Groupon was created in 2008 with a business model of offering daily deals with high discounts for a limited time. By the end of 2009, Groupon had expanded to 28 US cities. Today, Groupon operates in 48 countries and over 500 markets. In 2013, Groupon had $5.8 billion in gross billings and $2.6 billion in revenue, with a market share of 59.1% in the daily deals industry. However, Groupon faces intense competition and high threats of substitution and new entry into the market. It needs to continue innovating and providing the best deals to remain a leader.
2. INTRODUCTION
2007 – creation of “The Point” by Andrew Mason
2008 – creation of Groupon (group + coupon)
Business model - one deal per day, high discount, limited amount of time to buy the
deal and limited numbers of deals offered
1st Groupon - deal for Motel Bar, located just downstairs from the Groupon office in
Chicago, Illinois
End of 2009 – Groupon had spread to 28 U.S cities
Today – Groupon has expanded to 48 countries and over 500 markets
4. MISSION | CULTURE
Mission: “to become the world's commerce operating system. By
connecting buyers and sellers through price and discovery, we have the
opportunity to become one of the world's essential companies, a daily
habit for our customers and merchant partners.”
Culture – creativity, trust, empowerment, transparency, dedication to
customers & mindset of a startup
“We assume that people are fundamentally good and people are
responsible adults” – Andrew Mason
Examples: Open vacation policy, financial goals
6. CURRENT COMPANY PERFORMANCE
Fiscal year 2013:
Gross billings - $5.8 billion
Revenue - $2.6 billion
Operating income (excluding stock compensation & acquisition costs)
- $197.2 million for the full year
Gross profit margin – 58.34%
Operating profit margin – 2.94%
ROE – (-) 4.68%
Free cash flow - $153 million (5.96%
7. CURRENT COMPANY PERFORMANCE
Groupon is doing well in the daily deals market in terms of its market share and
potential growth
2013 – 59.1% market share
GROUPON, INC.
59.1%
OTHER
24.3%
LIVINGSOCIAL
16.6%
9. MAIN OPERATING METRICS
Subscribers - total number of individuals that have completed registration through a
specific date, less individuals who have unsubscribed
in 2011, Groupon had 83.1 million subscribers.
Cumulative customers - total number of unique customers that have purchased
Groupons since 2009
in 2011, it had 15.8 million customers
Featured merchants - total number of merchants featured in a given time period
In 2011, the pool was up to 40,000 merchants
Groupons sold - total number of Groupons sold in a given time period
In 2011, Groupon sold over 60 million Groupons total.
10. CORPORATE GOVERNANCE
Groupon Senior Management Team 2013
Chief Executive Officer & co-founder of the company
Eric Lefkofsky
Chief Financial Officer (since December 2010)
Jason Child
Senior Vice President , Product management (leaving in March)
Jeff Holden
Chief Operating Officer (since May 2012)
Kal Raman
General Counsel (since 2011)
David Schellhase
Senior Vice President, Engineering and Operations (since April 2013)
Sri Viswanath
Senior Vice President, Global Marketing (since June 2011)
Rich Williams
11. CORPORATE GOVERNANCE
STRATEGIC ISSUES
Lack of management skills
Employees grow up to 10,000
Disconnect between top management & employees
Groupon went public – November 2011
Issues with Groupon's S-1 filing
CEO takes the blame
Andrew Mason forced to step down
-> Eric Lefkofsky became the new CEO
12. CORPORATE GOVERNANCE
SOCIAL RESPONSIBILITY
Big supporter of social responsibility
G-Team – team responsible for organizing events using the Groupon website to
support many causes
Social Innovation team in Chicago
Represent corporate social responsibility department
Fall 2013 – development of two research projects
Is Groupon generating more economic activity?
Is Groupon shifting customers’ behavior?
13. EXTERNAL ENVIRONMENT- 5 FORCES
Threat of entry (HIGH)
Anyone can start an online discount business with enough capital.
Buyer power (HIGH)
There are low switching costs for consumers.
Buyers are always asking for more discounts/lower prices.
Supplier power (MODERATE)
There are low switching costs for merchants.
However, merchants are at the mercy of group buying sites.
Rivalry (INTENSE)
Fierce competition based on territorial expansion.
Substitutes (HIGH)
Many competitors.
Easy to find similar deals on competitors’ websites.
14. EXTERNAL ENVIRONMENT- COMPETITION
Groupon has five major competitors:
Living Social - offers one deal a day like Groupon
Tippr - same business model as Groupon but offers 3 deals
BuyWithMe - similar model but only offers deals if enough people
bought it
Kgbdeals - offers several deals per day but the quantity is very
limited
ScoutMob - offers discounts that will allow you to spend money at a
restaurant of your choice
15. INTERNAL ENVIRONMENT- SWOT
Strengths:
Effective communication and fast transaction
Innovation (=new way of purchasing)
Large customers database
Leader (currently) amongst competition
Many brands and variety in products or services (serve large group of customers)
Strong brand recognition
Geographically diversified – operates in 48 countries
Weaknesses:
Over leveraged financial position
Only available in most major cities
Usually first timer customers & rarely return
Recurring high marketing expenditure to maintain growth
16. INTERNAL ENVIRONMENT- SWOT
Opportunities:
Acquisition/Takeovers from large companies
Opportunities to grow market for new products and services
Partnership with social networks
Growth & development of apps for smart phones
Opportunity to tie up with Internet companies such as Google and Facebook to publicize
its deals and enhance its reach
Threats:
Deals mostly offered on discretionary items
There are no significant barriers of entry in the daily-deals segment
Strong competition from Living Social and other competitors
The purchase power could be lower in a big market (major cities)
Economic crisis or slowdown
17. KEY SUCCESS FACTORS
Need to provide best deals
Lots of variety of deals
Get customers to develop positive word of mouth
Good access to channels
Use transactional data to track customers’ preferences
Take advantage of latest technology advances
18. STRATEGIC ALTERNATIVES
Become the starting point for mobile commerce
Redefine local commerce
Enhance the email experience
Continue to build out their categories
Globalize the platforms and processes
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