WeWork PESTEL Analysis

WeWork PESTEL  analysis is a strategic analytical tool and the acronym stands for political, economic, social, technological, environmental and legal factors affecting the global flexible workspace provider.

 Political Factors in WeWork PESTEL Analysis

Political factors that can affect workspace providers such as WeWork are multiple and include government stability, tax policies, lobbying and level of bureaucracy. Co-working providers are also affected by corruption, freedom of press, activities of trade unions and other factors.

Government stability

Government stability plays an important role on the long-term growth prospects of WeWork. The global flexible workspace provider operates 756 locations in 38 countries[1]. Changes in government policies may impact WeWork’s ability to secure office space, enter in lease agreements and manage its workforce. Furthermore, government instability or war such us the one currently going on in Ukraine can result in the loss of WeWork properties with direct implications on the bottom line.

Tax Policies

WeWork is subject to tax policies in all 38 countries it operates. The co-working giant is directly affected by corporate taxes. The higher the corporate taxes, the higher is the cost of doing business in any particular region. Moreover, favourable treatment of leases in some countries increases the company’s profitability, considering that the workspace provider leases the majority of its locations. Despite its huge size, in the past WeWork had benefited from tax breaks intended for small businesses. Specifically, by 2019 the company had received about GBP 2 million tax refund on property taxes it had paid in UK.[2]

Lobbying

Lobbying can affect the performance and growth prospects of the global flexible workspace provider. It is an attempt by individuals or organizations to influence government decisions. Potentially lobbying can benefit co-working and flexible working sector through tax befits for leasing arrangements and providing other benefits for the use of office space. WeWork started to engage in lobbying relatively recently and the company spent USD 375000 in lobbying activities in 2022.[3]

Economic Factors in WeWork PESTEL Analysis

Many economic factors affect profitability and growth in co-working sector. The most notable among them are changes in currency exchange, inflation and interest rates, cost of labour, rate of unemployment and overall macroeconomic climate in the market. Co-working companies are also subject to the availability of credit, tax rate and a range of other factors.

Macroeconomic climate

Changes in the global economy can affect the demand for the flexible workspace in many ways. For example, economic growth usually results in the creation of new jobs, stimulating demand for new workspaces, including shared workspaces. Furthermore, changes in consumer spending, as another indicator of macroeconomic climate also affects co-working sector. The greater the level of consumer spending, the more demand for products and services with positive implications for co-working companies.

Currency exchange rates

Changes in currency exchange rates affect WeWork’s reported earnings. The company earned approximately 55%, 50%, and 45% of its revenues from subsidiaries whose functional currency is not the U.S. dollar for the years ended December 31, 2021, 2020 and 2019, respectively. Because its consolidated financial statements are reported in U.S. dollars, the company is exposed to currency translation risk when the company translates the financial results of its consolidated non-U.S. subsidiaries from their local currency into U.S. dollars.

As foreign currency exchange rates change, translation of the statements of operations of the company’s international businesses into U.S. dollars affects period-over-period comparability of its operating results. Any strengthening of the U.S. dollar against one or more of these currencies could materially adversely affect the WeWork’s business, financial condition and results of operations.

As of December 31, 2021, WeWork had a balance of USD7.6 million in cash and cash equivalents, USD1.8 billion in various other monetary assets and USD1.1 billion in various other monetary liabilities that were subject to foreign currency risk. It is estimated that a 10% change in the relevant exchange rates would result in a total net change of approximately USD86.1 million in foreign currency gain or loss on these transactions.

Availability of Credit

Availability of credit is one of the important external economic factors that affect all businesses including workspace providers. WeWork, for example depends on external funding extensively, considering it does not see the profitability on its horizon yet. Taking into account that the co-working giant already has more than USD3 billion of debt and expensive long-term leases the issue of availability of credit may be greater to WeWork compared to competitors.

WeWork Inc. Report contains a full version of WeWork PESTEL analysis. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on WeWork. Moreover, the report contains analyses of WeWork business strategy, leadership, organizational structure and organizational culture. The report also comprises discussions of WeWork marketing strategy, ecosystem and addresses issues of corporate social responsibility.

[1] Annual Report 2021, WeWork

[2] WeWork benefits from tax breaks intended for small businesses (2019) The Irish Times, Available at: https://www.irishtimes.com/business/commercial-property/wework-benefits-from-tax-breaks-intended-for-small-businesses-1.3991722

[3] Source: Open Secrets (2023)