Case Study Description of India's Alibaba: IndiaMART's Network Effects
Dinesh Agarwal and Brijesh Agrawal ("DA & BA") established IndiaMART with around US$1100 savings in 1996. By 2014, "IndiaMART.com is India's largest online marketplace for Small & Medium Size Businesses". Its revenue for the year ended March 2014 reached US$32 million. "The company offers a platform & tools to over 1.5 million suppliers to generate business leads from over 10 million buyers... (It) has over 2600 employees located across 40+ offices in the country". In keeping with its growth plans, the company evaluates various capital raising activities from time to time, including public or private placement opportunities. Factors that would benefit the company's valuation include a strong track record of year-on-year growth, a sustainable revenue basis from diversified product categories, a strong, huge, and active user base, and a solid conversion rate of buyer- leads to revenue dollars for its suppliers. The downside, though, is that the company has not been generating operational profits for five years since 2010. From scratch to US$32 million revenue, DA & BA have led the company's many evolutions; what are the major considerations in building the present business model? How do they ensure the development of strong networks in every product category of the multiple-sided platform? One criticism of IndiaMART's weakness is easy replicability - what is the founders' response in mitigating risks presented by this weakness? What should IndiaMART do to attract a fair valuation?
Swot Analysis of "India's Alibaba: IndiaMART's Network Effects" written by Abhishek Kathuria, W.H. Lo includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Indiamart's Indiamart facing as an external strategic factors. Some of the topics covered in India's Alibaba: IndiaMART's Network Effects case study are - Strategic Management Strategies, Economics, Financial analysis, Growth strategy, IT and Strategy & Execution.
Some of the macro environment factors that can be used to understand the India's Alibaba: IndiaMART's Network Effects casestudy better are - – technology disruption, cloud computing is disrupting traditional business models, wage bills are increasing, increasing transportation and logistics costs, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China,
customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of India's Alibaba: IndiaMART's Network Effects
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in India's Alibaba: IndiaMART's Network Effects case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Indiamart's Indiamart, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Indiamart's Indiamart operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of India's Alibaba: IndiaMART's Network Effects can be done for the following purposes –
1. Strategic planning using facts provided in India's Alibaba: IndiaMART's Network Effects case study
2. Improving business portfolio management of Indiamart's Indiamart
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Indiamart's Indiamart
Strengths India's Alibaba: IndiaMART's Network Effects | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Indiamart's Indiamart in India's Alibaba: IndiaMART's Network Effects Harvard Business Review case study are -
Ability to lead change in Strategy & Execution field
– Indiamart's Indiamart is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Indiamart's Indiamart in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Indiamart's Indiamart has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Indiamart's Indiamart to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Indiamart's Indiamart has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in India's Alibaba: IndiaMART's Network Effects Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Successful track record of launching new products
– Indiamart's Indiamart has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Indiamart's Indiamart has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Low bargaining power of suppliers
– Suppliers of Indiamart's Indiamart in the sector have low bargaining power. India's Alibaba: IndiaMART's Network Effects has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Indiamart's Indiamart to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy in the India's Alibaba: IndiaMART's Network Effects Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Ability to recruit top talent
– Indiamart's Indiamart is one of the leading recruiters in the industry. Managers in the India's Alibaba: IndiaMART's Network Effects are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Diverse revenue streams
– Indiamart's Indiamart is present in almost all the verticals within the industry. This has provided firm in India's Alibaba: IndiaMART's Network Effects case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Analytics focus
– Indiamart's Indiamart is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Abhishek Kathuria, W.H. Lo can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Cross disciplinary teams
– Horizontal connected teams at the Indiamart's Indiamart are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Sustainable margins compare to other players in Strategy & Execution industry
– India's Alibaba: IndiaMART's Network Effects firm has clearly differentiated products in the market place. This has enabled Indiamart's Indiamart to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Indiamart's Indiamart to invest into research and development (R&D) and innovation.
Innovation driven organization
– Indiamart's Indiamart is one of the most innovative firm in sector. Manager in India's Alibaba: IndiaMART's Network Effects Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses India's Alibaba: IndiaMART's Network Effects | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of India's Alibaba: IndiaMART's Network Effects are -
Workers concerns about automation
– As automation is fast increasing in the segment, Indiamart's Indiamart needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study India's Alibaba: IndiaMART's Network Effects, in the dynamic environment Indiamart's Indiamart has struggled to respond to the nimble upstart competition. Indiamart's Indiamart has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As India's Alibaba: IndiaMART's Network Effects HBR case study mentions - Indiamart's Indiamart takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High bargaining power of channel partners
– Because of the regulatory requirements, Abhishek Kathuria, W.H. Lo suggests that, Indiamart's Indiamart is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
No frontier risks strategy
– After analyzing the HBR case study India's Alibaba: IndiaMART's Network Effects, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Indiamart's Indiamart supply chain. Even after few cautionary changes mentioned in the HBR case study - India's Alibaba: IndiaMART's Network Effects, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Indiamart's Indiamart vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Indiamart's Indiamart is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Indiamart's Indiamart needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Indiamart's Indiamart to focus more on services rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Indiamart's Indiamart, firm in the HBR case study India's Alibaba: IndiaMART's Network Effects needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study India's Alibaba: IndiaMART's Network Effects, is just above the industry average. Indiamart's Indiamart needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Capital Spending Reduction
– Even during the low interest decade, Indiamart's Indiamart has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Lack of clear differentiation of Indiamart's Indiamart products
– To increase the profitability and margins on the products, Indiamart's Indiamart needs to provide more differentiated products than what it is currently offering in the marketplace.
Opportunities India's Alibaba: IndiaMART's Network Effects | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study India's Alibaba: IndiaMART's Network Effects are -
Loyalty marketing
– Indiamart's Indiamart has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Creating value in data economy
– The success of analytics program of Indiamart's Indiamart has opened avenues for new revenue streams for the organization in the industry. This can help Indiamart's Indiamart to build a more holistic ecosystem as suggested in the India's Alibaba: IndiaMART's Network Effects case study. Indiamart's Indiamart can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Indiamart's Indiamart can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, India's Alibaba: IndiaMART's Network Effects, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Low interest rates
– Even though inflation is raising its head in most developed economies, Indiamart's Indiamart can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Indiamart's Indiamart to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Indiamart's Indiamart can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Indiamart's Indiamart can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Indiamart's Indiamart is facing challenges because of the dominance of functional experts in the organization. India's Alibaba: IndiaMART's Network Effects case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Manufacturing automation
– Indiamart's Indiamart can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Buying journey improvements
– Indiamart's Indiamart can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. India's Alibaba: IndiaMART's Network Effects suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Indiamart's Indiamart in the consumer business. Now Indiamart's Indiamart can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Indiamart's Indiamart can use these opportunities to build new business models that can help the communities that Indiamart's Indiamart operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Indiamart's Indiamart in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Threats India's Alibaba: IndiaMART's Network Effects External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study India's Alibaba: IndiaMART's Network Effects are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Indiamart's Indiamart can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study India's Alibaba: IndiaMART's Network Effects .
Technology acceleration in Forth Industrial Revolution
– Indiamart's Indiamart has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Indiamart's Indiamart needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Regulatory challenges
– Indiamart's Indiamart needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Environmental challenges
– Indiamart's Indiamart needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Indiamart's Indiamart can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
High dependence on third party suppliers
– Indiamart's Indiamart high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Indiamart's Indiamart with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Indiamart's Indiamart will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Indiamart's Indiamart in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Indiamart's Indiamart.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study India's Alibaba: IndiaMART's Network Effects, Indiamart's Indiamart may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Indiamart's Indiamart needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Weighted SWOT Analysis of India's Alibaba: IndiaMART's Network Effects Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study India's Alibaba: IndiaMART's Network Effects needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study India's Alibaba: IndiaMART's Network Effects is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study India's Alibaba: IndiaMART's Network Effects is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of India's Alibaba: IndiaMART's Network Effects is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Indiamart's Indiamart needs to make to build a sustainable competitive advantage.
