Free Paper Example on WeWork: External and Internal Environment Analysis

1.1 Product or Market Position

External environment factors define and impact the strategy and structure of an organization (AlHawary & Al-Hamwan, 2017). Based on PESTLE Analysis, these factors revolve around the characteristics of the targeted demographic, economic dimensions of the targeted market, sociocultural factors, legal-political aspects, global trends, and technological changes (Indris & Primiana, 2015).

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Additionally, legal and political factors have shaped the performance of WeWork. The company has been favored by the legality of the subletting business niche. The legal implication of this move implies that the company has the right to re-rent private spaces they have acquired to third parties who require desk space, shared offices, or private offices.

According to WeWork’s Global Impact Report, the company has taken advantage of the growing population in cities and the global economic ripple effect to revolutionize private working spaces. It is estimated that over 800 million people will be looking for alternative occupations by 2030, which is a trend that the company is eying (WeWork, 2020).

Technological changes have for years favored WeWork’s organizational strategy. Fernandes and Solimun (2017) argue that business remodeling requires innovative strategies. The increasing innovation in the remote working tools industry has encouraged a significant number of organizations to allow employees to work away from their offices (WeWork, 2019).

Over the years, WeWork has targeted millennials and young entrepreneurs who want to spice up their corporate engagements by owning a private workspace. The company estimated the global demand to increase by 800 million in 2030. The increasing number of people working online comes with the need for a private space to undertake the assigned gigs. It is this niche that WeWork positioned its business model. However, the changes in economic performance in the recent quarters due to the COVID-19 pandemic have exacerbated the company’s poor performance.

1.2 Porter’s 5

PORTER’S 5 FORCES DESCRIPTION

• Competition in the Industry Since 2010 WeWork has enjoyed limited competition in the co-working private office space business niche
• Potential New Entrants The industry is not restrictive since new firms can join the industry
• Power of Suppliers The success of WeWork has relied on the office space owners and their willingness to rent their spaces to the company for re-renting
• Power of Customer WeWork has enjoyed over 600,000 members in and outside the United States. Customer retention and acquisition impact the success of business in this niche
• The threat of Substitute Product Co-working private space is a unique offering and product differentiation is the primary factor that defines the value proposition to customers

1.3 Value Chain and Key Success Factors

WeWork offers shared co-working spaces or private platforms and charges significant rent (Boyte-White, 2020). The customers include remote workers, freelancers, and entrepreneurs. By buying WeWork services, customers enhance their networking opportunities and enjoy zero expenses on office utilities. For example, customers spend about $630 every month in Los Angeles (Boyte-White, 2020). By sharing the office costs and spaces, WeWork diversifies cost, and enhance profitability. The company‘s values include striving to be better together, gratitude, and kindness (WeWork, 2020).

2.0 Internal Environment Analysis

2.1 Unique Resources: Tangible and Intangible

Financial, organizational, physical, and technological factors form part of the tangible resources in a business. WeWork enjoyed significant financial growth since its inception in 2010. However, that trend has changed since the company is making a series of losses. The failed IPO in 2019 saw the company cutting down on costs of operation but the situation has worsened because of the huge liabilities and the COVID-19 pandemic (Huet, 2020). With 600,000 members and thousands of leased office spaces across the globe with 50% in the United States, the company generated a 45% increase in revenue in 2018 estimated at $1.1. billion, but the profits dropped across each quarter in 2019 and the onset of 2020 (Huet, 2020).

In addition to tangible resources, companies also require intangible to effectively meet their objectives. WeWork has about 15,000 employees but this number has been going down following massive layoffs in 2019 that saw over 2,400 losing their jobs (Palmer, 2019). Human resources has played a key role in building a community that works with customers to meet the goals of the company (WeWork, 2020). Another intangible resource in the company is innovation. Innovation is a vital component in the success of any modern business (Fernandes & Solimun, 2017). WeWork boasts of a pool of innovative ideas in line with the dynamics of private workspaces, especially in office designs (WeWork, 2020). Currently, the company is facing the challenge od readjusting to the implication of COVID-19 on workspace designs. Furthermore, the reputation of a company is an intangible aspect that is also central to the process of shaping public perception and brand image (Cretu & Brodie, 2009). However, the challenge at WeWork has originated from their inability to balance internal inefficiencies and brand image, especially in terms of recent poor financial performance (Palmer, 2019).

2.2 Capabilities and Competencies

WeWork is known for its high growth rate since it only started in 2010 and managed to hit a valuation estimated at billions of dollars. The unique business model played a key role in inspiring the growth process. Targeted technology that integrated a centralized platform for all customers, as well as the sociodynamics shift in the private workspace, favored the company (WeWork, 2020). WeWork achieved fundamental growth through a unique value proposition and limited competition. The outsourcing of office spaces also enabled the company to cut costs. However, the business model used by WeWork is not as unique as ascertained by several competitors and the non-restricted nature of the industry.

On the flip side, the company has suffered significant challenges because of poor leadership. A lack of proper planning has adversely affected the company since the revenue downturn could be traced way before the COVID-19 pandemic. On the other hand, a failed IPO negatively affected both the market reputation and the internal reorganization of the company. WeWork, therefore, lost its sustainability capacity as one of the core competencies it has enjoyed since 2010. The company’s IPO is described as ‘the most ridiculous’ in 2019 (Trainer, 2019).

References

Al-hawary, S. S. & AlHamwan, A. M. (2017). Environmental Analysis and its Impact on the Competitive Capabilities of the Commercial Banks Operating in Jordan. International Journal of Academic Research in Accounting, Finance and Management Sciences, 7(1); 277 – 290. E-ISSN: 2225-8329, P-ISSN: 2308-0337.

Boyte-White, C. (22020). How WeWork Works and Makes Money. Investopedia. Retrieved from https://www.investopedia.com/articles/investing/082415/how-wework-works-and-makes-money.aspCretu, A. E. & Brodie, R. J. (2009). Chapter 7: Brand image, corporate reputation, and customer value. Emerald Group Publishing Limited, Bingley, 263-387. https://doi.org/10.1108/S1069-0964(2009)0000015011

Fernandes, A. R. & Solimun, R. (2017). Moderating effects orientation and innovation strategy on the effect of uncertainty on the performance of the business environment. International Journal of Law and Management, 59(6); 1211-1219. https://doi.org/10.1108/IJLMA-10-2016-0088

Huet, E. (2020). WeWork Sees More than $1 billion in Revenue but Growth Tumbles. Bloomberg. Retrieved from https://www.bloomberg.com/news/articles/2020-05-15/wework-sees-more-than-1-billion-in-revenue-but-growth-tumbles

Indris, S. & Primiana, I. (2015). Internal and External Environment Analysis on The Performance of Small and Medium Industries (SMEs) In Indonesia. International Journal of Scientific & Technology Research, 4(4); 188 – 197. ISSN 2277-8616. Retrieved from https://www.ijstr.org/final-print/apr2015/Internal-And-External-Environment-Analysis-On-The-Performance-Of-Small-And-Medium-Industries-smes-In-Indonesia.pdf

Palmer, A. (Nov 2019). WeWork Lays off 2,400 Employees. The CNBC. Retrieved from https://www.cnbc.com/2019/11/21/wework-lays-off-2400-employees.html

Trainer, D. (2019). WeWork is the Most Ridiculous IPO of 2019. Forbes. Retrieved from https://www.forbes.com/sites/greatspeculations/2019/08/27/wework-is-the-most-ridiculous-ipo-of-2019/#24a754f41ad6

WeWork. (2019). Global Impact Report 2019. WeWork Inc. Retrieved from https://impact.wework.com/app/uploads/2019/06/GIR-Report-V12.6-us-EN.pdfWeWork. (2020). About the Company. WeWork Inc. Retrieved from https://www.wework.com/mission