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CASE 14
Groupon, Inc.: Daily Deal or Lasting Success?
I. CASE ABSTRACT
Andrew Mason sat in his office in Chicago, Illinois thinking about the
city. His adult life began there—he graduated from Northwestern in 2003. His
business originated there not long after—Groupon began as a local Chicago
discount service and became a global phenomenon seemingly overnight. Mason
knew that Groupon was a great idea. The company was the first of its kind and
changed the way consumers spend, shop, and think about discounts. But how
could Groupon, based in such innovation and having experienced such
exceptional growth, be in such a precarious position? A wave of competition
had swelled including the likes of technology giants and both general and
niche daily deals services, all replicating Groupon’s business model. How
could Groupon compete against large companies and their expansive resources?
Would consumers and merchant partners flock to other services that better
suited their needs? Mason worried about the increasingly downward trajectory
Decision Date: 2012 FY Sales: $1.6 billion
FY Net Loss: $(347) million
II. CASE SUBJECTS AND ISSUES
Online Sales/Technology Brick–and–Mortar Sales
Strategy Formulation Competitive Advantage
CASE 14
Groupon, Inc.: Daily Deal or Lasting Success?
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III. STEPS COVERED IN STRATEGIC DECISION–MAKING PROCESS
IV. CASE OBJECTIVES
1. To discuss the integration of online promotion for brick–
–and–mortar retailers.
2. To discuss the impact of the restatement of financials.
V. SUGGESTED CLASSROOM APPROACHES TO THE CASE
1. This is an excellent case for instructor–led discussion.
2. This is an excellent case for an exam or written case analysis.
VI. DISCUSSION QUESTIONS
1. Does Groupon result in repeat customers or one–time users?
CASE 14
Groupon, Inc.: Daily Deal or Lasting Success?
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2. What is deal fatigue?
3. Can Groupon maintain its phenomenal growth rate?
VII. CASE AUTHOR’S TEACHING NOTE—Not Available
VIII. STUDENT STRATEGIC AUDIT
I. Current situation
A. Performance
1. History
a. The original concept for Groupon started in 2006, by
Andrew Mason when he became frustrated when trying to
cancel a cell phone contract.
b. He began developing a web platform based on the
c. Groupon began as a local Chicago discount service and
a. 2010—Groupon was serving more than 150 markets in
North America and 100 markets in Europe, Asia, and
South America.
a. Groupon owned number one market share in thirty–seven
of forty–eight countries served as of the first
quarter of 2012.
B. Strategic Posture
CASE 14
Groupon, Inc.: Daily Deal or Lasting Success?
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1. Mission
a. “To become the operating system for local commerce.”
2. Objective
a. Become an essential part of everyday local commerce
for consumers and merchants.
3. Strategies
a. Creating a new way for local merchant partners to
attract customers.
b. Use of its technology and scale to target relevant
deals.
4. Policies
a. Employ technology to improve the experience.
b. Groupon used a common information technology
platform.
II. Corporate Governance
A. Board of Directors
1. Eight members
a. One internal and seven external.
B. Top Management
1. CEO—founder Andrew Mason.
2. Seven other executives.
a. Diverse work experience.
i. Online retail—marketing and product development.
CASE 14
Groupon, Inc.: Daily Deal or Lasting Success?
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III. External Environment
A. Societal Environment
1. Economic
a. Marketplace is global (O).
2. Technological
a. Communication technology constantly changing modes
(O/T.)
3. Political and legal
a. Consumer protection, marketing practices, tax and
privacy rules and regulations (O/T).
b. Evolving regulation of internet business, the Credit
Card Responsibility and Disclosure (CARD) Act of 2009
(N/A).
4. Sociocultural
a. Increased availability of information pertaining to
the prices of goods and services (O).
B. Task Environment
1. Threat of new entrants: high
a. Significant revenue increases didn’t go unnoticed by
potential competitors.
2. Bargaining power of buyers: high
CASE 14
Groupon, Inc.: Daily Deal or Lasting Success?
a. Sales break down (North America 40 percent and
international 60 percent).
3. Threat of substitute products: moderate
a. Company’s offer discounts directly, rather than
through a medium such as Groupon
4. Bargaining Power of Suppliers: Low
a. Substantial subscriber base provides Groupon leverage
when working with Merchant Partners.
5. Rivalry among competing firms: high
a. Expansion of its global sales force.
6. Power of other stakeholders: low
a. To retain all earnings for the foreseeable future to
finance the operation and expansion of our business.
b. Investors and the Securities and Exchange Commission
IV. Internal Environment
A. Corporate Structure
1. Centralized management
2. Not properly organized on geographical lines.
3. Unclear structure
B. Corporate Culture and Values
1. Wide range of knowledge: academic, professional,
intellectual.
CASE 14
Groupon, Inc.: Daily Deal or Lasting Success?
C. Corporate Resources
1. Marketing
a. Overview
i. Objectives—grow subscriber and customer base.
ii. Strategies—focus on demographic most likely to use
the service (i.e. younger consumers prone to
search for deals via the internet and mobile
vi. All of the marketing efforts appear to be
consistent with the approach of the organization.
b. Market position and marketing mix
i. Groupon is targeting its primary market (Internet
and mobile device users) looking for discounts via
its current methods.
ii. Groupon experienced many “first–mover” advantages
resources.
iii. In 2011, 61 percent of sales came from
international markets, an increase of 25 percent
from the prior year.
iv. Products offered—in 2012; Groupon began offering
more than just the “Daily Deals” to its
subscribers in order to try and increase the
utilization from each of its subscribers. Expanded
from offering deals through e–mails to having a
CASE 14
Groupon, Inc.: Daily Deal or Lasting Success?
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organizations, such as Amazon and Google, are
threatening due to the size of their respective
customer bases and technological resources.
b. Marketing managers—helpful in devising new
products in order for Groupon to differentiate
itself from its competitors.
c. Marketing in foreign segments—marketing
approaches are similar throughout.
2. Finance
a. Revenue increased from $14,540 million to $1,610,430
million (2009–2011)(S).
CASE 14
Groupon, Inc.: Daily Deal or Lasting Success?
Key Ratios 2009 2010 2011
Explanation
Current Ratio 1.39 0.47 1.33
Current Ratio = CA/CL
CR> 1 indicates that the company can support
its short–term obligations without additional
financing.
ROI % –8.96% –108.34% –16.78%
ROI = NPafter taxes/ total assets
This ROI only got better in 2011 due to
increase in cash from investors. Groupon still
hasn‘t made a profit.
ROE % 4.47% –5118.06% –42.38%
ROE = NP After taxes/Shareholder equity
The increase from 2010 to 2011 is due to the
slight improvement in operations coupled with
3. Research and Development
a. Utilized existing technology, but did not bring new
technologies to the organization as means of
distribution or analyses (w).
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Groupon, Inc.: Daily Deal or Lasting Success?
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d. No strategic research of target market to help
identify merchant partners that provide goods or
services wanted (w.)
i. Development of new products that will help
differentiate Groupon from competitors, such as
Amazon and Google (s).
a. Groupon Now!
4. Operations and Logistics
a. Current objectives include: grow subscriber/customer
base and merchant partners, leverage technology,
increase quantity and variety of products, and expand
organically thru acquisitions.
themselves (delivering the product to consumers) was
strictly Internet and technology dependent, as all
deals were distributed through emails, website, or
other online applications. The corporation’s main
objectives were to grow subscriber base for the
Florida, and California.
ii. N/A
c. Data Centers, although mission critical facilities
with UPS (uninterruptible power supplies) are not 100
percent immune to natural disasters etc. Product
CASE 14
Groupon, Inc.: Daily Deal or Lasting Success?
d. Hosting servers, sales–staff, and revenue grow
proportionally to each other.
e. Groupon was a first–mover to the marketplace; they
own market share in all markets. Traditional
manufacturing metrics do not apply. Marketing costs
5. Human Resource Management
a. Current HR management strategy:
i. HR not discussed in depth.
ii. Objectives:
a. To hire motivated, internet
savvy/entrepreneurial employee.
b. Start–up company, exponential hiring spree
particularly in international markets.
c. No similar companies; Groupon was a “first mover.”
6. Information Systems
a. Employ technology to improve experience we offer
subscribers and merchant partners, increase the rate
at which our customers purchase Groupons, and enhance
the efficiency of our business operations.
i. Clearly stated.
ii. Yes.
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Groupon, Inc.: Daily Deal or Lasting Success?
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c. Exclusively uses the Internet. Competitors, such as
Google already have a stronghold with Internet
popularity.
d. Uses a common IT platform to manage database of
customers and business partners alike.
e. IT platform expanding to international markets, a
V. Analysis Strategic Factors
A. Situational Analysis—(please see exhibit 3)
B. Review of Mission and Objectives:
VI. Strategic Alternatives and Recommended Strategy
A. Strategic Alternatives
1. Present strategies appear to be in–line with company
direction.
a. Continue to launch new products to increase the
number of customers and merchant partners transacting
business through its marketplace.
b. Continue to promote Groupon not only as a discovery
2. Alternative Strategies
a. Cost Leadership
b. Not currently employed (minimal current competition).
i. Pros:
1. Would make entrance to industry more
difficult.