Company Background
This report will discuss about the opportunities and threats to be faced by Flipkart in entering in the Indian market. Furthermore, this report will also discuss about the internal business efficiency of Flipkart that can help them in their foreign business. A few recommended steps will also be discussed. Flipkart Company has grown over the years due to good leadership management. Furthermore they promote good relationship between buyers and sellers and in so doing they ensure circulation of goods and services within the market.
Flipkart is the leading name in the Indian e-commerce scenario with having the market leadership position in competing with Amazon and Snapdeal. It was founded in 2007 with the primary intension of selling books but in the later stage, it forayed in electronics, home décor, furniture, and fashion and lifestyle sectors (Flipkart.com, 2018). Thus, they are offering diverse products that are further helping them in catering to larger customer segments. Recently, it is reported that 77 percent of stake of Flipkart get acquired by American retail giant Walmart. The major reason of overnight success of Flipkart in the Indian market is their distinctive business approach. This is due to the reason that they initiated the concept of e-commerce in the Indian market when this concept was relatively new (Prashar, Vijay & Parsad, 2015). Thus, customers got the advantage of convenience by shopping from home and this helped them to expand rapidly.
In terms of the financial capabilities, Flipkart had the backing of Soft bank group. However, with the acquisition by Walmart, 20 percent stakes of soft bank are also sold. Now they are having the financial support of Walmart that denotes that they are having higher access to financial resources. Flipkart already gained immense marketing expertise and strategies in relation to the e-commerce sector. It will be beneficial in entering in the Australian market. In addition, with the recent acquisition by Walmart, their marketing expertise will also be added (Dutta & Bhat, 2014). In terms of the technological factors, Flipkart is having shopping as well as mobile app. Thus, they are already having the access to advance technology in this sector. However, Flipkart has also faced a number of issues regarding their employees where they are accused of exploitation. Thus, this may be a weakness for them in operating in the Australian market (Prasad & Rao, 2015). In addition, the lack of experience regarding the e-commerce sector of Australia is another weakness for Flipkart.
Determination of External Business Factors
Markets or business can be affected by either external factors or internal factors. The external factors are those that, the business has control over them. They can affect the business positively or negatively and sometimes can lead to the fall of the entire business. The internal factors are those that the business has control over and they don’t have adverse effects on business operations. The external factors include; political, Economic, Social, Technological, Legal and environmental factors.
a. Research and analysis of target international country/city market macro environment (PESTLE).
PESTLE analysis model
This is one of the ways of analyzing business and marketing models. It summarizes techniques on how to explore broader forces of macro-environment. The figure below shows the PESTLE model(Marketing Models, 2014).
The technique applied by this model is to dig deep, and it help the managers to view and analyze the process as a whole without missing a single point. The elements of PESTLE model are analyzed below.
Political
Operating through online mediums is easier in the Australian market due to the reason that physical presence is less required. Australia is having relatively favorable political conditions for doing business (Neilson, Pritchard & Yeung, 2014). They are also having favorable diplomatic relationship with India. This will reflect in easing the market entry process for Flipkart. Moreover, the stable government system in the country with having lower political risks is also favorable for Flipkart. As per the corruption index 2018, Australia is having the 13th raking in the world (transparency.org.au, 2018). This denotes that Flipkart will have less impact of corruption in doing business in Australia. Political factors are based on many other factors such as; Bureaucracy, corruption level, education law, employment law, press freedom etc. These political factors may create a barrier to the growth of business, though political systems due vary depending on the country. Some countries due have high political temperatures during elections and these high temperatures provides hostile environment for the business to thrive in. sometimes government can pose high tax on business companies which could hinder their expansion. That’s why some business companies to offer bribes to the government so that they can have minimal interference from the government. These political factors can lead to the following; mitigation of risk, political stability, changes in regulation and change in economy.
Economical
It is reported that Australia is having favorable economic growth in the recent years. Hence, Flipkart will have favorable market opportunities in the Australian market. However, the recent gst valuation by the government of Australia will have adverse impact on the business of Flipkart (Ramli et al., 2015). This is due to the reason that digital goods and services are also being included in the goods and service tax legislation. This may increase the taxation on the products sold by Flipkart and will eventually increase their price. Currently, there are number of e-retailers operating in the Australian market such as Ozbargain, JB Hi-Fi and Kogan. Apart from them, there are other offline retailers such as Woolworths and Coles, who are also having online channels. Thus, the intensity of competition will be more for them but Flipkart will have the advantage of offering diverse products under them. In addition, Amazon is not present in the Australian market and thus, Flipkart will not face one of the major competitors for them. Economic change can also be brought about by the government, by imposing taxes on goods and shipments of goods overseas. Economic effects are all brought about by all other factors which affects the business externally. They either brings the effect directly or indirectly.
Market Selection
Social
Globalization is having greater impact on the Australian society and majority of the customers are aware about the global products. Thereby, it will be beneficial for Flipkart in offering global products in the Australian market. Furthermore, it is reported that Australia is having 99 percent of literacy rate in the country (knoema.com, 2018). Thus, almost the entire population can shop online and use mobile app or website. This is another opportunity for Flipkart in doing business in Australia. It is also reported that Australia is having 69 percent of mobile internet penetration in the country (statista.com, 2018). Thus, Flipkart will have more potential market for their app based services. This also the way of life and how people due interact in a given setting or environment. Social can also be describes as change in fashion and taste, for example the younger generation prefers the digital technology as compared to the old millennials. These changes in social class due adverse effects on the business activities. They due affect the environment where the business operates. There are a number of social factors that due affect the business; lifestyle, religious and beliefs, sex distribution, social class and education level. Religious beliefs due affect how the consumption rates and purchasing power of the consumer. This intern affect the market strategy and the general expansion the business. The social factor focuses on the forces within the society as they can change the attitude, opinions and interests. This can lead to general change in sales and products. Social factor also depends whether the product in the market is legally accepted or not, is the product an alcoholic or a soft drinks. These are some of the determinants how social factors affect the business externally.
Technological
As discussed earlier, Flipkart is having website compatible with mobile and desktop. In addition, they are also having their mobile app. Therefore, in terms of technology, Flipkart is updated enough. Furthermore, Australia is having the favorable infrastructure of technology and innovation. This will help Flipkart to further develop their technology if they can have their research and development center there.
Legal
The major law that should be followed by Flipkart in doing business in Australia is competition and consumer Act 2010. This is more important for them due to the fact that they are accused for initiating policies that are against fair competition (Ackermann, 2014). In addition, privacy act 1988 should also be followed in safeguarding the confidential details of the customers. The strictness of these acts is more in Australia than in India. Hence, Flipkart should properly adhere to the rules and regulations.
PESTLE analysis model
Environmental
Business policies and practices are not having direct impact on the environment due to the fact that they operate entirely on online basis. Maybe however, in case of their warehouses and selling items that pollution ought to be considered. In this case, Flipkart should have to adhere to the environmental standards in Australia.
b. Research and analysis of the target market including consumers (or business customers if B2B) and market segments as well as a competitor analysis (micro environment).
In order to identify the target customers for Flipkart, different elements including demographic, geographic and behavioral segmentation will be used. In terms of demographic segmentation, the target market will be the customers between the age groups of 18 and 50. The major reason of this vast target demography is due to the reason that Australia is having higher market penetration of mobile internet and more and more customers are getting attracted towards the online shopping concept (Rupp, Kern & Helmig, 2014). In addition, the wide availability of different products for different set of age groups will also expand the target market for Flipkart. According to the reports, percentage of the population between the age groups of 20 and 50 are highest (Worldpopulationreview.com, 2018). Thus, Flipkart will have huge market potentiality.
In terms of the geographic segmentation, in the initial stage, only the metro cities should be targeted. This is mainly due to the reason that customer awareness about the online shopping will be more in the metro cities. Furthermore, professionals will be more in the metro cities and they are having the requirements of online shopping due to their lack of time. However, in the further stage, Flipkart will have the opportunity in operating in the smaller towns considering the fact that Australia is having higher level of market penetration of internet and mobile usage (Newton et al., 2013). Considering the fact that Flipkart is having higher level of diverse products, they should offer more utility products in the tier II and II cities. This can help them to open up new customer segments by meeting the geographical gap between the requirement of the customers and the availability.
In terms of the behavioral segmentation, customer segments with having lack of personal time for shopping and having the difficulties of shopping different items from a single place will be targeted. With having wide array of products and facility of faster delivery mechanism will help Flipkart to effectively cater to this segment. On the other hand, customers with having active lifestyles and having the preferences for global brands can also be targeted (Floh, Koller & Zauner, 2013). This is due to the fact that brick and mortar stores cannot offer all the global brands to the customers. Offering larger assortment of global brands especially in the fashion segment can act as competitive advantages for Flipkart. Thus, it can be concluded that success of Flipkart in the Australian market heavily depending on the urban customers.
This is like a tool used to engage the business to know whether the goals of the business is being achieved or not. It explains the current situation the business and where the business needs to be after a given period of time. The marketing plan contains things such as, current situation of the business, the target market, goals and objective of the business, the capital cost and the execution plan.
Industry competitiveness analysis
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Bargaining power of buyers |
· Bargaining power for the buyer will be moderate.· Buyers are having number of options in the market.· However, majority of the retailers are not offering higher product variants as like Flipkart.· On the other hand, buyer may prefer busying from different sites over using only Flipkart (Jiang, Yang & Jun, 2013). |
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Bargaining power of suppliers |
· Bargaining power of suppliers is high.· Flipkart will only retail the products of different brands.· They will initiate local sourcing in order to check the cost (Wu et al., 2014).· Pricing of the products will determine the selling process for Flipkart.· Majority of the suppliers for Flipkart are big brands and thus they cannot be influenced by the brand value for Flipkart. |
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Threat of substitutes |
· Threat for substitutes is high for Flipkart.· There are number of online shopping services operating in the Australian market.· Even though they are not selling diverse products like Flipkart but still separate ones are selling different items.· Customers will opt for the cheapest option and customer loyalty is less in this sector (Ashraf, Thongpapanl & Auh, 2014).· Switching cost is also lower for the customers.· Majority of the existing sites are Australian and customers will have more preferences for the Australian brands over Flipkart. |
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Threat of new entrants |
· Threat of new entrants is high for Flipkart.· Starting business through online channels is much easier.· Thus, the probability of starting e-retailing business in small scale is high.· Australia is having higher rate of emergence of startups. Hence, the threat of new entrants is high (Kim & Min, 2015).· Amazon can also enter in the Australian market further escalating the threat. |
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Competitive rivalry |
· Intensity of competitive rivalry is high.· Majority of the sites offer huge discounts to attract more customers.· Flipkart is also known for their discounted marketing strategy.· They have also initiated predatory pricing in the past in India (Gaudin & Mantzari, 2016).· Thus, the competitiveness for Flipkart should be maintained in the Australian market also. |
This report concluded that Australian market can provide huge market potentiality for Flipkart with their favorable business environment. In this report, the internal competencies of Flipkart are being identified along with discussing about their weaknesses. It is identified that the demographic target customer segments for Flipkart constitute the largest portion of the total population Australia. On the other hand, it is also identified that Flipkart will face high intensity of substitute products in operating in the Australian market. This report concludes that some they will face competitiveness in some elements of the industry and hence it is important for them to have effective business strategies in order to mitigate these issues.
Based on the factors discussed above on how business is being influenced by external factors, it’s important that when starting a business, these factors should be put into considerations to ensure the success and general expansion of the business.
Justification on the decisions
The above decisions were arrived at based the PESTLE model analysis and other models for start-up business. The other models were Orchestrate demand aggregation and setting up modern franchise business, which is basically suitable for running one retailer shop.
It is recommended that Flipkart should introduce more private level brands to have more profitability in the market. This will enable them to reduce the bargaining power of the suppliers.
Flipkart should offer diverse products in the Australian market similar to their existing strategy. This will help them to cover larger customer segments and increasing the sales volume.
They should also initiate localization strategy for certain products. This will help Flipkart to cater to the preferences of the local customers in the Australian market.
References
Ackermann, T. (2014). Competition law and consumer law: why we need a common consumer model. In Varieties of European Economic Law and Regulation (pp. 439-458). Springer, Cham.
Ashraf, A. R., Thongpapanl, N., & Auh, S. (2014). The application of the technology acceptance model under different cultural contexts: The case of online shopping adoption. Journal of International Marketing, 22(3), 68-93.
D. Newton, J., J. Newton, F., Turk, T., & T. Ewing, M. (2013). Ethical evaluation of audience segmentation in social marketing. European Journal of Marketing, 47(9), 1421-1438.
Dutta, N., & Bhat, A. K. (2014). Flipkart: journey of an Indian e-commerce start-up. Emerald Emerging Markets Case Studies, 4(7), 1-14.
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transparency.org.au. (2018). Corruption Perceptions Index (CPI) 2017 shows Australia falls again. Retrieved from https://transparency.org.au/corruption-perceptions-index-cpi-2017-shows-australia-falls-corruption-perceptions-index-scores/
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