Posted: April 13th, 2023

Capstone Project – Presentation essay

Table of Contents
Abstract 3
INTRODUCTION 4
COMPANY BACKGROUND 5
1.1 Founders 5
1.2 Early Attempts of WeWork 5
1.3 The Philosophy Behind WeWork 6
BUSINESS ANALYSIS 7
2.1 The WeWork Company Business Model 7
2.2 SWOT Analysis 8
2.3 MOST Analysis 10
2.4 PESTLE Analysis 10
2.5 Cost-Revenue Analysis 12
2.6 Rules and Regulations of WeWork 13
RISE OF WEWORK 16
3.1 The Hype 16
3.2 Going Global 17
3.3 WeCompany 18
3.4 IPO Attempt 20
FALL OF WEWORK 22
4.1 The WeWork Company Strategies 23
4.2 Employees’ Point of View 26
4.4 What Went Wrong for WeWork Company? 29
CONCLUSION 31
REFERENCES 33

Abstract
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.

INTRODUCTION
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.
COMPANY BACKGROUND

WeWork is an American company that established its niche in the real estate market. It was established in 2010 in SoHo, New York, United States. Its niche is in providing flexible shared workspaces for technology startups. It also provides services for other enterprises. It has specialized in designing and building workspaces, both physical and virtual, which are shared. In addition to this, it also offers office services for technology startups and companies. With WeWork, all the needs when it comes to office space for all types of companies can be met (Aydin, 2019).
1.1 Founders

WeWork was founded by Adam Neumann and Miguel McKelvey. However, from the beginning, it is Adam Neumann who took the reins of the company and he became its CEO. However, he was forced to resign in 2019 because of mounting pressure from investors. He also gave up the majority voting control in the company on 26th September 2019. Miguel McKelvey is still working in the company and he is the chief culture officer (Aydin, 2019).
1.2 Early Attempts of WeWork

The initial idea that the cofounders had was providing the office space as part of an ecosystem. In addition to the offices, they would also have apartments and gyms. This way, their concept was aimed at promoting communal life. The company was successful from its inception as it turned a profit just a month after it was launched. Within the next 2 years, the company had opened up four more locations. With the help of Benchmark, the company got funding of $17 million which further helped to accelerate its growth. It opened its first international office in London in 2014. By 2019, the company had over 800 office locations (Aydin, 2019).
1.2.1 GreenDesk

GreenDesk was the first real estate venture made by the cofounders. It was founded in 2008 and it was an early incarnation of WeWork. The mode of operation of the company was sustainable shared office space. It has recycled furniture, free-trade coffee and there were green office supplies. The customers were called members and renting of office space was done every month. The facilities they offered included fully furnished offices, conference rooms, high-speed internet, printing, other utilities, and a well-stocked kitchen. The company thrived even when the real-estate market was failing. In 2010, the cofounders sold their stake at GreenDesk and founded WeWork (Aydin, 2019).
1.3 The Philosophy Behind WeWork

The founders of the company believed in the concept of co-working and bringing the society together. WeWork believes that their services are a bigger portion of the society. Over the years, life-work balance has been shifting and with the advanced technology that brought smartphones, the home life has been invaded. Individuals are working from home for long hours, making responses to emails. With the aim of balancing this, wework has worked towards bringing many homes into a single place. The aim is to offer comfort at work just like the kind an individual will have back in his or her home. The aim is to eliminate anxiety, and promote more creativity among the employees. The founders aimed at creating a culture of fulfilled, motivated, and happy employees. The company values unique experiences, friendship, and growth above all the things that life has to offer. Has result, they have revolutionized the workplace by being human and kind, giving gratitude, striving to get the best as a team, and doing the right things.
BUSINESS ANALYSIS

2.1 The WeWork Company Business Model

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 companies that do not require very large premises for operation. WeWork provides insurance related to health, 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 entrepreneurial 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 further provides amenities that promote business operations in area since it is possible for enterprises to operate with the he help of existing 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.
2.2 SWOT Analysis

The company has expanded and it has a worldwide reach with offices in developed countries such as the United States, the United Kingdom, Canada, Germany, and more than 37 countries worldwide. Therefore, the company has an international status that many companies in the field do not have. The company’s value was approximately 47 billion dollars at the beginning of 2019. The company has major stakeholders such as Adam Neumann, JP Morgan, and SoftBank who contribute to the success of the company. The services that they offer are economical and inexpensive and this has helped to attract the market of young freelancers, entrepreneurs, and startups. The company has targeted various market segments and hence it has reached a lot more people and diversified its sources of revenue. The company also has in-house advertising which enables it to effectively carry out its marketing campaign and advertisement (Shaw, 2020).
The weaknesses of WeWork is that the working environment is very intense and maybe a source of stress for their clients. Newcomers may struggle with adjusting to the shared workplace because of the familiarity among the people that have worked there longer. The affordable amenities sometimes lead to overcrowding. In-house marketing sometimes does not portray the exact image of the workspaces. The goals of the tenants and those of the company are not aligned and this class may prove problematic to the company (Shaw, 2020).
The opportunities at WeWork include providing an independent mail system. Currently, the mailing services are in terms of receiving, however, if they incorporate on-demand mail receiving and delivery, they can attract more users. The company can maintain a record of the interests and preferences of the consumers and consequently design offices that meet this. The greatest demand in the present is home offices. Global expansion is a positive thing; however, it might be strenuous to the company. Therefore, there is the opportunity to merge, acquire, or partner with other brands and companies to make the process less strenuous (Shaw, 2020).
Two major threats are facing WeWork. First, there are major competitors in the industry such as Office Max, Office Depot, and Regus. These companies offer similar products and services as WeWork. To overcome this threat, the company should aim at differentiating itself from others by offering unique experiences to its tenants. Some consumers are attracted to products that are highly-priced and if they are priced lowly, they appear to be of low quality. Therefore, the company should also offer products which cater to these market (Shaw, 2020).
2.3 MOST Analysis

The mission statement of WeWork is to build more than beautiful, shared office spaces where a community can be built. It is a place where a person joins as an individual and becomes a part of a greater community. It is a place where success is redefined and measured by personal fulfillment and not just the bottom-line. The main objective of WeWork is to create a community-based business that is based on putting passion, people, product, and product before profit. The strategies that are employed by the company are delivering an amazing member and employee experience, earn the right to be the partner of choice, execute the core business brilliantly, building by building, grow and expand geographically smartly and profitably, create and sell valuable new products and services and monetize spaces, and operate with an ownership mentality. To be able to implement the strategies and achieve high performance within the company, the compensation model includes a competitive base salary, an annual bonus, and long-term incentives. This encourages the employees to work hard and be able to achieve the set objectives and execute the strategies of the company.
2.4 PESTLE Analysis

Political factors do not seem to have a significant impact on WeWork. Political turmoil and trade wars have significantly affected the employment rates within countries. Many people are unemployed leading to an increased venture into freelancing. This has increased the number of customers of WeWork who utilize the shared working spaces. Economic factors significantly affect the operations of WeWork. There is an emergence of the gig economy which has increased the number of freelancers and work-from-home positions and hence an advantage to the company. The home environment is not conducive for working which leads them to companies such as WeWork. There is also an increase in disposable income and hence professionals are looking for setting up their own offices (Bush, 2019).
The social factors impact WeWork where the workspaces offer an aspect of social interaction which lacks in online work. It helps to bridge the gap between independent working and workplace interaction. Technology has been a great driver of success at WeWork. Technology has made remote working possible and hence more professionals can utilize the WeWork working spaces. The cost of technology is also significantly low which has led to their high adoption. Remote work tools such as Slack, Google Docs, and Trello have also enabled remote working and consequently brought more customers to WeWork (Bush, 2019).
The company has faced many legal challenges and there is a need to address the issues. First, the aspect of liability sharing where in case of any problems, who will be held responsible. The company operates on space that it has leased which makes its business that of subletting. This may be legal in some areas but it is considered to be a questionable practice in other locations. To be able to avoid such problems, the company needs to buy the spaces in areas where subletting is not legal. The company’s business model is environmentally friendly as it reduces the use of resources such as electricity. Most of its customers are those that work on digital platforms which reduces the need for paperwork and this contributes to a greener environment (Bush, 2019).
2.5 Cost-Revenue Analysis

The primary revenue centers for WeWork are memberships and enterprise offerings. From an analysis of the company financial statements and annual reports over 85% of the company’s revenue is tied up to the membership. Out of the 85%, 40% is related to the enterprise offerings. The company revenue related to the membership has started decreasing in the recent years. The decrease can be attributed to the efforts by the company to diversify the income streams through introduction of new products. Enterprise members bring in more clients to the company and also contribute a large proportion in the company’s revenue. The clients are more likely to have longer leases which are responsible for increasing the company’s revenue block. The most basic membership at WeWork goes for $45 for a month. This package allows the members access to the 833 open and coming-soon WeWork offices. It also allows access to WeWork’s social networks where entrepreneurs interact and share ideas. However, using the facilities costs an additional $50 per day and hence this membership subscription is intended for those looking to network and have need office space occasionally. There are different plans which are offered by the company and their prices vary depending on the location. An example is in Los Angeles where with $320 per month, one is guaranteed a desk in a common area, for $400 the client has access to the same spot every day, and for $630 per month, the client gets a standard private office space. The amenities provided are high-speed internet, coffee, bike storage, printers, office supplies, daily cleaning, water and front desk service (Boyte-White, 2020).
The cost centers for WeWork are rent, construction & renovation, member acquisition and retention. The company has been having an impressive growth in the income level but the costs of the company have been growing very fast as well. The company reports 80% of total revenue in location and operating expenses. This is not alarming since the growth in costs can be explained by the expansion in the operations of the company. The company spends a lot of money on rent with the company renting over 14million square feet of office space. WeWork also spends a lot of money in renovating the space. The company needs to keep 70% of the office space to meet its rent obligations. WeWork spends a lot on sales and marketing to get customers to occupy the spaces and retain existing members.
The company operates mostly in leased spaces and it begins paying its lease once it signs the contract. However, occupation cannot be carried out unless the building is renovated to meet the aesthetics of WeWork, a period referred to as ‘fit-out.’ This usually takes four to six months and full occupation does not take place immediately after the fit-out period passes. The first few months of operation show the revenues being less than the costs incurred. This s because of the fit-out period. However, the company can break even soon after full occupancy is achieved as the rent is more than the costs incurred. With more time, the company begins to generate great revenue that accounts for the company’s profits. The early losses are typical of any business and not unique to just WeWork. Therefore, the numbers are okay when the company ventures into new territories. The company also generates financing from funding rounds and the sale of bonds (Edwards, 2017).
2.6 Rules and Regulations of WeWork

2.6.1 Rules and Regulations for Customers
The rules and regulations of WeWork customers are as follows (Terms and conditions):
a) The members have to be at or above the legal drinking age within the jurisdiction where they are located unless stated otherwise.
b) The account password or keycard should not be shared with anyone else.
c) All the fees are non-refundable and are paid in the local currency of the location of the company.
d) There are additional services that can be offered either in connection with a premise, service packages, or any other offerings.
e) The clients may be held liable for the repair cost of any damage caused to the premises and/or items by the client, their invitees, or pets.
f) The clients may not take, copy or use any information either directly or indirectly that belongs to other members.
g) Pets can only be brought to premises where they are allowed.
h) The company is not liable for the actions of other individuals that are sharing the workspace.
2.6.2 Rules and Regulations for Employees
WeWork has code of conduct that states the rules and guidelines for their employees to follow. The rules and guidelines of the employees are based on the company values. First the employees are required to respect each other and the differences between the age, sex, gender and ethnicity between them. The company provides a set of anti-discrimination laws for its employees. The employees are warned against discriminating employees and any form of violence, bullying, abuse or harassment directed towards other employees is not tolerated. Any employees that face any discrimination from their colleagues are advised to report the matter to the Human Resource department.
The company values confidentiality and it is the role of the employees to ensure that sensitive information about the company does not get into unauthorized hands. The guideline is that WeWork employees will not release any confidential and nonpublic information unless it is for business purpose or a legal order to submit such information. The employees should also be careful with what they post on their social media as the company wishes to speak in one voice. All employees are required to follow government regulations and applicable laws when interacting on social media. The company does not tolerate any fraud, sharing of confidential information or inappropriate conduct of employees on social media.
Employees of WeWork are required to conduct themselves in the best interest of the company and not their personal interests. Employees are not allowed to use their positions for any personal gain. The company employees are required by the organization not to sue their positions to give or receive anything of value unless it is in the company’s interest. WeWork employees should also not be part of any investments or businesses which compete directly or indirectly with the company. They should not cooperate with competitors of the WeWork. Wework employees are prohibited from taking for themselves or family members any corporate opportunities that are discovered using company resources.
The company values its reputation so much and thus bribing is not allowed for the WeWork employees. Employees are not allowed to offer or promise any cash or cash equivalents or receive any cash or cash equivalents for the purpose of getting a favorable outcome. Corruption is not accepted by the company and the employees must not participate in or tolerate any corruption activities in their workplace. All the employees must avoid any actions that give a perception of favoritism to external organizations such as offering gifts or any other action that impacts negatively on the reputation of the company.
The company assets must be protected; misuse and over use of the assets is not allowed. The employees of WeWork are required to ensure that the company assets are used for business purpose only. The assets of the business include both tangible and intangible assets. The entity also entrusts the employees with technology and computer equipment for the purpose of them undertaking their roles. Employees are responsible for the safety of the equipment and any loss or theft must be immediately reported to the organization.
RISE OF WEWORK
3.1 The Hype

The success of the company made Neumann the talk of the town. Everyone was fascinated by how he could transform the freelance-desk sharing concept to becoming one of New York’s biggest private office tenants. The preliminary hype over the real – estate startup may be liable on a consensual phantasm between the founders and investors. The organization has been making efforts to scramble for cash since the attempt to get into the stock market. The hype was both in the publishing sphere and the company sphere.
3.1.1 Beer, Parties and Summer Camps

The company had a corporate drinking culture as it was providing unlimited alcohol supply within its workspaces. Members had unlimited access to beer and wine. However, this policy was later changes and they were limited to four-once pours per beers in a day which could only be accessed between noon to 8pm on weekdays (Holmes, 2019). The summer camps served as venues for enjoyment rather than relaxation and advancement of the company (Meltzer, 2014). It was free entry for the already working employees, aiding the company to maintain its employees working under difficult circumstances both physically and mentally. The company mainly dwelled on the party culture and this was greatly influenced by the hype they received.
3.1.2 Investments

SoftBank through executive and chairman at WeWork Claure Marcelo, the company need not to worry anymore. Claure says that it is a time to show the investors that they are viable. In 2019, SoftBank invested 18.5 billion dollars to the company, which is more than Bolivia GDP, that has at least 11 million individuals.
3.2 Going Global

WeWork was founded in New York but it has expanded to the international space. Now, they are offering subscription options for use of international offices. This is important for members who need a place to work for a short time when they are on a trip abroad as well as local people.
3.2.1 Europe

WeWork’s expansion to Europe contributed to the ballooning of the business of Co-working space. It has set up workspaces in London, Manchester, and Moscow. However, competition in Europe is stiff because of other major players in the industry such as IWG Plc and local startups (Mathis, 2019).
3.2.2 Asia

To expand to Southeast Asia, the company set aside a budget of $500 million. This is because the co-working space in the region is already well established. New companies that venture require extensive capital and manpower to be able to succeed. The expansion to Asia was a success until they formed WeChina, a subsidiary of WeWork (Mehl, 2019).
3.2.3 South America

Its expansion to South America began in Argentina and Brazil. However, it first opened its first two locations in Mexico City. The other locations were Buenos Aires opened in May 2017, Sao Paulo in June, and Rio de Janeiro. By 2017, the company was also considering opening its offices in Lima, Peru, and Bogota, Colombia.
3.2.4 Africa

WeWork ventured into Africa in 2019 with South Africa being the first country where they set up their offices. It partnered with Redefine Properties, a South African real estate company to set up its first location in Johannesburg. They viewed South Africa as the gateway to the rest of the world and establishing offices there would help in the expansion to the rest of the continent (Reuters, 2019).
3.3 WeCompany

In January 2019, WeWork decided to rebrand its name as WeCompany as it got into activities outside office space into educational and residential units. However, it did change back to the original name WeWork in barely two years. This was made in line with the efforts of the firm to aim on its core items as well as ground itself as a worldwide end-end business solutions leader. Additionally, it is an announcement that illustrates the progress the firm is making its roots stronger and implementing against the strategic goals it has put in place under the new top leadership. some of the progress includes coming up with non-core ventures, growing its balance sheet, and right sizing its world portfolio. This has enabled the firm to innovate and adapt in the face of the current world pandemic as well as retaining its profitability.
3.3.1 WeLive

WeWork moved towards the housing sector. It has done this through its co-living start up WeLive. It is a functioning apartment building that operates on modern set of principles in urban housing industry. The units are completely furnished with a yoga studio and laundry room. There is an espresso bar as well as trendy eateries as well as happy hours. Also, the firm promotes neighborhoods that are so friendly with real time human friends. It is basically an in-built community. (Crabb, 2020). The objective is to end the digital age kind of loneliness. It is eliminating the social dislocation due to more social interaction online. It aims at eradicating the lost sense of community for urban residents. WeLive is dedicated to fill the existing social void, in theory. WeLive was planned to allow customers to rent fully-furnished apartments for stays of one night or longer. The program was one of the ways the office-sharing startup tried to branch out under former CEO Adam Neumann in recent years. It is still an ongoing operation.
3.3.2 WeGrow

WeGrow is an education arm of the company that was born from WeWork. In one of his interviews, former CEO Adam Neumann said he came up with the idea with his wife when they realized the lack of elite education in the New York area after their children were born. A major feature of the curriculum is weekly trips to a farm in Westchester, where the kids spend time in nature and learn about science by growing their own fruits and veggies. On Thursdays, they practice their math — and entrepreneurial — skills with a farm stand at the school, selling the produce to WeWork members and donating the money to charity. The school was focused on growing future business leaders and the interest of the students. The parents who came to see what the school looks like were experiencing a unique center. Once the family arrives at school, the day begins with a music circle, where parents and children sing along and dance to Beatles and Disney songs in a space dubbed “the magic meadow” — a green carpeted island amidst pale wood fixtures, all designed by an avant-garde Danish architect. Afterward, parents troop over to a lounge area for socializing and free coffee.
The founder, Rebekah Neumann wife to former CEO to wework had bigger plans for WeGrow. She began with an elementary school in New York. The school had not grown out of New York.
The management informed the parents of WeGrow students that the program will come to an end at the end of the academic year in 2020. This is due to the company’s efforts to focus on its core business functions.

3.3.3 Rise by We

It is a vision program that WeLive has in to make sure that people get full wellness experience. Leading with community, rejuvenation, and movement, rise takes pleasure in social wellness as a crucial aspect of improving people’s quality of life. It advocates for strengthened bodies through face to face training in boxing and cardio, enlivening people’s spirits via meditation, yoga, Pilates, and making friends in the sauna, café, and mineral baths. Rise by We offers fitness spas, clubs, as well as classes that are in relation to wellness, health, and physical training. So as to offer the services and related elements. This is achieved by gathering and utilizing personal data. There are policies that guide the utilization of personal data.
3.4 IPO Attempt

During its failed attempt to go public, the company valuation went down from 47 billion dollars to 10 billion dollars. The CEO Adam Neumann was removed and the process of IPO got delayed definitely. This was in august 2019, in October the same year, the biggest investor SoftBank took over the firm. Adam was given a 1.7 billion dollars golden parachute to step down from the CEO position and the board chairman. The bank assigned the company a 5 billion dollars valuation at the end of the 3rd quarter. On 21st November, the company confirmed sacking 2400 employees. (Stokes‐Rees, & Livingstone, 2020). After the going public filing was made, an intensified scrutiny on the company’s leadership and finances from the media and investors was done. There were concerns on the firm’s CEO Adam and the profitability of the firm. The IPO was delayed on 16th September. Some of the concerns on the CEO included smoking weed on a private jet, trademarking the term we and forcefully wanting to buy WeWork for 5.9 million dollars, and giving workers tequila after discussing layoffs. The company had a series of bad behavior and undesirable business priorities on top of the smoking weed. The company faced allegations of allowing alcohol consumption in the company events.
The failed IPO attempt disclosed a lot of unknown information about the company dealings that could have resulted into the failed IPO attempt. The major reason that led to the failed IPO attempt was poor corporate governance. Former CEO, Adam Neumann, according to media reports after the failed IPO attempt, was the main cause of the failure. Neumann was borrowing money from WeWork for a very minimal interest or no interest at all. Prior to the failed IPO, Neumann had cashed out over $700 million out of the company’s stock. Being the CEO of the company at the time, that did not look good to investors the company was trying to convince to buy the stocks.
The plans for an IPO was postponed indefinitely on September 30th, 2019 because the $47 billion valuation was very doubtful. On 22nd October, 2019, the company got a funding deal with SoftBank and this was aimed at reviving the company. The deal gave WeWork $5 billion in loans, accelerated a $1.5 billion investment SoftBank pledged to make the following year, and launch a tender offer for $3 billion in shares for the other shareholders. This deal led to WeWork having an 80% stake of the company, however, they would not have a majority of the voting rights. With this deal, WeWork was valued at approximately $8 billion in 2020 (Boyte-White, 2020).
FALL OF WEWORK

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 business 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 licenses, insurance, and publication 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 appropriate research question is: How did WeWork apply its operational strategy to promote profits and what issues caused it to encounter losses?
4.1 The WeWork Company Strategies
4.1.1 Global Presence

Creation of a global presence is important for any company since it provides a method of acquiring many customers and generating 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. 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 (Boyte-White, 2020).
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 assessing their current operations and determining 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.
4.1.2 Co-working space-as-a service

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 doing so, 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 rented those 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 rented 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-working-space-as-a-service was effective since WeWork had high capability of gaining new customers due to its public and social awareness.
4.1.3 Economies of Scale

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 business 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 maximizing 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 adopted 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 conducted more businesses under one roof.
4.2 Employees’ Point of View

The employees at WeWork believed in the wild ambitions of the cofounder and CEO, Adam Neumann. They were enthralled by the cool culture and lavish perks that were being provided by the company. However, as the red flags mounted, they started to be concerned. Now the employees see how the approach that was taken by the company was insane. It was impossible for it to work and the employees were high, as stated by a software engineer at WeWork. There was no form of organization in the company and despite generating significant revenue, there were no realistic targets being set. The expenditure of the company was extravagant and they grew concerned when 8,000 employees were flown to a company retreat and Lorde performed and Deepak Chopra led a meditation. Neumann had a scattershot approach and reckless spending and the employees hoped that there were other intelligent people who were responsible for making practical financial decisions. Discovering that there were none, the employees grew further concerned (Mohamed, 2019).
The employees at WeWork feel abandoned and neglected as they have been left to bear the brunt of the failing company. The CEO responsible for the failure has left the company with a golden parachute of over 1 billion dollars. However, many employees have been rendered unemployed during these times. These are people who do not have a source of income and instead of being compensated for their hard work, the source of the problem is the one being compensated. This is very heartbreaking for the employees and may reduce employee commitment (Sharf, & Jeans, 2020).
The company laid off over 2,400 employees after the failed IPO. The company employees had joined the organization with the hope that they would change their lives and the lines of those who depend on them. The employees were saddened to see the fallout between WeWork and SoftBank which has given them so the employees a loss. Most of the company employees were looking forward to selling the stocks that they had bought but with the failed IPO the employees were left stuck with shares. Most of the employees had plans of reinvesting the gains that they would achieve from the offering and thus the failed IPO has killed many of the employees’ dreams.
Some of the employees consider a lawsuit because they stand to gain in case the company files for bankruptcy. When the company files for bankruptcy the investors that have preferred stock will be paid before the common stock owners. The company had promised equity and salary increments when the employees were buying the shares. The company employees’ living standards have been negatively impacted by the failure of the company.
4.3.1 Lawsuits

The floodgates for lawsuits against WeWork and Neumann have opened. One WeWork employee Natalie Sojka filed a lawsuit in San Francisco County Superior Court against Neumann and SoftBank. This is just one of many disgruntled employees. The company is also facing other lawsuits from former executives. One of them is Lisa Bridges, a former senior vice president and the head of compensation (Mashayekhi, 2019). There are many lawsuits currently facing WeWork and going by its financial standing, it is difficult to determine whether or not it would survive.
There are investors who files a class action lawsuit against the company. The investors inject their money into a company expecting to reap benefits through dividends. This can only be achieved with the proper management of the finances that the investors provide to the company. However, in the case of WeWork the finances were mismanaged and this led to the loss of their capital. Flying over $8,000 employees is a poor financial decision under any circumstance. Therefore, they sued the company on the grounds of poor management of their finances (The Real Deal, 2020). Additionally, the employees in the company filed discrimination lawsuits. An example is Christopher Clermont, who was the head of diversity and inclusion at WeWork. He filed a lawsuit against the company claiming that it had underpaid minority employees and excluded them from being promoted to the leadership roles. Clermont is black, and he states that his position was for promotional material but he was given little to no responsibilities. Diane Allen also accused the company of sexual harassment, racial and gender discriminations and equal pay violations (Ali, 2020).
There is a complaint that the former company CEO Neumann and the board breached the fiduciary duty that they have to the minority shareholders. The company CEO abused his position and control by buying shares at very low prices and thus decreasing the value of the minority shares like those that are held by the company employees. The employee, Sojka, claimed through his law suit that the buyout by Soft Bank was subject to the “entirely fairness standard”. The burden of proof lies on the company. The company should prove that what they did was entirely fair. The employee’s attorney feels that they have a strong case because when one employee controls and dominates a company and gets improper personal benefits then the transactions are subject to the fairness standard.
4.4 What Went Wrong for WeWork Company?

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.
4.4.1 Downsides of WeWork Business Model

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 remaining operational in business.
4.4.2 Poor Market Research and Analysis

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 result 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 environment (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.
CONCLUSION

Coworking promotes facilitators of new economic structures majorly with the economy knowledge as well as the increase in independent employees. There is extra content observed in coworking workplaces, services and more educational tools. Sharing is indeed caring; therefore, despite the failing of going public by WeWork, the future is luminous and things might be yet to change.
In an analytical point of view, WeWork’s business model is based on generating revenues through the process of renting office spaces for organizations and SMEs. The company’s business model is focused on customer segments of individuals and enterprises. The company has targeted various market segments and hence it has reached a lot of people and diversified its sources of revenue. The company has weaknesses of the working environment being very intense and maybe a source of stress for their clients other than its expenses and building costs. The company has many opportunities including an independent mailing system as well as organizing workspace based on the consumers’ preferences. But it would be hard for the company to compete with other competitors in the industry such as Office Max, Office Depot, and Regus.
The company failure can be explained by so many factors. One the corporate governance and structure was not well developed. The company CEO used the authority and power that he had to the disadvantage of the company; he bought shares at depressed values and borrowed money at minimal or no interest. The company’s business model change was not a good idea; the model did not focus on building relationships with the customers but only focused on making profits. The company made the decision to make an Initial Public Offering based on the hype without effective research. If the company had done thorough research it would have seen the risks ahead and prepared well for them. The board members have come up with the various initiatives. The programs as discussed in this paper indicate that the company is optimistic about committing to having a sustainable society that is at peace at all times. However, time will tell if it is also realistic or not.

REFERENCES

Ali, A. (July 10, 2020). Former WeWork employees file discrimination lawsuits. Retrieved from: https://allwork.space/2020/07/former-wework-employees-file-discrimination-lawsuits/
Aydin, R. 2019. The history of WeWork – from its first office in a SoHo building to pushing out CEO and cofounder Adam Neumann. Insider. Retrieved from https://www.businessinsider.com/wework-ipo-we-company-history-founder-story-timeline-adam-neumann-2019-8?IR=T
Bloomberg Quicktake. (2019). The Spectacular Rise and Fall of WeWork [Video]. Retrieved from https://www.youtube.com/watch?v=X2LwIiKhczo&authuser=4.
Boyte-White, C. (2020) How WeWork Works and Makes Money. Investopedia. Retrieved 17 February 2021 from https://www.investopedia.com/articles/investing/082415/how-wework-works-and-makes-money.asp
Crabb, J. (2020). Casper IPO shows WeWork effect on valuations. International Financial Law Review.
Davis, D. (2019). Vertically Integrated Research: An Unusual Business Model. Architectural Design, 89(3), 68-75. Retrieved 17 February 2021 from
https://onlinelibrary.wiley.com/doi/abs/10.1002/ad.2437
“Economies of Scale”. (n.d.). (“Economies of Scale”, n.d.). Retrieved 19 February 2021 from https://corporatefinanceinstitute.com/resources/knowledge/economics/economies-of-scale/.
Gandini, A., & Cossu, A. (2019). The third wave of coworking: ‘Neo-corporate model versus ‘resilient practice. European Journal of Cultural Studies, 1367549419886060. Retrieved from
https://journals.sagepub.com/doi/abs/10.1177/1367549419886060
Holmes, H. 2019. WeWork’s Corporate Drinking culture seems incredibly stressful. Observer. Retrieved from: https://observer.com/2019/06/wework-corporate-drinking-culture/
Kitsios, F., Kamariotou, M., & Talias, M. (2020). Corporate Sustainability Strategies and Decision Support Methods: A Bibliometric Analysis. Sustainability, 12(2), 521. doi: 10.3390/su12020521
Mashayekhi, R. 2019. WeWork’s Legal Floodgates may have just opened. Fortune. Retrieved from: https://fortune.com/2019/11/19/wework-softbank-takeover-lawsuits/
Mathis, W. 2019. WeWork Europe expansion faces growing competition before IPO. Yahoofinance. Retrieved from: https://finance.yahoo.com/news/wework-europe-expansion-faces-growing-083157663.html
Mehl, B. 2019. Is WeWork’s expansion into Southeast Asia a success? Retrieved from: https://www.coworkingresources.org/blog/weworks-expansion-in-southeast-asia-has-it-been-a-success
Mehta, S. (2020). Types of Research Methodology. Retrieved 17 February 2021 from https://eduvoice.in/types-research-methodology/#7-qualitative-research-methodology-.
Meltzer, M. 2014. Camping out with the office. New York Times. Retrieved from: https://www.nytimes.com/2014/09/07/fashion/wework-goes-to-summer-camp.html
Meredith, D. (2019) What happened to WeWork?. Equity. https://www.coworkingresources.org/blog/the-wework-business-model
Porteous, C. (2020). 8 Legal Requirements When You Start A Business. Retrieved 17 February 2021 from https://www.entrepreneur.com/article/346713.
Reuters. 2019. WeWork picks South Africa for first African foray. Retrieved from: https://www.reuters.com/article/us-wework-expansion-idUSKCN1PW0Z3
SBI. (2020). The Impact of Poor Data Quality on Sales and Marketing. Retrieved 17 February 2021 from https://salesbenchmarkindex.com/insights/the-impact-of-poor-data-quality-on-sales-and-marketing/.
Schaefer, P. (2020). Why Small Businesses Fail: Top 8 Reasons for Startup Failure. Retrieved 19 Febraury 2021 from https://www.businessknowhow.com/startup/business-failure.htm.
Sharf, S., & Jeans, D. 2020. WeWork Employees feel abandoned and angry as SoftBank ditches its $3 billion buyout offer. Forbes. Retrieved from: https://www.forbes.com/sites/samanthasharf/2020/04/13/wework-employees-feel-abandoned-and-angry-as-softbank-ditches-its-3-billion-buyout-offer/?sh=21b795c91320
Stokes‐Rees, E., & Livingstone, P. (2020). Transition in Uncertain Times.
The Real Deal. (June 4, 2020). WeWork, SoftBank hit with class action over failed IPO. Retrieved from: https://therealdeal.com/2020/06/04/wework-softbank-hit-with-class-action-over-failed-ipo/
Verbeke, A., Coeurderoy, R. & Matt, T. (2018). The future of international business research on corporate globalization that never was…. J Int Bus Stud 49, 1101–1112. https://doi.org/10.1057/s41267-018-0192-2.
WeWork (2021) WeWork Locations. https://www.wework.com/locations
Zeitlin, M. (2019). Why WeWork went wrong. Retrieved 19 February 2021 from https://www.theguardian.com/business/2019/dec/20/why-wework-went-wrong.

Check Price Discount

Study Notes, Research Topics & Assignment Examples: Discussion Healthy Eating Approach Essay »MKT00720 – Marketing Assignment 2: Report