Groupon Harvard Case Solution & Analysis

Groupon  Case Solution


Groupon is one of the fastest growing technology companies, which has successfully expanded in 44 countries and 500 markets. Groupon, Inc. is currently the world's largest online coupon company with nearly 40 million dynamic clients. In 2011, Groupon turned into the largest IPO by the U.S. Web organization since Google.

The organization declined the $6 billion takeover offer from Google in late 2010. In April 2012, the SEC inspected the company's modification of its first plan of financial results as apublic organization taking after two finance updates before its IPO which took place in November.

Taking after the SEC examination, Groupon’s shares increased and accounting specialists and speculators a like critiqued the organization's management. Groupon stated that it would reconsider the results of final quarter after discovering that the management had not set aside enough money for client discounts, increasing its loss by$22.6 million.

In spite of the fact that the organization grew tremendously in only a couple of years, the critics wondered if the coupon giant will endure with a business model, which keeps being replicated by numerous contenders, including Living Social.

Issues identified:

The company is facing the problem of sustainability in the business model as the current business model resulted in negative return on investment, high competition, low diversification of products and has narrow target market with discount rate of 50%. Moreover,it has capacity problems. Along with this, the company is facing the problem of competitors that want to gain the market share and these competitors are; Living social and Bloom Spot, as they have selected different ways to attract the market. The company’s financial performance is also not satisfactory as it shows that the company is generating less profit due to the use of shady accounting practices as well as the marketing cost is higher.

Analysis of the Issues

The first issue is related with the business model, which is aligned with the chameleon model that offers personalized products and services based on the customers’ needs. It was observed that the local business faced problem regarding structure and to increase the sales, only 66% deals resulted in profit and most of the customers had to sell at a price more than the face value of coupon. Therefore, in the local business, the customers were getting poor services and had bad experience from the local business. Along with this, the business model could be replicated easily by the competitors.

The other problem was regarding low profit; the main reason was the decreasing sales, it was again depending on the number of subscribers due to bad experience faced by the customers and poor service, due to these reasons, the offerings of the company decreased. The decrease in the quality of the services provided negatively affected the image of the company, where as the deals were offered in prices higher than the face value or gross price as well as more discounts were offered to the customers.

In terms of increasing competition, the company had moderate power in the hand of social media and it had low IT suppliers, low capital intensive nature of business, low bargaining power as compared to the competitors and low purchasing power of the subscribers.

Effective solutions/strategies:

The company should follow the strategic analysis that shows the vision of the company as “to make the company a leading internet platform in the industry with the goal to meet the financial objective of improving the stock rating and to increase the sales target by at least 1%This would help the company to meet the strategic objective of overtaking the competitors in terms of performance and will become as a recognized industry leader...................'

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