THE WEWORK COMPANY: INTERNATIONALIZATION STRATEGY OF

A BORN GLOBAL
SYNOPSIS

The case discusses internationalization strategies used by one of the fastest-growing coworking space
companies globally, The WeWork Company (WeWork) that was co-founded by Adam Neumann and
Miguel McKelvey in 2010 in the USA. In developed economies, where WeWork operated as a wholly
owned subsidiary, it was primarily focused on the community of freelancers and entrepreneurs for
membership of its coworking spaces. The company was also using standard lease agreements to possess
properties from the landlords in the developed markets. However, once the company entered the Asia-
Pacific, especially India, instead of using the traditional greenfield mode of entry, opted for joint ventures.
In these markets, WeWork also favored management fee-based agreements and not the standard lease-
based agreements with landlords. In India, WeWork also recognized the potential of “enterprise” clients,
who helped WeWork in achieving occupancy-levels of 90 percent within the first six months of its
operations. Later WeWork also diversified into other service categories, like co-living and education. As
WeWork grew in the American, the European and Asian markets, its revenues increased but losses
increased more than revenues, which raised doubts amongst investors over the sustainability of its
business model. In June 2019, the company considered buying a 70 percent stake in the Indian subsidiary.
Does Neumann need to borrow any lessons from Asian markets for similar success in the European and
the US market? Can he make WeWork a true “born global” company? Should Neumann continue to
expand internationally given increasing losses? Should he improve on his business model for future
profitability?

SUPPLEMENTAL MATERIALS

 “Life at WeWork | WeWork” YouTube video, 2:19, Posted by “WeWork,” March 19, 2018, accessed
August 21, 2019, https://www.youtube.com/watch?v=Tj25cD9m-zQ
 “We Are WeWork: WeWork India” YouTube video, 2:50, Posted by “WeWork India,” September
24, 2018, accessed August 21, 2019, https://www.youtube.com/watch?v=u9Fdn9t1bl8
 “Optimizing space itself with WeWork's Adam Neumann | Disrupt NY 2017,” YouTube video,
21:35, Posted by “TechCrunch,” May 15, 2017, accessed August 21, 2019,
https://www.youtube.com/watch?v=-EKOV71m-PY
 “Why WeWork Is Considering An IPO Despite Losing $1.9B in 2018,” YouTube video, 8:50, Posted
by “CNBC,” May 20, 2019, accessed August 21, 2019, https://www.youtube.com/watch?
v=QJt8F7sNITc

ANALYSIS

1. Do you think WeWork is a “Born-Global”? What could be the possible driving forces in making
it “Born Global”?

Please see the video “Life at WeWork | WeWork” (see “Supplemental Materials”), which presents the
views of the WeWork co-founders, Neumann and Miguel McKelvey, about the company and its
mission.

To be considered ‘global,’ a firm must reach beyond its immediate geographical region, within eight
years of its inception.1 Born globals are firms that “from or near their founding, seek superior
international business performance from the application of knowledge-based resources to the sale of
outputs in multiple countries.”2 Rapid internationalization, i.e., initial foreign market entry within two to
seven years from the period of domestic establishment, is a major characteristic of born globals. 3 Apart
from this, for born globals, the ratio of foreign sales to total sales is 25 percent or more. 4 WeWork was
established in 2010 in the USA and by 2014 it established its first international venture in the UK
followed by Israel. In between January to June 2019, WeWork’s international market operations
contributed 41 percent of the total revenue, establishing the company as a born global 5 (see Exhibit
Below).

2019
Item  2016 2017 2018 (Jan-
June)
Revenue ($ Billion) 0.44 0.89 1.82 1.53
Revenue from USA ($ Billion) 0.33 0.61 1.07 n/a
Revenue from Rest of the World ($ Billion) 0.11 0.28 0.75 n/a
Expenses ($ Billion) 0.83 1.81 1.93 2.9
Total Lease Costs ($ Billion) 0.28 0.53 1.00 n/a
Total Location Operating Expenses ($ Billion) 0.43 0.81 1.52 n/a
Work Station Capacity (in thousands) 107 214 466 604
No. of Members (in thousands) 87 186 400 527
Occupancy (%) 81.31 86.92 85.84 87.25
Source: “Revenue of WeWork Worldwide From 2016 to 2018 (in Million U.S. Dollars),” Statista.com, August 2, 2019,
accessed August 24, 2019, https://www.statista.com/statistics/880069/wework-revenue-worldwide/ ; “Expenses of WeWork
Worldwide From 2016 to 2018 (in Million U.S. Dollars),” Statista.com, May 17, 2019, accessed August 24, 2019,
https://www.statista.com/statistics/880101/wework-expenses-worldwide/ ; “Number of WeWork Members Worldwide From
Q1 2017 to Q1 2019 (in 1,000s),” S Statista.com, May 21, 2019, accessed August 24, 2019,
https://www.statista.com/statistics/955746/membership-wework-worldwide/ ; Craig Smith, “25 Amazing WeWork Statistics
and Facts (2019): By the Numbers,” Expandedramblings.com, August 19, 2019, accessed August 24, 2019,
https://expandedramblings.com/index.php/wework-statistics/ ; “Form S-1 Registration Statement: The We Company,” United
States Securities and Exchange Commission, August 14, 2019, accessed August 24, 2019,
https://www.sec.gov/Archives/edgar/data/1533523/000119312519220499/d781982ds1.htm

The domestic market is significant for a traditional multinational firm but not for a born global. 6 Typically
for multinationals, home market resources, support international efforts, which is not the case for born
globals.7 As they expand fast, they do not have adequate resources from the home market to invest in
international market expansion. WeWork relied heavily on venture capital funds and not from revenues
from the USA market to expand internationally. For WeWork, SoftBank Group Corp, a Japanese
conglomerate was a major venture capitalist investing in the company’s international expansion. 8

2. Which entry mode is more appropriate for WeWork, a joint venture (as in India) or wholly
owned subsidiary (as in Europe)?

Please see the video “We Are WeWork: WeWork India” (see “Supplemental Materials”), which give a
brief account about WeWork’s expansion strategy in India.

The choice between a joint venture and a wholly owned subsidiary can also be analyzed from Pankaj
Ghemawat’s CAGE (Cultural, Administrative, Geographic, and Economic) distance framework. 9 The
CAGE framework is used by managers to “identify and assess the impact of distance on various
industries.”10
Cultural Distance. Before discussing the cultural distance among countries, the instructor should
introduce students to the concept of National Culture and its six dimensions (Power distance,
individualism vs collectivism, masculinity vs femininity, uncertainty avoidance, long term orientation vs
short term normative orientation, and indulgence versus restraint). 11 The instructor should also, introduce
to students the country comparison tool (https://www.hofstede-insights.com/country-comparison/)
developed by Professor Geert Hofstede, Gert J. Hofstede, Michael Minkov and their research teams. 12
Using the tool, students will be able to observe and compare the score of countries like the USA, the UK,
India, and China across the six dimensions of culture (see Exhibit TN-1A). India differed from the USA
and the UK on all national cultural dimensions except for masculinity and uncertainty avoidance (see
Exhibit TN-1A). A high cultural difference implies a low commitment entry mode for firms. 13 Between
joint ventures and WOSs, joint ventures imply only an equity stake, but not complete ownership as
happens with WOSs. In India, the risk for WeWork was further reduced by opting for a management fee-
based structure with the landlord of a property instead of a standard lease agreement which it had with
landlords in the European or the American market (see exhibit below). Thus, for WeWork joint venture
was the ideal entry mode in India.

Phase ACTIVITY
Phase 1: Find Identification & Sourcing of Location:

- WeWork invested significantly in technology to build a huge data

repository of locations. This data repository was used for identifying
location of properties for developing coworking spaces (Belanger, 2017;
Ulaga, Niessing, and Brandwein, 2019).

- Exchange of an unexecuted draft lease agreement or a term sheet with

a property owner happened in this phase. Historically, only a few of the
locations were considered for the second phase. Movement from the
Find phase to the Sign phase depended on favorable (for WeWork)
negotiation of the lease terms. The terms included “free rent periods,
which we [WeWork] primarily use to transform a traditional office space
into a WeWork location, and tenant improvement allowances, under
which a landlord reimburses us [WeWork] for all or a portion of the
capital expenditures we incur during this transformation” (“Form S-1
Registration Statement,” 2019).

Phase 2: Sign Signing of Lease Agreement:

- This phase included “locations that are the subject of a lease

agreement that has been signed but with respect to which we [WeWork]
have not taken possession and no lease cost expense has been
recognized” (Form S-1 Registration Statement,” 2019).

- Typically, WeWork followed two types of agreements- Standard Lease

agreement (in the USA and Europe) and Management Agreement (in
China, India, and Japan). Under a standard lease agreement, all the
terms mentioned in the Find phase were met by the landlord, and
WeWork paid an annual rent. In a Management Agreement “the
building owner funds all capital expenditures to build out the space to
our [WeWork’s] design specifications and maintains full responsibility
for the space, while we [WeWork] function as the manager and receive
an agreed-upon management fee” (“Form S-1 Registration Statement,”
2019). In the future, We Work wanted to employ a more capital-efficient
partnership by using participating lease agreements under which “the
landlord typically pays or reimburses us [WeWork] for the full build-out
 of the space. Additionally, we [WeWork] generally do not pay a
specified annual rent, but rather rent is determined based on revenues
or profits from the space” (“Form S-1 Registration Statement,” 2019).
Phase 3: Build Building the Coworking Space:

- According to WeWork this phase included, “locations that are the

subject of a lease agreement that has been signed and with respect to
which we have taken possession and lease cost expense has been
recognized, but which have not yet opened to members,” (“Form S-1
Registration Statement,” 2019).

- Use of software and machine learning to optimize layouts with the most
extraordinary efficiency (Belanger, 2017; Ulaga, Niessing, and
Brandwein, 2019).

Phase 4: Fill Non-mature Location:

- According to WeWork if a location or coworking space was open for

less than 24 months, it was in the Fill phase. Such a location was also
categorized by WeWork as non-mature (“Form S-1 Registration
Statement,” 2019).

- By extensive use of localized digital marketing and leveraging on word

of mouth referrals from loyal members, WeWork promoted the location
to its target customers/ members to fill its workstations (Shaoolian,
2017). Target customers (in the USA) were entrepreneurs and
freelancers, who required a sense of belongingness at work (Schneider,
2019).

- Booking of coworking spaces was through a mix of online application

and offline negotiations (“Form S-1 Registration Statement,” 2019). In
between January to June 2019, 83% of the revenue of WeWork was
generated through membership fees and the remaining 17% was
through sales of complementary products and services like coffee,
internet access, etc., to members.
Phase 5: Run Mature Location:

- If a location was open for more than 24 months, WeWork classified it as

belonging to the Run phase or a mature location (“Form S-1
Registration Statement,” 2019).

- Marketing and promotional activities of the Fill phase continued in this

phase as well (“Form S-1 Registration Statement,” 2019).

Source: Lydia Belanger, “Here's How WeWork Pinpoints the Perfect Locations for Its Co-Working Spaces in Neighborhoods,”
Entrepreneur-Europe, September 25, 2017, accessed August 17, 2019, https://www.entrepreneur.com/article/300677; Wolfgang
Ulaga, Joerg Niessing and Nancy J. Brandwein, “WeWork - Service Excellence through Business Model Innovation:
Creating Outstanding Customer Experiences by Leveraging Data, Analytics and Digital Technologies (Product #: IN1584,”
Ivey Publishing, February 5, 2019, accessed August 14, 2019, https://www.iveycases.com/ProductView.aspx?id=104868;
Gabriel Shaoolian, “Localized Digital Marketing: How Brands Like Airbnb and WeWork are Leading the Way,” Forbes, July
26, 2017, accessed August 19, 2019, https://www.forbes.com/sites/gabrielshaoolian/2017/07/26/localized-digital-marketing-
how-brands-like-airbnb-and-wework-are-leading-the-way/#67943d3c4025; Michael Schneider, “WeWork Is Proof That
Amenities Matter for Culture--but Not in the Way You Would Think,” Inc., February 27, 2019, accessed August 19, 2019,
https://www.inc.com/michael-schneider/wework-is-proof-that-amenities-matter-for-culture-but-not-in-way-you-would-
think.html; “Form S-1 Registration Statement: The We Company,” United States Securities and Exchange Commission,
August 14, 2019, accessed August 24, 2019,
https://www.sec.gov/Archives/edgar/data/1533523/000119312519220499/d781982ds1.htm

Administrative distance/ political distance: This risk implies similarity in political risk 14 (see Exhibit-TN
1B). According to Credendo, a European credit insurance group, direct investment involves three types of
risks, namely, political violence risk, expropriation and government action risk, and currency
interconvertibility and transfer restriction risk. 15 Political violence risk involves terrorism and political
violence damage to material assets. 16 Expropriation risk involves, “all discriminatory measures taken by a
host government which deprive the investor of its investment without any adequate compensation.” 17 The
currency interconvertibility and transfer restriction risk refer to “the inability to convert and transfer out
of the host country any funds related to the investment.” 18 From Exhibit TN-1B, it is explicit that India
scores high on the political violence risk, while China scores high on the expropriation and government
action risk. Across all the three types of risk, the USA and the UK have a very good score and are similar.
Moreover, the United States resembles more the UK in this risk than to India or China. According to the
CAGE distance framework, more the administrative distance or political risk distance between the home
and host country, a lesser commitment entry mode will be more justified. As follows, joint ventures
should be the preferred entry mode in Asian countries and WOS should be the preferred entry mode in
developed markets.

Geographic distance. This refers to the physical distance between countries. 19 North America and Europe
are closer continents than North America and Asia. Thus, a low commitment entry mode like a joint
venture should be preferred by a firm when the host country is at a distance.

Economic distance. This refers to the difference in host and home country GDP per capita. 20 It can be
observed from Exhibit TN-1C, the difference between India (ranked 157) and USA (ranked 19 th) is much
more than the USA and the UK (ranked 39). Therefore, a firm should adopt a low commitment entry
mode, like a joint venture to enter India. Similar is the case with China (ranked 108 th) which has a high
economic distance with the USA and the UK.

Overall, according to the CAGE distance framework, the cultural, administrative, geographic, and
economic distance is high between Asian countries and the USA and the UK. Thus, faster adoption of
local market conditions can take place only when a low commitment entry mode like a joint venture is
opted for, in comparison to a wholly owned subsidiary.

3. What aspects of the business can Neumann improve for profitability?

Value Propositions and Customer Segments

Value proposition refers to the collection of products and services that a business offers to meet the needs
of its customers.21 The value proposition of WeWork was to offer a community. 22 WeWork’s mission
statement stated, “elevate the world’s consciousness by deploying a worldwide platform that provides its
clients with flexible access to beautiful spaces, as well as culture of inclusivity and the energy of an
inspired community.”23 For this reason, initially their target customers (in the USA) were entrepreneurs
and freelancers, whose need for a sense of belongingness while at work, was served by WeWork. 24
However, in Asian countries such as India, WeWork’s value proposition changed to flexibility and
convenience.25 These were the requirements of WeWork’s most demanding potential group of customers-
enterprises, so that they could focus on their core business, even if they have to spend a little more on
coworking spaces.26 WeWork brought the same value proposition to developed markets to target
primarily enterprise customers rather than freelancers or entrepreneurs, through “Headquarters by
WeWork.27
Unlike enterprises in the USA and Europe, most of the multinationals in the Southeast Asian markets
were leveraging the coworking space model for convenience, even if it was expensive. 28 In India,
multinational enterprises like Microsoft and HSBC found WeWork service to be more flexible. Students
can deduce that these MNCs instead of buying out spaces in India, which according to the CAGE model
poses a high political risk (as discussed in Q2), found it more efficient to keep the lease arrangement
flexible. The instructor can also bring to the notice of the students, certain development in the USA in
2019. Donald Trump, President of the USA, urged the American multinationals in China to wind up their
business and return to the USA. 29 Although very rare, such macro environmental risks highlight
challenges companies have in host countries. On the contrary, in markets like the USA and the UK, these
enterprises maintain their headquarters, and therefore have more surety about the existence of their
business and may want to have their own long-term space rather than leasing it for few years.

So, the model of targeting enterprises in Southeast Asian markets like India may not work in the USA and
the UK. Therefore, WeWork may need customizing its product according to the needs of the most
profitable potential customer segment in a particular country. Thus, community building may remain a
more profitable proposition in markets like North America, whereas flexibility works in Southeast Asia.

Switching to lease-based model: A lease-based model is typically encouraged when a company does not
enjoy enough resources to buy it.30 For instance, airline companies lease aircraft when they cannot buy it.
However, there is a difference in the cost structure of products such as aircraft and real estate. Aircraft
value starts depreciating the moment it is purchased, while with real estate it is the reverse. 31 Generally,
property prices appreciate with time. 32 Thus, instead of buying a property when WeWork manages a
property on a lease, it is losing on its appreciation, which otherwise could have become a long-term asset
for the company.33 This is another factor that WeWork may require to consider for profitability. Some
students may strongly disagree with this perspective as any heavy investment for an already loss incurring
firm, may not be beneficial in the short run. Still another option for WeWork could be becoming asset-
light, i.e., opt only for the management of property like Neumann did in the Asian market. 34 This could
heavily cut down on WeWork’s requirement for financial resources.
EXHIBIT TN-1A: COUNTRY COMPARISON BASED ON CULTURE DIMENSIONS

Culture Dimensions China India UK USA

Power Distance 80 77 35 40
Individualism 20 48 89 91
Masculinity 66 56 66 62
Uncertain Avoidance 30 40 35 46
Long Term Orientation 87 51 51 26
Indulgence 24 26 69 68
Source: “Country Comparison,” Hofstede-insights.com, accessed August 22, 2019, https://www.hofstede-
insights.com/country-comparison/

EXHIBIT TN-1B: FOREIGN DIRECT INVESTMENT- COUNTRY RISK

Currency
Political Expropriation and
Inconvertibility and
Violence Government
Country Transfer
Risk Action Risk
Restriction Risk
China 3 5 2
India 4 3 3
United Kingdom 1 1 1
United States 1 1 1
Source: “Country Risk and Insights,” Credendo, accessed August 28, 2019, https://www.credendo.com/country-risk

EXHIBIT TN-1C: ECONOMIC DISTANCE BASED ON GDP PER CAPITA (2017) ($)

Country  GDP Rank

China 16,700 108
India 7,200 157
United Kingdom 44,100 39
USA 59,500 19
Source: “The World Factbook: Country Comparison,” Central Intelligence Agency, July 1, 2019, accessed August 24,
2019, https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html
ENDNOTE
1
Sylvie Chetty and Colin Campbell-Hunt, “A Strategic Approach to Internationalization: A Traditional versus a “Born-Global”
Approach,” Journal of International Marketing 12, no. 1 (2004): 57-81.
2
Gary A Knight and Tamar Cavusgil, “Innovation, Organizational Capabilities, and the Born-Global Firm,” Journal of International
Business Strategy 35, no. 2 (2004): 124-141.
3
Sylvie Chetty and Colin Campbell-Hunt, op. cit.
4
Ibid.
5
“Form S-1 Registration Statement: The We Company,” United States Securities and Exchange Commission, August 14, 2019,
accessed August 24, 2019, https://www.sec.gov/Archives/edgar/data/1533523/000119312519220499/d781982ds1.htm
6
Sylvie Chetty and Colin Campbell-Hunt, op. cit.
7
Ibid.
8
Debojyoti Ghosh and Deepti Chaudhary, “Will the WeWork Game Plan Work?” Fortuneindia.com, August 22, 2018, accessed
August 18, 2019, https://www.fortuneindia.com/enterprise/will-the-wework-game-plan-work/102307
9
Pankaj Ghemawat, “Distance Still Matters,” Harvard Business Review 79, no. 8 (2001): 137-147.
10
Ibid.
11
“The 6 Dimensions of National Culture,” Hofstede-insights.com, accessed August 22, 2019, https://www.hofstede-
insights.com/models/national-culture/
12
“Country Comparison,” Hofstede-insights.com, accessed August 22, 2019, https://www.hofstede-insights.com/country-comparison/
13
Keith D. Brouthers and Lance E. Brouthers, “Explaining the National Cultural Distance Paradox,” Journal of International Business
Studies 32, no. 1 (2001): 177-189.
14
Pankaj Ghemawat, op. cit.
15
“Credendo’s country risk assessment” Credendo.com, accessed August 23, 2019,
16
Ibid.
17
Ibid.
18
Ibid.
19
Pankaj Ghemawat, op. cit.
20
Ibid.
21
Ibid.
22
Rey Mashayekhi, op. cit.
23
Ibid.
24
Peter Bacevice, Gretchen Spreitzer, Hilary Hendricks, and Daniel Davis, “How Coworking Spaces Affect Employees’ Professional
Identities,” Harvard Business Review Digital Articles, April 17, 2019, accessed August 24, 2019, https://hbr.org/2019/04/how-
coworking-spaces-affect-employees-professional-identities
25
Marcus Ellison, op. cit.
26
Ibid.
27
Taylor Soper, “WeWork Brings ‘Headquarters by WeWork’ Concept for Medium-Sized Companies to Seattle Area,” Geekwire.com,
June 11, 2019, accessed August 23, 2019, https://www.geekwire.com/2019/WeWork-brings-headquarters-WeWork-concept-
medium-sized-companies-seattle-area/
28
Marcus Ellison, op. cit.
29
Eugene Kiely, “Can Trump ‘Order’ U.S. Companies to Leave China?” Factcheck.org, August 27, 2019, accessed August 29, 2019,
https://www.factcheck.org/2019/08/can-trump-order-u-s-companies-to-leave-china/
30
Alexander Muse, “WeWork owes $18 Billion in Leases?,” Medium: Business, April 28. 2018, accessed August 27, 2019,
https://medium.com/@amuse/WeWork-owes-18-billion-in-leases-4083a2bac1e5
31
Ibid.
32
Charlie Farrell, “Housing: Don't Confuse An Expense With An Investment,” CBS News, August 30, 2010, accessed August 27,
2019, https://www.cbsnews.com/news/housing-dont-confuse-an-expense-with-an-investment/
33
Alexander Muse, op. cit.
34
Ellen Huet, “WeWork Wants to Become Its Own Landlord with Latest Spending Spree,” Bloomberg Businessweek, May 15, 2019,
accessed August 27, 2019, https://www.bloomberg.com/news/features/2019-05-15/wework-wants-to-be-its-own-landlord-it-also-
wants-2-8-billion