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Groupon was established in 2008 by CEO Andrew Mason and is presently the market leader for the daily deal industry. The company has shown tremendous growth since 2009 and currently has about 150 million subscribers worldwide with revenue of USD$1.6 billion in 2011. However, the industry itself is very new and still questionable.
This report will identify the few crisis such as Accounting Irregularity and etc that is faced by Groupon. There will also be an analysis and evaluation on the company. Methods of analysis would include the evaluation of Groupon's Strengths and Weaknesses using the SWOT analysis, exploring the macro-environment and implementing a few strategies and changes to manage the crisis with the most effective method.
Our first recommendation for Groupon is to hire people who have experienced expertise in the Accounting Department to ensure that their accounts do not have any discrepancies. They could also hire professional external auditors to check on their company's accounts and finance. This could ensure that their annual finance report are accurate and true.
Secondly, we recommend that Groupon provide the right information to consumers. This is to ensure that complaints are greatly reduced and that all customers will be satisfied in their products and services. Groupon must utilize its resources effectively in order to retain customers and to improve on their revenue yearly.
Groupon is a website that provides deal coupons at a markdown price, for usually 40% - 60% off the retail price. It operates by emailing to their subscribers and by offering their deals on their website and mobile applications. Consumers could then print their coupon and claim their discount at retailers and merchants for a limited time period. The company was first established from their former website, "The Point," which was launched in November 2007 by Founder and CEO Andrew Mason. Unfortunately, "The point" has failed to attract adequate advertising revenues to sustain the business.
In 2008, Andrew Mason then launched Groupon with his management team in Chicago, focusing on consumer's buying power and group buying model. Andrew Mason came up with a strategy to focus on helping people to have access to products and services (according to their income) that are affordable and discounted with a wide variety of choices. Groupon then started out by offering one deal each day for their customers.
By 2009 and 2010, Groupon soon experienced a rapid growth and was attending to over 100 markets internationally and 150 markets within the U.S. In August 2011, Groupon was valued at USD$1.6 billion and had become the fastest company in history to reach USD$1 billion in sales.
Description of the crisis
Crisis of Deception
Groupon has been criticized by investors and analysts on its poor and inadequate internal control when they are being forced to restate earnings for their first quarter when they have "accidentally" exclude $22.6 million from the $42.7 million of quarterly losses in their financial report. The U.S Securities and Exchange Commission (SEC) questioned Groupon on its accounting practices and had advice Groupon to cut its reported revenue in half. Besides that, Groupon has also been told to warn their investors that there is a "material weakness" in their financial report.
To add on, Groupon was also reported to be sued by a shareholder who accused the company for misleading investors about its financial prospects. The shareholder had accused Groupon for overstating their revenue, issued false materials and misleading consumers with their financial report. When Groupon was being interviewed about their accounting issues, they immediately shrug their responsibilities by saying that "They're still a new company and don't know what are they doing".
Disgruntled customers had also demand the refund for goods and services, partially due to the fact that Groupon is offering more expensive products than before. Unfortunately, Groupon has refused to state on the number of customers that have demanded for a refund. Groupon's revenue has dropped below expectations and had lay of 80 sales employees. Investors were also disappointed in Groupon's Accounting Irregularity and had since lost their confidence in them.
This analysis examines 4 areas of interest in the macro environment:
The current U.S population consists of 314 millions of people. According to the 2012 World Population Data, the U.S population is beginning to age rapidly. The baby boomers who were born at the end of World War II are beginning to age. Besides that, census data also suggest that the age group from 15 to 64 is expected to grow by 42% for the next couple of years. It is predicted that nearly one out of five Americans will be seniors due to the declining fertility rate. Therefore, most industries will have to make adjustments suited for the aging consumers. Industries should not only focus their attention on young consumers, but to also focus on the rising number of aging people's needs.
United States is considered as one of the world's wealthiest nations. It has a plentiful ofÂ natural resources, well developed infrastructure and a high productivity rate. The economy of U.S has also maintained a stable GDP growth rate. However, unemployment seems to be increasing for the past few years. According to Reuters, there are about 23.7 millions of U.S residents who are either underemployed or unemployed. Besides that, the U.S economy has not fully recovered from the financial crisis in 2008 and it is predicted that recession may be "fast approaching". Consumer's spending will therefore decrease; affecting many industries.
â‘¢ Socio - cultural
In the U.S, there is a strong cultural mindset that everyone should have equal opportunity and economic mobility. There are also many significant trends in America's culture. Among them includes mobile technology and sports. Internet is becoming a part of an everyday life and people could have all forms of communication at the tip of their fingers. Checking their emails or purchasing products over the web has never been easier. Inclusive of that, most of the Americans would spend their free time engaging in sports activities. Therefore, Industries should take this factor into consideration to improvise on more products that will cater to the people's social and cultural habits.
There is a consistent development of technology in our society. The technology trend has a great impact on our economy. For example, there is the use of cell phone apps to make purchases online. Such technology would benefit both consumers and related industries. Purchasing products would be deemed as "convenient" for consumers, therefore increasing revenues for the particular industry. With such technologies available, marketing channels could also deliver their information or advertisements via email, social networking sites (Facebook, Twitter) and the web.
Largest subscribers (Based in industry)
Range of deals offered (eg. Travel, goods & services)
Experienced group of management team
Retention of loyal customers
Poor accounting practices
Decrease in income yearly
Weak business model
Lack of network effect
Consumers are mainly young females with excess income
Lack of company research
Creativity in marketing
Growth of technology
Increase in market share
Conjunction with social networks
Acquisition from large companies
Cash flow issues & shortage
Decreasing margins of daily deals
Losing consumer's confidence
Rising number of competitors / imitators
Aggressive expansion that may lead to managerial / financial problems
Groupon has revealed their plans to venture in mobile service to more than 30 countries in the near future. Its daily deal service is already available in 48 countries. The company will be expanding its partnership with Nokia to bring the location-based service to global customers and to allow users to purchase deals directly from mobile devices. In December 2011, a quarter of Groupon's vouchers were purchased via a mobile device
Groupon has also hired a second accounting firm, KPMG, in addition to its current accountant Ernst & Young. KPMG's role is to ensure that Groupon is compliant with federal regulations around accounting and disclosures of public companies. In addition, Groupon plans to hire more accounting and finance staff.
There will also be a reward system where loyal customers are given extra benefits for frequent purchases from the same merchant. Groupon is also providing payment analytics software to vendors for its back-end office. Besides that, Groupon is trialing a booking management system and is planning to offer more business analytics and processing software in the future.
Organization Structure & Culture
Groupon has portrayed itself as a fun and dynamic company for their employees and consumers. The culture of the organization is to share their values, interest and principle together as a company. Besides that, Groupon is currently increasing their focus to standardize their Human Resource operation; transforming the department from recruitments to division in order to create a common language in the company.
Reorganizing the company
Groupon needs to reorganize and regulate their business in order to sustain their client's trust in them as well as stockholders, stakeholders and employees. So what are the changes that can be made to improve the current crisis that they are facing?
Groupon should engage another team of external auditors with better financial expertise. This will set as a control for Groupon to report clear financial reports in the future.
Having a better internal control within the organization will minimize the problems and mistakes that will arise in the future.
Educate the staffs on the importance of customers. One of the key values of Groupon is to provide valuable service to their consumers. A true retention system is important when you first start in engaging customers.
To provide reasonable price and accurate information over the internet to reduce the refund and return rates of the coupon that may cause customer's dissatisfaction.
How to managers resist change?
Any changes that are being made to the Organization will definitely impact the employees. It is not easy for employees to adapt to a sudden change in the organization. However, some changes are inevitable and needs to be implemented. So how can managers of the organization do to reduce this resistance of change?
To educate and communicate to their employees on the motive and reason behind implementing such changes to the Organization. Managers have to be very clear and accurate on what are the changes made in order for the employees to understand the need for changes.
This will result in better performance in the organization, thus benefiting employees.
Give facilitation and extra support to employees whom will get affected by the change. Managers can provide employees with skill trainings to facilitate themselves better when the changes are being implemented.
Include participation from employees into the process of decision making and change. This allows employees to voice out their opinions on the change that are being surfaced.
Ways to motivate employees during crisis
Get to know the employees as people. Find out if they have any difficulties pertaining to the job or outside the job. Try to be a listening ear and understand their difficulties and reach out a helping hand when necessary.
Provide feedback on the performance of a particular employee. Let them know if there is any area they should improve. Compliment them if they possess an excellent work performance. Feedback is very important to ensure that all employees are on the right track
Teamwork and bonding
Organize team building and networking sessions with the employees in order for them to exchange their thoughts and opinions on the company's crisis and etc. This is to ensure that there is a good relationship between all employees in order for them to work together as a team.
Send the employees to attend training courses to empower them with the right knowledge and information. This would enhance the company with right information and skills, and at the same time, employees would also be grateful for the opportunity provided.
Incentives and bonuses
Ensure the employee is rewarded after working in the company for a period of time (years). Reward employees with extra incentives when they have accomplished a remarkable work performance for the company. This would make them feel motivated and valued by the company.
Innovations and its relevance
Groupon is considered as an innovative company to a certain extent as they had formed a completely new market space. The company had also won an innovation award in Chicago when they were less than a year old.
Groupon innovated on offering goods and services at a significant reduced price for consumers and has never been satisfied at stopping their innovation improvements. They have proven themselves by upgrading their delivery methods from email subscriptions to Groupon's mobile and by also providing customers with regular product updates. They had also created an application that is compatible for the IPhone and Android users to purchase their products and services conveniently.
Groupon does not only focus on expanding their market or new consumers. Instead, they extent their concentration by improving the experiences for consumers and to provide more suitable offers to their current subscribers. We would however also suggest that Groupon could do something beyond that. For example, giving customers the ability to structure their own deals and to personalize the type of discounts they want. They could have a bid on who gets to carry out the deals and to see which business owners could fulfill the criteria. Groupon should also ensure that these business owners would fulfill the information that they provided for the customers. Complaints will also be greatly reduced.
In conclusion, Groupon may have successfully grown its business very quickly, but the company's future survival still looks very vague. If the company could make some changes to the way it operates and go beyond offering daily deals, there might be more room for improvements, opportunities and revenues.
Groupon have to be more transparent in their internal and material control to prove to their investors that their business is still sustainable. They could engage a new team of external auditors with experienced expertise to manage their accounting irregularity. Accounting issues is always a sensitive factor for investors and consumers. By taking such measures, they can rebuild investor's confidence slowly. Groupon should also manage and maintain their relationship with the customers and investors. Retaining strategy is of ultimate importance for a business model to work.