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 – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, increasing energy prices, there is increasing trade war between United States & China, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google,
talent flight as more people leaving formal jobs, wage bills are increasing, 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 -
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.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Groupon are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Sustainable margins compare to other players in Retail (Catalog & Mail Order) industry
– Groupon has clearly differentiated products in the market place. This has enabled Groupon to fetch slight price premium compare to the competitors in the Retail (Catalog & Mail Order) industry. The sustainable margins have also helped Groupon to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Groupon has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Groupon staying ahead in the Retail (Catalog & Mail Order) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Groupon is one of the most innovative firm in Retail (Catalog & Mail Order) sector.
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.
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.
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.
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.
Strong track record of project management in the Retail (Catalog & Mail Order) industry
– Groupon is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses of Groupon | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Groupon are -
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.
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.
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.
Workers concerns about automation
– As automation is fast increasing in the Retail (Catalog & Mail Order) industry, Groupon needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Need for greater diversity
– Groupon has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High operating costs
– Compare to the competitors, Groupon has high operating costs in the Retail (Catalog & Mail Order) industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Groupon lucrative customers.
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.
No frontier risks strategy
– From the 10K / annual statement of Groupon, it seems that company is thinking out the frontier risks that can impact Retail (Catalog & Mail Order) industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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.
Increasing silos among functional specialists
– The organizational structure of Groupon is dominated by functional specialists. It is not different from other players in the Retail (Catalog & Mail Order) industry, but Groupon needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Groupon to focus more on services in the Retail (Catalog & Mail Order) industry rather than just following the product oriented approach.
High bargaining power of channel partners in Retail (Catalog & Mail Order) industry
– because of the regulatory requirements in United States, Groupon is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Retail (Catalog & Mail Order) industry.
Groupon Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Groupon are -
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.
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.
Learning at scale
– Online learning technologies has now opened space for Groupon to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
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.
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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Groupon can use these opportunities to build new business models that can help the communities that Groupon operates in. Secondly it can use opportunities from government spending in Retail (Catalog & Mail Order) sector.
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.
Building a culture of innovation
– managers at Groupon can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Retail (Catalog & Mail Order) industry.
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.
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Catalog & Mail Order) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Groupon can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Groupon can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Threats Groupon External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Groupon are -
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.
High dependence on third party suppliers
– Groupon high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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.
Environmental challenges
– Groupon needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Groupon can take advantage of this fund but it will also bring new competitors in the Retail (Catalog & Mail Order) industry.
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.
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.
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.
Stagnating economy with rate increase
– Groupon can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Retail (Catalog & Mail Order) industry.
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.
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.
Shortening product life cycle
– it is one of the major threat that Groupon is facing in Retail (Catalog & Mail Order) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Easy access to finance
– Easy access to finance in Retail (Catalog & Mail Order) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Groupon can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.