Groupon Swot Analysis Paper
To: Board of Directors
From: Corporate Investments
Date: 08/12/11
Re: Groupon investment
Groupon’s business model is based around offering mass discounts on certain products and services to subscribed customers from merchants that have signed up with them. The strategy used combines economies of networking and economies of scale. (Mordoekataus, 2011) Groupon has demonstrated vast growth in terms of reporting revenue of $713.4 million in 2010, reaching over 83 million subscribers while advertising the products and services of 56,781 merchants. (Mordoekataus, 2011) In terms of strengths, Groupon is able to offer consumers large discounts as well as allowing for the new discovery of products and services. Local merchants signed up with …show more content…
(Abdullah, 2011)In terms of Porter’s forces of analysis there is a high threat of new entrants as there are hardly any barriers to entry in terms of setting up a business offering the same products. Groupon’s business model has no comparative advantage as there are potentially high levels of substitute competition as consumers will quickly move onto other companies that are offering better deals as well as merchants switching to be able to retain a higher level of profit than what is being offered by …show more content…
It raises the question as to how much Groupon is actually paying for subscribers and whether the benefits actually outweigh this cost. Investor money is also not being used traditionally in the sense of being used to grow the business but are instead being given went to early investors and insiders. (Mordoekataus, 2011) The only way for Groupon to succeed in sustained merchant growth in the long term is to separate itself from the competition by being able to innovate. There is some opportunity for customer retention by teaming up with large supermarket corporations through the use of loyalty cards. (Conlin, 2011) This is an effective strategy as they do actually have big marketing budgets that they might be looking to minimize by giving out coupons. My recommendation would be not to invest in Groupon as its business model is by no means sustainable. The main reason for this is the presence of such a high level of competition, accompanied by no barriers to entry in this market. Groupon has little bargaining power with product suppliers and it seems as if it has already reached its
From: Corporate Investments
Date: 08/12/11
Re: Groupon investment
Groupon’s business model is based around offering mass discounts on certain products and services to subscribed customers from merchants that have signed up with them. The strategy used combines economies of networking and economies of scale. (Mordoekataus, 2011) Groupon has demonstrated vast growth in terms of reporting revenue of $713.4 million in 2010, reaching over 83 million subscribers while advertising the products and services of 56,781 merchants. (Mordoekataus, 2011) In terms of strengths, Groupon is able to offer consumers large discounts as well as allowing for the new discovery of products and services. Local merchants signed up with …show more content…
(Abdullah, 2011)In terms of Porter’s forces of analysis there is a high threat of new entrants as there are hardly any barriers to entry in terms of setting up a business offering the same products. Groupon’s business model has no comparative advantage as there are potentially high levels of substitute competition as consumers will quickly move onto other companies that are offering better deals as well as merchants switching to be able to retain a higher level of profit than what is being offered by …show more content…
It raises the question as to how much Groupon is actually paying for subscribers and whether the benefits actually outweigh this cost. Investor money is also not being used traditionally in the sense of being used to grow the business but are instead being given went to early investors and insiders. (Mordoekataus, 2011) The only way for Groupon to succeed in sustained merchant growth in the long term is to separate itself from the competition by being able to innovate. There is some opportunity for customer retention by teaming up with large supermarket corporations through the use of loyalty cards. (Conlin, 2011) This is an effective strategy as they do actually have big marketing budgets that they might be looking to minimize by giving out coupons. My recommendation would be not to invest in Groupon as its business model is by no means sustainable. The main reason for this is the presence of such a high level of competition, accompanied by no barriers to entry in this market. Groupon has little bargaining power with product suppliers and it seems as if it has already reached its