Case Study Description of Flipkart: Valuing a Venture Capital-funded Startup
The Indian online retail ("e-tail") market had seen a flurry of activity. Success stories such as Makemytrip.com and Naukri.com in the travel and job search domains, respectively, were significant catalysts for this new breed of start-ups. Of these start-ups, Flipkart stood out as one of the most successful (and audacious) - mostly because of the funding the company managed to secure over a very short period of time as compared to its competitors. The firm was celebrated for its bold stance on growth versus profitability but simultaneously had its share of critics and skeptics. The latest round of venture capital funding had valued Flipkart at $1.6 billion, nearly eight times sales. In less than two years, the firm had attracted nearly $550 million in venture capital funds and its sales turnover had grown nearly 30-fold. Was Flipkart growing too big too soon? Were these valuations justified? S. Veena Iyer is affiliated with Management Development Institute-Gurgaon.
Swot Analysis of "Flipkart: Valuing a Venture Capital-funded Startup" written by S. Veena Iyer includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Flipkart Ups facing as an external strategic factors. Some of the topics covered in Flipkart: Valuing a Venture Capital-funded Startup case study are - Strategic Management Strategies, Financial analysis and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Flipkart: Valuing a Venture Capital-funded Startup casestudy better are - – digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , technology disruption, wage bills are increasing, central banks are concerned over increasing inflation,
increasing transportation and logistics costs, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Flipkart: Valuing a Venture Capital-funded Startup
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Flipkart: Valuing a Venture Capital-funded Startup case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Flipkart Ups, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Flipkart Ups 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 Flipkart: Valuing a Venture Capital-funded Startup can be done for the following purposes –
1. Strategic planning using facts provided in Flipkart: Valuing a Venture Capital-funded Startup case study
2. Improving business portfolio management of Flipkart Ups
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Flipkart Ups
Strengths Flipkart: Valuing a Venture Capital-funded Startup | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Flipkart Ups in Flipkart: Valuing a Venture Capital-funded Startup Harvard Business Review case study are -
Ability to recruit top talent
– Flipkart Ups is one of the leading recruiters in the industry. Managers in the Flipkart: Valuing a Venture Capital-funded Startup are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- Flipkart Ups 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 Flipkart Ups is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Flipkart: Valuing a Venture Capital-funded Startup Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the Flipkart: Valuing a Venture Capital-funded Startup 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.
Diverse revenue streams
– Flipkart Ups is present in almost all the verticals within the industry. This has provided firm in Flipkart: Valuing a Venture Capital-funded Startup 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.
Superior customer experience
– The customer experience strategy of Flipkart Ups in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Flipkart Ups has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Flipkart Ups to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Flipkart Ups has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Flipkart Ups 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.
Effective Research and Development (R&D)
– Flipkart Ups 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 Flipkart: Valuing a Venture Capital-funded Startup - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Flipkart Ups has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Organizational Resilience of Flipkart Ups
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Flipkart Ups does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Flipkart Ups is one of the most innovative firm in sector. Manager in Flipkart: Valuing a Venture Capital-funded Startup Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Flipkart Ups is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Flipkart: Valuing a Venture Capital-funded Startup | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Flipkart: Valuing a Venture Capital-funded Startup are -
High cash cycle compare to competitors
Flipkart Ups 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.
Slow to strategic competitive environment developments
– As Flipkart: Valuing a Venture Capital-funded Startup HBR case study mentions - Flipkart Ups 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Flipkart: Valuing a Venture Capital-funded Startup, it seems that the employees of Flipkart Ups 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Flipkart: Valuing a Venture Capital-funded Startup 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 Flipkart Ups has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of Flipkart Ups, firm in the HBR case study Flipkart: Valuing a Venture Capital-funded Startup needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Flipkart Ups has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow decision making process
– As mentioned earlier in the report, Flipkart Ups has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Flipkart Ups even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Flipkart: Valuing a Venture Capital-funded Startup, in the dynamic environment Flipkart Ups has struggled to respond to the nimble upstart competition. Flipkart Ups has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Interest costs
– Compare to the competition, Flipkart Ups has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Products dominated business model
– Even though Flipkart Ups 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 - Flipkart: Valuing a Venture Capital-funded Startup should strive to include more intangible value offerings along with its core products and services.
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 Flipkart Ups supply chain. Even after few cautionary changes mentioned in the HBR case study - Flipkart: Valuing a Venture Capital-funded Startup, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Flipkart Ups vulnerable to further global disruptions in South East Asia.
Opportunities Flipkart: Valuing a Venture Capital-funded Startup | 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 Flipkart: Valuing a Venture Capital-funded Startup are -
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. Flipkart Ups can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Flipkart Ups can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Flipkart Ups can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Flipkart: Valuing a Venture Capital-funded Startup 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Flipkart Ups 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Flipkart Ups can use these opportunities to build new business models that can help the communities that Flipkart Ups operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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 Flipkart Ups 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Flipkart Ups is facing challenges because of the dominance of functional experts in the organization. Flipkart: Valuing a Venture Capital-funded Startup 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.
Creating value in data economy
– The success of analytics program of Flipkart Ups has opened avenues for new revenue streams for the organization in the industry. This can help Flipkart Ups to build a more holistic ecosystem as suggested in the Flipkart: Valuing a Venture Capital-funded Startup case study. Flipkart Ups can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Flipkart Ups 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 Flipkart Ups to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Flipkart Ups can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting 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.
Loyalty marketing
– Flipkart Ups 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Flipkart Ups 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. Flipkart Ups 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.
Leveraging digital technologies
– Flipkart Ups can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Threats Flipkart: Valuing a Venture Capital-funded Startup External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Flipkart: Valuing a Venture Capital-funded Startup are -
Stagnating economy with rate increase
– Flipkart Ups can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Shortening product life cycle
– it is one of the major threat that Flipkart Ups is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Flipkart Ups business can come under increasing regulations regarding data privacy, data security, etc.
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 Flipkart Ups.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Flipkart Ups 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 Flipkart: Valuing a Venture Capital-funded Startup .
High dependence on third party suppliers
– Flipkart Ups 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.
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 Flipkart Ups in the Finance & Accounting sector and impact the bottomline of the organization.
Environmental challenges
– Flipkart Ups 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. Flipkart Ups can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Flipkart: Valuing a Venture Capital-funded Startup, Flipkart Ups may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
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.
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. Flipkart Ups 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.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Flipkart Ups can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Flipkart Ups 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 Finance & Accounting industry regulations.
Weighted SWOT Analysis of Flipkart: Valuing a Venture Capital-funded Startup 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 Flipkart: Valuing a Venture Capital-funded Startup 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 Flipkart: Valuing a Venture Capital-funded Startup 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 Flipkart: Valuing a Venture Capital-funded Startup 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 Flipkart: Valuing a Venture Capital-funded Startup 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 Flipkart Ups needs to make to build a sustainable competitive advantage.
