Strategic Analysis on Flipkart

                                              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:

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