Insight into the Future Strategic Management of Flipkart

Introduction

This report is aimed at provision of insights into the future strategic course to be adopted by Flipkart Inc. The report consists of five parts. The first part, basing itself on the history of operations of the past five years, is an analysis of the strategic thinking underlying the strategic direction Flipkart inc. had adopted over the same period. The second part uses PEST analysis to better understand e-commerce as an industry in India. The third part employs the Business Canvas Model to analyse the strategic capabilities and strategic drift of the Indian e-commerce giant.

The fourth part, with the aid of SWOT analysis, is aimed at analysing the competitive position of Flipkart Inc. The final part of the report assesses requirement of the firm, in terms of resources, to stay true to the future strategic direction evolved for the firm in focus.

Task 1: Strategic thinking and direction of Flipkart

This section of the report elaborates on the strategic thinking and strategic direction of Flipkart over the past five years.

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Flipkart is an e-commerce marketplace, based out of Bangalore, India. It is currently owned Flipkart Pvt. Ltd., Singapore (uniconomy.com, 2016). After eighteen rounds of funding, it has received a total funding of $7.3 billion. Investors in the company include SoftBank, eBay, Naspers, Tiger Global Management and Tencent Holdings Ltd (crunchbase.com). Starting off as an online seller of books in 2007, Flipkart now has expanded to areas like fashion and consumer electronics. Strategic acquisitions of weRead, Jabong.com, Myntra, PhonePe and eBay India has meant that it now commands 34% of India’s market share in business to customer (B2C) e-marketplace.

This has been the go to strategy adopted by it to ensure dominance in a relatively nascent industry. It has recently turned investor with investments in Wildcraft India and Nestaway. Initially operating as a B2C marketplace operator and having received funding from foreign investors, regulatory concerns have changed the business model to being a B2B marketplace. It has its own logistics arm Ekart and operates a payment gateway PayZippy. It is major player in the online apparel and consumer electronics marketplace industry. Exclusive partnerships with manufacturers such as Lenovo and Samsung, customer friendly initiatives such as cash-on-delivery, easy replacements, an envious brand portfolio and an efficient logistics team are the company’s strengths. In 2018, Walmart acquired 77% of Flipkart. The increased manoeuvrability comes at a time when the competition with the next biggest rival Amazon India is heating up, with the latter catching up faster than expected in terms of market capitalization (Sen, A., 2018, livemint.com). Market consolidation and building on a customer base that stands at 100 million are its priorities. Walmart has sold off interests in its British arm and in intent on channelling its focus on markets with better growth prospects (Toni, G., 2018, marketwatch.com).

Industry analysis report of Flipkart is dealt with in this part of the report. Industry analysis is a strategic management tool used to better understand the industrial environment (Glenn, S., 2008, Electronic Journal of Academic and Special Librarianship, v.9, n0.3). Developing an understanding of the industry helps define a company’s future course of actions and is essential to successful strategic management practices. Following is an analysis of Flipkart’s industry environment using PEST analysis framework.

PEST Analysis

Several macro-environmental forces have an impact on an organization’s performance in the market. PEST analysis is a strategic management tool that aids in assessing these macro environmental conditions and their effects on business performance. Sustained and extensive PEST analysis is used by organizations worldwide, to look for threats and opportunities, as and when they arise, to ensure sustainability and thriving in case of environmental distress (Babatunde, B.O, 2012).

Political:

E-commerce has grown at nearly 19 percent in the last year, according to data from NASSCOM, a software industry body in India (Vasundhara R., 2018). Business-to-consumer (B2C) commerce has shown a 34 percent increase over the same period (Paul, A., 2018). With the government focussing on extending mobile connectivity to all areas and simultaneously pushing for digital payments, the e-commerce industry as a whole stands to gain. The change in FDI regulations, which enabled Walmart to buy 77 percent in Flipkart Inc. is widely perceived as a threat to small retailers and the traditional economy. A confederation of all India traders have approached Competition Commission on India (CCI), the apex industry watchdog with their grievances in this regard (Businesstoday.in, 2018). Increased instances of economic nationalism in the global economy, internal security challenges such as left-wing extremism, sectarian strife and separatism pose a threat to businesses. Road and electricity access to rural areas are being extended to all parts of the country, posing new threats and opportunities.

Economic:

With favourable demographics, an amiable regulatory environment and a sustained economic growth forecasted for years, India is set to become a true economic behemoth (IBEF, 2018). Globalization by far poses the biggest of challenges faced by e-commerce companies, namely maintaining that delicate balance between globalization and localization (Pavan Chandra, 2018). Another issue that has been raised likewise, is taxation. Most e-tailers (another term for retailer using the e-commerce mode) are either unlisted or based out of less or least taxed locations in the world. Taxes such as VAT, income and service taxes applicable on the brick-and-mortar retailer has been seldom applied to e-tailers (Aarati Krishnan, 2014). Predatory pricing by e-tailers is another issue currently being looked into by CCI. With India slated to come up with a National Policy on E-commerce within six months, opportunities and threats are multifarious. Ability to adapt to the new regulatory environment is key. Disruptions caused by measures such as GST, E-Way bills and strikes have to be factored in to ensure viability.

Social:

Operating in what is clearly a global, open economy, losing existing customers to new entrants is a threat that is very real. Meeting customer aspirations is key here. Distrust, in the untapped rural market, of digital payments, along with Indian economy’s well documented reliance on hard currency, create a need for cumbersome customer service initiatives such as cash on delivery. Building trust and attracting customers from sources they have been traditionally dependent, in rural India is a challenge while being an opportunity as well.

Technological:

Omni-channel is the way ahead in e-commerce. Adequate technological expertise, data security and management, logistical challenges posed by it are immense. Tapping into improved mobile connectivity and increased reliance on digital payments requires a customer centric, user-friendly approach (Pavan Chandra, 2018).

Critical Success Factors:

Critical success factors are key areas in which a satisfactory performance is a must for a business to thrive. Continued attention and care in these areas with a focus on achievement results is essential to an organization’s performance in the face of competition (Rockart, 1979).

Brand awareness and reach: Adequate marketing strategies adopted by Flipkart has been rewarded with higher visibility and brand awareness. An app only approach has helped it cash in on enhanced mobile connectivity, especially in small towns (Shaantanu G., 2015). Ensuring on time delivery to tier-II, tier-III cities and rural areas has helped earn customer trust as well as gaining visibility in a hitherto untapped market.

Pricing and availability: Competitive and, often, predatory pricing has helped Flipkart earn a customer base that is price sensitive. 24*7 availability, exclusive deals on certain products such as mobiles, initiatives like Big Billion Day are factors that have helped retaining as well as enhancing customer base.