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 - – technology disruption, increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, increasing commodity prices, increasing transportation and logistics costs, increasing energy prices, digital marketing is dominated by two big players Facebook and Google,
supply chains are disrupted by pandemic , there is increasing trade war between United States & China, 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 -
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.
Training and development
– Flipkart Ups has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Flipkart: Valuing a Venture Capital-funded Startup 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.
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.
Sustainable margins compare to other players in Finance & Accounting industry
– Flipkart: Valuing a Venture Capital-funded Startup firm has clearly differentiated products in the market place. This has enabled Flipkart Ups to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Flipkart Ups to invest into research and development (R&D) and innovation.
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.
Analytics focus
– Flipkart Ups 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 S. Veena Iyer 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 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.
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.
Ability to lead change in Finance & Accounting field
– Flipkart Ups 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 Flipkart Ups in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Flipkart Ups digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Flipkart Ups has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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.
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 -
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.
Aligning sales with marketing
– It come across in the case study Flipkart: Valuing a Venture Capital-funded Startup that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Flipkart: Valuing a Venture Capital-funded Startup can leverage the sales team experience to cultivate customer relationships as Flipkart Ups is planning to shift buying processes online.
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.
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.
No frontier risks strategy
– After analyzing the HBR case study Flipkart: Valuing a Venture Capital-funded Startup, it seems that company is thinking about the frontier risks that can impact Finance & Accounting 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.
Capital Spending Reduction
– Even during the low interest decade, Flipkart Ups 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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Flipkart Ups is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Flipkart: Valuing a Venture Capital-funded Startup can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, firm in the HBR case study Flipkart: Valuing a Venture Capital-funded Startup has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Flipkart Ups 's lucrative customers.
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.
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 -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Flipkart Ups 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, Flipkart: Valuing a Venture Capital-funded Startup, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
Learning at scale
– Online learning technologies has now opened space for Flipkart Ups 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.
Better consumer reach
– The expansion of the 5G network will help Flipkart Ups to increase its market reach. Flipkart Ups 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.
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.
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.
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.
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 Flipkart Ups in the consumer business. Now Flipkart Ups can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
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.
Building a culture of innovation
– managers at Flipkart Ups 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 Finance & Accounting segment.
Using analytics as competitive advantage
– Flipkart Ups 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 Flipkart: Valuing a Venture Capital-funded Startup - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Flipkart Ups to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 -
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.
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. Flipkart Ups needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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.
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.
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.
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.
Technology acceleration in Forth Industrial Revolution
– Flipkart Ups has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Flipkart Ups needs to keep up with the evolution of technology in the Finance & Accounting 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 Flipkart Ups in the Finance & Accounting sector and impact the bottomline 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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Flipkart Ups with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.