Analysis: A Business Evaluation Of WeWork Kaan Over Departme ✓ Solved
Analysis: A Business Evaluation of WeWork Kaan Over Department
WeWork company was incorporated in the year 2010 and was labeled one of the future drivers of the world economy, however, nine years down the line, the company was reported to be on the brim of collapse with a loss of $9 billion in the wake of the company’s ambitious plan to go public. The study sought to establish the business model utilized by WeWork and examine its strategic plans to determine what went wrong for the company.
The study employed the online or literature research methodology and it was established that some of the strategies that were employed by WeWork were the cause of the company downfall in 2019. It was recommended that research and market analysis is an important tool when it comes to decision making and therefore it is essential to report factual figures and conduct thorough research.
The purpose of this research is to analyze the business model employed by WeWork company and examine the strategies that it has employed to ensure that it is competitive and survives within the market. It is also important to note how the company made losses in the year 2019 and subsequently lost value. The paper will also seek to analyze the international operations of the company and how WeWork’s operation within the global market is fairing. Finally, the article will conclude on the general health of WeWork company and make recommendations on necessary strategy changes for its profitability.
1. INTRODUCTION
For a business to continue making profits or even survive in the current competitive global industry, it requires a good strategy and an excellent masterplan. WeWork is a company that provides shared coworking spaces to small and medium enterprises that cannot afford their own premises. Founded in 2010, WeWork rapidly grew, with its shared workspaces being valued at $47 billion at one point. However, after announcing its IPO plans in 2019, it reported losses amounting to $9 billion. This analysis aims to uncover the missteps that led to these losses.
2. ANALYSIS OF WEWORK'S STRATEGIES
2.1. Business Model
WeWork's business model is based on renting office spaces for organizations and SMEs. The company rents large office spaces at wholesale prices and partitions them to rent to smaller businesses. This model leverages economies of scale, allowing WeWork to generate significant revenue while providing affordable coworking spaces to startups.
2.2. WeWork's Strategies
2.2.1. Global Presence
One key strategy was establishing a global presence, which diversified sources of revenue and reduced reliance on local markets. This global strategy allowed profitability even amid fierce competition, particularly from American markets.
2.2.2. Co-working Space-as-a-Service
WeWork provided a comprehensive package of services beyond just office space; it included amenities like printing and office management. This co-working space model allowed collaboration among various businesses under one roof, thus creating an ecosystem that added value to tenants.
2.2.3. Economies of Scale
By renting large spaces under long-term leases and subleasing to clients, WeWork capitalized on economies of scale. However, this became a double-edged sword, as some clients found the costs too high for shared spaces compared to traditional office rentals.
2.3. What Went Wrong for WeWork?
Despite WeWork's initial success, the company faced a significant downturn due to its expensive business model and lack of proper market research. The pricing strategy deterred potential clients, ultimately leading to a loss of investor confidence.
2.3.1. Business Model Flaws
WeWork's innovative approach faltered as it became apparent that its pricing could not sustain the demand. Many businesses found the costs prohibitive, driving them away.
2.3.2. Market Research Oversights
Before its IPO, WeWork vastly overestimated the demand for its coworking spaces, which inflated its valuation. This miscalculation led to diminished investor trust, ultimately causing the company's collapse in its IPO endeavors.
Conclusion
WeWork's ambitious vision and innovative co-working model captured significant market interest. Still, mismanagement in pricing and a lack of diligent market analysis precipitated its downfall. Sustainable business practices and sharp market insights are essential for any company, and WeWork's experience serves as a cautionary tale for entrepreneurs.
Recommendations
Businesses must emphasize creating sustainable pricing structures and conduct profound market research. Clear, accurate reporting is crucial for maintaining investor confidence and ensuring long-term viability.
References
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- WeWork. (2021). WeWork Locations.
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