1 Assess the bases of Groupon's resources and capabilities

using the VRIO criteria (Figure3.2 and Table3.2).

2 Andrew Mason admits that Groupon has thousands of

copycats, yet his assessment is that imitating Groupon is

difficult. Why do you think that investors disagreed?

3 If you were the new Groupon CEO what resources and

capabilities would you build on to give the company a

sustainable competitive advantage?

Illustration 4.2 Groupon and the sincerest form of flattery When a firm identifies a new market niche it must also make sure its resources and capabilities are valuable, rare, inimitable and supported by the organisation. Chicago-based Groupon was launched in 2008 by Andrew Mason also emphasised Groupon's advanced technology Mason with the idea to email subscribers daily deals of platform that allowed the company to 'provide better heavily discounted coupons for local restaurants, theatres, targeting to customers and give them deals that are more spas, etc. Via the emails or by visiting the Groupon website relevant to them'. Part of this platform, however, was built customers purchase these substantially discounted deals via acquisitions - a route competitors possibly also could in the form of electronic coupons which can be redeemed take. at the local merchant. Groupon brings exposure and more If imitation is the highest form of flattery Groupon has customers to the merchants and charges them commissions been highly complimented, but investors have not been flat- for the same. The venture rapidly grew into a daily deal tered. Consequently, Andrew Mason was forced out in 2013, giant and became the fastest-growing internet business succeeded by the chairman Eric Lefkofsky. Even though ever to reach a $1bn valuation milestone and, thus, became Amazon and other copycats left the daily-deals business he a 'unicorn' (name for start-ups with valuations over $1bn). struggled to explain how Groupon would fight off imita- In 2010 Groupon rejected a $6bn ((4.5bn) takeover bid by tors. The company was forced to exit over 30 international Google and instead went public at $10bn in 2011. markets. Lefkofsky later returned to his chairman role and While Groupon's daily deals were valued by customers - the was followed by Rich Williams in 2015. He managed to turn company quickly spread to over 40 countries - they also Groupon profitable for the first time ever in 2017, but still attracted thousands of copycats worldwide. Investors did not regain investors' confidence with the share price still questioned Groupon's business and to what extent it had below $4, far from the $20 IPO price. Williams, however, was are and inimitable resources and capabilities. CEO Andrew optimistic: Mason denied in the Wall Street Journal (WSJ) that the model was too easy to replicate: "[Groupon] is one of the first unicorns. It got a lot of praise and attention it didn't deserve at the beginning. We've There's proof. There are over 2000 direct clones of the not recovered from that. Over time, the numbers will Groupon business model. However, there's an equal amount speak for themselves.' of proof that the barriers to success are enormous. In spite of all those competitors, only a handful is remotely relevant.' Sources: Crains Chicago Business, 9 March 2018 (John Pletz: 'What's this? Groupon is now profitable'); 'Groupon Shares Crumble After This, however, did not calm investors and Groupon shares Company Names New CEO', 3 November 2015, Forbes; 'Groupon fell by 80 per cent at its all-time low in 2012. One rare asset Names Rich Williams CEO', 3 November 2015, Wall Street Journal; 'All Groupon had was its customer base of more than 50 million Things Digital', 2 November 2012, Wall Street Journal; Financial Times, customers, which could possibly be difficult to imitate. The 2 March 2013; Wall Street Journal, 31 January 2012. more customers, the better deals and this would make customers come to Groupon rather than the competitors Questions and the cost for competitors to acquire customers would go up. Further defending Groupon's competitiveness, the 1 Assess the bases of Groupon's resources and capabilities CEO emphasised in WS/ that it is not as simple as providing using the VRIO criteria (Figure 3.2 and Table 3.2). daily deals, but that a whole series of things have to work 2 Andrew Mason admits that Groupon has thousands of together, and competitors would have to replicate every- copycats, yet his assessment is that imitating Groupon is thing in its 'operational complexity": difficult. Why do you think that investors disagreed? "People overlook the operational complexity. We have 3 If you were the new Groupon CEO what resources and 10,000 employees across 46 countries. We have thou- capabilities would you build on to give the company a sands of salespeople talking to tens of thousands of sustainable competitive advantage? merchants every single day. It's not an easy thing to build."\fTable 3.2 Some bases of market segmentation Type of factor Consumer markets Industrial/organisational markets Characteristics of people/ Age, gender, ethnicity Industry organisations Income Location Family size Size Life-cycle stage Technology Location Profitability Lifestyle Management Purchase/use situation Size of purchase Application Brand loyalty Importance of purchase Purpose of use Volume Purchasing behaviour Frequency of purchase Importance of purchase Purchasing procedure Choice criteria Choice criteria Distribution channel Users' needs and preferences for Product similarity Performance requirements product characteristics Price preference Assistance from suppliers Brand preferences Brand preferences Desired features Desired features Quality Quality Service requirements