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WeWork Case Analysis

WeWork has strengths in its lack of competition, concentrated business model enabling fast growth, and brand image/user experience. However, weaknesses include high investment costs, potential management issues from the CEO hiring relatives, and poor corporate governance as the CEO cashed out $700 million. Opportunities exist in exploiting stressed neighborhoods and expanding internationally. But threats include new entrants, recession negatively impacting customers, and changing customer needs. Overall WeWork has potential, but recession risks and corporate governance issues raise concerns for investment currently.

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231 views2 pages

WeWork Case Analysis

WeWork has strengths in its lack of competition, concentrated business model enabling fast growth, and brand image/user experience. However, weaknesses include high investment costs, potential management issues from the CEO hiring relatives, and poor corporate governance as the CEO cashed out $700 million. Opportunities exist in exploiting stressed neighborhoods and expanding internationally. But threats include new entrants, recession negatively impacting customers, and changing customer needs. Overall WeWork has potential, but recession risks and corporate governance issues raise concerns for investment currently.

Uploaded by

Seema
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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WeWork Case Analysis

10/2/19
 Strength
o No competition
o Concentrated and growing fast
o Brand image
o User experience
o High profit

Like the article suggested, WeWork has virtually no competition. IWG is the only
competitor to WeWork; however, WeWork is much more concentrated and growing
exponentially faster than IWG. WeWork’s valuation is over 13 times more than IWG (The
WeWork IPO). WeWork has brand image as a strength as they are reputable and worldwide. It
has provided exceptional user experience; whether the company is new, growing, or
established, WeWork will have a specialized experience for that company. WeWork targets
poor neighborhoods or neighborhoods that aren’t doing that well so they can negotiate a
cheaper price with the landlord; WeWork then charges a premium for anyone that wants to
lease from them. This creates really high profit for WeWork.

 Weakness
o Potential management issue
o High investment cost
o Poor corporate governance

WeWork faces potential weaknesses in investment costs as it is costly to lease large


amount of property at once. Especially in uncertain times like today where the fear of recession
continues to grow. WeWork has typical lease period of 15 years, if the recession were to hit,
WeWork won’t be able to get out of its lease while all of its lease to other companies only last
15 months. While WeWork does use special delivery vehicle for their 15 years leases to protect
them from lawsuit from landlords, they will still suffer heavy capital losses. WeWork doesn’t
seem to have the best corporate governance as it has hired relatives of its CEO. Moreover, the
CEO has cashed out over 700 million dollars of his holdings (The WeWork IPO), which makes us
question the longevity of WeWork.

 Opportunities
o Stressed neighborhoods
o International market

WeWork has the opportunity to exploit stressed neighborhoods for cheap leases and
lend it out at a high premium. WeWork has a very concentrated market, meaning they have
multiple locations in one city, but they have reached fewer cities. While it is a good business
model to support growth, it also means there is a lot more cities that it can enter in the future.
It might take time, but it will be more steady than less concentrated client base.
 Threats
o New entrants
o Recession
o Changing customer needs

Because this is a fairly untapped market, WeWork should expect new companies to
follow their business model. However, the barrier to entry will be quite high as the capital
requirement for leasing multiple buildings and workspaces will be extremely high. WeWork also
has to beware of the upcoming recession. Most of their leases are only 15 months, if a
recession hit, it will deter new customers and lose some old customers. WeWork has also to be
careful with the ever-changing customer needs. Although I don’t think this is as much of a
threat as the others because office buildings will exist for decades to come. But WeWork should
still pay attention to the change in customer needs to provide better user experience.

 Conclusion
o WeWork has a lot of potential to succeeded. It has multiple strengths, including
its concentrated business model that facilitates fast growth. With the lack of
competition currently, WeWork virtually has a monopoly on the market;
especially the fact that they are the most recognized brand in the market.
WeWork has provided exceptional user experiences in the past as they cater to
any needs of the company. However, there are some weaknesses in their
corporate governance in which their CEO has hired multiple relatives to work at
the company. The CEO has also cashed out $700 million worth of holdings. This
does not give shareholders and the market a lot of confidence. WeWork also
requires a lot of investment to purchase office buildings; and it might be hard to
acquire such high capital in a bear market. Some of the opportunities for
WeWork are the international market. Because WeWork is very concentrated,
meaning they have multiple locations in one city instead of one location in
multiple cities, they have a lot more cities for development and expansion. There
are also opportunities for WeWork even in a recession as they can purchase
lease at a discounted rate provided they have enough capital. However, they
need to be cautious as their leases are for 15 years, and they are leasing out for
15 months. In a recession, they will have a hard time attracting new clients and
loosing old clients at the same time. WeWork does not face many threats as
barrier to entry is quite high for initial capital requirement. However, like I
mentioned above, recession could be their biggest threat. WeWork also has to
pay attention to their customer needs as they are constantly changing; although
the changes will be slow. Overall, I believe WeWork has the potential for growth;
but with the current economy heading for a recession, it would be very
dangerous to invest in WeWork especially with their poor corporate governance.
I believe WeWork would be a good investment in a bull economy; a change in
corporate government body would be great as well.

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