Harvard Case - The WeWork Company: Internationalization of a Born Global Firm
"The WeWork Company: Internationalization of a Born Global Firm" Harvard business case study is written by Arpita Agnihotri, Saurabh Bhattacharya. It deals with the challenges in the field of Strategy. The case study is 10 page(s) long and it was first published on : Mar 17, 2020
At Fern Fort University, we recommend that WeWork adopt a phased approach to international expansion, prioritizing strategic partnerships, leveraging its core competencies in community building and flexible workspaces, and adapting its business model to local market needs. This strategy will enable WeWork to achieve sustainable growth while minimizing risks associated with rapid global expansion.
2. Background
The case study explores WeWork's journey from a start-up to a global co-working giant. Founded in 2010, WeWork disrupted the traditional office market by offering flexible, collaborative workspaces to individuals and businesses. Adam Neumann, WeWork's charismatic founder, envisioned a community-driven platform that fostered innovation and entrepreneurship. WeWork's rapid expansion, fueled by significant venture capital funding, propelled it into a global phenomenon, with locations in over 100 cities across the world.
However, WeWork's aggressive growth strategy and its complex financial structure ultimately led to a tumultuous period, culminating in a failed IPO attempt and a significant financial restructuring. This case study examines the challenges and opportunities associated with WeWork's international expansion, focusing on its competitive advantage, business model adaptability, and the need for a more sustainable growth strategy.
3. Analysis of the Case Study
3.1. SWOT Analysis:
- Strengths:
- Strong Brand Recognition: WeWork has established a strong brand synonymous with innovation, community, and flexible workspaces.
- Disruptive Business Model: WeWork disrupted the traditional office market by offering flexible and affordable workspaces, appealing to a growing segment of the workforce.
- Global Network: WeWork has built a vast global network of locations, providing a platform for collaboration and networking.
- Data-Driven Insights: WeWork has accumulated valuable data on workspace preferences, member demographics, and market trends.
- Weaknesses:
- High Debt Levels: WeWork's rapid expansion was fueled by significant debt, making it vulnerable to financial shocks.
- Complex Financial Structure: WeWork's complex financial structure, including variable lease agreements and revenue recognition practices, raised concerns among investors.
- Dependence on Venture Capital: WeWork's reliance on venture capital funding created pressure to maintain rapid growth, potentially compromising long-term sustainability.
- Lack of Profitability: WeWork struggled to achieve profitability, despite its significant revenue growth.
- Opportunities:
- Growing Demand for Flexible Workspaces: The rise of remote work and the gig economy is driving demand for flexible workspaces.
- Emerging Markets: WeWork can tap into the growing demand for co-working spaces in emerging markets.
- Technological Advancements: WeWork can leverage technology to enhance its offerings, such as AI-powered workspace management and data analytics.
- Strategic Partnerships: WeWork can collaborate with other companies to expand its reach and offer complementary services.
- Threats:
- Competition: WeWork faces intense competition from established players and new entrants in the co-working space.
- Economic Downturn: An economic downturn could negatively impact WeWork's revenue and profitability.
- Regulatory Changes: Governments may introduce regulations that impact the co-working industry.
- Changing Work Preferences: Shifts in work preferences, such as a return to traditional office environments, could threaten WeWork's business model.
3.2. Porter's Five Forces Analysis:
- Threat of New Entrants: High, due to low barriers to entry and the availability of flexible workspace solutions.
- Bargaining Power of Buyers: Moderate, as members have options for alternative workspaces, but WeWork's brand and network offer unique value.
- Bargaining Power of Suppliers: Moderate, as landlords have leverage in lease negotiations, but WeWork's scale provides some bargaining power.
- Threat of Substitute Products: High, as traditional office spaces, home offices, and other co-working providers offer alternatives.
- Rivalry Among Existing Competitors: High, as the co-working market is highly competitive, with numerous players vying for market share.
3.3. Value Chain Analysis:
WeWork's value chain can be analyzed as follows:
- Inbound Logistics: Sourcing and managing building materials, furniture, and other supplies for its workspace locations.
- Operations: Managing and maintaining workspace facilities, including cleaning, security, and IT infrastructure.
- Outbound Logistics: Providing access to workspace locations for members and managing member onboarding and support.
- Marketing & Sales: Attracting new members through online marketing, social media, and partnerships.
- Service: Providing a range of services to members, including community events, networking opportunities, and administrative support.
- Customer Service: Addressing member inquiries, resolving issues, and providing ongoing support.
3.4. Business Model Innovation:
WeWork's core business model innovation lies in its community-driven approach to flexible workspaces. By creating a sense of belonging and fostering collaboration, WeWork differentiates itself from traditional office spaces.
3.5. Key Challenges:
- Financial Sustainability: WeWork's high debt levels and lack of profitability are major concerns.
- Global Expansion Strategy: WeWork needs a more strategic approach to international expansion, considering local market needs and cultural nuances.
- Competition: WeWork faces intense competition from established players and new entrants in the co-working market.
- Regulatory Environment: WeWork needs to navigate a complex regulatory environment in different countries.
4. Recommendations
4.1. Phased International Expansion:
- Prioritize Strategic Partnerships: WeWork should focus on establishing strategic partnerships with local companies and real estate developers in target markets. This will provide access to local expertise, reduce investment costs, and accelerate market penetration.
- Adapt Business Model to Local Needs: WeWork's business model should be adapted to local market preferences, cultural nuances, and regulatory requirements. This may involve offering customized workspace solutions, incorporating local design elements, and partnering with local businesses.
- Leverage Technology and Analytics: WeWork should leverage data analytics to identify promising markets, understand local demand, and optimize its operations.
4.2. Focus on Profitability and Sustainability:
- Optimize Revenue Streams: WeWork should explore new revenue streams, such as offering additional services like event spaces, meeting rooms, and virtual office packages.
- Reduce Operating Costs: WeWork should optimize its operations by streamlining processes, negotiating better lease terms, and leveraging technology to improve efficiency.
- Strengthen Corporate Governance: WeWork should improve its corporate governance practices, including financial transparency, risk management, and board oversight.
4.3. Enhance Brand Management and Customer Experience:
- Strengthen Brand Positioning: WeWork should reinforce its brand positioning as a provider of innovative, community-driven workspaces.
- Improve Customer Service: WeWork should invest in improving its customer service, ensuring a positive and consistent experience for members.
- Foster a Strong Community: WeWork should continue to foster a strong sense of community within its spaces, offering networking events, workshops, and other activities that enhance member engagement.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies: WeWork's core competencies in community building, flexible workspaces, and data analytics are key to its success. The recommendations leverage these competencies to achieve sustainable growth.
- External Customers and Internal Clients: The recommendations prioritize member satisfaction and employee engagement, ensuring a positive experience for both groups.
- Competitors: The recommendations address the competitive landscape by focusing on differentiation, innovation, and strategic partnerships.
- Attractiveness: The recommendations are expected to improve WeWork's financial performance by optimizing revenue streams, reducing costs, and enhancing profitability.
6. Conclusion
WeWork's international expansion presents significant opportunities for growth, but it also requires a careful and strategic approach. By focusing on strategic partnerships, adapting its business model to local markets, and prioritizing profitability and sustainability, WeWork can navigate the challenges of global expansion and achieve long-term success.
7. Discussion
Alternative strategies include:
- Rapid Expansion: This approach involves rapidly expanding into new markets, leveraging venture capital funding to acquire properties and build out new locations. However, this strategy carries significant risks, including high debt levels, potential overexpansion, and difficulties in adapting to local markets.
- Organic Growth: This approach focuses on organic growth within existing markets, expanding gradually through new locations and service offerings. While this strategy minimizes risk, it may limit growth potential and require significant time and resources.
Key Assumptions:
- The demand for flexible workspaces will continue to grow in the coming years.
- WeWork can successfully adapt its business model to meet the needs of diverse markets.
- WeWork can secure strategic partnerships that provide access to local expertise and resources.
8. Next Steps
- Develop a detailed international expansion plan: This plan should outline target markets, entry strategies, financial projections, and key performance indicators.
- Establish a dedicated international team: This team should be responsible for overseeing international operations, managing partnerships, and adapting the business model to local markets.
- Develop a robust risk management framework: This framework should identify and mitigate potential risks associated with international expansion, such as currency fluctuations, political instability, and regulatory changes.
- Monitor performance and adjust strategies as needed: WeWork should continuously monitor its performance in international markets and adjust its strategies based on market conditions and competitor activity.
By taking these steps, WeWork can successfully navigate the challenges of international expansion and establish itself as a leading provider of flexible workspaces in the global market.
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Case Description
The case discusses the international expansion strategy of The WeWork Company (WeWork), a co-working space company. In the United States and Europe, the expansion of WeWork occurred through greenfield investment; membership focus was on freelancers and entrepreneurs. In Asian markets such as India, where WeWork entered through a joint venture, enterprise customers were the revenue generators. In June 2019, a co-founder of WeWork considered buying the entire stake of its partner in the Indian joint venture. However, given that revenues continuously remained lower than losses, investors doubted the expansion strategy and business model of WeWork. Should WeWork's pace of expansion be slowed? Can WeWork's business model be revamped for more profitable returns, and if so, should it?
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