Strategic analysis on Flipkart
The purpose of
your analysis is to assess the current competitive position of the firm and to
make recommendations on how to improve that position.
Flipkart: Flipkart is a
company founded in the year 2007 by Sachin Bansal and Binny Bansal. It is an
e-commerce company that made online shopping popular in India. It offers various products on online like
books, mobile phones, digital cameras, laptops, watches etc. Initially, it has
started selling books online and later it has spread to offer many products.
1. SWOT analysis
on Flipkart
2. Pestel
framework.
3. About
industry.
4. Competitor
analysis.
5. Porter’s five
force’s model.
6. Current competitive
position- generic porter’s framework.
7. Actions
recommended to improve its position.
Strategy, mission, values of flipkart:
The mission of Flipkart is to “provide
their customers a memorable online shopping experience”.
The Vision of Flipkart is to become “Amazon
of India”.
Core values of Flipkart:
1. Customer
Obsession
2. Ownership
3. Impact
4. Honesty
5. Selflessness
6. Communication
7. Innovation
By seeing the
mission and values of the organization, we can infer that they are in 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
customer obsession. So, until and unless you are concerned about your customers
or obsessed with your customers, you can’t provide delightful experience.
SWOT Analysis:
Strengths:
1.
Strong Brand value
2.
Own Logistics Arm e kart
3.
Own Online payment gateway solution Payzippy
4.
Own Marketplace model
|
Weaknesses:
1.
Investor driven organization Or lack of Independent board
2.
Secretive and Political Culture.
3.
Excessive focus on expanding customer base rather
than pulling profits
|
Opportunities:
1.
Online fashion and apparel business
2.
Providing logistics services to its competitors.
3.
Growth in online retail sector in India
|
Threats:
1.
From competitors like Amazon, Snapdeal, Infibeam, Indiaplaza, Homeshop18 etc.
|
Reasons for Strengths:
·
Flipkart
is a company which has entered into online E-Commerce industry very early. It
has strong brand value in India.
·
Flipkart
has developed its own logistics arm E-Kart, which has been initially used for in-house
deliveries.
·
Recently,
it has developed its own payment gateway solution provider, where customers can
save their credit card details, Payzippy.
·
Flipkart
has its own marketplace model where sellers need to register in this platform
and buyers can negotiate with the sellers on varied service levels and it also
helps company to reduce its own inventory. Flipkart will just deliver those
products.
Reasons for Weaknesses:
·
Most
of the money has been invested by Venture firms like Tiger global and Accel
Partners. SO, most of the decisions that
are taken by founders of firm have to been approved by Investors.
·
Secretive
and political culture is followed in this company while they are recruiting
hires which is creating problems in this company.
·
Flipkart
is excessively focusing on expanding customer base rather than pulling profits
in the process having cash burn.
Opportunities:
·
Flipkart
can venture into online apparel and fashion business, where the gross margins
are higher.
·
Flipkart
can offer its logistics services to its competitors in online retail sector
with its logistics arm E-kart. With online commerce sector going to boom in the
coming years, online transactions are going to increase. So, if Flipkart offers
its logistics services to its competitors, it can gain money from those
transactions.
Threats:
Flipkart
is facing a lot of competition from some of the online retailers like Amazon,
Snapdeal, Indiaplaza, Homeshop18 etc.
I would discuss
briefly about industry in which Flipkart is operating. Flipkart is operating in
online retail industry.
Online Retail Industry: Online retail industry is 1.4-1.6 billion $. According to a recent TechnoPak report, e-tailing has
the potential to grow more than hundred-fold in the next 9 years, to reach $76
billion by 2021. This growth will be driven by the country's growing
Internet-habituated consumer base, which will comprise 180 million broadband
users by 2020, and a burgeoning class of mobile Internet users. In the next
five years, Indian online retail industry will grow to 10 billion $. Some of
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 companies will keep the money for 15 days and later they
pay to these online retail companies. The major players in this industry are
Flipkart, Snapdeal, Amazon, Myntra, Jabong, Homeshop18, Indiaplaza etc.
Now,
with some information about online retail industry in India, we will go for the
Porter’s five force framework and analyze this industry.
Porter’s five forces framework:
Supplier
power:
In this
industry, suppliers are the manufacturers of finished products like Nike, Dell,
Apple etc. Online retail companies sell various products ranging from books to
computer accessories to apparels to footwear. Since there are many suppliers
for any particular category, they can’t show power on online retail companies. For
example, if you take computers category, there are many suppliers like Dell,
Apple, Lenovo, and Toshiba who wants to sell their products through these
online retail companies. So, they won’t be having power to control the online
retail companies. Online customers can select the products on their own and the
switching costs in this case is 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 suppliers because it acts as
one of the channel to sell the products. Now, with most of the customers in
India purchasing online through online retail companies, they can’t afford to
lose this channel. So, they can’t dictate terms with online retail companies.
So, in this industry the supplier power is low.
Buyer
power:
Buyers in this
industry are customers who purchase products online. Since this industry is
flooded with so many players, buyers are having lot of options to choose.
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 several online retail websites. So, product differentiation is
almost low. So, all these factors make customers to possess more power when
compared to online retail companies.
Threat
of New Entrants:
·
Threat
of new entrants is very high in this online retail industry because of
following reasons:
·
Indian
government is going to allow 51% FDI in multi-brand online retail and 100% FDI
in single brand online retail sooner or later. So, this means foreign companies
can come and start their own online retail companies.
·
There
are very less barriers to entry like less amount of money required to start a
business, less amount of infrastructure required to start business. All you
need is to 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 gateway provider like bill desk.
·
Industry
is also going to grow at a rapid rate. It is going to touch 76 billion $ by 2021.
Industry is going to experience an exponential growth rate. So, obviously no
one wants to miss this big opportunity.
Threat
of substitutes:
·
Substitute
for this industry as of now is physical stores. Their threat is very low for
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
penetration of internet and smart phones, future in retail belongs to online
retail.
·
When
we compare relative quality, relative price of product that he/she buys online
with physical store, both are almost same and in some cases, online discounts
will be available which makes customers to buy products online.
Rivalry
with in Industry:
Competition is
very high in this industry with so many players like Flipkart, Myntra, Jabong,
Snapdeal, Amazon, Indiaplaza, Homeshop18 etc.
Environmental
Analysis:
1.
Demographic
trends:
When it comes to online retail industry, for people to shop 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. Out of this, 110 million
people access internet through mobiles. In India, 8-10% of online users
transact online. So, it means it comes to 20 million people. 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
retail usage in India.
2.
Socio-cultural
Influences: Culturally,
Indians tend to buy the products in physical stores. They want to touch, feel
the product before buying. If the risk associated with product is very high,
like in purchase of Television, Laptop, Washing Machine etc., they tend to go
to physical store, then see the features and if satisfied, will buy the
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, these factors are negatively affecting online retail industry.
But slowly, culture of buying is changing. They are going for online purchases
but this rate is less when compared to offline purchase. But with 30 day
replacement guarantee, if the product is not functioning properly, by
E-commerce companies, and with the availability of peer’s or friend’s feedback
about products online, they are slowly moving from offline to online purchases.
3.
Political-Legal
factors: 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, with
general elections going to happen this year, most of the people in India are
predicting that Bharatiya Janata Party (BJP) will come into the rule. Prime
ministerial candidate Narendra Modi of BJP is investor friendly. Previously,
when he 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 investor-friendly chief minister who has
led Gujarat to double-digit economic growth.
India is also
pushing for Foreign Direct Investment in Online Retail Industry.
Technological Factors: With the advancement of technology at a rapid
pace, online retail industry is going
to benefit a lot. Several technological devices like 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 purchase their
products online. Even Smart phone market is growing at a very rapid 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 “Predictive Analytics”.
Since companies can gather the data about their customers when they are doing
business with them, they can use these data to personalize the services by
using predictive analytics
5. Macroeconomic factors: India’s current GDP is 1.842 trillion $ and
tenth largest economy in terms of GDP.
Growth Outlook:
Economy poised for gradual recovery in 2014-15. Reserve Bank of India, an apex
bank of India is expecting A GDP of 5.6% in the year 2014-15. Even investor
confidence is going to boost after general elections because investors are
confident about BJP prime ministerial candidate Narendra Modi. Also, India is
going to become third largest economy after China and U.S. So, on an economic
front, this is going to help online retail industry.
Actions recommended for Flipkart:
Flipkart has not
been into fashion and apparels business in online retail. Since the margins are
very high in this space, Flipkart can cash this opportunity by venturing into
this space. Currently, only Myntra and Jabong are leading players in this
space. Flipkart can venture into this space either by starting on its own or by
merging with one of these firms.
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
logistics arm E-kart, it can provide this logistics service to its competitors
in online retail industry.
In this type of
industry, price matters a lot to customers. If same product is offered by two
e-tailers 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 determining the price of the product. Filpkart should try to optimize its
supply chain in such a manner that its supply chain costs should be very less
and try to offer products at lower price compared to its competitors.
Big data and
predictive analytics are going to play a big role in the future. There are many
tools like R, SQL available to mine the data and to find out the patterns. 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, Amazon uses customer’s purchase history and suggests products according
to it.
Flipkart can
also employ relationship marketing into it. Instead of mainly focusing on
customer acquisition, it should also focus on customer retention. Because loyal
customers are more profitable when compared to new customers.
Reference Sources:
