Capstone Project - Draft 2

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 due to a loss of $9 billion in the wake of the company’s ambitious plan to go public. This paper sought to establish the business model utilized by WeWork by examining its strategic plans to determine what went wrong for the company that was considered to have one of the world’s most ambitious business plan. The study employed the online or literature research methodology and it was established that some of the strategies that were applied by WeWork were the cause of the company’s 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.

IPO (Initial Public Offering)

Strategic management is critical for companies to remain competitive in the global industry. Creation of an effective plan is critical since it ensures the proper alignment of a company’s activities to its expected outcomes. Strategic management is critical for any business since it ensures a business gets operated based on environmental conditions. Sustainability is connected to strategies of businesses since it ensures businesses are able to survive in different conditions. Decision-making is a strong basis of company improvement since it promotes sustainability regardless of operational factors (Kitsios et al., 2019). 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 was founded in 2010 and currently has its headquarters in NYC. 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. This is an effective strategy since there are many existent and startup companies available in the current environment. The majority of such companies aim to promote high profits while using minimum operational costs. Due to the company’s structure, it has been able to increase its profits with shared workspaces being valued to as high as $47 billion.

In 2019, the company required to raise $4 billion to promote its expansion to different locations and to increase its market share through IPO. To ensure it raised the money required, WeWork listed its shares in the public stock exchange markets. The strategic move provided the company with 1.54 billion in revenue. The operations were ineffective since the company encountered $9 billion in losses. The outcome caused the company to suspend its IPO plans.

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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 premise? To answer this question, it is imperative to assess whether busines operations require physical spaces or if they can work on online platforms. WeWork considered this metric when promoting its operations as it ensured it provided companies that required physical space affordable rental spaces. A significant number of organizations, especially SMEs are currently grappling with the same question. The business environment has been exposed to many operational issues that require enough funds for maintenance. As such, it is imperative to promote business operations using affordable methods of operation.

New businesses require conformity to federal taxes, industry licences, insurance, and publiciation of the businesses (Porteous, 2020). As such, it is critical for all the businesses to plan an effective technique of promoting business continuity. Many organizations fail to realize their potential due to financial problems that they encounter during the first few years of their inception. It is common for businesses to close down soon after inception due to lack of funds to promote operations. It becomes difficult to provide employees with expected remuneration when the business environment is exposed to adverse methods of operation. WeWork analyzed such factors when it adopted its strategy so that new businesses would have an effective environment for operation.

WeWork represents a company that has sought to reduce the financial baggage of renting a premise for the small businesses. The company operated as an office startup that promoted operations for businesses that could not afford to rent out large spaces (Zeitlin, 2019). The strategy has been effective since it ensures businesses are able to operate regardless of environmental conditions. As a business on its own, WeWork company has been able to make progress, profits, and losses. It is imperative to examine WeWork’s strategy to determine how it makes profits. The approapriate research question is: How did WeWork apply its operational strategy to promote profits and what issues caused it to encounter 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’s mission is centered on its capability of provide flexible methods of business operation. The company targeted startups mainly because they rewire favorable operational methods for businesses. The company also targets small businesses and sole proprietorship company’s that do not require very lrge premises for operation. WeWork providesisnurance related to helath, dental, disability, life, and mental care to promote the effective delivery of business operations. From this perspective, the company promoted favorable working conditions that ensure any business is capable of achieving high profits.

The company’s business model is focused on customers segments of individuals and enterprises. The majority of individuals are people that adopted new entrepreunarial perspectives and require favorable conditions. Enterprises are also involved whereby they require letting of office spaces to promote start up business operations. The company serves small and medium businesses that require office space. The company provides offices and conference rooms depending on the types of business operations conducted in the area. The business model of the company focuses on development of business operations using available technology companies that require minimal spaces since most operations are conducted online.

The company offers competitive pricing since it provides contracts using the measurement of office space required by any business. The company furher provides amenities that promote business operations in area since it is possible for enterprises to operate with the he help of exisiting support team. The company offers internet, equipment, and support team help that ensures the cost of the rental space covers all components of business operations. The company’s business focused on international relations that further promoted operations in more geographical locations. The availability of many offices and enterprises under one roof provided the company with effective methods of operations since it is possible for business relationships to get developed in the areas.

The company’s proposed plan was effective since it ensured new and registered business would acquire a conducive environment for business. The company derives its business viability and business model by renting big office spaces at a wholesale price. It is possible to take advantage of economies of scale by negotiating different prices for the premises. WeWork applied a strategy of partitioning the space, then renting 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.

Creation of a global presence is important for any company since it provides a method of acquiring many customers and generatin more revenue. Global presence further promotes company operations since it is possible to gain knowledge concerning diverse methods of operations when a company collaborates with businesses that serve diverse clients. Boyte-White (2020) stated that WeWork promoted its operations by adopting global expansion and ensuring it acquired “$3 to $4 billion” using an IPO strategy. The company promoted its global presence through such techniques since it was possible to create effective outcomes. The company’s proposal was strategic yet it failed in its desire to produce more profits.

Verbeke et al., (2018) stated that globalization is critical for any business as it promotes growth in all aspects of businesses. The technique is critical since it promotes business operations based on the availability of capital, comprehension of business relations, and development based on acquisition of knowledge related to better business performance (Verbeke et al., 2018). WeWork is connected to the promotion of globalization since it aims to improve businesses’ operations by assessin their current operations and determinin future viability. The future of any company is dependent on its capability to generate revenue and store profits. WeWork adopted this technique since it ensures the company’s its rents office space for encounter favorable operational environment.

WeWork promoted its global presence through adoption of the effective strategy of expansion that exposes companies to diverse methods of gaining profits. The strategy was effective since it provided a larger market for the company to pick from. Creation of a global presence is effective since it further provides the company with a larger area to collect revenue compared to local businesses. 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. In this regard, a global presence promotes the company’s profits since it is exposed to diverse companies.

WeWork company's main business was to offer rental space for many businesses that were unable to afford to rent their own premises within cities. The company conducted assessment of cities and determined that the rent was not affordable for the majority of startup companies. In this regard, the company found a strategic location where it was possible for it to rent and purchase a large office space and divide it according to the needs of customers. In so doing, the company was able to bring together many businesses and organizations under one roof. The subdivided office spaces promoted the company’s mission of increasing economic growth regardless of tough business environments. The enterprises that letted that spaces found it easy to generate revenue since it was possible to increase profits in areas that seemed unfavorable for new businesses.

WeWork was able to generate high revenues using the technique since there were many companies in the target locations. It was possible for the businesses to collaborate and to gain much profits based on the availability of diverse business areas. The companies that letted the office spaces were exposed to favorable environments since it was possible to create effective business operations. The business acquired new connections in the premises which promoted increase in professionalism. It was possible to establish a strong organizational culture since the company enhanced its social awareness skills through the strong connections.

WeWork found a business opportunity whereby it provided the businesses with services such as printing, office cleaning, and even the front office management. This created profitable outcomes since WeWork charged the companies for the paid services. It was easy for the company to acquire strong operational techniques by enhancing its connections with existent companies. The co-workin-space-as-a-service was effective since WeWork had high capability of gaining new customers due to its public and social awareness.

Another important strategy that WeWork employed was taking advantage of the economies of scale. The economies of scale is a technique of increasing output of a businesss by taking advantage of existent operations. The technique reduces the amount of per unit fixed cost by improving productivity of a company through distribution of fixed cost activities (“Economies of Scale”, n.d.). WeWork was able to enhance its fixed costs outcomes by maximing profits yet it had purchased office spaces at a standards price. 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.

The economies-of-scale strategy adpted by WeWork was effective and enhanced its ability to create new business operations based on existent office locations. The company could reduce promotion costs since it was not mandatory to work with external companies to promote business operations. WeWork could simply inform their tenants about other business operations by communicating internally in all its office locations. Thereby, the clients who had rented out smaller units ended up paying more or higher per cubic meter. This promoted WeWork’s revenue since it conduted more businesses under one roof.

[Unnecessary spendings of WeWork and the CEA Adam Neumann]

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Despite the brilliant strategies that WeWork company employed, it still went on to post losses that were estimated to be around $900 million (Boyte-White, 2020). The losses occurred during the periods that the company had applied strategies of improving existent operations. This was ironic since the company had forecasted that its IPO would generate billions in revenue. The operational tactics also seemed favorable since WeWork had acquired many clients. It is thus imperative to study the company to determine actions that led to the dramatic change of events.

The business model employed by the company seemed effective in theory and through analysis yet the models were expensive and limited connections with investors and clients (Gaddini & Cossu, 2019). The business model was centered on creating strong customer relationships through provision of services that seemed suitable to the existent business environment. The proposed model was effective and ensured WeWork was capable of charging its tenants more money by providing more services.

The strategy that was most disadvantageous was the company’s plan of charging spaces according to time. WeWork was an effective company that displayed much possibility of success yet its projected growth failed as it attempted to make more profits. The company did not fully comprehend that its customers were small businesses that required more attention and minimal operational costs. WeWork only focused on acquiring profits using its clients since it considered that it had provided them with affordable operational environments. The technique was highly ineffective since people found it hard to pay for high prices while remainin operational in business.

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Before the company decided to go public in 2019, it is reported that it had overestimated the needs and market base requirement for shared-office space. The news displayed the company’s ineffective method of dealing with business since it did not fully comprehend the market expectations. A common issue that causes small businesses to fail is lack of proper planning (Schaefer, 2020). The issues results in the adoption of a business model that is not suitable in the area suggested. This occurred in the case of WeWork since it projected that its business plan would produce high profits yet the IPO had opposite results. The outcome of the IPO revealed clearly that WeWork conducted ineffective research and thus required a different plan for operation.

The company provided an effective proposal for its investors by informing them of positive operational procedures. This led to an overstatement of the company’s share value and consequently when investors were scared away, the company lost direction and crumpled. Improper market research is dangerous for any business since it exposes a company to adverse operational procedures. Data is critical in the current environment since it promotes knowledge of the business environement (SBI, 2020). In the case of WeWork, data analysis is critical since it promotes an effective technique of understanding the business environment.

WeWork used the existent data effectively yet it got exposed to ineffective methods of operation. The issues reveal that poor market research is often engulfed and cannot get detected easily. WeWork had high hopes and possibility of gaining profits yet the outcome was unexpected. It is evident that market research is a critical process that requires proper analysis by all persons involved in improvement of a company. The needs of a workforce are determined using proper market research yet WeWork was unable to enhance its profitability.