1. REPORT PREPARED FOR: Groupon REPORT TITLE: Business Model Analysis   BY: Go Digibonkers POSTGRADUATE DIPLOMA IN BUSINESS APMG 8119: DIGITAL ENTERPRISE 2015
By Shari Grenz, Himesh Trivedi, Viraek Cheu, Pooja Cornelius and Swati Chawla
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2. Conclusion & Recommendation
Agenda 1
Business Background 2
Revenue Analysis 3
Cost Analysis
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Value Proposition 5
Conclusion & Recommendation

3. Business Background
Headquarters: Chicago, United States Founded: January 2008
150 markets in North America & 100 markets in the rest of the world
40 million customers
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Shareholders: Mainly American investment companies
Declined $6 billion takeover offer from Google

4. Customers Merchants Featured deals, coupons Goods Risk free promotions
Business Background
Groupon offers a variety of deals on various goods and services.
Featured deals, coupons
Goods
Customers
Risk free promotions
Motivated customer
Merchants
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5. Business Model - Process
Customer redeems coupon at Merchant
Groupon features deal
Merchants
sign up
Deal reaches public
Customers pay Groupon
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Groupon pays Merchant Share
Customers sign up

6. Canvas Business Model
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7. Revenue Generation Source of Revenue Explanation Local Deals
Revenue derived from partnering with local merchants such as restaurants, parlours etc on a 50:50 partnership.
Goods
Revenue derived from the sale of various merchandise such as electronics, clothing etc
Travel
Revenue derived from deals with travel based companies, hotels etc.
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8. Revenue Analysis

9. Revenue Analysis

10. Risks & Advantages Risks Advantages Outsourcing Competition Inventory
Dependence
Large target market
Expanding travel market
Low overhead costs

11. Key Findings of the Revenue Model
Revenues are mainly generated through goods and merchandise, particularly in North America.
Main risk of Groupon´s revenue model is the dependence on vendors.
Pure online business allows to reach a large target market and additional revenue stream opportunities.

12. Cost Analysis Cost of Revenues Direct + 3rd party Other expense
Operating Expenses:
Marketing + SGA
+ Acquisition
40%
$1.3m
Selling:
Payroll + Stock
Commission
Others (tech, telecommunications and travel)
General and administrative:
Others (Depreciation maintenance, Tech…) 1%
Interest
Losses: FX…
Legal
advisory
8% $242k
Refunds
43% $1.4m
Inventory
Shipping
Fulfilment
Inventory markdowns
processing fees
Editorial
Technology
Web hosting
+ Marketspace  Cost online rather than offline cost
+ Cost structure  activity base  3 costs
8% $269k
Online & Offline
Payroll + Stock
Others (discount…)

13. Cost Analysis 196% & 32% Cost vs 123% Revenues
Opportunities and Challenges (Groupon, 2015):
Shipping and fulfilment costs  Outsourcing
Acquisition  Extra ongoing cost Ticket Moster and Ideel
Legal and regulatory concerns  Intellectual property claims

14. Key Findings of the Cost Analysis
83% of the costs are direct costs and costs for SGA, another cost driver are the costs for growth through acquisitions
Activity-base cost
There are a lot of potential costs e.g. for legal issues, regulatory costs.
Various initiatives have been carried out in order to lower the costs.

15. Value Creation Value = Returns > Expenditure.
The most important aim for any business entity.
Creating value helps in selling products.
To understand value creation understand your target audience.

16. Digital Tribe People with common interests and beliefs.
No longer constrained or isolated by physical boundaries.
Groupon - Digital Clubbers

17. Customer compensation
Internal Organisational Perspective
Context
Compelling Content
Coverage
Compliance
Customer compensation
Convenience

18. BUT External Customer Perspective Pros Real time deals Upto 70% off
Control
Not a default channel to access services
Choice
Limited choices of products available
Pros
Real time deals
Upto 70% off
Wide range of products
Comment
No platform for users existing
BUT
Consolidation
It‘s not a one stop shop service
Contraption
Merchant app available but no app for purchasing
Combination
No bundles of vouchers offered
Conversation
No online chat facility

19. Digital Equaliser

20. Key Findings for Value Creation
Groupon´s value creation from the internal organisational perspective supports the company´s growth.
Groupon doesn’t have enough customer interface, better customer care/ services will certainly improve the value creation.

21. Theoretical Implications
Considers all nine fields of the “Business Model Canvas”
Including two parts of KPMG´s framework, value proposition and the revenue model + digital tribe
20 C´s model of KPMG: Groupon fits in the 6 C's i.e. compelling content, context, coverage, convenience and customer compensation

22. Customer Satisfaction & Loyalty
Managerial Implications & Recommendation
Vendor relationships and contracts
Expansion
Cost by function approach
Internal legal team
Combination and Conversation: Bundling, online chat
Choice and Comment: Choices of products, platform
Increasing Revenues
Customer Satisfaction & Loyalty

23. Thank you!
Do you have any questions?