Introduction
Thousands of diverse ideas float in the air and surround people every day, but it is believed that almost all of them are not new. Thereby, it is almost impossible or rather challenging to suggest something that was not devised ages ago. However, often, really talented people manage to create a striking and innovative product or service, which has not been introduced before and is challenging to imitate. One such invention is Groupon – an American online global marketplace that was established in November 2008. This company connects its subscribers and customers from fifteen countries with local merchants by finding deals on restaurants, services, goods, travel, and activities (“The History of Groupon,” n.d.). The purpose of this paper is to evaluate Groupon’s growth strategy and transformation process to identify the best fit growth strategy for its strategic management. Also, Groupon’s key strategic positioning based on its resources and capabilities will be analyzed to recommend a new growth strategy and the VRIO Analysis Table of Groupon will be provided.
Groupon Transformation Process
In 2007, Andrew Mason became one of the founders of The Point, a special website aimed at gathering people and helping them to accomplish their goals. In 2008, Andrew Mason, Eric Lefkofsky, Brad Keywell, and The Point created Groupon, an online marketplace that was advertising several local businesses by finding and offering deals to people for a limited time (“The History of Groupon,” n.d.). In Chicago, Illinois, downstairs from the Groupon office, there was a Motel Bar and the first Groupon was an offer precisely for this restaurant. After it became successful, a great number of the city’s businesses decided to join and Groupon started advertising deals for increasingly larger companies like the Art Institute of Chicago (“The History of Groupon,” n.d.). However, the company maintained its great sense of humor because it was the reason it managed to get attention from its very first customers (“The History of Groupon,” n.d.). Finally, Groupon started expanding to other cities and states, rather rapidly gaining popularity among customers and businesses.
The company continued to develop and extend, and every day significantly more people found out about it. Surprisingly, by the end of 2009, Groupon had managed to spread to twenty-eight cities of America (“The History of Groupon,” n.d.). However, the best achievement was that the following spring, the company reached a great number of international markets including Belgium, Switzerland, the United Kingdom, Spain, Italy, France, and Germany (“The History of Groupon,” n.d.). In 2011, this resounding success and growth resulted in the company’s initial public offering.
The primary transformation of Groupon happened soon after the IPO; several imitators appeared, intense competition emerged and the organization’s popularity started to fade. For several years, there was declining revenue, and finally, Groupon attempted to change its business (Johnson et al., 2017). It was achieved “by moving away from the heavily discounted coupon vouchers that made it famous toward a less discount-driven user experience that encourages more habitual use” (Sanchez, 2019, para. 2). Groupon also started to invest in partnerships to increase the number of deals that are available on its platform.
Groupon Growth Strategy
The primary strategy of Groupon is staying oriented around its clients and trying to make them feel comfortable and satisfied with the company. There were a few changes accepted by the organization to meet the needs of communities, small businesses, and customers (Sanchez, 2019). For instance, in July 2012, Groupon noted that, in North America, approximately a third of all transactions of the company were made via a mobile device (Sanchez, 2019). To support its customers and increase their level of comfort and the number of operations, the company increased deal inventory, updated the previous version of its app, and canceled the waiting period. It has let the clients use a new Groupon as soon as they purchase it and not wait until it starts working. Such a strategy increases the number of satisfied customers who are willing to use the app or website again and do not mind sharing the services of Groupon with their friends and relatives (Li et al., 2017). Hence, the company spends little effort and gets much more profit.
Moreover, there are several methods that Groupon used to achieve significant growth and all of these techniques are aimed at making more people learn about this organization and, thereby, increasing the number of customers. For example, there was a rule that for a deal to become available, a certain amount of people had to sign up for it. However, if the predetermined minimum of subscribers was not met, no one got that offer (Li et al., 2017). The great idea was that the company provided its customers with the possibility of sharing the link, telling their friends and families about the deal, and encouraging them to buy it. After buying a coupon, people could share it, and these simple but smart methods increased the number of customers (Sanchez, 2019). Daily emails that listed the most attractive offers, coupons for multiple people, and getting $10 in Groupon money for sharing with a friend had a significant influence on the success and growth of the organization.
The Best Fit Growth Strategy
The best growth strategy is proven to be focused on meeting the needs of the customers. The success of Groupon was achieved because the company was an online marketplace of an utterly innovative form that amused people. Its main purpose was to make the lives of its clients easier and only after achieving this goal, there was another one – earning money and extending the company. Thereby, the best strategy is to make the customers happy and then use their satisfaction to promote Groupon. It is proven that loyal customers are ready to help the company become successful and famous.
Groupon’s Key Strategic Positioning
To recommend a new growth strategy for Groupon, it is necessary to analyze its critical strategic positioning based on its resources and capabilities as they contribute to its long-term survival and potentially to competitive advantage. Resources are the assets of companies that they have or can call upon; according to Table 1, Groupon’s resources include employees, patents, partners, and finances. The organization’s computer systems and workers are rather valuable since they, as mentioned above, follow the customer’s needs and update the apps and website according to them. Groupon’s capabilities, which are the ways those assets are used or deployed effectively, include distribution network and using its finances to invest in development and increasing the income. Also, its capability is keeping a robust global presence due to the company’s past uniqueness and success that are not easy to forget.
The leading strategic position of the online marketplace is following the needs and demands of its customers and addressing them, but it is not as strong as it used to be in 2011. There are threats like imitations and strong competition and Groupon is slowly being forced out of the area of online markets. Though it has a great number of advantages that were listed above, there are several weaknesses like local food products, cost structure, and research and development that need to be increased and changed according to the current situation. The new growth strategy would be to address all the weaknesses and drawbacks of the company and create new strengths. It is necessary to remember what attracted clients in 2008 and try to make this feature even better. In addition, it is of vital importance for the growth of Groupon to introduce something entirely new to the clients. Still, before doing that, it is essential to analyze what other online markets suggest.
Table 1. VRIO Analysis of Groupon.
Conclusion
To conclude, it is possible to say that Groupon is indeed one of the most successful and amusing companies that have ever existed. The secret of its prosperity was its purpose – making the lives of its customers more comfortable and better. Unfortunately, its strategy was not strong enough to let the company remain the best in the online market area and Groupon could not face and survive the competition. It is of vital importance to keep this weakness in mind while creating a new growth plan.
References
The History of Groupon.(n.d.). Web.
Johnson, G., Whittington, R., Angwin, D., Regner, P., & Scholes, K. (2017). Groupon and the sincerest form of flattery. In Exploring strategy: text & cases (p. 81). Pearson.
Li, H., Shen, Q., & Bart, Y. (2017). Local market characteristics and online-to-offline commerce: An empirical analysis of Groupon.Management Science, 64(4), 1860-1878. Web.
Sanchez, L. (2019). Groupon’s evolving business strategy. The Motley Fool. Web.