Groupon (GRPN) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Catalog & Mail Order)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Groupon (United States)
Based on various researches at Oak Spring University , Groupon is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, increasing energy prices, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , increasing transportation and logistics costs, increasing commodity prices,
customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Groupon can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Groupon, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Groupon operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Groupon can be done for the following purposes –
1. Strategic planning of Groupon
2. Improving business portfolio management of Groupon
3. Assessing feasibility of the new initiative in United States
4. Making a Retail (Catalog & Mail Order) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Groupon
Strengths of Groupon | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Groupon are -
Innovation driven organization
– Groupon is one of the most innovative firm in Retail (Catalog & Mail Order) sector.
Digital Transformation in Retail (Catalog & Mail Order) industry
- digital transformation varies from industry to industry. For Groupon digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Groupon has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Analytics focus
– Groupon is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Retail (Catalog & Mail Order) industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Superior customer experience
– The customer experience strategy of Groupon in Retail (Catalog & Mail Order) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Groupon is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Groupon is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Groupon emphasize – knowledge, initiative, and innovation.
Ability to lead change in Retail (Catalog & Mail Order)
– Groupon is one of the leading players in the Retail (Catalog & Mail Order) industry in United States. Over the years it has not only transformed the business landscape in the Retail (Catalog & Mail Order) industry in United States but also across the existing markets. The ability to lead change has enabled Groupon in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Groupon is one of the leading players in the Retail (Catalog & Mail Order) industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– Groupon has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Highly skilled collaborators
– Groupon has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Catalog & Mail Order) industry. Secondly the value chain collaborators of Groupon have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Groupon has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Low bargaining power of suppliers
– Suppliers of Groupon in the Services sector have low bargaining power. Groupon has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Groupon to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy of Groupon comprises – understanding the underlying the factors in the Retail (Catalog & Mail Order) industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Weaknesses of Groupon | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Groupon are -
Slow to strategic competitive environment developments
– As Groupon is one of the leading players in the Retail (Catalog & Mail Order) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Catalog & Mail Order) industry in last five years.
Aligning sales with marketing
– From the outside it seems that Groupon needs to have more collaboration between its sales team and marketing team. Sales professionals in the Retail (Catalog & Mail Order) industry have deep experience in developing customer relationships. Marketing department at Groupon can leverage the sales team experience to cultivate customer relationships as Groupon is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Groupon has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Retail (Catalog & Mail Order) industry over the last five years. Groupon even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Ability to respond to the competition
– As the decision making is very deliberative at Groupon, in the dynamic environment of Retail (Catalog & Mail Order) industry it has struggled to respond to the nimble upstart competition. Groupon has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Groupon supply chain. Even after few cautionary changes, Groupon is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Groupon vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Groupon has a high cash cycle compare to other players in the Retail (Catalog & Mail Order) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Capital Spending Reduction
– Even during the low interest decade, Groupon has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Retail (Catalog & Mail Order) industry using digital technology.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Groupon is slow explore the new channels of communication. These new channels of communication can help Groupon to provide better information regarding Retail (Catalog & Mail Order) products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Groupon products
– To increase the profitability and margins on the products, Groupon needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Groupon has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Products dominated business model
– Even though Groupon has some of the most successful models in the Retail (Catalog & Mail Order) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Groupon should strive to include more intangible value offerings along with its core products and services.
Groupon Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Groupon are -
Developing new processes and practices
– Groupon can develop new processes and procedures in Retail (Catalog & Mail Order) industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Groupon can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Groupon to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Groupon can improve the customer journey of consumers in the Retail (Catalog & Mail Order) industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Retail (Catalog & Mail Order) industry, but it has also influenced the consumer preferences. Groupon can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Groupon to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Groupon to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Groupon can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Groupon can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Groupon has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Retail (Catalog & Mail Order) sector. This continuous investment in analytics has enabled Groupon to build a competitive advantage using analytics. The analytics driven competitive advantage can help Groupon to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Groupon is facing challenges because of the dominance of functional experts in the organization. Groupon can utilize new technology in the field of Retail (Catalog & Mail Order) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Use of Bitcoin and other crypto currencies for transactions in Retail (Catalog & Mail Order) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Groupon in the Retail (Catalog & Mail Order) industry. Now Groupon can target international markets with far fewer capital restrictions requirements than the existing system.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Groupon can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Groupon to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Loyalty marketing
– Groupon has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Threats Groupon External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Groupon are -
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Groupon needs to understand the core reasons impacting the Retail (Catalog & Mail Order) industry. This will help it in building a better workplace.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Technology acceleration in Forth Industrial Revolution
– Groupon has witnessed rapid integration of technology during Covid-19 in the Retail (Catalog & Mail Order) industry. As one of the leading players in the industry, Groupon needs to keep up with the evolution of technology in the Retail (Catalog & Mail Order) sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Groupon in Retail (Catalog & Mail Order) industry. The Retail (Catalog & Mail Order) industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Consumer confidence and its impact on Groupon demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Retail (Catalog & Mail Order) industry and other sectors.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Groupon business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Groupon needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Retail (Catalog & Mail Order) industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Groupon can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Groupon prominent markets.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Groupon.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing wage structure of Groupon
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Groupon.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Groupon may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Catalog & Mail Order) sector.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Catalog & Mail Order) industry are lowering. It can presents Groupon with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Catalog & Mail Order) sector.
Weighted SWOT Analysis of Groupon Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Groupon needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Groupon is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Groupon is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Groupon to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Groupon needs to make to build a sustainable competitive advantage.
