupon Company had more than 35 million users and had annual revenues amounting to almost one billion US dollars. Following the continuous success, Groupon attracted the attention of Google, which was offering to buy out the company. The decision that the management at Groupon had to make was to strategically decide what was best for Groupon, to sell out, or to continue alone.

Industry Analysis
I. Threat of new competition
The threat of new competition in the daily deal industry in which Groupon Company operated was significantly high. As highlighted in the case, once Groupon established their Groupon model of collective buying and offering daily deals, there was a flood of businesses from different sectors and from different geographical locations, which were eager and ready to get into business with Groupon and capture the emerging and wide customer base that Groupon had. As a result, new competitors emerged to get the most out of the success of collecting buying and daily deals generated by Groupon. Therefore, the threat of new competition remained significantly high as the market became saturated.

Irrespective of the increasing competition, the majority of the new competitors focused on niche buying pockets such as travel, and therefore, none was able to effectively rival Groupon. Nevertheless, it was important for Groupon to keep an eye on competition because many of the emerging competition used deals that were similar to Groupon’s in terms of offer timing, the type of local businesses promoted, and the means through which the local businesses would get into business with a collective buying company in order to promote and push their enterprises into the public eye. The only difference between Groupon and her new competitors was in how each one placed its spin on how their daily deals were made accessible to potential customers who bought them.

There are many online and offline organizations that were coming up offering the same products and services that Groupon offered thus, increasing the threat of new competition. The low switching costs, low barriers of entry and low exit barriers, access to distribution, and industry profitability are the main factors that can decrease the profitability of industry players and more so in markets where product differentiation is difficult to achieve. Such as a market is where Groupon operated and as such made the threat of new competition in the daily deal industry high.

The low barrier to entry in this industry was due to the fact that daily deal business is based on a clever idea and not on major technological progress and new entrants into the market have few or no compliances to deal with since the industry is not heavily regulated.