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Final project
Contents
Synopsis...........................................................................................................................................3
Problems in the organization...........................................................................................................4
Problem statement...........................................................................................................................4
Description.......................................................................................................................................5
SWOT ANALYSIS.........................................................................................................................6
Strengths.......................................................................................................................................6
Weakness.....................................................................................................................................7
Opportunities................................................................................................................................7
Threats..........................................................................................................................................8
Two alternate strategies that the company might adopt to address the problem.............................9
Recommendation for implementation...........................................................................................10
References......................................................................................................................................11
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Synopsis
This case study about Groupon delineates over several aspects dealing with the performance of
the company including financial, marketing, operations, management, information system et
cetera. It starts off with the objectives of the company including its aim to expand its subscriber
and customer base by investing in online marketing activities, increase the number of merchants
in partnership and ensure retention, elevate the number and variety of innovative products
available to customers and expand the company through acquisitions and partnerships.
Moving on to the corporate governance or the management composition Groupon, there are eight
Board of Directors and eight members in the top management team. Groupon is divided into two
segments: North America and International segments. We got to know that the company’s
growth is pumped by its investments in the international segment including European and Asian
markets due to which the total revenue from this segment accounted for 36% of the total
revenues in 2010. The financial aspect of the report talks about the company’s financial
performance in the years 2009, 2010 and 2011 where the growth in revenue in these years was
attributed to the domestic and international expansion through exploring new markets and
acquisitions.
Moreover, the company stated that it measures its performance through consolidated segment
operating income, gross billings and free cash flow. Delving into the information technology
aspect, it is stated that the company uses the latest technology to connect to its subscribers and
merchants and these platforms help in enhancing communication as well as enable them in
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tracking deal performance and analyzing demographic data. Information is secured through
Secure Socket Layer (SSL). To grow its customer base, Groupon used online platforms including
SEO, display advertisements, social media etc. and focused on demographic factors especially
age and gender.
Groupon has numerous competitors including traditional offline discount services and those
dealing online including GiltCity, DailyDeals.com, Bloomspot and Eversave. Last but not the
least, it had to face various regulatory issues in terms of consumer protection, marketing
activities, taxation and privacy rules and litigation issues including 2012 lawsuits and in terms of
intellectual property infringement suits.
Problems in the organization
1. Groupon first issue is global growth vs core competences. Its core competence is based
on local management teams, small subscriber and merchant partner bases which gave the
company a foundation to apply its expertise, resources and brand to balance businesses.
They also had to partner with locals to expand its international businesses.
2. The investors do not trust Groupon financial reports filed with SEC. While Groupon is
reporting that they are doing well, its stock market value still dropped since financial
investor questioned Groupon financial reports. Claimed that they filed all the correct
papers, and have to explain how they came up with these numbers; it is a conflictual
matter with the investors. Groupon restatement of its financial in 2012 did not make
things better.
3. Groupon charged merchant 50% of the revenue, while it takes Groupon 60 days to make
payment; which makes it hard for merchants to remain in the program. As a result, a lot
of merchants are using Groupon as marketing tool to increase their own customer base
then move out as merchants. Therefore, Groupon has to spend a lot to increase their local
merchant base.
4. The company is facing is the rapid growth. With the rapid expansion and large subscriber
base the company wasn’t prepared for how quickly they grew. They wanted to expand
and maintain market position and gain new customers. This created a weakness that led
to a poor industry structure.
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Problem statement
Losing trust and credibility from within the investors and starting to have a bad name or a bad
image in the corporate world was the biggest issue for Groupon.
It was having its credibility put on the line and people raising questions on the company's
financials and the fact that this led to people thinking of the fact that the company might be
involved in fraudulent reporting of financials.
Description
There were a number of issues as highlighted earlier but in our opinion we believe that the fact
the investors do not trust Groupon financials and reports anymore which is the biggest factor in
the corporate world if you lose trust and credibility from your shareholders and investors, there is
likely no chance that any company would be able to survive after this in the corporate world..
Shareholders or investors are the primary source of funding for running the company's core
operations and the day to day business. In such situations usually share prices are likely to drop
down at a rapid speed
Seeing this situation company starts to get alienated from its corporate competitors and
competitors start to gain market share. Non proper filing with the SEC and the failure to justify
and explain the facts and figures and the fact that they do not match with the numbers or
statistics provided in the financials made Groupon situation even more difficult.
Trust once lost with investors in the corporate world cannot be regained easily and Groupon even
tried to cater to the situation by reinstating its financials in 2012 which in itself is not considered
a proper thing to do in the corporate world but even this measure did not help the company gain
its investors trust back again.
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SWOT ANALYSIS
Strengths
Highly competent staff thanks to effective learning and training initiatives. Through
significant financial investments in employee training and development, Groupon has
created a team that is not just highly trained but also driven to do more.
Strong Brand Portfolio - Groupon has made investments over the years to develop a
strong brand portfolio. Groupon's SWOT analysis merely emphasises this point. If the
company wants to grow into new product categories, this brand portfolio can be very
helpful.
Excellent Returns on Capital Investment - By creating new revenue streams, Groupon has
created strong returns on capital expenditures and has executed new projects with a fair
amount of success
Strong dealer community - It has created a culture among distributors and dealers
whereby the dealers invest in training the sales staff to explain to the customer how he or
she can derive the most benefits from the items in addition to promoting the company's
offerings.
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Reliable raw material suppliers give the organisation a strong foundation from which to
overcome any supply chain constraints.
Effective Go To Market tactics for its products.
Groupon's products now have a consistent level of quality thanks to automation, which
also allows the business to scale up and down in response to market demand.
Weakness
Margin reduction due to intense competition from other competitors
Lack of client loyalty because many customers only use the promotions once.
More funding is required for emerging technologies. Groupon needs to invest more
money in technology to unify the processes across the board given the scope of expansion
and the variety of regions the firm plans to enter. The company's vision currently does
not match the level of technology investment.
The products' marketing could have been far better. Even if the product is a sales success,
its positioning and unique selling proposition are not well defined, which could invite
competition to attack it in this market niche.
The organization's structure only works with the current business model, which prevents
it from expanding into related product sectors.
Day’s inventory is more than that of the competition, forcing the company to raise
additional money for channel investments. This may have an effect on Groupon's long-
term growth.
Not very effective in integrating businesses with diverse work cultures. As was already
indicated, Groupon has seen several failures when attempting to merge businesses with
diverse work cultures, despite its success in doing so for small businesses.
High attrition rate in the workforce - Compared to other companies in the sector,
Groupon has a higher attrition rate and must spend significantly more on staff training
and development.
Opportunities
The market penetration of mobile apps has expanded, and Groupon's app can tap into this
market.
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Better personalization and targeting of offers to draw in new clients
Fostering relationships with current partners for future and repeat business.
Government green initiatives also present a chance for state and federal government
contractors to buy Groupon products.
After years of recession and a sluggish rate of industry growth, the economic recovery
and increase in consumer spending present Groupon with a chance to gain new clients
and expand its market share.
The adoption of new technology standards and a government free trade agreement have
given Groupon the chance to access a new emerging market, which has resulted in the
opening up of new markets.
The new tax laws may have a big effect on how businesses are conducted and may
present new opportunities for established firms like Groupon to boost their profitability.
Groupon has the chance to use a distinct pricing approach in the new market thanks to the
new technology. It will allow the business to attract new clients with various value-
oriented propositions while retaining its existing ones with excellent service.
Threats
In developing areas, many imitations have appeared, threatening to reduce Groupon's
market share.
Deals that are not personalized pose a threat to the ecosystem of the entire business
model.
Intense rivalry
A danger to Groupon's ability to build its earnings steadily in some international markets
is the lack of skilled labor in certain regions.
In the medium to long term, emerging technologies created by competitors or market
disruptors could pose a severe challenge to the sector.
Because the market for these highly valuable products is seasonal, any unlikely
occurrence during the busiest time of the year could have a short- to medium-term
negative influence on the company's profitability.
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Given that the policies in those areas have changed and that the liability laws in various
nations varied, Groupon may be subject to a variety of responsibility claims.
The American economy's growing trend of isolationism could trigger comparable
responses from other governments, which would hurt international trade.
Two alternate strategies that the company might adopt to address the problem
The company is accused of being involved in fraudulent reporting of its financial information
which results in investors and stakeholders losing trust in it due to lowered credibility. Typically,
it is a must upon each and every firm (especially the large-scale ones) to have an independent
auditor for the verification of the accuracy of the company’s disclosures. In order to reduce
information asymmetry frictions in financial results, Groupon, Inc. should disclose its financial
information on a periodic basis as it would serve as a way to write contracts on and provide
investors with all the information about its operations and how are these operations being
financed.
One solution to this problem is PCAOB inspection. PCAOB stands for Public Company
Accounting Oversight Board that carries out the inspection of registered public firms in order to
assess the degree of compliance with the Sarbanes-Oxley Act the rules of the Board, the rules of
the Securities and Exchange Commission, and professional standards the company is following
(PCAOB, 2022). Groupon can take this inspection and get its financial reporting system checked
for any errors or shortcomings.
PCAOB inspection aims to evaluate a company’s quality of audit services and financial reporting
and focus on detecting deficiencies and improve quality control system hence reducing financial
friction and enhancing financing and investments. As per the case study, there was no proper
filing with the SEC which is a major reason for its investors losing trust. So when the company
would get itself inspected by PCAOB, it would be mandatory upon it to properly file with the
SEC to satisfy the requirements of PCAOB inspection.
Other than this, it is a must upon the directors to make sure that the audit committee consists of
competent, committed and experienced members because just meeting the requirements of
having financial literacy isn’t enough to manage complex financial reporting requirements.
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Groupon can also generate a Review Report which provides the interested parties with financial
statements along with a certain level of assurance.
The external auditor/accountant will carry out analytical procedures, enquiries and discussion
with the management regarding the financial statements after which a report will be attached to
explicitly state that the financial statements are properly “reviewed” and so are highly credible
and reliable (I & A Professional Corporation, 2021). Moreover, for better credibility, the
company can go for an option of an audit report too. This report gives the highest assurance of
the financial statements thus the highest level of credibility to these statements.
In this case, the external accountant conducts a full scale and thorough audit of the entire
company and follows several auditing procedures including analysis, substantive testing of
financial statement balances such as samples of invoices, agreements, source documents et
cetera. After this entire process, the accountant then provides an opinion and a report stating of
the financial statements are fairly stated and mark them as “audited” (I&A Professional
Corporation, 2021).
End users such as investors get the highest level of confidence if financial statements are marked
with this terminology. This way the company would be able to justify the numbers and statistics
it has stated in their statements as well.
Chosen strategy for implementation:
Directors to make sure that the audit committee consists of competent, committed and
experienced members.
Recommendation for implementation
The role of external accountant will be transparent and credible in order to maintain
accurate financial reporting.
Audit report for improved credibility
The validity of the documents can be verified easily
To capitalize clients into repeat customers, they should focus on bottom line. The
company would grow organically. The focus towards profitability would help Groupon in
gaining competitive advantage by creating partnerships with startups.
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They can also implement price change to the customer.
Introduce promotions which customers want to see.
References
I&A Professional Corporation. (2021, March 4). It’s a Simple Formula. . ...Credible Reporting =
Better Results. Ierfino-Np. https://www.i-acpa.com/blog/2017/12/its-a-simple-formula-
credible-reporting-better-results/
Public Company Accounting Oversight Board. (2022). Inspections. PCAOBUS.Org.
https://pcaobus.org/oversight/inspections
