porter forces analysis

1. 1. Threat of New Entrants: High
• Many traditional real estate companies exist which also aim to bring individual
tenants into larger commercial space.
• Traditional companies are rigid with lease agreements and consistent tenants
whereas WeWork differentiates itself by seeking to grow and change with the
tenant.
• However, barriers to entry in the form of copyrights and patents are very low,
meaning that new companies can very easily adopt a similar approach to
WeWork.
The largest barrier to entry in the shared workspace real estate market is capital
requirements, which WeWork has overcome with its immense scale.

2. 2. Bargaining Power of Customers: High
• Many real estate substitutes are available, although they do not offer the
supposed community culture WeWork brings with shared workspaces.
• However, WeWork’s differentiation is contingent on the sharing of office
space
being perceived as added value in the eyes of the customer.
• That being said, WeWork does have a first-mover advantage in this
market and so for most customers will be considered the ‘go-to’ for these
sorts of workspaces.
• In an economic downturn WeWork are unable to back out of their leases,
meaning that their reliance on regular tenants will remain high despite a
potentially lower demand from customers.

3. 3. Bargaining Power of Suppliers: High
• WeWork does not own its tangible assets (workspaces), the asset
owner (supplier) has high power when it comes to rental prices and
rules surrounding the use of the real estate.
• WeWork obtains real estate using long-term contracts and leases it to
tenants in the short-term. This long-term rental commitment is a liability
that comes with significant risk.
• The company has recently shifted towards longer more secure tenants,
it is difficult to say whether this will be sufficient to carry them through a
recession.
• WeWork has contractually backed a fraction of their obligated payments
to landlords by corporate and bank guarantee. Should WeWork be
unable to find tenants during the economic downturn, a portion of their
payments will be
contractually obligated even if the company approaches bankruptcy.

4. 4. Threat of Substitutes: Moderate