Question

PROBLEM SOLVING APPLICATION CASE (PSAC), Redeeming Groupon oric bumpy rise of Groupon high at decision making and creativity. For thische wewe best Groupon's earliest days. Ito and including PO under leadership of its first CEO and cofound Andrew Mason No one doubts Mason was creative, or that he was wess decision maker Let's start with the main Coupon marketing by leveraging social media. The potential of the idea was huge There was always a sense that Groupon had a lot of good deas but no real focus. Benchmark Capital o d of this period Moson ishe type of guy who comes up with wild ideas that often have no beginning or end and then let them wrote Vanity Faina 2011 pro Finding out where they land is part of the report an even larger neto (The drop in revenue resulted from the company having to pay higher refunds to merchants than had been stated Slower growth. Athough In 2002 year as a public company. Groupon's revenue increased 45 percent. this is nowhere the explosive growth that Initially made it a Wall Street dan Revenues had Increased ve fold in 2011 and 22 fold in 2010) While Groupon was riding Ngh, Mason's shortcomings were overlooked. But lation plummeted business wit ers became more critical Here's Adam Hartung in Forbes CEO Andrew Maison deserves a lot of credit for building the sales machine that outperformed everyone else including Google and Amazon But the other side of his performance was complete experience in how to man age finances, operations or any other part of a large publicly traded corporation. Un professional analyst presentations, executive Dumovec disrespectful comments to investors and chronic roofbleness all were accept able and only the kept up that torrid growth ca. 10 You may ready know that Maison lost his position in Feb ruary 2013. But for the sake of developing your problem solving skills, we will be asking you to analyze Groupon's situation up to that point and to consider the steps thana change in ledershia Examples of Business Issues and Lack of Focus The same brashness that let Groupon cut deals in ways that were out of the ordinary may have blinded the company to the need for mundane business agence. Ben Edelman assed ate professor of business Administration at Harvard Business School said that management had very patience... Groupon was not hesitant to jump into these businesses be fore they had figured out the important details that may have deterred others from jumping in Edelman said During Groupon's rise, many business critics were won ried that it was growing too fast, working in areas where it lacked expertise, overspending on marketing and starlev els, and always running losses IPO as Turning Point Such issues came to the fore before and after Groupon's IPO, its successful November IPO, thanks to higher levels of transparency and heightened scrutiny Before getting to the IPO stage, the seas were choppy Problems included: • Multiple disagreements about the offering price. • Major issues with financial statements requiring multiple flings and corrections Ongoing complaints from merchants about the value they received from the service given its cost Following the IPO, more chop followed the initial eupho m. Over the next year, Groupon saw valuation pop as high as over $27 and then drop as low as $250 a share. Among its problems • Accounting in March of 2012, the company blamed an internal weakness" in its controls and had to Apply the 3-Stop Problem Solving Approach to OB Stop 1: What is the problem? . Use the integrative Framework for Understanding and Applying to help identify the outcomes that are Important in this case . Which of these outcomes are not being achieved in the case? . Based on considering the above two questions, what is the most important problem in this case? Stop 2: Use the Integrative Framework to help identify the OB concepts or theories that help you to understand the problem in this case What person factors are most relevant? . What environmental characteristics are most important to conside? • Do you need to consider any processes? Which ones? . What concepts or theories discussed in this chapter are most relevant for solving the key problem in this case? Decision Making and Creaty CHAPTER 11

Answer 1

Stop 1: What is the problem?

Groupon started with a simple idea, attract consumers by offering discounted prices. Merchants jumped in because they got more customers with having to spend extra on customer acquisition. Initial days were glorious, they acquired a number of merchants and customers. In order to grow they bought out smaller companies, there is nothing wrong with this strategy, except that Groupon compromised on due diligence while on this acquisition spree. It ventured into spaces where it lacked expertise, did not budget marketing expenses and went on a hiring spree.

After going public, issues like incorrect financial statements, disagreements between management and investors, public outcry from existing merchants etc. came to the fore. Amidst all this, the share price of Groupon went from $ 27 to $2.60. In March 2012, the company's losses expanded due to the merchants' public outcry.

Exactly after one year after its IPO, Groupon was able to grow it revenue by 45% which was low, considering that it had grown by 100% and 2200% in the preceding 2 years. Eventually the company's valuation started to go down.

CEO Andrew Mason was credited of building a team that mostly focused on sales but was found wanting in other departments like finance and operations. Soon the management became infamous for being unprofessional, arguing with investors, etc. All of this without registering profit.

- Integrative framework to understand and apply OB to identify outcomes important for the case

The following image depicts the framework

ORGANIZATIONAL MECHANISMS Organizational Culture Organizational Structure INDIVIDUAL MECHANISMS GROUP MECHANISMS Job Satisfaction Leadership: Styles & Behaviors INDIVIDUAL OUTCOMES Stress Leadership: Power & Influence Job Performance 00 0000 00 Motivation Teams: Characteristics Organizational Commitment Trust, Justice, & Ethics Teams: Cultural Values Learning & Decision Making INDIVIDUAL CHARACTERISTICS Personality & Culture Values Ability

Outcomes important for the case are organisational culture and structure; leadership style, behaviour, power and influence and individual characteristics of the leader.

- Outcomes not achieved in the case

Outcomes like individuals mechanisms of the staff and individual outcomes are not evident per se but would be vital

- Based on the above 2 questions, what is the most important problem in the case

It is evident from the case that company co founder and CEO was arrogant. This attitude of his permeated in the hierarchy as the Groupon staff hailed him as a role model.

Stop 2: Use Integrative Framework to understand and apply OB concepts & theories that help understand the problems in the case

- What person factors are the most relevant?

Attributes like stress, job satisfaction, motivation, ethics and decision making are the most relevant.

- What environmental characters are the most relevant?

The most important environmental character here is organisational structure as it was top down, the the attitude of the CEO influenced the organisational culture.

- Which concepts and theories discussed in the chapters are most important to solve the key problems in the case?

Having an open structure which leads to more transparency would have been crucial to avoid the mistakes which occurred at Groupon.

Stop 3: What are your recommendations to solve the problem?

The business model should be tweaked to achieve a trade off that would be beneficial to the company's customers as well as merchants. Groupon only focused on sales to achieve its revenue targets and neglected operations and finance, which is why they could not post a profit. Operations is the back bone of the business which leads to optimum use of resources and also keeps the external partners happy. Managing finances is the most vital aspect of a business, get the 2 things in order would be the foremost recommendation.