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Sa t u r d a y, 2 2 F e b r u a r y 2 0 1 4

Strategic Analysis on Flipkart

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Thulasi Prasad
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StrategicanalysisonFlipkart
Thepurposeofyouranalysisistoassessthecurrentcompetitivepositionofthefirm
andtomakerecommendationsonhowtoimprovethatposition.
Flipkart: Flipkart is a company founded in the year 2007 by Sachin Bansal and
BinnyBansal.Itisanecommercecompanythatmadeonlineshoppingpopularin
India. It offers various products on online like books, mobile phones, digital
cameras,laptops,watchesetc.Initially,ithasstartedsellingbooksonlineandlaterit
hasspreadtooffermanyproducts.
1.SWOTanalysisonFlipkart
2.Pestelframework.
3.Aboutindustry.
4.Competitoranalysis.
5.Portersfiveforcesmodel.
6.Currentcompetitivepositiongenericportersframework.
7.Actionsrecommendedtoimproveitsposition.
Strategy,mission,valuesofflipkart:
ThemissionofFlipkartistoprovidetheircustomersamemorableonlineshopping
experience.
TheVisionofFlipkartistobecomeAmazonofIndia.
CorevaluesofFlipkart:
1.CustomerObsession
2.Ownership
3.Impact
4.Honesty
5.Selflessness
6.Communication
7.Innovation
Byseeingthemissionandvaluesoftheorganization,wecaninferthattheyarein
sync with each other. For example, its mission statement reads out that it wants to
provide customers with online memorable experience and one of its values is
customerobsession.So,untilandunlessyouareconcernedaboutyourcustomersor
obsessedwithyourcustomers,youcantprovidedelightfulexperience.

Blog Archive

2014 (1)
February (1)
Strategic Analysis on Flipkart

SWOTAnalysis:
Strengths:
Weaknesses:
1.StrongBrandvalue
1.InvestordrivenorganizationOrlackof
2.OwnLogisticsArmekart
Independentboard
3. OwnOnlinepaymentgatewaysolution
2.SecretiveandPoliticalCulture.
Payzippy
3.Excessivefocusonexpandingcustomer
4.OwnMarketplacemodel
baseratherthanpullingprofits

Opportunities:
Threats:
1.Onlinefashionandapparelbusiness 1. From competitors like Amazon,
2. Providing logistics services to its Snapdeal,
Infibeam,
Indiaplaza,
competitors.
Homeshop18etc.
3.GrowthinonlineretailsectorinIndia

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ReasonsforStrengths:
Flipkart is a company which has entered into online ECommerce industry very
early.IthasstrongbrandvalueinIndia.
FlipkarthasdevelopeditsownlogisticsarmEKart,whichhasbeeninitiallyused
forinhousedeliveries.
Recently, it has developed its own payment gateway solution provider, where
customerscansavetheircreditcarddetails,Payzippy.
Flipkart has its own marketplace model where sellers need to register in this
platformandbuyerscannegotiatewiththesellersonvariedservicelevelsanditalso
helpscompanytoreduceitsowninventory.Flipkartwilljustdeliverthoseproducts.
ReasonsforWeaknesses:
MostofthemoneyhasbeeninvestedbyVenturefirmslikeTigerglobalandAccel
Partners.SO,mostofthedecisionsthataretakenbyfoundersoffirmhavetobeen
approvedbyInvestors.
Secretiveandpoliticalcultureisfollowedinthiscompanywhiletheyarerecruiting
hireswhichiscreatingproblemsinthiscompany.
Flipkart is excessively focusing on expanding customer base rather than pulling
profitsintheprocesshavingcashburn.
Opportunities:
Flipkart can venture into online apparel and fashion business, where the gross
marginsarehigher.
Flipkartcanofferitslogisticsservicestoitscompetitorsinonlineretailsectorwith
itslogisticsarmEkart.Withonlinecommercesectorgoingtoboominthecoming
years, online transactions are going to increase. So, if Flipkart offers its logistics
servicestoitscompetitors,itcangainmoneyfromthosetransactions.
Threats:
Flipkart is facing a lot of competition from some of the online retailers like
Amazon,Snapdeal,Indiaplaza,Homeshop18etc.
I would discuss briefly about industry in which Flipkart is operating. Flipkart is
operatinginonlineretailindustry.
OnlineRetailIndustry:Onlineretailindustryis1.41.6billion$.Accordingtoa
recentTechnoPakreport,etailinghasthepotentialtogrowmorethanhundredfold
inthenext9years,toreach$76billionby2021.Thisgrowthwillbedrivenbythe
country's growing Internethabituated consumer base, which will comprise 180
millionbroadbandusersby2020,andaburgeoningclassofmobileInternetusers.In
thenextfiveyears,Indianonlineretailindustrywillgrowto10billion$.Someof
the major challenges for online retailers are customer loyalty, trust, and education.
Most of the customers prefer Cash on Delivery option instead of credit/debit card
payment. So, this makes online retailers to lose some of the cash as the delivery
companieswillkeepthemoneyfor15daysandlatertheypaytotheseonlineretail
companies. The major players in this industry are Flipkart, Snapdeal, Amazon,
Myntra,Jabong,Homeshop18,Indiaplazaetc.
Now,withsomeinformationaboutonlineretailindustryinIndia,wewillgoforthe
Portersfiveforceframeworkandanalyzethisindustry.
Portersfiveforcesframework:
Supplierpower:
Inthisindustry,suppliersarethemanufacturersoffinishedproductslikeNike,Dell,
Apple etc. Online retail companies sell various products ranging from books to
computeraccessoriestoapparelstofootwear.Sincetherearemanysuppliersforany
particularcategory,theycantshowpowerononlineretailcompanies.Forexample,
ifyoutakecomputerscategory,therearemanysupplierslikeDell,Apple,Lenovo,
andToshibawhowantstoselltheirproductsthroughtheseonlineretailcompanies.
So, they wont be having power to control the online retail companies. Online
customerscanselecttheproductsontheirownandtheswitchingcostsinthiscaseis
zero. It is very difficult for manufacturers of finished products to come into this
industry because of challenges in Logistics. Online retail industry is important to
suppliersbecauseitactsasoneofthechanneltoselltheproducts.Now,withmostof
thecustomersinIndiapurchasingonlinethroughonlineretailcompanies,theycant
affordtolosethischannel.So,theycantdictatetermswithonlineretailcompanies.
So,inthisindustrythesupplierpowerislow.
Buyerpower:
Buyers in this industry are customers who purchase products online. Since this
industryisfloodedwithsomanyplayers,buyersarehavinglotofoptionstochoose.
Switching costs are also less for customers since they can easily switch a service
from one online retail company to other one. Same products will be displayed in
severalonlineretailwebsites.So,productdifferentiationisalmostlow.So,allthese
factors make customers to possess more power when compared to online retail
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companies.
ThreatofNewEntrants:
Threatofnewentrantsisveryhighinthisonlineretailindustrybecauseoffollowing
reasons:
Indiangovernmentisgoingtoallow51%FDIinmultibrandonlineretailand100%
FDI in single brand online retail sooner or later. So, this means foreign companies
cancomeandstarttheirownonlineretailcompanies.
Thereareverylessbarrierstoentrylikelessamountofmoneyrequiredtostarta
business,lessamountofinfrastructurerequiredtostartbusiness.Allyouneedisto
tie up with suppliers of products and you need to develop a website to display
products so that customers can order products, and a tie up with online payment
gatewayproviderlikebilldesk.
Industryisalsogoingtogrowatarapidrate.Itisgoingtotouch76billion$by
2021.Industryisgoingtoexperienceanexponentialgrowthrate.So,obviouslyno
onewantstomissthisbigopportunity.
Threatofsubstitutes:
Substituteforthisindustryasofnowisphysicalstores.Theirthreatisverylowfor
this industry because customers are going for online purchases instead of going to
physical stores as it will save time, effort, and money. With the advent and
penetrationofinternetandsmartphones,futureinretailbelongstoonlineretail.
Whenwecomparerelativequality,relativepriceofproductthathe/shebuysonline
withphysicalstore,botharealmostsameandinsomecases,onlinediscountswillbe
availablewhichmakescustomerstobuyproductsonline.
RivalrywithinIndustry:
CompetitionisveryhighinthisindustrywithsomanyplayerslikeFlipkart,Myntra,
Jabong,Snapdeal,Amazon,Indiaplaza,Homeshop18etc.
EnvironmentalAnalysis:
1. Demographictrends:Whenitcomestoonlineretailindustry,forpeopletoshop
online, they need to have internet. India is third largest country when it comes to
internet usage after U.S and China. Presently, above 200 million people are using
internet.Outofthis,110millionpeopleaccessinternetthroughmobiles.InIndia,8
10%ofonlineuserstransactonline.So,itmeansitcomesto20millionpeople.And
also, with smart phones, tablets coming into picture, number of people who are
going to use internet is going to get increased. This means, increase in the online
retailusageinIndia.
2. SocioculturalInfluences:Culturally,Indianstendtobuytheproductsinphysical
stores.Theywanttotouch,feeltheproductbeforebuying.Iftheriskassociatedwith
productisveryhigh,likeinpurchaseofTelevision,Laptop,WashingMachineetc.,
theytendtogotophysicalstore,thenseethefeaturesandifsatisfied,willbuythe
products. Indians will mostly influenced by peers, friends while purchasing the
products. They will ask their friends or peers suggestions and only will buy the
product.So,thesefactorsarenegativelyaffectingonlineretailindustry.Butslowly,
culture of buying is changing.They are going for online purchases but this rate is
lesswhencomparedtoofflinepurchase.Butwith30dayreplacementguarantee,if
the product is not functioning properly, by Ecommerce companies, and with the
availability of peers or friends feedback about products online, they are slowly
movingfromofflinetoonlinepurchases.
3. PoliticalLegalfactors:India is a democratic country where its people elect the
government through elections for every five years. For those five years, elected
government will rule the country. So, in terms of political climate in India, it is
stable.Now,withgeneralelectionsgoingtohappenthisyear,mostofthepeoplein
IndiaarepredictingthatBharatiyaJanataParty(BJP)willcomeintotherule.Prime
ministerialcandidateNarendraModiofBJPisinvestorfriendly.Previously,whenhe
was the Chief Minister of Gujarat, he has implemented several policies and made
Gujarat, one of the state in India, a vibrant state. Indian business has in the past
applauded Modi as an investorfriendly chief minister who has led Gujarat to
doubledigiteconomicgrowth.
IndiaisalsopushingforForeignDirectInvestmentinOnlineRetailIndustry.
Technological Factors: With the advancement of technology at a rapid pace,
onlineretailindustryisgoingtobenefitalot.Severaltechnologicaldeviceslike
smart phones, laptops, tablets etc. are going to help this online retail Industry
because with the penetration of these devices, Indian consumers are going to
purchasetheirproductsonline.EvenSmartphonemarketisgrowingataveryrapid
rate in India. People in India are going to smart phones as these phones provide
various features when compared to traditional phone models. Other technology
which is going to help this industry is big data and PredictiveAnalytics. Since
companiescangatherthedataabouttheircustomerswhentheyaredoingbusiness
with them, they can use these data to personalize the services by using predictive
analytics
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5.Macroeconomicfactors:IndiascurrentGDPis1.842trillion$andtenthlargest
economyintermsofGDP.
GrowthOutlook:Economypoisedforgradualrecoveryin201415.ReserveBankof
India,anapexbankofIndiaisexpectingAGDPof5.6%intheyear201415.Even
investor confidence is going to boost after general elections because investors are
confidentaboutBJPprimeministerialcandidateNarendraModi.Also,Indiaisgoing
tobecomethirdlargesteconomyafterChinaandU.S.So,onaneconomicfront,this
isgoingtohelponlineretailindustry.
ActionsrecommendedforFlipkart:
Flipkart has not been into fashion and apparels business in online retail. Since the
marginsareveryhighinthisspace,Flipkartcancashthisopportunitybyventuring
intothisspace.Currently,onlyMyntraandJabongareleadingplayersinthisspace.
Flipkartcanventureintothisspaceeitherbystartingonitsownorbymergingwith
oneofthesefirms.
Since online retail is going to boom in the coming years, it is necessary for this
industry to have logistics support. So, since Flipkart is already having its own
logisticsarmEkart,itcanprovidethislogisticsservicetoitscompetitorsinonline
retailindustry.
Inthistypeofindustry,pricemattersalottocustomers.Ifsameproductisoffered
by two etailers at two different prices, customers will go for the lowest price. So,
Flipkart should try to offer the products at lower prices. This can be done by
optimizing its logistics services. Since logistics cost plays an important role in
determiningthepriceoftheproduct.Filpkartshouldtrytooptimizeitssupplychain
in such a manner that its supply chain costs should be very less and try to offer
productsatlowerpricecomparedtoitscompetitors.
Bigdataandpredictiveanalyticsaregoingtoplayabigroleinthefuture.Thereare
manytoolslikeR,SQLavailabletominethedataandtofindoutthepatterns.So,
Flipkart can use data about its customers like what are they buying, what are their
buying patterns and can target them by using predictive analytics. For example,
Amazonusescustomerspurchasehistoryandsuggestsproductsaccordingtoit.
Flipkart can also employ relationship marketing into it. Instead of mainly focusing
on customer acquisition, it should also focus on customer retention. Because loyal
customersaremoreprofitablewhencomparedtonewcustomers.
ReferenceSources:
http://articles.economictimes.indiatimes.com/201402
13/news/47305247_1_logisticsarmpayzippysachinbansal
http://forbesindia.com/article/boardroom/canflipkartdeliver/33240/0
http://www.businessstandard.com/article/companies/flipkartchangesbusiness
modellaunchesflipkartmarketplace113040600051_1.html
http://businesstoday.intoday.in/story/flipkartstrategytotacklecompetitionfrom
amazonindia/1/202612.html
http://www.huntshire.com/Company/Values/102/flipkart
http://www.moneycontrol.com/smementor/mentorade/infotech/eretailindustrywill
beworth10billion5yrstime995352.html
http://economictimes.indiatimes.com/tech/internet/fdiinonlineretailriftarisesas
mncsseek100fdidomesticcosinsistonpartialopening
up/articleshow/28569069.cms
http://www.iamai.in/PRelease_detail.aspx?nid=3222&NMonth=11&NYear=2013
http://www.tmu.ac.in/gallery/managementjournal/final_inner_07.pdf
http://in.reuters.com/article/2013/09/06/indianarendramodipmrahulgandhielec
idINDEE98503W20130906
http://www.nextbigwhat.com/indiansmartphonesmarketjulyseptember2013297/
http://in.reuters.com/article/2014/02/17/indiaseconomicoutlookseenimprovingi
idINDEEA1G09420140217
http://www.rbi.org.in/scripts/PublicationsView.aspx?id=15716

Posted by Thulasi Prasad at 03:07

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