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 - – increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices,
wage bills are increasing, central banks are concerned over increasing inflation, 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 -
Effective Research and Development (R&D)
– Indiamart's Indiamart has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study India's Alibaba: IndiaMART's Network Effects - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
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.
Learning organization
- Indiamart's Indiamart is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Indiamart's Indiamart is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in India's Alibaba: IndiaMART's Network Effects Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
Superior customer experience
– The customer experience strategy of Indiamart's Indiamart in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
Highly skilled collaborators
– Indiamart's Indiamart has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in India's Alibaba: IndiaMART's Network Effects HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
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 -
High cash cycle compare to competitors
Indiamart's Indiamart has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study India's Alibaba: IndiaMART's Network Effects, it seems that the employees of Indiamart's Indiamart don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
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.
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.
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.
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.
Products dominated business model
– Even though Indiamart's Indiamart has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - India's Alibaba: IndiaMART's Network Effects should strive to include more intangible value offerings along with its core products and services.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the India's Alibaba: IndiaMART's Network Effects HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Indiamart's Indiamart has relatively successful track record of launching new products.
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.
Skills based hiring
– The stress on hiring functional specialists at Indiamart's Indiamart has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
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.
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 -
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.
Using analytics as competitive advantage
– Indiamart's Indiamart has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study India's Alibaba: IndiaMART's Network Effects - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Indiamart's Indiamart to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Indiamart's Indiamart can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Indiamart's Indiamart can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Indiamart's Indiamart can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Learning at scale
– Online learning technologies has now opened space for Indiamart's Indiamart to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
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.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Indiamart's Indiamart to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Indiamart's Indiamart to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help Indiamart's Indiamart to increase its market reach. Indiamart's Indiamart will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Indiamart's Indiamart can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 -
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.
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.
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.
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 .
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.
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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Indiamart's Indiamart business can come under increasing regulations regarding data privacy, data security, etc.
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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Indiamart's Indiamart in the Strategy & Execution sector and impact the bottomline of the organization.
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.
Shortening product life cycle
– it is one of the major threat that Indiamart's Indiamart is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Indiamart's Indiamart can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
