Is Groupon's Business Model? Is It Sustainable?
Assignment 1
Assignment 1 is worth 10% of your final grade, and should be completed after Lesson 3. It has two parts.
Part A: seven short-answer questions worth a total of 35 marks
Part B: two case analyses worth a total of 65 marks
Part A: Short-Answer Questions (35 marks total)
1. What are the major similarities and differences between the Google and Yahoo business models?
Similarities between the business models of Google and Yahoo are that they are both Internet and computer software companies, they both have maps capabilities, searching abilities, instant messaging, finance portals, they are both free, they provide email services for consumers, they both are creative companies, and they give their consumers the ability to create …show more content…
customized profiles. Differences between the Google and Yahoo business models include their home pages, Yahoo has a very cluttered homepage with a lot of information that jumps out at its viewers, Google has a simple designed homepage, consumers know exactly how to use Google because of this layout and sometimes they change the “Google” heading into a creative image reflecting their company. Google employs almost twice the number of employees in comparison to Yahoo. Yahoos email services have an unlimited amount of email storage, and Google has a limited amount but it increases every day. Google has a search engine for books and a desktop search, while Yahoo does not. Yahoo also has a job site (Hot Jobs) while Google does not.
2. What are the most critical challenges and issues companies face when expanding the reach of their markets?
The most critical challenges and issues that companies face when expanding the reach of their markets include keeping up with the market, businesses are continually changing therefore market research must be continuous, it is important to understand product lifecycles so that companies who are expanding can maximize their profitability. Another challenge is cash flow and financial management, with expansion comes an increased amount of cash flow, companies must make the best use of their finances and is an important factor in business planning and accessing new opportunities. One more critical challenge that expanding companies face is having the proper management operation systems. The larger that a business grows it becomes harder to make sure that information is shared and that different operating functions work together effectively. These systems must effectively manage financial records, interactions with customers, employee details, etc.
3. Describe the major business-to-business models. Give examples of each model (other than the ones listed in the textbook).
The four major business-to-business models are e-distributors, e-procurement, exchange, and industry consortium (Turban, 2012). E-distributors are a single firm online version of retail and wholesale that directly supply products and services to individual businesses, for example www.chempoint.com which sells and distribute chemicals to companies (Turban, 2012). E-procurement is firms that provide products to other companies, they create and sells access to digital electronic markets for example www.buyerquest.com which is an e-procurement software system (Turban, 2012). Exchanges are an independent digital electronic marketplace that allows for hundreds of suppliers to meet a smaller number of very large commercial purchasers. The fourth major business-to-business models is industry consortia which is an industry owned vertical marketplace that serve specific industries. They supply a small number of companies with products and services that are specific to their industry for example TheSeam that supplies food and beverages to the hospitality industry.
4. What type of features and characteristics would a large business need in its electronic commerce system? The key components of an electronic commerce system that a large company would need in their business model are a value proposition that defines how the company’s service or product would fulfill the needs of their customers (Turban, 2012). A good revenue model that effectively describes how the firm would earn revenue, produce profits, and produce a good return on invested capital. The company would also need a good market opportunity that is the company’s potential financial opportunities that are available to the company in the marketplace. It is important for the company to have a competitive advantage in the market place and be involved in a competitive environment (Turban, 2012). The company must also put together an effective management team, and an organizational development strategy that entails how the company will organize their work that needs to be accomplished. Finally the company must make sure they have an effective market strategy, the plan that entails how the company will enter new or existing markets and attract new customers.
5. What are portals, and why do they offer an important benefit to e-commerce?
Portals are Internet sites that provide access to links or other sites, they are beneficial to e-commerce because they offer people and businesses to sell and purchase a host of products or services through the Internet along with offering a variety of features to consumers (Turban, 2012). There are two types of e-commerce portals business-to-business portals and business to consumer portals. E-commerce portals can help a company promote their brand and different products they offer. Examples of portals include the shopping cart, payment gateways (pay pal site), and external links.
6. Explain why it is difficult to categorize e-commerce business models. It is difficult to categorize e-commerce business models because there are many there are so many e-commerce business models and more are being invented, there is no one correct way to categorize e-commerce business models. There can be similar business models that may appear in more than one sector, the type of technology involved can affect the classification of a business model, and many companies use multiple business models which can be confusing when trying to categorize them (Turban, 2012).
7. Describe how XML differs from HTML. XML files are meant to hold data and data in an XML file is well described. In XML files tags can be defines and you can tell by looking at the file what it holds (Turban, 2012). XML is case sensitive and is used to store and transport data. HTML on the other hand is used to display data and it is a presentation language. HTML is not case sensitive; you can apply styles and use different layouts to display the data in an HTML file (Turban, 2012).
Case1:
You have been hired as the information technology project manager for a fast-growing e-commerce business in the retailing industry. You are in charge of developing the company’s e-commerce system.
a) Consider your options for building the e-commerce site in-house with existing staff or outsourcing the entire operation. What recommendation best fits the interests of the company? Explain why and support your analysis. (15 marks)
Creating an e-commerce site in-house with existing staff allows the retailing company to build a site that is developed by existing employees (Turban, 2012). This would be the best recommendation for the development of the company’s e-commerce system. As the information technology project manager there would probably already have a full web development team, on the other hand if the company lacked a team of web developers they would need to search for an outside supplier to develop the e-commerce site for the retailing company (Turban, 2012). When developing the e-commerce system work is focused on creating new features based on updating the site, resolving problems, and processing orders more effectively. Having the existing in-house staff develop the e-commerce site would allow the company to have skills that are more specialized and handle ongoing operations instead of relying on third party operations. Since the company is a fast growing e-commerce business and not a brick and mortar company there would be a need for continuous web development support and consistent changes to the website would have to be made to remain up to date and effective. A turnkey website may be a good option for the retailing company because it is a less expensive option and large development projects may become costly especially for smaller or new businesses. Relying on the staff in house can provide specialization and if needed outside vendors can be contracted if there are specific skills that the internal staff lacks for some parts of e-commerce development.
b) Which e-commerce suite software package would you choose and why? (Your answer should be based on the nine key factors presented in Laudon & Traver, page 224.) (15 marks)
The best e-commerce suite package that would suit the needs for the fast growing retail company would be one that provides basic functionality for online sales such as an online catalog, order taking via an online shopping cart, and online credit card processing (Turban, 2012). The company would probably do well with a basic package such as a business application provided by Bizland, HyperMart, or Yahoo Merchant Solutions. They would only need a basic e-commerce suite package because it would be a faster method, easy to use, maintain, and is cost effective. More complex e-commerce suite packages such as Broad Vision Commerce are more effective for large global firms and can be effective in resolving more complex issues and include advanced features. If the retailing company continues to grow and expand it may need to switch its basic software suites to a more advanced option.
Case 2:
a) What is Groupon’s business model?
Is it sustainable? (10 marks)
Groupon’s business model is one that focused its main goal on growing as fast as they could. They knew that customer acquisition was necessary to achieve to make their company grow into a publicly traded corporation, but their business model was based on planning and preparing for short-term initiatives. Their business model also lacked a strategic plan that took long-term goals into consideration. Groupon is a business that is based on offering daily deals to subscribers from local companies. A group of approximately twenty-five people have to buy into the Groupon deal to receive the purchased coupon (Turban, 2012). The company’s business model encourages their subscriber’s invite their friends or family to participate in the deal so that they can get the …show more content…
discount. Groupon does not have a sustainable business model; their operations are based on short-term gains and disregarded planning that is needed to achieve long term sustainability. Groupon offers their suscribers coupons or deals to get approximately fifty percent off of items or services from local establishments, such as restaurants, salon services, fitness classes, etc. Merchants that agree to get involved with Groupon end up taking approximately a seventy-five percent cut in their potential sales through the use of promoting their stores through Groupon in comparison to promoting themselves and offering in store discounts (Turban, 2012). Groupon offers merchant a way to gain new customers and attract more attention. Groupon itself takes fifty percent of the profit from the sale of the coupon and leaves the merchant with the rest making the cut of seventy-five percent (Turban, 2012). This model is not sustainable because eventually merchants will no longer participate in Groupon deals for the cost is causes their company.
b) Map the eight elements of Groupon’s business model. Which ones are strong and which ones are faulty? (25 marks)
Eight key elements of Groupon’s business model include value proposition, revenue model, market opportunity, competitive environment, competitive advantage, market strategy, organizational development, and management team (Turban, 2012).
Groupon is strong in their value proposition that asks consumers why they should buy from Groupon. Groupon is strong in this aspect because they offer their subscribers some personalization and customization options for certain deals, they offer a discounted price which is appealing to consumers, and Groupon facilitates transactions and manages the delivery of the coupon. With regards to Groupons revenue model, the company is lacking. The company knows that to generate profits they must have an advertising revenue model, a transaction fee revenue model, and a sales revenue model, but the company is focused on short-term gains and lacks the ability to plan for and produce a long-term return on investment capital. Groupon is strong when it comes to considering their market opportunity. The company divides their market opportunity into smaller niches such as different categories for deals, and different locations so that consumers can find a deal in their area (Turban, 2012). Groupon is strong with regards to their market strategy, competitive advantage and is involved in a competitive environment depending on geographical location. Although there are other deal sites like Groupon it is still a preference and a leader, they know how to enter
markets and to attract more subscribers, and competitors cannot compete with the discounted coupons on their site. Groupon lack in having a good management team, their not sustainable business model reflects this. Groupon does have a decent level of organizational development; the company has different functional departments to keep their business running.
References
Turban, D. (2012). Electronic commerce 2012 - a managerial and social networks perspective. (Vol. Boston, pp. 60-196). Boston, MAss.: Pearson Learning Solutions.
Assignment 1 is worth 10% of your final grade, and should be completed after Lesson 3. It has two parts.
Part A: seven short-answer questions worth a total of 35 marks
Part B: two case analyses worth a total of 65 marks
Part A: Short-Answer Questions (35 marks total)
1. What are the major similarities and differences between the Google and Yahoo business models?
Similarities between the business models of Google and Yahoo are that they are both Internet and computer software companies, they both have maps capabilities, searching abilities, instant messaging, finance portals, they are both free, they provide email services for consumers, they both are creative companies, and they give their consumers the ability to create …show more content…
customized profiles. Differences between the Google and Yahoo business models include their home pages, Yahoo has a very cluttered homepage with a lot of information that jumps out at its viewers, Google has a simple designed homepage, consumers know exactly how to use Google because of this layout and sometimes they change the “Google” heading into a creative image reflecting their company. Google employs almost twice the number of employees in comparison to Yahoo. Yahoos email services have an unlimited amount of email storage, and Google has a limited amount but it increases every day. Google has a search engine for books and a desktop search, while Yahoo does not. Yahoo also has a job site (Hot Jobs) while Google does not.
2. What are the most critical challenges and issues companies face when expanding the reach of their markets?
The most critical challenges and issues that companies face when expanding the reach of their markets include keeping up with the market, businesses are continually changing therefore market research must be continuous, it is important to understand product lifecycles so that companies who are expanding can maximize their profitability. Another challenge is cash flow and financial management, with expansion comes an increased amount of cash flow, companies must make the best use of their finances and is an important factor in business planning and accessing new opportunities. One more critical challenge that expanding companies face is having the proper management operation systems. The larger that a business grows it becomes harder to make sure that information is shared and that different operating functions work together effectively. These systems must effectively manage financial records, interactions with customers, employee details, etc.
3. Describe the major business-to-business models. Give examples of each model (other than the ones listed in the textbook).
The four major business-to-business models are e-distributors, e-procurement, exchange, and industry consortium (Turban, 2012). E-distributors are a single firm online version of retail and wholesale that directly supply products and services to individual businesses, for example www.chempoint.com which sells and distribute chemicals to companies (Turban, 2012). E-procurement is firms that provide products to other companies, they create and sells access to digital electronic markets for example www.buyerquest.com which is an e-procurement software system (Turban, 2012). Exchanges are an independent digital electronic marketplace that allows for hundreds of suppliers to meet a smaller number of very large commercial purchasers. The fourth major business-to-business models is industry consortia which is an industry owned vertical marketplace that serve specific industries. They supply a small number of companies with products and services that are specific to their industry for example TheSeam that supplies food and beverages to the hospitality industry.
4. What type of features and characteristics would a large business need in its electronic commerce system? The key components of an electronic commerce system that a large company would need in their business model are a value proposition that defines how the company’s service or product would fulfill the needs of their customers (Turban, 2012). A good revenue model that effectively describes how the firm would earn revenue, produce profits, and produce a good return on invested capital. The company would also need a good market opportunity that is the company’s potential financial opportunities that are available to the company in the marketplace. It is important for the company to have a competitive advantage in the market place and be involved in a competitive environment (Turban, 2012). The company must also put together an effective management team, and an organizational development strategy that entails how the company will organize their work that needs to be accomplished. Finally the company must make sure they have an effective market strategy, the plan that entails how the company will enter new or existing markets and attract new customers.
5. What are portals, and why do they offer an important benefit to e-commerce?
Portals are Internet sites that provide access to links or other sites, they are beneficial to e-commerce because they offer people and businesses to sell and purchase a host of products or services through the Internet along with offering a variety of features to consumers (Turban, 2012). There are two types of e-commerce portals business-to-business portals and business to consumer portals. E-commerce portals can help a company promote their brand and different products they offer. Examples of portals include the shopping cart, payment gateways (pay pal site), and external links.
6. Explain why it is difficult to categorize e-commerce business models. It is difficult to categorize e-commerce business models because there are many there are so many e-commerce business models and more are being invented, there is no one correct way to categorize e-commerce business models. There can be similar business models that may appear in more than one sector, the type of technology involved can affect the classification of a business model, and many companies use multiple business models which can be confusing when trying to categorize them (Turban, 2012).
7. Describe how XML differs from HTML. XML files are meant to hold data and data in an XML file is well described. In XML files tags can be defines and you can tell by looking at the file what it holds (Turban, 2012). XML is case sensitive and is used to store and transport data. HTML on the other hand is used to display data and it is a presentation language. HTML is not case sensitive; you can apply styles and use different layouts to display the data in an HTML file (Turban, 2012).
Case1:
You have been hired as the information technology project manager for a fast-growing e-commerce business in the retailing industry. You are in charge of developing the company’s e-commerce system.
a) Consider your options for building the e-commerce site in-house with existing staff or outsourcing the entire operation. What recommendation best fits the interests of the company? Explain why and support your analysis. (15 marks)
Creating an e-commerce site in-house with existing staff allows the retailing company to build a site that is developed by existing employees (Turban, 2012). This would be the best recommendation for the development of the company’s e-commerce system. As the information technology project manager there would probably already have a full web development team, on the other hand if the company lacked a team of web developers they would need to search for an outside supplier to develop the e-commerce site for the retailing company (Turban, 2012). When developing the e-commerce system work is focused on creating new features based on updating the site, resolving problems, and processing orders more effectively. Having the existing in-house staff develop the e-commerce site would allow the company to have skills that are more specialized and handle ongoing operations instead of relying on third party operations. Since the company is a fast growing e-commerce business and not a brick and mortar company there would be a need for continuous web development support and consistent changes to the website would have to be made to remain up to date and effective. A turnkey website may be a good option for the retailing company because it is a less expensive option and large development projects may become costly especially for smaller or new businesses. Relying on the staff in house can provide specialization and if needed outside vendors can be contracted if there are specific skills that the internal staff lacks for some parts of e-commerce development.
b) Which e-commerce suite software package would you choose and why? (Your answer should be based on the nine key factors presented in Laudon & Traver, page 224.) (15 marks)
The best e-commerce suite package that would suit the needs for the fast growing retail company would be one that provides basic functionality for online sales such as an online catalog, order taking via an online shopping cart, and online credit card processing (Turban, 2012). The company would probably do well with a basic package such as a business application provided by Bizland, HyperMart, or Yahoo Merchant Solutions. They would only need a basic e-commerce suite package because it would be a faster method, easy to use, maintain, and is cost effective. More complex e-commerce suite packages such as Broad Vision Commerce are more effective for large global firms and can be effective in resolving more complex issues and include advanced features. If the retailing company continues to grow and expand it may need to switch its basic software suites to a more advanced option.
Case 2:
a) What is Groupon’s business model?
Is it sustainable? (10 marks)
Groupon’s business model is one that focused its main goal on growing as fast as they could. They knew that customer acquisition was necessary to achieve to make their company grow into a publicly traded corporation, but their business model was based on planning and preparing for short-term initiatives. Their business model also lacked a strategic plan that took long-term goals into consideration. Groupon is a business that is based on offering daily deals to subscribers from local companies. A group of approximately twenty-five people have to buy into the Groupon deal to receive the purchased coupon (Turban, 2012). The company’s business model encourages their subscriber’s invite their friends or family to participate in the deal so that they can get the …show more content…
discount. Groupon does not have a sustainable business model; their operations are based on short-term gains and disregarded planning that is needed to achieve long term sustainability. Groupon offers their suscribers coupons or deals to get approximately fifty percent off of items or services from local establishments, such as restaurants, salon services, fitness classes, etc. Merchants that agree to get involved with Groupon end up taking approximately a seventy-five percent cut in their potential sales through the use of promoting their stores through Groupon in comparison to promoting themselves and offering in store discounts (Turban, 2012). Groupon offers merchant a way to gain new customers and attract more attention. Groupon itself takes fifty percent of the profit from the sale of the coupon and leaves the merchant with the rest making the cut of seventy-five percent (Turban, 2012). This model is not sustainable because eventually merchants will no longer participate in Groupon deals for the cost is causes their company.
b) Map the eight elements of Groupon’s business model. Which ones are strong and which ones are faulty? (25 marks)
Eight key elements of Groupon’s business model include value proposition, revenue model, market opportunity, competitive environment, competitive advantage, market strategy, organizational development, and management team (Turban, 2012).
Groupon is strong in their value proposition that asks consumers why they should buy from Groupon. Groupon is strong in this aspect because they offer their subscribers some personalization and customization options for certain deals, they offer a discounted price which is appealing to consumers, and Groupon facilitates transactions and manages the delivery of the coupon. With regards to Groupons revenue model, the company is lacking. The company knows that to generate profits they must have an advertising revenue model, a transaction fee revenue model, and a sales revenue model, but the company is focused on short-term gains and lacks the ability to plan for and produce a long-term return on investment capital. Groupon is strong when it comes to considering their market opportunity. The company divides their market opportunity into smaller niches such as different categories for deals, and different locations so that consumers can find a deal in their area (Turban, 2012). Groupon is strong with regards to their market strategy, competitive advantage and is involved in a competitive environment depending on geographical location. Although there are other deal sites like Groupon it is still a preference and a leader, they know how to enter
markets and to attract more subscribers, and competitors cannot compete with the discounted coupons on their site. Groupon lack in having a good management team, their not sustainable business model reflects this. Groupon does have a decent level of organizational development; the company has different functional departments to keep their business running.
References
Turban, D. (2012). Electronic commerce 2012 - a managerial and social networks perspective. (Vol. Boston, pp. 60-196). Boston, MAss.: Pearson Learning Solutions.