Groupon Investment Appraisal- one can raise a few doubts over Groupons business model and their current strategic position.

The first 200 words of this essay...

Investment Appraisal

Business model

Groupon's business model relies on a simple idea: customers register with the website to get daily deals in their area. If a sufficient amount of interested buyers is reached, the company uses its buying power to get an important discount.1 The firm has rapidly expanded through markets in North and Latin America, Europe, Asia, and has reached more than 30 million customers and 142 million email subscribers.2 As we are considering an investment opportunity, it is relevant to mention that Groupon makes its margins by taking a percentage off the deal offered by local providers. The group has had a fast growth supported by a huge customer's and merchant's base, along with the ability to provide a large range of deals. Despite these strengths, one can raise a few doubts over Groupon's business model and their current strategic position.

The company operates in a very volatile market. Low capital requirement and no intellectual property rights restriction make it easy to enter the market, which leads to an increased number of competitors (Porter, 1980). These numerous competitors imply little brand loyalty and no customer lock in. Customers have no switching costs (Amit