WeWork Singapore Firm’s Strategies for Dealing with COVID-19

Executive Summary

Co-working spaces have emerged as a unique form of sharing economy, which often uses the Slogan of ‘working alone together.’ The sharing economy has itself been driven by the need for people and businesses to adopt green practices. In this case, the co-working spaces are described as collaborative environments designed to feed creativity and innovation. Co-working spaces also involve multi-tenant offices in the context of a sharing economy. WeWork is a global company that engages in the purchase and lease of office properties across the country and lets them to businesses seeking office spaces. The Covid-19 pandemic has caused a sharp rise in demand for co-working spaces, which means that new strategic actions need to be taken to address this demand and the long-term prospects.

Introduction

The Covid-19 has changed how people work and how companies organize their workforces. The habits and lifestyles of people across the world have also been altered because of such government directives as social distancing (Ceinar and Mariotti, 2021, p. 279). Singapore is one of the countries that initiated early lockdowns due to the rapid rise in cases of new infections. Productivity losses could be expected, but the country had a plan for businesses and other facilities to resume operations (Dickens et al., 2020, p. 2). The case of WeWork will be addressed in this report with the focus being on how the company was affected by the pandemic and the strategies it used to overcome Covid-19.

WeWork Singapore PTE. Ltd. is a private limited company based in Singapore. It was incorporated in 2017 and its principal activity is letting leased or self-owned real estate property except for coffee shops, food courts, and eating houses (SGP Business, n.d.). WeWork is a global company with over 800 locations from which it offers businesses office spaces at their convenience (WeWork, n.d.). even though not much information is available regarding the company, it can be deduced that WeWork is in the business of co-working spaces.

According to Berbegal-Mirabent (2021, p. 1) co-working spaces have emerged as a unique form of sharing economy, which often uses the Slogan of ‘working alone together.’ The sharing economy has itself been driven by the need for people and businesses to adopt green practices. In this case, the co-working spaces are described as collaborative environments designed to feed creativity and innovation. In this report, the current financial situation of WeWork is examined alongside internal and external analysis. The problem of Covid-19 and the strategies deployed to address it will also be explored.

Current Company Financial Situation

Past Performance

The past performance of WeWork Singapore can be reflected in the financial trends for the global operations and major markets. Since 2010, the annual growth has consistently displayed an upward trajectory in terms of the number of locations. However, a sharp upward turn was experienced from 2015 to 2018, with the current status indicating that the number of locations is positively associated with the financial performance. In the financial year 2018, WeWork generated a revenue of $1.8 billion and recorded total funding of $13.8 billion. In the third quarter of 2019, the company generated a revenue of $934 million. The steady growth of revenues is illustrated by the fact that the company made $436.1 million and $886 million in 2016 and 2017 respectively. Using 2016 as the base year, it can be estimated that the revenue growth rate for 2017 was 103% while that of 2018 was 106% (Craft, n.d.). Therefore, it is apparent that the past performance of WeWork’s global operations has been positive.

Despite the past financial performance highlighted above, it can be seen that the Covid-19 pandemic has had a negative impact on the performance. For example, it was reported that the company made a loss amounting to $3.2 billion in 2020 (Sen, 2021, para 1). However, it can be expected that future growth will continue to show a positive trend once the crisis has ended. The argument is that the company is seeking additional investments from potential new investors.

Financial Strength

WeWork is currently financially strong as illustrated by the capital base and the revenue growth. According to Sen (2021, para. 2), WeWork is currently valued at $9 billion, inclusive of debt. With such capital, it can be argued that the company is big enough to make critical investments and survive a major crisis, including the Covid-19 pandemic. However, the valuation of the company remains an open question because other sources of information indicate a valuation of $17 billion (Edwards, 2017, para. 5). Regardless of which of these two estimates is correct, the company is considered to be financially healthy.

External Analysis

Trends, Opportunities, and Threats

The current trends largely involve the effects of Covid-19 on business and how firms are responding to the pandemic. WeWork operates in the co-sharing spaces sector, which can be described as multi-tenant offices in the context of a sharing economy. The company targets self-employed workers where the growing use of technology diminishes the need for office spaces (Weijs-Perrée et al., 2019, p. 534). small business people often do not require huge office spaces, which means they will also be willing to share office space with others. The co-working spaces have been observed to grow in popularity over the past few decades because they offer low-cost, inspiring, and dynamic workplaces where people can share knowledge, co-create, and interact. This explains why WeWork’s portfolio includes event space, desk space, open workspace, and office space (WeWork, n.d.). WeWork tailors these portfolios to meet the specific needs of the tenants.

The pandemic has also presented the threats and opportunities experienced by the company externally. As an opportunity, Covid-19 has the effect of accelerating the demand for flexible shared office space. This explains why Hu (2020, p. 276) labels the situation a crisis-opportunity scenario to imply that the pandemic may have helped create better prospects for some firms. An article by Gusain (2020, para. 1) stated that the pandemic has necessitated a scenario where people work from home, which is already shifting to working from anywhere. According to Chan and Waters-Lynch (2020, para. 9), companies from both Singapore and Australia have experienced a sharp increase in inquiries. The reason for this trend is that co-working spaces are deemed more flexible and affordable. If this is the situation, it can be expected that WeWork is one of those Singaporean companies taking advantage of the opportunity.

As a threat, the pandemic has affected many aspects of business, especially as a result of the measures implemented by governments across all markets where WeWork operates. Such measures as social and physical distancing mean that lifestyles and habits are altered (Ceinar and Mariotti, 2021, p. 279). Therefore, the facilities rented and leased by the company cannot operate at full capacity, which means that the growing demand may not reflect an actual growth in revenues. Other aspects of the external environment can affect the company, for example, current government regulations due to the pandemic, environmental issues of sustainability and energy consumption, and legal restrictions across various markets. Additionally, favorable external factors may include the social (for example, growing preferences for remote working), technological, (for instance, advances in IT that facilitate remote working), and economic (including the affordability of shared spaces). These factors can be summarized using SWOT and PESTEL analysis frameworks as illustrated in the appendix.

Scope

The company’s scope of operations is the major business to customer (B2C) because it rents facilities directly to tenants. However, there are also aspects of business-to-business (B2B) interactions, especially where WeWork leases properties from landlords and sub-rents them to tenants. However, the company’s operations are majorly about offering customers the best products in the market. Across all locations, it can be argued that the company offers the best consumer experiences as illustrated by the case of Singapore. WeWork is considered to be the most prevalent company in the industry due to its multiple locations both in Singapore and abroad. Most importantly, WeWork offers 20/7 office access, pantries stocked with water and fresh fruit, and trendy working areas. The fees for the company range from $520 per month for hot desking to $1250 per month for private offices (Har, 2020). These rates are relatively cheaper than competitors, which gives WeWork a competitive edge. Information about leasing is inadequate, which means that the major scope of WeWork’s business is dealing directly with the customers in search of co-working spaces across the world.

Internal Analysis

Capabilities and Competencies

The internal analysis of WeWork can be accomplished by exploring the capabilities and competencies of the company, as well as two of the SWOT elements: strengths and weaknesses. From a global perspective, WeWork is present in many countries across the world, which gives it a strong brand. The huge capital base is also a key strength and capability since it allows the company to make the necessary improvements. As mentioned earlier, WeWork is considered to be the best company in certain markets, which gives it a favorable global reputation. In terms of marketing, a positive reputation in some markets may be a competence that can reflect in other markets. The ability of the firm to develop affordable products is also a key competence.

The capital base has been obtained from certain stakeholders who have been keen to see the company grow. Therefore, financially stable and supportive stakeholders can be regarded as a key strength. For example, such corporations as JP Morgan, Softbank, Adam Nuemann, and Benchmark are some of the serious stakeholders of WeWork. Therefore, it can be argued that the company’s financial stability can always be assured as a result of the support from these banks. It can be argued that the growing demand for co-working spaces results in serious growth prospects on which financiers are willing to make critical investments. Other key strengths, capabilities, and competencies include the fact that WeWork’s operations are economical and low cost, which makes it possible to maximize income. Lastly, diverse services and products and in-house advertising make up the rest of the key strengths.

In terms of weaknesses, it can be argued that the facilities offered are not always the best for the consumers. Due to the sharing aspect, some spaces may be crowded, meaning they can sometimes be noisy and unconducive. Such amenities as an internet connection may also be problematic due to overcrowding. Other weaknesses include inter-organizational conflicts and contradictions between the company’s and tenants’ goals. However, these weaknesses can easily be addressed to offer the customers the best experiences. The rationale is that there have not been many complaints regarding these issues, which means that WeWork is effective in resolving any problems. Lastly, leased properties may pose a management problem because all activities have to be agreed upon between the company and the landlord. The question of who should manage the tenants is critical because tenants often are served by the company and not the landlords.

Future Endurance

The future endurance of the company can be assessed in terms of how it addresses the current problems. Most importantly, the responses to the Covid-19 pandemic illustrate how the company endures challenges. For example, WeWork implemented a professional distancing strategy for meeting rooms and common spaces as a result of the social and physical distancing requirements. The first initiative was to reduce the capacity of the meeting rooms to achieve the label of safe to occupy (WeWork, 2020, p. 7). Therefore, the company has endured by using its flexibility to address emerging issues. In the future, it can be expected that WeWork will use the same approach to all challenges and address the current and perceived weaknesses.

Issue/Problem Definition

Issue

From a strategic perspective, the main problem facing WeWork is ensuring a consistent demand for its products even after the pandemic. Currently, many people have observed that co-working spaces are experiencing a rise in demand amid Covid-19 (Lin, 2020). The explanation given is that with social distancing and many offices and workplaces closed. co-working spaces are regarded as the better alternative to shutting the business down completely. Arguably, it is not clear what the new patterns will be when the crisis is over. One hypothesis is that with people getting used to remote working, the demand for co-working spaces will rise. In this scenario, WeWork faces the challenge of meeting the growing demand to effectively compete in the market. The alternative hypothesis is that conventional workplaces will be reopened, in which case the firm may experience a sharp drop in demand for co-working spaces. The current investments made as a result of the rise in demand may become a problem, especially if the company is to operate below capacity.

Goals and Objectives

With the current issues as highlighted above, several goals and objectives have to be set by WeWork. Firstly, the company needs to understand the current demand patterns and plan for the future, specifically post-Covid-19. The strategic objective, in this case, is to determine the nature of future property investments. Secondly, the company needs to find the perfect mix of purchased and leased properties. With this objective, the focus will be on flexibility where leased properties can be divested or invested in as a result of fluctuations in demand. Lastly, market research needs to be conducted to help understand why consumers purchase the products and services. The suitability of co-working spaces and the growing preference for remote working should help WeWork set the necessary strategic directions.

Strategy

Saved Components

The saved components include staging, arenas, vehicles, economic logic, and differentiators. The strategy to be developed by WeWork should be based on the problem and the set objectives. Therefore, the staging component describes the speed and sequence of moves. For WeWork, the strategy is to make critical investment decisions for the future, in which case staging involved researching the market and making the decisions. The speed of these actions will depend on the scope of the investments: long term, medium, or short term. The short-term goal is to meet the current demand while the medium- and long-term objectives involve ensuring sustained demand and operations at full capacity. A recent study of the growth of co-working spaces projects steady growth in the near future, with an estimated number of co-working spaces reaching 41,975 (Coworkign Resources, 2020). Therefore, the company needs to move fast to ascertain these findings and formulate key investment strategies.

The Arenas component highlight where the firm will be active. Globally, the company needs to find the necessary facilities to rent to tenants. Additionally, the nature of investments will also include the necessary infrastructure, including such amenities as an internet connection. In the short term, measures to overcome the Covid-19 pandemic will also need to be implemented. The vehicle is a component that indicates how a firm will get where it seeks to be in terms of strategy implementation. In this case, the company needs to meet the growing demand and operate at full capacity post-Covid-19. Therefore, the vehicles will include capital investments, which include human resources and information and communication technologies (ICTs).

The component of economic logic explains how the business obtains returns from the strategic implementation. In this case, operating at full capacity means generating maximum revenues from the leased and purchased properties. Additionally, a balanced investment decision prevents the company from making losses after the pandemic in case the demand for co-working spaces goes down. Leased properties can be perceived as short-term investments that can be divested as needed. Lastly, investments in ICT serve to attract more clients because such aspects as remote working require efficient ICT systems. Additionally, many businesses involve technology, and the creation of ICT co-working spaces has already started in such locations as Tehran as explained by Tehran Times (2019, para. 3). These aspects are economically logical because they offer the potential for financial gain.

The last component is the differentiators, which explain how the firm will win in the marketplace. Currently, WeWork is already among the leaders in the industry due to its global brand and better services and products offered. However, one of the key differentiators is that WeWork can offer more affordable rates to the customers as compared with the competitors. In the short term, the key differentiator is how the company addresses the changes necessitated by the Covid-19 pandemic. In Singapore, some of the efforts to deal with the crisis are already visible. For example, the company follows guidelines offered by the World Health Organization regarding water, waste, and sanitation (WHO, 2020, p. 1). In the future, the company can develop other products and service features to differentiate itself in the market.

Implementation

Changes in Value Chain

The implementation of the strategies by WeWork will drastically affect the value chain. First, the value of properties across the different markets may rise due to the growing demand. The key changes will be in the construction sector where the co-sharing spaces have to be specially designed for their purpose. It is currently not clear what type of properties and facilities are used in co-sharing. However, the growing preference for these arrangements means that several other stakeholders may need to adjust certain practices to meet the client’s specifications. Providers of other services and amenities will also need to adjust to the new form of working spaces and environments. Internet providers, for example, can design new tools for sharing and safety infrastructure for the users of co-working spaces.

Measures to Monitor Implementation

The measures to monitor strategy implementation will include the development of key performance indicators (KPIs). The main argument is that the strategy being implemented seeks to improve the performance of the company. According to Taouab and Issor (2019, p. 98), measuring performance offers management valuable information regarding the progress of the strategy and to pinpoint problematic areas hindering success. The strategic management process involves such steps as strategy formulation where the steps taken during implementation can be outlined. These may serve as milestones and KPIs where the completion of each step indicates success and progress. Most importantly, the quality of the decisions made and the financial implications of the resulting investments will be used to monitor the implementation.

Environmental and Social Impacts of Strategic Mitigation

Currently, the key social impacts involve the changes in preferences of workers between the conventional workplaces and co-working spaces. These changes can only be anticipated, which means the future remains relatively uncertain. However, the current experiences created through the strategy implementation mean that these social perceptions may change for the better to offer WeWork better prospects. Environmentally, the company needs to be concerned with the current trends in sustainability, specifically energy consumption (Coworkign Resources, 2019). The argument is that with the pressure to adopt clean energy, WeWork may be forced to make new and unplanned investments to reduce its carbon footprints.

Conclusion

Co-working spaces are displaying an upward growth trend, partly as a result of the Covid-19 pandemic. WeWork’s global presence, financial strength and reputable brand are among the key competencies to help it take advantage of the opportunities. Further growth of the company can be facilitated by more investments, but a balance between leased and purchased properties should be achieved. Many firms are entering the market to fill any emerging gaps, and WeWork’s prospects could be partly determined by the strength and capabilities of the competitors.

Reference List

Berbegal-Mirabent, J. (2021) ‘What do we know about co-working spaces? trends and challenges ahead’, Sustainability, 13(3), pp. 1-30.

Ceinar, I. and Mariotti, I. (2021) ‘The effects of Covid-19 on coworking spaces: patterns and future trends’, in Mariotti, I., Di Vita, S., and M. Akhavan (Eds.). New Workplaces—Location Patterns, Urban Effects and Development Trajectories, Research for Development. Cham: Springer Nature Switzerland AG, pp. 277-297.

Chan, C. and Waters-Lynch, J. (2020). Commentary: Co-working spaces look pretty attractive right about now. Web.

Coworkign Resources (2019). Sustainable coworking spaces. Web.

Coworkign Resources (2020). Global coworking growth study 2020. Web.

Craft (n.d.) WeWork stock price, funding rounds, valuation and financials. Web.

Dickens, B. et al. (2020). ‘Modelling lockdown and exit strategies for COVID-19 in Singapore’, The Lancet Regional Health – Western Pacific, 1, pp. 1-7.

Edwards, J. (2017). The financials for $17 billion WeWork’s UK unit show it doesn’t make a profit… yet. Web.

Gusain, A. (2020). Work from home to work from anywhere: the future of co-working spaces. Web.

Har, D. (2020). The 27 hottest co-working spaces in Singapore. Web.

Hu, R. (2020). ‘COVID-19, smart work, and collaborative space: A crisis-opportunity perspective’, Journal of Urban Management, 9(3), pp. 276-280.

Lin, C. (2020) ‘It’s a flight to flexibility’: why co-working spaces are seeing rising demand amid COVID-19. Web.

Sen, A. (2021). WeWork discloses $3.2 billion loss in 2020 as it seeks SPAC deal – source. Web.

SGP Business (n.d.). WeWork Singapore PTE. Ltd. Web.

Taouab, O. and Issor, Z. (2019). ‘Firm performance: definition and measurement models’, European Scientific Journal January, 15(1), pp. 93-106.

Tehran Times (2019) First ICT co-working space established in Tehran. Web.

Weijs-Perrée, M., et al. (2019) ‘Analysing user preferences for co-working space characteristics’, Building Research and Information, 47(5), pp. 534-548.

WeWork (2020) Maintaining a comfortable, healthy workplace. WeWork.

WeWork (n.d.) Reimagine your workspace. Web.

WHO (2020) Water, sanitation, hygiene, and waste management for SARS-CoV-2, the virus that causes COVID-19: Interim Guidance. Geneva: World Health Organization.

Appendix

SWOT Analysis

PESTEL Analysis