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Groupon Competitor and Financial Analysis Final

Groupon Competitor and Financial Analysis Final

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I.
 
Competitor analysis
The main online competitors of Groupon are
LivingSocial
,
Bloomspot
. They are as young as Groupon, asmuch like the same but they have chosen different way to approach the market. LivingSocial is thebiggest competitor right now in term of sale and market share in US market as well as internationalmarket. Like every other players, they offer deal each day but provided with some minor options andalso product group for special targets. On the other hand, Bloomspot is focusing on its customerdatabase which allows company to analyze the productivity ratio for companies and merchant. In theend, they want to create better benefit for the whole value chain.In addition to current players, the marke
t also sees the rise of tech giant. Groupon’s most outstanding
future competitors are
Google Offers
and
Facebook Deal
. Those future competitors have a commonadvantage which is they have a huge number of existing users and importantly with its personalinformation so they can make use of that and with a little effort they can make way to dominate themarket. However, those applications are in beta stage so the time will tell. Moreover, is it too late tocapture the market while it is saturate with thousand of copycats and several of deals and offer sites inthe Internet? If they could differentiate or even cut down its margin and cost, there is still a chance forthem.Although, this type of business model rooted for long time ago; the traditional way could not burgeonwithout the flourish of Internet. Offline competitors could be seen as co-ops, employee clubs (masterthesis). However, in this specific industry, those offline competitors slowly switch to use online tool toadvertise themselves and attract more customer or participators. However, they are not competitiveand only local business.Moreover, recently there have been some corporations implementing the group buying for its ownbusiness. They encourage people to select the deal and with each level of quantity achieved, the pricegoes down. It is similar to the daily deal sites but offer special products like shoes (Adidas) and laptop(Dell Swarm). However, because there must be a huge effort to advertise to customers but what isgained is not so much, not to mention the lack of diversity and limit of choice; this model have beenremoved silently without any awareness.Thus, in this analysis, we will focus on analyze the 2 main online competitors and 1 future competitorwhich are LivingSocial, Bloomspot and Google Offers using the model of competitive strategy fromPorter, Micheal E. The order is ranked by the level of importance.
 
 
Figure 1 Porter, 1980, Competitive strategy
1.
 
LivingSocialLiving social is the biggest competitor of Groupon in Us and international market. It has raisedfunding through many venture capitals and private firm (Amazon) to wait for good time for IPO.Currently, it has about 26 million members in 250 markets in 12 countries
1
.Customers could get benefitfrom a lot of product package: Daily deals, Instant, Escapes, Adventures, and Families which addressmany segments of the market: General users, tourists, travellers, young people, and families group (incorresponding order).
2011(estimated) 20010 2000 2008
Revenues $380,000,000 $40,000,000 $3,200,000Total Employees 1,800 590 30 10Productivity (Revenue/Employee) $211,111 $67,797 $106,667Number of subscribers 28,000,000 12,000,000 300,000(Source: LivingSocial market research, Privco.com)
 
ObjectivesIt is currently having local presence in 235 cities in US, 80 cities in Europe and around 40 cities inOceania. The US market is considered the native market so it is easier to familiarize with legal system,building new customers than in international markets. Hence, they want to focus more in US marketwhich is more profitable, especially in the largest cities like DC and New York. With an attempt to dothat, the daily deals site offer the Hyper local Daily deal which promotes buying in immediateneighborhood so that customers can have more choices to enjoy its shopping, dining and playing.Furthermore, they also offer a gift card of high-end grocery food with 50% discount from a nationwidegrocery store which means that LivingSocial can increase its mailing list even better as part of its
1
 
Heine, Christopher, “
LivingSocial picks up $400 million in funding” 
 
Objectives StrategyAssumptions Resources & capabilitiesCompetitors
 
strategy
2
.Like many daily deal sites, its members can purchase and redeem its voucher at the next day.However, there is one big thing that differentiates LivingSocial to other site is members can have theoption to send the link to his or her contacts and if three of them purchase the offer, the initial membercan have it for free.
 
StrategyOverall, LivingSocial adopts the following strategy: Product leadership according to Michael Treacyand Fred Wieserma
3
. They have grown a wide range of product packages to offer the most fastidiousperson with a reasonable price which other competitors do not expect from customers. Moreover, theyhave built powerful and firm business systems in many cities in US that could deliver more compared toits competitors. Its local staffs will bring more value to customers because they have localizedknowledge and relationships which will provide more sustainable competitive advantage though it isslower and expensive t
han Groupon’s telemarketing way
4
. In addition to that, holding 32% of sharesmakes Amazon responsible and committed to LivingSocial. A lot of money and effort have been pouredin LivingSocial which would make a win-win situation for both.
o
 
They have launched some food events to aim at high-end customers who they charge $100 to$200 to experience a new atmosphere and unforgettable moments. Moreover, the deals isonly exclusive to LivingSocial members so the limitation can be an attraction to othercustomers and a bonus reward to the existence members
5
 
o
 
The strategic partnership with Amazon is a big leap for a young start-up. They also have soldover 1 million of Amazon voucher worth $20 for only $10
. In addition, by leveraging Amazon’s
vast customer list, the acquisition cost of new customer and vendors is dramatically decreases.
In the future, Amazon‘s Kindle Fire will be sold which could be a good news for
LivingSocial.With an ultralow price which Amazon accepts to make loss, the Kindle Fire will be ablockbuster and a good advertiser for L
ivingSocial’s d
eal.
o
 
Mergers and Acquisition activities
Date Target Deal type Price Purpose
10/2010Urban EscapesAcquisitionn/a New product and market 11/2010 Jump On It Majority Acquisitionn/a Australian market
 
01/2011
Let’s Bonus
Acquisitionn/aMarket expansion
2
Cheredar, Tom, LivingSocial offers 50% off Wholefoods gift card, VentureBeat, September 13, 2011http://venturebeat.com/2011/09/13/livingsocial-offers-50-percent-off-whole-foods-gift-card/,accessed 1/12/2011
3
Kotler, P., Armstrong, G., Saunders, J., Wong, V.,
Principles of Marketing
, Second European edition, 1998, Chapter 12 pp.503-534
4
 
Treacy, M. and Wieserma, F., 1993, “
Customer intimacy and other value discipline’s
, Harvard Business Review
5
 
Associated press, “LivingSocial launching exclusive food events,” WallStreetJournal, October 17, 2011,

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