Groupon: The road ahead                         Anurag Jaiswal                   Ignacio Muñiz Garcia                     ...
Agenda1. Introduction2. Situation analysis and challenges a) Internal analysis and challenges b) External analysis and cha...
What is Groupon?   Groupon is deal-of-the-day website that has grown exponentially worldwide                              ...
Local Deals MarketThe local deals market in the U.S. is expected to increase at a faster pace than theoverall Online ads m...
Groupon Performance in the US     The growth seens to be slower and even negative in the last month          Groupon Reven...
Agenda1. Introduction2. Situation analysis and challenges a) Internal analysis and challenges b) External analysis and cha...
Groupon main challengesGroupon is facing both, internal and external challenges                                External Ch...
Problems in operations and services – local businesses and customers     Leading to low level of satisfaction and loyalty ...
Why revenues are decreasing                 The internal service problems are damaging the number of deals and their value...
Local Deals Industry analysis     Due to the high profitability of the industry and the medium-low strength of the     com...
Competition analysis  Local deals market is heating up in the USOur analysis shows that there are the following main compe...
Competition analysisA comparison of services offered                          Matrix                                      ...
Competition analysisA comparison of revenues                                                                              ...
Why revenues are decreasing                 The competitive increase of the market is putting pressure in the margins     ...
Agenda1. Introduction2. Situation analysis and challenges a) Internal analysis and challenges b) External analysis and cha...
Recommendations Strengthen internal capabilities & differentiation to safeguard market-leader positionRecommendation      ...
Thank you!             Q & A?                      16
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Strategy Analysis - Groupon

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Prepared by the students of strategic management at the MBA program of IE Business School, this presentation analyzes Groupon’s position in the US market, the pitfalls in its current business model and recommends solutions for sustainable growth

Published in: Business, Travel

Strategy Analysis - Groupon

  1. 1. Groupon: The road ahead Anurag Jaiswal Ignacio Muñiz Garcia Mariana Penzini Pedro Oliveira Roman Viñoly Shirley Kleinman IE Business School
  2. 2. Agenda1. Introduction2. Situation analysis and challenges a) Internal analysis and challenges b) External analysis and challenges3. Recommendation 1
  3. 3. What is Groupon? Groupon is deal-of-the-day website that has grown exponentially worldwide Selected deals every day! A minimum number of Groupon keeps people must buy the 50% of the deal 30% to 90% deal for it be valid value Discount!Groupon’s growth record Rejects $6B buyout by Raises $950M funding Expands to Latin Google, and expands to and expands to India America, Acquires Clan HK, Singapur and Taiwan South Africa and Israel Descuento 500 Expands to Japan 400 Expands to Europe via and Russia trough acquisition of CityDeal acquisitions 300 Raises $30 M in a Deals launched in funding round 200 major US cities 100 0 Apr-09 jun-09 sep-09 oct-09 nov-09 Apr-10 jun-10 sep-10 oct-10 nov-10 jul-09 Aug-09 jul-10 Aug-10 Jan-10 feb-10 Jan-11 feb-11 Dec-09 Dec-10 mar-09 may-09 mar-10 may-10 mar-11 Source: Groupon Reports and neXtup Research 2
  4. 4. Local Deals MarketThe local deals market in the U.S. is expected to increase at a faster pace than theoverall Online ads market Local deals market in the US 3,620 3,120Local Deals Market (Millions) 2,620 2,120 20% CAGR 1,620 3,069 2,557 1,120 2,131 272% CAGR 1,776 1,480 620 1,000 200 120 2009 2010 2011E 2012E 2013E 2014E 2015E Source: eMarketer and neXtup Research Estimates 3
  5. 5. Groupon Performance in the US The growth seens to be slower and even negative in the last month Groupon Revenues in US Millions USD100 88,9 75,6 80,5 80 61,7 18% CAGR 52,8 54,5 60 45,5 40 26,4 30,5 29,4 20,6 5% CAGR 13,5 19,0 20 10,8 0 Jan-10 feb-10 mar-10 Apr-10 may-10 jun-10 jul-10 Aug-10 sep-10 oct-10 nov-10 Dec-10 Jan-11 feb-11 Source: Groupon website Groupon.com Unique visitors Millions20 15,6 14,7 15,215 11,2 22% CAGR 8,3 8,610 6,5 7,6 4,6 4,9 5 2,0 2,5 3,1 12% CAGR 1,9 0 Jan-10 feb-10 mar-10 Apr-10 may-10 jun-10 jul-10 Aug-10 sep-10 oct-10 nov-10 Dec-10 Jan-11 feb-11 Source: Compete 4
  6. 6. Agenda1. Introduction2. Situation analysis and challenges a) Internal analysis and challenges b) External analysis and challenges3. Recommendation 5
  7. 7. Groupon main challengesGroupon is facing both, internal and external challenges External Challenges Higher competition Internal Challenges Subscribers and Local business low service 6
  8. 8. Problems in operations and services – local businesses and customers Leading to low level of satisfaction and loyalty Local-businesses face ..to upsell to customers ...and to turn Groupon’s customer Local difficulty to best for more than the customers to repeat profile changes fromBusiness structure and face value of the full-price customers deal-savvy to the operate a deal coupon general population Only 66% of deals were profitable Only 50% of customers Only 31% of customers Business NO willing to collaborate again Low level of satisfaction and 42% Repeat customers ? high level of Churn rate 58% Business willing to collaborate again End-customers receive low quality Not redeeming vouchers End service and bad experiencecustomers from the local-business ~ 20% breakage rate Source: Jesse H. Jones Graduate School of Business 7
  9. 9. Why revenues are decreasing The internal service problems are damaging the number of deals and their value Bad service and experience # of subscribers from subscribers decrease de number of deals Deal Subscribers Deal per subscribers ! Bad service and experience from local business will damage # of deals Groupon’s negotiation power to offer Business deals deals with more gross price and 300 deals # of Local Business discount to customers demand ! Deal Local Business Deal per Local Business Groupon Net Revenues $ 30.000 Discounted Value Gross price ! $ 200 $ 500 Net deal size ! $ 100 Groupon Revenues in US Discount to Millions USD Share to Groupon100 88,9 customers 75,6 80,5 80 18% CARG 52,8 54,5 61,7 50% 60% 60 45,5 40 26,4 30,5 29,4 19,0 20,6 5% CARG 20 10,8 13,5 0 Jan-10 feb-10 mar-10 Apr-10 may-10 jun-10 jul-10 Aug-10 sep-10 oct-10 nov-10 Dec-10 Jan-11 feb-11 Source: Groupon webside 8
  10. 10. Local Deals Industry analysis Due to the high profitability of the industry and the medium-low strength of the competitive forces, we expect the entrance of new competitors in the market Market characterized by network externalities High strength Medium strength Medium bargain power of suppliers Low strength  Moderate power in the hands of the mass social-media players – Facebook and Google  Low power of the IT suppliersMedium threat of new entrants Medium Threat of substitutes Medium barriers to entry  Significant numbers of substitutes – low capital-intensive nature of the – Other communication tools business,… Competitors – Coupons catalogues – …but high network externalities Low barging power of customers Business Subscribers  Low bargain power of the business  Low bargain power for the subscriber – Low concentration of business, very atomize – Large number – Unorganized nature 9
  11. 11. Competition analysis Local deals market is heating up in the USOur analysis shows that there are the following main competitors in the US.Here is a comparative analysis with Groupon: Is deals their Local core Offers Types of deals Operations Description business? Sales force  Offers of the day Local services and products    Local services and Amazon.com is stakeholder Offers of the day products 300+ cities in US  Offers Catalogue Premium Products and services  6 metropolitans in US X Offers of the day and catalogue Local services and products X BETA to be launched in Portland, Oregon X Offers catalogue Local services and products X Businesses join for free 10
  12. 12. Competition analysisA comparison of services offered Matrix Size = subscribers High Groupon social % Gross Margin Google Gilt City Facebook Low Low Customized service High 11
  13. 13. Competition analysisA comparison of revenues Size = Revenues 100% 80% Average margin per deal 60% 40% 20% 0% -5 0 5 10 15 20 25 30 35 -20% Average number of deals offered each day 12
  14. 14. Why revenues are decreasing The competitive increase of the market is putting pressure in the margins # of subscribers Deal Subscribers Deal per subscribers # of deals Business deals 300 deals # of Local Business demand Deal Local Business Deal per Local Business Groupon Net Revenues $ 30.000 Discounted Value Gross price $ 200 $ 500 Net deal size $ 100100 Groupon Revenues in US Millions USD 75,6 80,5 88,9 Share to Groupon ! Discount to customers 80 18% CARG 52,8 54,5 61,7 50% 60% 60 45,5 40 26,4 30,5 29,4 19,0 20,6 5% CARG 20 10,8 13,5 0 Jan-10 feb-10 mar-10 Apr-10 may-10 jun-10 jul-10 Aug-10 sep-10 oct-10 nov-10 Dec-10 Jan-11 feb-11 Source: Groupon webside 13
  15. 15. Agenda1. Introduction2. Situation analysis and challenges a) Internal analysis and challenges b) External analysis and challenges3. Recommendations 14
  16. 16. Recommendations Strengthen internal capabilities & differentiation to safeguard market-leader positionRecommendation Description Consequence  Advise the businesses on how to best structure and operate a deal – cap size • High quality of Deal management service – Number of employees • Repeatconsulting services – Upsell customers – Follow-up  Collect data about customers • Coupon Deal customization  Offer each customer the most relevant deals purchase • Threat of  Exclude the businesses’ existing customers cannibalization  Provide a feedback platform to both businesses and customers • Quality of localFiltering mechanism  Block particular customers or take corrective measures against businesses businesses  Identify ”best” businesses and build stronger long-term relationships • Quality of end customer  Loyalty programs • Customer loyalty Brand loyalty • Repeat  Improve the customer services to the end-customers customers • Revenue growth • Wider customer Higher value  Target the “luxury” businesses category base • Breakage 15
  17. 17. Thank you! Q & A? 16

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