Capstone Project - Draft 1

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 a loss of $9billion 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 that was taught as having one of the world’s ambitious business plan. 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.

I acknowledge my professor for the great support he has shown me through the course and in the process of writing this research

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Contents Abstract iii Acknowledgment iv TABLE OF CONTENTS v LIST OF ABBREVIATION vi 1. INTRODUCTION 1 PURPOSE OF THE RESEARCH 2 RESEARCH METHODOLOGY 3 2.0. CHAPTER 1 4 2.1. The Wework Company Business Model 4 2.2. The WeWork Company Strategies 5 2.2.1. Global Presence 5 2.2.2. Co-working-space-as-a service 5 2.3. What went wrong for WeWork Company? 6 2.3.1. WeWork Business Model 6 2.3.2. Poor Market Research and Analysis 6 Conclusion 7 Recommendation 8 Appendix 9 References 10

LIST OF ABBREVIATION

IPO (Initial Public Offering )

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. A company that offers unique, quality, and affordable goods and services, is most primed to succeed within their respective industries. A good business idea must strive to fill an existing gap that exists in the industry and make money in the process, generated through revenues. WeWork is a company that came up with a splendid masterplan that sought to fill and address an urgent need for working space for small and medium-sized companies that could not afford a premise by themselves.

WeWork is a company that provides shared coworking spaces to small and medium enterprises that are not in a position to afford them. The company provides a shared workspace to companies that are starting up at relatively lower costs than that they would spend while looking for a space of their own. The company has been able to increase its profits with shared workspaces being valued to as high as $47 billion. The company was founded in 2010 and currently has its headquarters in NYC.

In 2019, the company needed to raise $4 billion that could have been used to upscale and expand in a different world location and to increase its market shares through IPO, and in the process, it decided to list its shares in the public stock exchange markets. In the subsequent year that followed the public listing of the company shares, it generated revenues to a tune of 1.54 billion, however, it incurred losses to a tune of $9billion and as a result, the company suspended its IPO plans

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 while also examining the strategy that the company seeks to employ so as to expand and retain new markets. It is also important to note how the company made losses in the year 2019 and also subsequently lose value and the paper will seek to analyze the grave mistake that the company made that saw it lose its value in the year 2019. The international operations of the company will also be analyzed. The paper will seek to understand how WeWork’s operation within the global market is fairing and whether the company is making profits or losses within the markets that it is operational. Afterward, the article will conclude on the general health of WeWork company and make recommendations on what needs to be changed within its strategy for the company to continue making profits.

Research methodology refers to detailed techniques and procedures that research utilizes in the identification, selection, processing, and analysis of information regarding their topic. As a researcher, an individual is required to establish a research methodology that will enable them to acquire the most accurate and precise results about their research. One also has a variety of research techniques that they can decide to employ, however, one is required to keen examine which research methodology is the most appropriate which also considering their timeframe and cost. In this research, we are going to employ the online or literature research methodology. This will entail looking into the company’s business plan, strategic statements, and financial statements. We will also examine the company’s IPO blueprint and the employees manual to look at the kind of ethics that the company instills into its workforce.

The advantages of using this research methodology and the reason why it was fit to use in this research are that online or literature research methodology offers a cheaper, faster, accurate, and verifiable method of conducting research.

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What do you do when you have a great business idea and it is operational but lacks the required amount of money to rent a sho premise? A significant number of organizations, especially SMEs are currently grappling with the same question. Many organizations fail to realize their potential due to financial problems that they encounter during the first few years of their inception. WeWork represents a company that has sought to reduce the financial baggage of renting a premise for the small businesses. As a business on its own, WeWork company has been able to make progress, profits, and losses. We are therefore to examine what strategy has WeWork employed that made it make profits and what happened when it made losses?

WeWork's business model is based on generating revenues through the process of renting office spaces for organizations and SMEs (Davis, 2019). The company derives its business viability and business model by renting big office spaces at a wholesale price thereby taking advantage of economies of scale since it can negotiate to pay less and partitioning the space, then rent it to startups and SMEs who then pay a higher price per cubic meter. In this process, the company is able to generate the revenues required to run its operations and make profits.

One of the strategies that WeWork as a company was able to leverage in regarding having a global presence. This made sure that the company had a bigger market and also ensured that it had a buggers source of revenues as compared to just have a localized business. This also ensured that the company diversified its sources of income by market. For example, WeWork continued to make enough profits even when there was stiff competition from other businesses in Europe and these sales and revenues came from countries such as America.

WeWork company's main business was to offer rental space for many businesses that we're unable to afford to rent their own premises within cities. In so doing, the company was able to bring together many businesses and organizations under one roof. Therefore this brought another opportunity for WeWork to generate revenues. Services such as printing, office cleaning, and even the front office management were done by WeWork while the companies paid for the services.

2.2.3. Economies of Scale

Another important strategy that WeWork employed was taking advantage of the economies of scale. While the business rented apartments and bigger office spaces as a unit and on long-term leases, it rented out to its clients on a short-term basis and charged its services based on square units or time. Thereby, the clients who have rented out smaller units ended up paying more or higher per cubic meter.

Despite the brilliant strategies that WeWork company employed, it still went on to post losses that were estimated to be around $9Billion, and also the company realized a sharp decline in its revenues. Therefore, we are going to examine what actions led to this dramatic change of events for the company.

The business model employed by the company, as much as it was looking good on paper and advertisements, the models were known to be very expensive and scared both investors and clients away (Gaddini & Cossu, 2019). In particular cases, the company charged for space on a time basis. This ended up becoming too expensive that no client could afford.

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Before the company decide to go public in 2019, it is reported that it had overestimated the needs and market base requirement for shared-office space. This led to an overstatement of the company’s share value and consequently when investors were scared away, the company lost direction and crumpled.

WeWork company had one of the most unique and ambitious business models the world has ever seen. The strategies that the company employed prove to be very successful for the company and its business model. The economies of scale strategy were on a strategy that generated revenues for the company but also became one of its nightmares since people started shunning away from its services when they realized it was expensive. The business also made the mistake of conducting poor market research and evaluation and which subsequently led to the collapse and abandonment of the IPO ventures.

After the findings, it is recommended that business organizations and entrepreneurs should be very keen when deciding on the business models of their venture. It is important since it will guide the business and ensure its survival and profitability in the long run. Also, market research and analysis is an essential tool when it comes to decisionmaking within an organization. It is also important to report the correct figure when doing a market analysis.

Boyte-White, C. (2020) How WeWork Works and Makes Money. Investopedia. https://www.investopedia.com/articles/investing/082415/how-wework-works-and-makes-money.asp