Welcome to the Fall 2012

MB107 Executive PresentationOrientation

Find your team number and sit together with your team.

We’ll get started soon!

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Orientation Meeting Agenda• What is Company X?

• Who’s who in the MB107 Program

• What is the Executive Presentation?

• Dry Run and EP Specifics

• Analysis and Strategy Development

• Financial Target: Economic Logic and Financial Estimates

• Team Dynamics & Project Timeline

• Student Perspective

• Semester Timeline

10 hints about the firm…1. It employs nearly 13K people and has 38 million customers worldwide. 2. The majority of its sales are international. 3. It boasted sales of $1.1 billion in the first six months of 2012. 4. Companies have (unsuccessfully) offered them buy-out money of $2

billion, $3 billion, and even $6 billion! All bids were turned down. 5. It’s name is a portmanteau. 6. It’s been called a “toddler” firm, around only since 2008 and public

only since last November.7. It’s an internet firm, leveraging the power of social networking. 8. Many view it as a friend to small business – bringing more customers

to the doors of local merchants.9. Still, others criticize it for hurting small business.10.Its CEO is one of the youngest in the industry. He graduated from

Northwestern as a music major in 2003. 3

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MB107 Executive Presentation

What will you do to move this public firm forward over the next three years?

You are now “junior executives” working for Andrew Mason, CEO of Groupon.

Groupon’s business model

A Groupon [is] an online coupon that allow[s] a consumer, upon subscribing to Groupon.com, to purchase a specific service from a local business at a discount rate of 50% to 90% off the regular

price.” (Chatterjee, O’Keeffe, and Streiff, 2012, p. 1)

How it works

1) Groupon’s sales force works with local merchants in over 40 countries and numerous cities to put together deals on leisure, entertainment, recreation, and even novel experiences

2) Creative writers and copy editors write and design the offers guided by an inch-thick manual

3) They send “deal of the day” offers to thousands of subscribers in their free daily email, Facebook, or Twitter feed

4) Groupon collects the money as an agent for the local merchant (called gross billings)

5) Groupon and the local merchant usually have a 50/50 split of revenues, but some merchants negotiate better terms

In all, Groupon leverages the power of collective purchasing. Once there are enough subscribers wanting the coupon, the deal is “on”. Thus, it’s

called Groupon! (sources: Gupta, Weaver, & Rood, 2011; Radcliffe, Stein, and Gottschalk, 2012)

Other products Groupon Now! offers are for only a few hours and

taps into customers’ desire to purchase from smartphones (through a partnership with Nokia using Nokia Maps app)

Groupon Getaways are for travel deals – through a partnership with Expedia

Groupon Live for entertainment deals – through a joint venture with Live Nation

Groupon Goods offers provide discounts on goods• These are mostly direct sales where Groupon

is the merchant of record (versus Groupons in which Groupon is the 3rd party agent selling on behalf of the local merchant)

(sources: Radcliffe, Stein, and Gottschalk, 2012; www.seekingalpha.com, “Groupon’s cheap valuations”,

9/7/12)

Your job?You must come up with a strategy

to move Grouponforward in the next 3 years.

The Bottom Line?YOUR TARGET IS

TO ADD 10% TO THEIR OPERATING PROFIT

BY YEAR-END 2015

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Who’s Who in MB107 ProgramMB107 Faculty Coordinator – Professor Caroline D’Abate

MB107 Faculty – Professors Hamilton and Tancredi-Penman

MB240/316 Coaching and Leadership Faculty – Prof.Tancredi-Penman

MB107 Staff – Nancy Walker, Rebecca McCourt ‘14, Tyler Orfao ‘13

MB107 Coaches – Enrolled in MB240/316 and Volunteer coaches

Management and Business Faculty – Experts are available Seek them out for specialized questions (marketing, financials, presentations,…)

Reference Librarian – Barbara Norelli, Social Science Librarianhttp://libguides.skidmore.edu/MB107

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What is the Executive Presentation?Outcome: Strategic Plan for Groupon Strategic recommendation Financial analysis & projections Detailed plan for marketing, operations,

and implementation Briefly describe what other options

you considered and why your chosenstrategic path is the right course of action

Formal and Professional Presentation Your Role: Junior Executives of Groupon Your Audience: Senior Executives from Groupon (actually executives

from across the country and various industries) Presentation Format:

-Formal Presentation 20-25 minutes – visual aids/hand-outs encouraged-Question and Answer 10-15 minutes -Senior Exec Evaluation/Consensus 10 minutes (students leave room)-Feedback Session 5-7 minutes (you will receive a team grade)

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Dry Run and EP SpecificsDry Runs are Tues/Wed/Thurs nights (October 23, 24, 25)• Each team has been assigned a one-hour time slot on one of these evenings• Presentation in front of 3-4 student execs and MBD faculty• At the very least, you must have:

• A good understanding of the situation• A clear strategic recommendation• Basic financials• Basic PowerPoint

• Solid preparation will yield quality feedback• Use feedback to refine and enhance presentation for the EP day (December 7th)• Bring your iPhone, Flip, DVD recorder, or other device to film the dry run for your

own review (if needed, contact Media Services to borrow a recording device)

Presentation Day – Friday, December 7th at the Holiday Inn• Assignment sheet outlines main tasks (Do not ignore it!)• You must update the case to December 7th (Look for 2012 Q3 earnings report in

November)

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Dry Run & EP Specifics: Executives’ Evaluation

Some key concerns Do you have a good understanding of Groupon’s situation? Have you identified the key challenges? Will your strategy address those

challenges? Is it implementable? Have you convinced them that it can work? Have you

convinced them that it’s the right course of action?

Ultimate goal is reliable, consistent, valid, and accurate assessments of your strategic plan and presentation. We give them clear evaluation criteria (you’ll see the evaluation form beforehand). But remember…

This is real-worldHuman perception is involved

Subjective judgments are being made“People will be people”

Imperfection is the rule rather than the exception

What’s great about Groupon?“Groupon started a phenomenon that spread like wildfire: an internet coupon linked

with an irresistible social component and a hip approach to marketing.”

“The concept is sheer genius. The web-savvy, interactive format is so well thought out. Who ever heard of acquiring 516 new, quality customers in one day with no

money up front?”

Groupon allows businesses to:A) gain broad exposure with limited marketing effort

B) attract new customers, esp young, well-educated customersC) create overnight business

Groupon gives consumers the chance to buy goods and services at deep discounts, while experiencing something new and exciting within

their own region. (Chatterjee, O’Keeffe, & Streiff, 2012)

But, Andrew Mason’s not all smiles. There are risk factors…

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What strategic plan will fit the challenges Groupon is facing?

Worry List

Copycats and competitors

(Living Social, Amazon,

Google, Yipit) Acquiring customers

Sourcing great deals

Investing in and

managingour fast growth

Balancing our fast

expansion with costs &

smooth operations

Knowing local

cultures, business practices,

laws, policies

Relying heavily on email and

social networking technology

Media and financial industry scrutiny

Losing key leaders and

partners

Changing regulations about gift cards (e.g. CARD Act)

(source: Form 10Q Quarterly Report 2012 - Q2

August 14, 2012)

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Moving forward…“We expect the percentage of revenue derived internationally to continue to be the majority of our revenue in future periods as we continue to expand globally and increase our penetration of the marketing opportunities in countries outside of North America, including those where we are already established.”

(Q2 2012 10Q, Notes to financial statements, Overview)

Acquired travel site Uptake

Purchased Hyperpublic (aggregates place & deal data)

Acquired Adku, an e-commerce data firm

Bought local clones to gain entrance into India, South Africa, and Israel

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Analyze Groupon’s current situation to identify the major issues.

Two “Key Slides” to include in your presentation:

1. The key challenges/opportunities/issues facing Groupon are…

2. Our strategy addresses these by… (explain how)

Analysis and Strategy Development

Q: Where should I start?

A: Read the case…it’s the foundation of your analysis.Read reports and articles linked on the MB107 website

and stay current on any “new” news or reports on Groupon

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Analysis and Strategy DevelopmentStart with Situational Analysis

That leads to Strategy Development

External Analysis• General/Macro-environment• Porter’s 5 forces• Industry life cycle• KSFs• Value chain• Competitor analysis

• Strategic group mapping• Market segmentation• Rivals’ profiles Strategic

OptionsInternal Analysis• Mission/vision• SWOT• Core/distinctive competencies• Competitive advantage• Internal value chain

Select Optimal Strategy (5 elements)• Arenas• Vehicles• Differentiators• Staging• Economic logic

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Analysis and Strategy Development: Your strategic recommendation must be comprehensive

Economic Logic• Lowest costs via scale advantages?• Lowest costs via scope and replication advantages?• Premium prices due to unmatchable services?• Premium prices due to proprietary product features?

Arenas • Which product categories?• Which market segments?• Which geographic areas?• Which core technologies?• Which value chain emphasis?

Staging• Speed of expansion:

fast, slow, moderate?• Sequence of initiatives:

methodical or ad hoc?• Action steps

Differentiators• Image?• Customization?• Price?• Styling?• Product Reliability?

Vehicles• Internal Development?• Joint Ventures?• Licensing/Franchising?• Acquisitions?

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Financial Target – GrouponRefer to the MB107 Financial Template Guide (word doc)• Utilize case data, Groupon’s 2011 Annual Report, Groupon’s 2012 Q1 and

Q2 10Qs and earnings releases, upcoming Q3 report• Recent company events/presentations (http://investor.groupon.com/index.cfm) • Analyst estimates (e.g., Yahoo Finance, Mergent Online, Datamonitor

Industry Profiles, First Research reports)• Project Groupon’s operating income (without the effect of your strategic

recommendation) out through 2015 (this is the projected baseline)• Your strategic recommendation must contribute an additional 10% to

Groupon’s operating income by year-end 2015

Refer to the Financial Template (excel) – Step 1 tab – Groupon’s historical financials 2009-2012HY(you’ll need

to update to Q3 2012)– Step 2 tab - Calculate baseline financial projections for 2012 -2015

using cost/revenue assumptions (do research to determine assumptions)

– Steps 3-5 tab - Demonstrate the impact of your strategy on the projected financials (show how they earn the extra 10%)

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Financial Analysis & ProjectionsStrategy gets the plane started, the numbers keep you in the air!

Absolute Performance (Groupon) & Relative Performance (rivals)

SWOT – Key Success Factors of Groupon vs. competition

Current and Future Standing on Key Financial Variables – Margins, Ratios, inventory turnover, profitability, etc.

Financial Projections:Gross billings and revenue for Groupon

Division revenues (direct vs. 3rd party)Geographic revenues (North America vs.

International) Cost of sales and Operating costs

Don’t be afraid to lose a little money in YR1 Project three years out

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Financial Target/Economic LogicWhat will account for the returns of your strategy?

Some key concerns:

Capital

- What is your funding source? How will you pay for your proposed plan?

- Operations? Investments? Financing? Cash?“We currently plan to fund investments in our North America and International

segments with our available cash and cash equivalents balance and cash flows generated from the respective operations during this year.” (Groupon’s Q2 2012 10Q)

Can you provide qualitative explanations for your quantitative analysis?- Offer a coherent explanation of your finances- Realism – Is it realistic? Feasible? You need to provide a good story - Back it up – Use external sources to provide evidence

Explain and justify the assumptions that underlie your numbers- Assumptions about costs- Assumptions about growth (in gross billings, merchants, subscribers, units sold, market share, revenue projections, existing product and new product or market sales)

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Team Dynamics: Your Junior Executive Team

Create SYNERGY & ride MOMENTUMApply individual and team GOAL-SETTINGBe ACCOUNTABLE to your teamCOMMUNICATE early, often, and effectively

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Team Dynamics

MB107 Teams Fail When Team Members or Individuals:Don’t develop competencies from the course

Use the analytical tools you’re learning in MB107

Engage in social loafing Instead, hold each other accountable Share the workload

Fail to take the advice of others Instead, recognize escalation of commitment is occurring Realize when it’s time to move on Seek intervention when you need to

Emphasize relationships, rather than the task Instead, look for symptoms of groupthink Mare sure you’re not putting “getting along” ahead of

making good decisions

Don’t forget the 360-degree evaluations!

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Team Dynamics:Your Coaches

Coaches work with your team

• They won’t do the work for youThey are facilitators, advisors, and leadersThey’re here to help you negotiate team relationshipsThey’ll help you stay on targetThey work with you from today through to December 7th

  

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Team Dynamics:Meetings

Keep a schedule that works for everyone

If your team need a place to meet for one or two nights during the semester, you must reserve a room.

You cannot assume that campus spaces are available.

Room reservations should be made only when you absolutely need them and through Skidmore’s Scheduling

Office:

http://cmsauthor.skidmore.edu/odsp/scheduling-office.cfm   

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Team Assignment: Project Timeline

Revise presentation based on

dry run feedback

Prepare presentation for

dry run

• Groups formed –

Teambuilding• Situational

analysis• Identify issues

• Develop strategy

Phase 1 Phase 2 Phase 3

Today to Oct 15

Oct 25 – Dec 6

Friday, Dec 7th

Oct 15 to 23(Dry Runs Oct 23 - 25)

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The Student Perspective Tyler Orfao ’13 and Rebecca McCourt ‘14

MB107 Student Coordinators, 2012-13torfao@skidmore.edu

rmccourt@skidmore.edu

We’re here for you!Come to us with team problems, for team support,

for help with preparing for the dry runs or the EP, etc…

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ResourcesMB107 website

Financial Template (excel and word doc)

Your coaches

Student coordinators

Barbara Norelliand Library Resources

MB107, Coaching, and Leadership Faculty

All MB dept faculty

SUCCESS

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ResourcesMB107 website

Financial Template (excel and word doc)

Your coaches

Student coordinators

Barbara Norelliand Library Resources

MB107, Coaching, and Leadership Faculty

All MB dept faculty

SUCCESS

Your team is critical for success…

Start by “building” that team tonight!

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A FEW FINAL NOTESTO BE PROFESSIONAL, YOU MUST BE PREPARED!

– Address technology needs prior to December 7th (multi-media, connection issues, laptop issues, multiple flash drives, etc.)

Prepare for no Internet access at hotel – This means no email, no datastor, no Dropbox/Cloud

Use USB/flash drives Equipment /power failures – The show must go on…can

you present without powerpoint?– Travel arrangements – getting to/from the Holiday Inn– Know the time of your presentation (it’s a tight schedule)– Perform Library Research Assignment – Check your Skidmore e-mail multiple times each day!