Boundry-less Innovation: Strategic Analysis of Regus PLC
Updated: Apr 7, 2019
By Marc Rodriguez
Minnesota School of Business MBA Program
A dominant player in the flexible workplace industry, Regus PLC (LON:RGU) offers workplace solutions and professional services in 2,269 locations around the world (Regus, 2014; MarketLine, 2014). Regus enables professionals to work remotely by renting business centers, boardrooms, training rooms, demonstration rooms, office space, day offices, part-time offices, and executive suites in short- and long-term leases (Regus, 2014; MarketLine, 2014). Virtual services include administrative support, a telephone answering service, business address creation, and mail handling (MarketLine, 2015). Regus, headquartered in Luxembourg City, Luxembourg, employs 7,138 people and boasts 2.1 million customers, including Google, Apple, Twitter, and Toshiba (Regus, 2014). Established in 1989, Regus posted revenues of £1,676.1 million in 2014—an increase from £1533.5 million in 2013—with £207 million of net capital invested in growth (Regus, 2014). The goal of this paper is to view Regus through the AFI strategy framework—analysis, formulation, and implementation—using a SWOT analysis and Porter’s Five Forces to provide short-term and long-term strategic improvement plans.
Regus Mission and Vision Statements
A mission statement describes what a company does and how it achieves actions; a vision statement captures a company’s aspirations and motivations (Rothaermel, 2015). Through its customer-oriented mission statement, Regus strives to develop, deliver, and support outsourced workplace solutions that allow individuals and companies to work however, wherever, and whenever they need (Regus, 2014). The Regus vision statement illustrates the company’s aim to be number one in all markets in which they operate, through a controlled and disciplined expansion strategy (Regus, 2014). Regus believes the commitment, loyalty, and efforts of their team members play a key role in their success (Regus, 2014).
Regus Values Statement
Being the world’s largest provider of flexible workspaces brings great responsibility (Regus, n.d.). In addition to socially and environmentally responsible business conduct, Regus divides corporate responsibility into six categories: workplace; employee relations; health and safety; risk management; environment; and community (Regus, n.d.). Regus endeavors to improve the lives of stakeholders, reduce the risk of harm to people and the environment, and provide customers with sustainable products and services (Regus, n.d.)
Regus Corporate Strategy
Strategy concerns the choice of where to compete and how to compete (Rothaermel, 2015). One can study Regus’ top-down corporate strategy, or rational process in which management facilitates future success, by studying strategic objectives and the company’s approach to achieve these goals (Rothaermel, 2015). In the 2014 annual report, Regus leaders divide strategic objectives into four categories: deliver sustainable returns; develop national networks; control costs; and lead the industry through innovation (Regus, 2014). These internal activities help Regus transform inputs into outputs and add incremental value to customers (Rothaermel, 2015). Regus produces sustainable returns through revenue from new locations, development of incremental revenue streams, active management of existing networks, and strong overhead cost control (Regus, 2014). National network growth occurs from addressable audiences and existing customers—expanding only in locations where potential investment meets the company’s stringent returns criteria (Regus, 2014). Regus controls costs through economies of scale and operational leverage from network growth (Regus, 2014). Innovation, research, and development help Regus shape flexible workplace trends, providing an outlet to introduce revenue to new and existing customers (Regus, 2014).
Regus Business Model
A business model details how a company intends to make money (Rothaermel, 2015). A company’s ability to gain and sustain a competitive advantage stems from unique strengths intrinsic to the company (Rothaermel, 2015). Core competencies enable a company to differentiate products and services and create higher value for customers and stakeholders (Rothaemel, 2014). Regus’ core competencies consist of four fundamental elements: people, network, products, and brand (Regus, 2014). Customers use Regus so they can focus on what, not where, they are working (Regus, 2014). People remain loyal to the company due to high-caliber customer support and the convenience of a large network (Regus, 2014). Regus’ brand reputation allows the company to recruit, train, promote, and retain qualified employees—an investment in long-term success (Regus, 2014). The Regus business model entails investing aggressively in growth, either through organic openings or acquisitions, and developing diversity in partner relationships (Regus, 2014).
These strategies help the company grow in a capital-efficient manner, with a reduction in net growth capital expenditure per location (Regus, 2014). Through the ability to reflect changing market conditions and manage risk, Regus capitalizes on favorable investments in attractive assets (Regus, 2014). The Regus model includes a strong conversion of profit into cash, focusing on optimizing revenue generation by improving each location’s performance (Regus, 2014). When combined with reduced overhead costs, Regus’ business model delivers strong returns (Regus, 2014). This combined research of Regus is meant to provide context for a strategic analysis. Strategy involves a set of goal-directed actions designed to gain and sustain superior performance relative to competitors (Rothaermel, 2015). A study of strategic management combines analysis, formulation, and implementation affords a starting point for further analysis. To that end, the goal of this paper is to view Regus through the AFI strategy framework—analysis, formulation, and implementation—using a SWOT analysis and Porter’s Five Forces to provide short-term and long-term strategic improvement plans.
When leaders want to perform an internal and external analysis of their company, they often turn to a SWOT analysis (Rothaermel, 2015). Firms can approach growth sensibly and strategically if they monitor not only an ever-changing financial landscape, but also their internal performance dynamics (Reed, 2013). The SWOT framework allows management to compare internal strengths (S) and weaknesses (W) with external opportunities and threats (O and T) (Rothaermel, 2015). A thoughtful, honest SWOT analysis creates a dashboard of a firm’s products, services, and potential (Goodrich, 2015). At Regus, this dashboard reveals:
• Existing sales networks (Regus, 2014)
• Barriers to market entry for competitors (Regus, 2014)
• Reduced labor costs (Regus, 2014)
• A skilled workforce (Regus, 2014)
• High sales growth rate (Regus, 2014)
• Market Experience (Regus, 2014)
These strengths indicate Regus can leverage its consistently increasing sales networks, brand recognition, differentiation, and financial resources to continue market expansion in both new and emerging markets (Rothaermel, 2015). Over time, Regus has cultivated intense customer loyalty; new entrants would find it hard to overcome Regus’ presence in the market. The firm’s focus on a skilled workforce (through cohesive employee and manager training), outsourcing, and optimizing productivity help reduce labor costs (Regus, 2014). As evidenced in the firm’s 2015 expansion into Erbil, Iraq, Regus leaders are adept at recognizing the need for flexibility, agility, appropriate business locations—factors that lead to a high sales growth rate and a proven track record of customizing solutions for a wide variety of businesses and industries (Regus, 2015). As Regus’ market expansion continues, the brand becomes stronger and more credible, financially and politically. Regus’ long-term debt-to-total-assets ratio declined from June 2014 to June 2015, suggesting the firm is becoming less dependent on debt (Guru Focus, n.d.). Regus’ strengths reveal a talent for maximizing internal competencies while global growth (Reed, 2013).
• Volatile profitability (Daily Mail, 2014)
• Unpredictable occupancy rates (Regus, 2014)
• Unpredictable foreign exchange movement (Regus, 2014)
• Reliance on third parties (technology infrastructure, cellular providers, local Internet companies, smartphone, tablet, and computer manufacturers) (Regus, 2014)
• Low capital expenditures (CAPEX) (Daily Mail, 2014)
• Break-even cycle of 16 to 18 months (Daily Mail, 2014)
Regus’ weaknesses show that flexibility is not without consequence. Unpredictability in profitability, occupancy rates and foreign exchange rates are factors that the firm can only react to, not foresee. The liability of empty offices diminishes profitability. Exchange rates and the strength of sterling negatively impacted the translation of financial results in 2014—reducing reported revenue, gross profit, and operating profit by £99.7 million, £24.4 million, and £11.4 million respectively (Regus, 2014). Regus leaders attempt to minimize weaknesses by either tolerating risks, treating risks with controls and mitigating actions, terminating activities, or transferring risks to third parties (Regus, 2014). Transactions take place in the functional currency of the specific Regus location; thus, the firm’s exposure to risk is limited by matching income and expenses, and assets and liabilities, in the same currency (Regus, 2014). Because Regus utilizes existing technology and infrastructure, rather than developing in-house, they display a weakness by depending on third parties to provide mobile infrastructure. Low CAPEX weakens growth development, but shareholders may view it as a positive, proactive measure. During the first six months of 2015, Regus opened 231 new business centers based on £120 million of net growth CAPEX (Regus, 2014). Shareholders view lower CAPEX as more conducive to sustainable returns (Regus, 2014). The flip side to business center growth is a longer break-even period of up to 18 months—a process that could be tightened.
• Venture capital (Regus, 2014)
• New market identification and expansion (Regus, 2014)
• Cross-promotional partnerships with staffing companies, real estate brokerages, cellular providers, or Internet providers
• Outsourcing administrative staff, similar to a temporary agency model
• On-site daycare for mobile workers
• Sponsorship and hosting of special events and local, regional, or national conferences
With plans to open an additional 220 locations in 2015, Regus leaders are constantly identifying and pursuing external opportunities (Regus, 2014). Known in the industry as a consistent, powerful player, Regus could easily target venture capital opportunities to ease expansion into global markets. The firm achieves and sustains growth by maintaining a strong balance sheet while taking advantage of access to debt capital to increase and diversify facilities (Regus, 2014). Growth plans favor increased utilization of partnerships (Regus, 2014). Regus can only grow profits and brand equity by partnering with complementing industries, such as staffing agencies, office furniture wholesalers, or office supplies retailers. Regus has shown the industry it can master the mobile workplace concept. At this point in the company’s development, it could differentiate even more by adding peripheral people and services appropriate to office flexibility. There is no need for Regus to stop at the “where.” It could expand by focusing on the “who” (outsourced staff) and “how” (vendor partnerships) also. Through the success of external opportunities, Regus enhances the ability to provide long-term returns to shareholders. Opportunities with added-value could include on-sight daycare (for employees and customers), and corporate sponsorship (for special events or philanthropy).
• New competitors (Rothaermel, 2015)
• Fluctuating real estate costs
• Economic downturn (Regus, 2014)
• Loss of critical systems (central data center integrity) (Regus, 2014)
• Susceptibility to disruption from service outages, viruses, hardware problems or recalls, and software glitches (Regus, 2014)
• Loss of funding (a reduction in external funding would effect liquidity) (Regus, 2014)
• Fraud (landlord and supplier procurement-related fraud) (Regus, 2014)
• Lease obligations (matching profitability with rents in each business center) (Regus, 2014)
• Exchange rates (potential adverse effects of depreciation) (Regus, 2014)
• Quicker break-even time from competitors
• Potential for increased employee turnover rates
Despite Regus’ prominence, no industry is competitor-proof. Given the right venture capital and resources, a competitor could usurp Regus’ dominance in the market. Other firms could poach Regus executives in an effort to gain insight and exploit their experience. In a technology-based industry, stability is never a full guarantee. Fluctuating real estate costs, an unpredictable aspect of property management, can affect gross profits and market position—even more so when a firm works within different real estate markets across the world. Economic downturns can reduce Regus’ operating performance. A loss of critical systems or disruption in services could adversely affect Regus’ everyday operations, lessen brand reputation, and create profit loss (Regus, 2014). Regus takes the blame for outages; customers only see one logo on their marketing and billing materials. A third-party problem is Regus’ problem.
Regus relies on external funding to support debt position. The loss of funding would create a deficit in liquidity—a constant threat that Regus mitigates by developing and maintaining a 12-month, rolling forecast (Regus, 2014). Whereas this threat applies to all multinational enterprises, it applies acutely to Regus considering virtual services are a central part of the business. On another note, Growth may court the threat of overcapacity; failure to fill new business centers would create a deficit in rents and profits (Regus, 2014). Also related to rent is the ongoing potential for landlord fraud. A company that works within the leasing model will eventually encounter a spectrum of professional and unprofessional conduct. Regus needs to constantly monitor competitors’ break-even time to ensure they are staying competitive with new centers.
Porter’s Five Forces Model
Developed by Michael Porter, a Harvard Business School professor, the five forces help managers study an industry’s profit potential, shape company strategy, and create profitability (Rothaermel, 2015). The five forces include: threat of entry; power of suppliers; power of buyers; threat of substitutes; and rivalry among existing competitors (Rothaermel, 2015).
Threat of entry
Regus’ business model depends on a level of technology, research, and development that may be difficult for incumbent firms to match. As such, Regus’ threat of entry is low. Capital requirements act as the price of entry into an industry (Rothaermel, 2015). A firm entering the mobile workplace would require an extensive mobile technology infrastructure and large amount of venture capital funds to secure leases for business centers.
Power of suppliers
The power of suppliers may exert pressure through bargaining power—a factor that can raise production costs or reduce quality inputs (Rothaermel, 2015). Regus is susceptible to property leasing companies, regional office furniture companies, and computer hardware vendors. In the mobile workforce industry, the power of suppliers is formidable, as Regus must contend and negotiate on different fronts for local pricing. Suppliers can threaten to forward integrate if Regus does not stay current with research and development (Rothaermel, 2015).
Power of buyers
The power of buyers concerns the pressure an industry’s customers can put on a firms’ industry margins (Rothaermel, 2015). Regus’ buyers, like any renters, demand clean, safe, and reliable workspaces. The maintenance involved in building upkeep provides buyer’s with power. Buyers force Regus to stay current with business technology—potentially reducing profit potential by subtracting from earned value (Rothaermel, 2015).
Threat of substitutes
The threat of substitutes conveys the idea that products or services available from outside the industry come close to meeting the needs of current customers (Rothaermel, 2015). Any place where a customer can work virtually—coffee shops, hotels, airports, businesses, public libraries, restaurants—could present a threat to Regus’ flexible workplace model. Any facility that leases space for work stations, conventions, trainings, or conferences are substitute threats. Further threats to substitutes include real estate brokerages which rent professional spaces.
Rivalry among existing competitors
Rivalry among existing competitors describes the intensity with which companies in the same industry fight for market share and profitability (Rothaermel, 2015). Regus’ main competitors include Brookfield Office, Properties Inc. Serviced, Office Group PLC, Town Centre Securities PLC, and Basepoint Centres Ltd. The U.S. mobile workforce population is projected to grow steadily over the next five years, increasing from 96.2 million in 2015 to over 105 million by 2020 (IDC, 2015). Rivalry and competition in the mobile workforce forces firms to compete in manufacturing, construction, retail, and health care—industries that inherently are more mobile-friendly (IDC, 2015). Within these areas, competitors focus on non-office based mobile workers and mobile, on-location workers (IDC, 2015).
Role of complements
Some experts suggest an addition to Porter’s Five Forces: the strategic role of complements (Rothaermel, 2015). Complements are products or services that add value to the original product (Rothaermel, 2015). Regus’ complements include advances and price reductions in the smartphone, tablet, and computer industries; ubiquitous video conferencing platforms (Skype and FaceTime), advances in cellular network strength, Internet-based work platforms that enable and encourage virtual team work (Google Docs, Microsoft Office 365), cloud computing, and a trend of companies offering monthly payment plans for new devices and upgrade programs for devices (iPhone Forever, Apple Forever). The growing acceptance of corporate bring-your-own-device programs also is a complement (IDC, 2015).
Strategic Improvement Plan
Strategy is elusive, complex, and central to planning (Mishra, Mohanty, & Mohanty, 2015). Leaders derive implementation from consciously intended courses of actions and guidelines—affecting firm performance by blending short-term performance outcomes with long-term performance goals (Mishra et al., 2015; Hitt, Hoskinsson, & Ireland, 2015). By creating a SWOT analysis, leaders measure existing products and services against future scenarios based on strengths, weaknesses, opportunities, and threats (Rothaermel, 2015; Mishra et al., 2015). Strategy is a guide to future choices, actions, and decisions (Mishra et al., 2015; Mintzberg, 1987). Porter’s Five Forces serve as a framework to assess the industry attractiveness for strategic positioning that delivers sustainable and profitable results against competitors (Rothaermel, 2015; Mishra et al., 2015).
Short-Term Improvement Plan
Concentrating on a time period of six months to one year, short-term goals are necessary components in achieving long-term goals (Williams, n.d.). Executives determine what steps the firm will take to promote good and services and when they will go live (Grunert, n.d.). Short-term projects refer typically to quantifiable goals planned for the upcoming quarter or year (Grunert, n.d.). Short-term improvement recommendations for Regus are divided into three categories: revenue; customer service; and community outreach (Williams, n.d.).
• Analyze competitors trends: The SWOT analysis reveals volatile profitability as a weakness. Regus should analyze competitors buying and service trends in an effort to dissect their methods (Williams, n.d.). Regus can formulate a strategy to counter competitors’ strengths through a forensic examination of their processes.
• Study competitors’ services: Similarly, Regus should devote one month to learning what competitors offer that is not part of Regus’ products and services (Williams, n.d.). The take-away could reveal new strategies in marketing, advertising, and competitive advantage—and ultimately increased revenues—that were not previously considered (Williams, n.d.).
• Re-evaluate sales targets: Concrete goals can help drive revenue spikes also; subsequently, Regus’ corporate office could re-evaluate measurements and standards for sales goals (Ryan, n.d.). Lower-level managers tasked with elevated sales goals often increase the quality and timeliness of expectations (Ryan, n.d.). A robust incentive plan could motivate managers to hit new targets.
• Loss harvesting: Despite the best planning, capital loss is never avoidable completely. Short-term capital gains are different from long-term gains; however, using loss strategically can off-set realized capital gains and mitigate portfolio risk—a process known as “loss harvesting” (Meziani & Yang, 2012, p. 116). Regus should study gains and losses in a timely manner to reap a tax benefit by realizing losses and deferring gains (Meziani & Yang, 2012). Stein et al. (2008) state that firms can employ capital gains as a strategy to save income tax; it may prove more tax-efficient to pay a lower tax rate on long-term capital in the short-term and avoid a high tax penalty on short-term gains later (as cited in Meziani & Yang, 2012).
• Outsourcing staff: An external opportunity for Regus could be found in outsourcing staff. Rather than provide the workspace, Regus could operate similar to a staffing agency and provide temporary staffing solutions. To execute the short-term piece of this plan, Regus should first appoint a special projects manager to oversee the project. Executives and the new manager would handpick an aggressive, innovative, and motivated team. The outsourcing team would be responsible for sending a staffing questionnaire to customers, identifying trends and holes in customers’ current staffing, and brainstorming potential solutions. Next, corporate leaders should task local managers to set customer service feedback goals for their work centers. After six month of hopefully high scores, Regus’ marketing team could use this fresh feedback to market a customer service staffing division—touting Regus’ innate ability to train high-caliber employees. Instead of bringing the workplace to the professional, Regus could switch it up and bring the staff to the office. Differentiation could include two divisions: administrative (receptionists, administrative assistants, and office managers) and professional (marketing, accounting, human resources). Within the first six months, the outsourcing team could not only study the models and practices of national staffing agencies, it could determine whether it would be prudent for Regus to partner with an existing staffing agency. For both existing customer service teams and the proposed outsourcing team, Regus should include positive employee appreciation measures to maintain employee morale.
• Expanding virtual services: Using the Ansoff Matrix, Regus’ core competencies incorporate a diversification strategy in four areas (Appendix A) (Strategy Expert, n.d.; Mind Tools, n.d.; Rothaermel, 2015). The safest option, market penetration, helps firms expand existing products in a predictable market (MindTools, n.d.). Regus can court more customers by expanding virtual services and workspace options, experimenting with different sales channels (corporate sponsorship and alliances, smartphone in-app advertising, information booths within large retail chains); and marketing to specific demographics (age, educational level, job titles, alma matters). Product development presents slightly more risk as firms ponder introducing new products into the existing market (MindTools, n.d.). Regus could offer virtual, customer service kiosks at unstaffed work centers; or partner with Office Depot/Max, Staples, or Best Buy to create retail branded “stores” in Regus’ larger workspaces and business centers where customers could order supplies and equipment. These possibilities blend a diversification strategy with Regus’ virtual and customer service potential.
• Increase involvement: Regus team members support local charities through fundraising, volunteering, donations, in-kind gifts, networking events, mentoring and work experience support, and awareness raising initiatives (Regus, 2014). Collectively, Regus raised £150,000 through support of 132 projects for 100 charities (Regus 2014). Broken down by region, thirty-eight countries where Regus does business participated in community engagement activity (Regus, 2014). Whereas community outreach at Regus is strong, it could be improved considering the company operates in over 100 countries. Regus should create short-term goals, rewards, and recognition for employees who volunteer (Williams, n.d.).
• Increase recognition: Another short-term goal would find Regus partnering with high-profile international and national charities to increase brand recognition (Williams, n.d.). Short-term goals include: increasing engagement from 38 to a minimum of 50 contributing countries and identifying and possibly aligning with at least two international and two national charities. These short term goals would bond Regus to local communities through information sharing, community cohesion, and practicability (May, 2015).
Long-Term Improvement Plan
Organizational effectiveness is the long-term prosperity and survival of a firm (Yukl, 2013). Long-range planning builds upon short-term goals, directing ideas forward with a sense of purpose, urgency, and context within vision and mission statements (Cross, n.d.). Executives need to have a long-term perspective and the ability to comprehend complex relationships among variables relevant to the performance of the organization (Yukl, 2013). A top executive must be able to anticipate future events and plan for them—relying on conceptual skills, technical knowledge, and interpersonal skills for developing relationships, obtaining information, and implementing decisions (Yukl, 2013). A short-term improvement plan including revenue, customer service, and community outreach goals ultimately creates the basis for Regus’ long-terecommendations: expand workplace market share; promote growth through value-added marketing; and deliver sustainable returns.
Expanding market share
• Counter competitors: Any facility that leases space for work stations, conventions, trainings, or conferences are substitute threats to Regus. After completing the one-month analysis of competing services, Regus should conduct a more in-depth examination of products and services in the market. Leadership can study the results and use this forensic study to formulate strategies to counter competitors’ strengths and capitalize on weaknesses. Regus leaders should consider consumer reviews online, such as Yelp or Angie’s List, to search for trends in competitor weaknesses.
• BYOD networking: The mobile workforce market is under-saturated and primed for growth; conventional workplace traditions are changing (Brooke, 2014). The line between consumer and professional is blurred through smart devices and online freedom: one need only combine a smartphone, tablet, or laptop computer with free WIFI or a mobile hotspot and they are in their “office.” Regus should capitalize on market growth by targeting companies with BYOD—bring your own device—policies that enable employees to use personal devices for business use (Longhorn, 2015; Howell, 2014). Regus can explain to potential customers how a mobile workforce can help differentiate them from competitors: taking advantage of overall network infrastructure; creating convergence through virtual services, fixed offices, and mobile workforce; reducing overhead costs; increasing customer service efficiency; and reducing office space leasing (Langhorn, 2015). Firms that incorporate the mobile technology and BYOD trend are prime customers for Regus. With this goal, Regus should recruit world-class cyber security professionals to ensure optimal security for existing and potential customers. BYOD as a strategy plays against threat of substitutes; Regus can cast a net to customers who work in coffee shops, airports, hotels, and sign them up to work in work centers with administrative support.
• Co-branding: Firms looking to differentiate their brand often leverage external forces—brands, events, countries, charitable causes—in hopes that brand transfer will enhance and increase company awareness (Angle, Cunha, & Forehand, 2015). Regus can strengthen existing brand identity by considering co-branding opportunities with local entities in each market: successful builders and contractors; community charities; chambers of commerce; staffing agencies; infrastructure providers; cable companies; seasonal events organizers; REALTORS®; and real estate brokers (Angle et al., 2015). This association, in addition to facilitating transfer of positive associations, creates forward vertical integration—changing the value chain by stimulating local Regus locations to take ownership of customer activities (Angle et al., 2015; Rothaermel, 2015). Opponents of co-branding state that the results of co-branding follow the predictions of adaptive-learning—a theory that consumers may associate each brand differently as a result of cue interaction effects (Angle et al., 2015). To quell confusion, Regus and potential co-branding constituents should emphasize the strengths of all partners and communicate expected benefits (Angle et al., 2015).
Growth through added-value marketing
• Cost Savings: Brady, Davies, & Gann (2005) state that within the dynamics of a value-added environment, the exchange of economic value should equal customer benefits in economic, commercial, technical, and service capacities (as cited in Battaglia, Bittencourt, Borchardt, Diesel, Marciano, Pereira, & Schimith, 2015). Regus benefits from economies of scale by sharing resources, capabilities, and core competencies with marketing partnerships and business centers (Rothaermel, 2015; Regus, 2014). The pursuit of growing Regus’ long-term business networks requires marketing that stresses the dual benefits of cost-efficiency and differentiation—global efficiency that involves local responsiveness under a transnational strategy (Rothaermel, 2015). Business that operate in mobile locations—even partially—can lower costs associated with office leasing or purchasing, utility bills, building maintenance, property insurance, office furniture and equipment lease or purchase, Internet bandwidth usage, and administrative wages. The cost-savings messaging is simple: Regus can save companies money. The cost-savings objective is straight-forward: List the ways.
• Mobility: Stable and growing, Regus’ earnings are invested to hold market position or create future growth through increased investments (Rothaermel, 2015). Kridel (2015) states by 2017, 75% of firms’ internal applications will cater to smartphones and tablets. The computing industry is shifting away from personal computers to mobile devices (Kridel, 2015); Rothaermel, 2015). Seventy-three percent of senior executives view mobile devices as critical to everyday business; thus, the mobile workforce industry provides large-enterprise to firms of all sizes (Kridel, 2015). As an influx of younger professionals—the current Generation Y and Generation Z in five to ten years—poses a challenge for employers not only to stay current within their industries, but to stay current with talent (Langhorn, 2015). Regus can bridge the generation gap for companies and ensure they are top-of-class in their markets with the latest technology and trends—factors that will help in recruiting. Rivalry and competition in the mobile workforce forces firms to compete in manufacturing, construction, retail, and health care—industries that inherently are more mobile-friendly (IDC, 2015). Regus can expand market share if the company can harness this force of new customers in mobile-rich markets.
• Complements: Some experts suggest an addition to Porter’s Five Forces: the strategic role of complements (Rothaermel, 2015). Complements are products or services that add value to the original product (Rothaermel, 2015). Regus’ complements include advances and price reductions in the smartphone, tablet, and computer industries; ubiquitous video conferencing platforms (Skype and FaceTime), advances in cellular network strength, Internet-based work platforms that enable and encourage virtual team work (Google Docs, Microsoft Office 365), cloud computing, and a trend of companies offering monthly payment plans for new devices and upgrade programs for devices (iPhone Forever, Apple Forever). Emphasizing these peripheral attributes is a good strategy. Regus can market the company to potential customers as an extension of the technology they already possess—at home and in the office.
• Sustainability: Environmentally conscious customers will appreciate Regus’ shift to a low-carbon economy. Flexible working implies a reduction in commuting and fixed office space (Regus, 2014). Regus works with local, state, and regional governments to ensure compliance and leadership in corporate sustainability leadership (Regus, 2014). Engaging with local economies has expanded support for Regus in many communities (Regus, 2014). While flexible working helps customers reduce carbon emissions, Regus works further to minimize its own environmental impact—resulting from the company’s own growth—through an ongoing energy-saving initiatives (Regus, 2014). Environmental value programs can help market Regus as eco-friendly as well as create fertile ground for marketing and co-branding opportunities.
Delivering sustainable returns
Shareholder value creation is one of the traditional frameworks used to measure and assess firm performance (Rothaermel, 2015). Investors take a risk that the firm’s expenses will exceed revenues (Hitt et al., 2015). Because shareholders are the legal owners of public companies, the measure of competitive advantage most important to them is the money they provide in return for equity shares—risk capital (Rothaermel, 2015). Regus incorporates the importance of shareholders returns into its business model (Regus, 2014). Regus increased the dividend policy by 11% in 2014—doubling dividends over the last five years (Regus, 2014). To meet or beat this level of shareholder expectation, Regus needs to manage risk carefully: alter growth plans thoughtfully to reflect changing market conditions and exchange-rate movement; decrease the lead times between contracting with partners and opening new locations; capitalizing on favorable investments environments; restricting growth when fiscally prudent; and shortening break-even cycles. This stringent shareholder returns matrix ideally leads to continued growth and ultimately, sustainable and attractive shareholder returns (Regus, 2014).
In providing a comprehensive strategic analysis of a firm, one must not only examine various models, they must offer recommendations for improvement. The AFI strategy framework creates a roadmap for leadership to analyze, formulate, and implement strategic planning while communicating the firm’s direction to managers and employees (Rothaermel, 2015; Lashley & Clark, 2013). Utilizing these methods to examine Regus, one finds a company that enjoys a competitive advantage through differentiation, low barriers to entry, and a highly effective, global sales networks. The company’s weaknesses—volatile profitability and unpredictable occupancy rates—can be off-set through aggressive identification and pursuit of external opportunities. Short-term improvement goals concerning revenue, customer service, and community outreach pave the way for long-term success in expanding market share, focusing on added-value to attract new customers, and continuing to please shareholders. Regus exists on the leading edge of technology; however, a lapse in research and development could allow competitors to catch up.
After analyzing Regus through the SWOT and five forces models, it is apparent that Regus leverages strengths in an industry marked by manageable pressure from buyers and suppliers and with low threat of entry. Through a business model that draws upon people, networks, products, and brand to sustain a competitive advantage, Regus enables customers to pay only for the space and services they need (Regus, 2014). The transition from fixed to flexible working begins with customer service, continues with competitive rates, and endures through the flexible relationship at which Regus dominates—boundary-less innovation.
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