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CHAPTER 1 INTRODUCTION
A virtual organization can be defined as a group of individuals or organizations
with specialized core competencies,who work spontaneously together with the help of ICT
to develop and deliver a product or service in the market to gain competitive edge. Virtual
organizations do not represent a firms attribute but can be considered as a different
organizational form.
Unfortunately, it is quite hard to find a precise and fixed definition of fundamental notions
such as virtual organization or virtual company. The term virtual organization ensued from
the phrase virtual reality, whose purpose is to look like reality by using electronic sounds
and images. The term virtual organization implies the novel and innovative relationships
between organizations and individuals. Technology and globalisation both support this
particular type of organization.
Virtual can be defined as "not physically existing as such but made by software to appear to
do so",in other words unreal but looking real. This definition precisely outlines the leading
principle of this unconventional organization, which holds the form of a real (conventional)
corporation from the outside but does not actually exist physically and implicates an entirely
digital process relying on independents web associates. Thus, virtual organizations are
centred on technology and position physical presence in the background. Virtual
organizations possess limited physical resources as value is added through (mobile)
knowledge rather than (immovable) equipment.
Virtual organizations necessitate associations, federations, relations, agreements and alliance
relationships as they essentially are partnership webs of disseminated organizational entities
or self-governing corporations.
1.2 SEGMENTATION OF VIRTUAL COMPANIES
Today e-commerce is a byword in Indian society and it has become an integral part of our
daily life. There are websites providing any number of goods and services. Then there are
those, which provide a specific product along with its allied services.

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Multi Product E-Commerce Some internet portals provide almost all categories of goods
and services in a single site; hence, they are targeting buyers of every possible
product/service.

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The most popular examples are www.flipkart.com, www.shopclues.com, ebay.in,

www.snapdeals.com,

www.indiaplaza.com,

www.thebestofindia.com,

www.homeshop18.com, shopping.rediff.com, shopping.indiatimes.com and so on.

These Indian e-commerce portals provide goods and services in a variety of categories like:
Apparel and Accessories for men and

Jewellery
Audio/Video entertainment goods
Gift articles
Real estate and services
Business opportunities
Employment
Travel tickets
Matrimony
Petsand more.

women
Health and beauty products
Books and magazines
Computers and peripherals
Vehicles
Software
Consumer electronics
Household appliances

B. Single Product E-Commerce Some Indian portals/websites deal in a specialized field, for
example
Automobiles: Examples are: http://www.indiacar.com/ and http://www.automartindia.com/.
On these sites we can buy and sell four-wheelers and two-wheelers, new as well as used
Vehicles, online. Some of the services they provide are: Car research and reviews Online
evaluation Technical specifications Vehicle Insurance Vehicle Finance Dealer Locator
Regional Transport Office regulations Expert speak Message boardand more.
Stocks and shares and e-commerce
In India today, we can even deal in stocks and shares through e-commerce. Some of the sites
are: http://www.equitymaster.com; http://www.5paisa.com. Some of the services offered to
registered members are: Online buying/dealing of stocks and shares; Market analysis and
research Company information Comparison of companies Research on Equity and
Mutual Funds Tracking Market Trends Hotline for advice on Risk Management 24-Hour
helpdesk.and more.
Real

estate

and

E-commerce:

Portals

like

http://www.indiaproperties.com/,

www.99acres.com facilitate online dealing in real estate. They offer either outright purchase
or lease of a property through their portal. They provide information on new properties as

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well as properties for resale. One can deal directly with developers or builders or through
consultants and brokers.
Allied services: Housing Finance Insurance companies Architects & Interior Designers
NRI services Property Management Consultants Packers & Movers Security &
Maintenance Services Vaastu or Feng Shui Consultantsand more.
Travel & Tourism and E-commerce: India has a rich history with cultural heritage and ecommerce is instrumental, to a large extent, in selling India as a product, encouraging Indians
as well as foreigners to see its multifaceted culture and beauty. A major Government of India
portal, http://www.tourisminindia.com/, has a vast variety of information for a potential
tourist. The tourist destination sites are categorized according to themes like:
Adventure - trekking, mountain

Forts and Palaces

climbing etc

Buddhist attractions

Eco-Themes pertains to jungles,

Hill resorts

flora and fauna

Desert treks

Beaches of India

Pilgrimage sites

Architectural attractions
Gifts and E-commerce: In the bygone days, one had to plan what to gift a loved one, trudge
across to your favourite shop, and browse for hours before purchasing a gift. Today there are
specific Indian websites making the act of gifting quick and easy to suit ones lifestyle. One
such site is http://www.indiangiftsportal.com/.
Hobbies and E-Commerce:
The most popular hobbies from time immemorial are reading, music and films. On the
Indian website http://www.firstandsecond.com/ one can buy more than 300,000 titles of
books, cassettes, VCDs and DVDs. The books cover a wide range of topics like Business,
Art, Cookery, Engineering, Childrens Stories, Health, Medicine, Biographies, Horror, Home
& Garden, etc. As for music and videos, they are available in English as well as in Indian
languages to cater to the varied tastes and the topics range from devotional songs, old-time
favourites and retro and jazz to the latest pop, rap, etc.

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Matrimony and E-commerce: It is said that marriages are made in heaven, but in the world
of E-commerce they are made on marriage portals like http://www.jeevansathi.com/ (meaning
lifepartner.com in Hindi) and http://www.shaadi.com/ (meaning marriage.com in Hindi). One
can search for a suitable match on their websites by region of residence (India or abroad),
religion or caste. Once registered with them, they have email facility and chat rooms too, so
that the couple gets to know more about each other before making the biggest decision of
their lives.
Employment and e-commerce: Two major portals like www.monsterindia.com and
www.naukri.com are instrumental in providing job seekers with suitable employment at the
click of a mouse. They have directories categorized under the headings Employers and Job
Seekers. The service for job seekers is free and for Employers they charge a nominal fee.
Jobs are available online in fields ranging from secretarial to software development, and from
real estate to education. The opportunities offered are unlimited.

1.2.1VIRTUAL ENTITIES BUSINESS MODELS

Although ecommerce tends to be thought of as a homogeneous business model based on
the success of such titans as Amazon.com, there are actually many different ways that an
ecommerce website can make money online.Based on who is selling to whom, what theyre
selling, where they got it, and how theyre completing the transaction(s), an ecommerce
business can build a completely unique model that gives them special leverage within a given
market. The type of business model you choose also has significant operational and cash flow
implications, as well as determining how youll position your sales and marketing. Here are
four of those common models:
1) Business-to-Consumer
Ecommerce is commonly thought of as a business selling something through an online
interface to a consumer -- also known as business-to-consumer (B2C). The most widely
known ecommerce businesses, such as Amazon Direct (which differs from Amazon as a
whole -- which well touch on later), Buy.com, Wal-Mart.com, Target.com, etc., are ones
where a retailer sells directly to a consumer.

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For example, you might buy an HDTV directly from BestBuy.com, or buy lamps and
furniture directly from Target.com, and then use them in your own home.
2) Business-to-Business
Business-to-business (B2B) refers to a business (the ecommerce retailer) selling directly to
another business the goods or services that are used by the recipient to power their business.
It may be as fundamental to their business as selling iron to a construction company, or as
supplemental as selling coffee to be consumed by employees.
Wholesalers, such as parts of AliBabas model or manufacturers of original products, will
typically sell B2B.
3) Consumer-to-Business
In a consumer-to-business (C2B) model, consumers sell products and services to businesses,
instead of the other way around. For example, the consumers could list jobs-to-be-done or
products they want and businesses compete for and complete the transaction through the C2B
website. Or, a business could have a site where consumers can sell them things that they
need.
Examples can include freelancer sites such as vWorker.com or TaskRabbit, where the enduser lists jobs that businesses (either individual businesses or larger businesses) can fulfill.
B2C can also include sites such as Monster.com and CareerBuilder.com where the end-user
(the prospective employee) lists their product (resume and skills) to attract a business.
Reverse auction websites, where an end-user lists a product they want and businesses bid to
see who can make the least money selling it to them, are another example of C2B ecommerce
businesses.
All of those annoying "cash for gold" commercials could also be thought of as C2B, since
consumers are selling a product directly to a business which is, in turn, using the product to
make money.
4) Consumer-to-Consumer

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In a consumer-to-consumer (C2C) model, the ecommerce website serves to facilitate the

transaction between two consumers. Auction sites such as eBay or OLX(specifically when
items are sold by individuals, rather than businesses listing products for auction -- a semantic
distinction which nonetheless fundamentally changes the relationship between the seller and
buyer) are the classic examples of C2C ecommerce sites.
Combining Models
Amazon.com -- arguably the most successful ecommerce business of all time -- uses all four
of these models in a combination where they're independent of one another to varying
degrees. Amazon Direct sells products that they warehouse and ship (B2C), Amazon
Marketplace allows individuals or businesses to sell directly to consumers (C2C, depending
on whos selling), Amazons Mechanical Turk program can connect consumers directly with
freelancers to do work (which, again, can be C2B or B2B or C2C depending on whos buying
and whos selling), and Amazon Supply sells B2B.
1.3 CORPORATE STRATEGIES
Organization frame strategies in all the functional areas.the functional areas include the
following
1.HUMAN RESOURCES
The survival and success of a firm depends upon quality of its people.therefore ,a firm must
frame personnel or employees related policies in order to motivate employees which in turn
would lead to its success.
The various personnel strategies are:

Recruitment and selection strategy

Promotion strategy

Training strategy

Transfer strategy

Performance appraisal strategy

Compensation strategy

2.MARKETING STRATEGIES

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Marketing is the important aspect of an organization.the success of the organization

is largely attributed to the performance of the marketing.therefore there must be
suitable marketing strategies in respect of the following

Product strategy

Promotion strategy

Pricing strategy

Marketing research strategy

Distribution strategy

3.FINANCIAL STRATEGIES

Financial management deals with planning,raising,utilizing and controlling of firms

financial resources to achieve organizational goals

Depreciation strategy

Credit strategy

Dividend strategy

Retained earnings strategy

4.OPERATIONAL STRATEGIES

The production department aims at improving quality,increasing quantity and

reducing cost of production.to achieve production objectives there is a needto frame
production strategies

Production capacity

Quality of product

Size and location of plants

Research and development

Technology

modernisation

1.4 EMERGENCE OF M-COMMERCE IN INDIA

India is the second largest cellular market in the world after China, with a massive
subscriber base of 867.80 million, as of March 2013. Majority of smartphone users
are still on 2G network. Budget 4G smartphones coupled with affordable plans, can
very well drive 4G growth in India. The most obvious mobile commerce trend is
further development. Yearly m-commerce sales are forecasted to increase fourfold
billion in the next few years. Businesses are beginning to realize that m-commerce is
key to enhance their brand, boost sales, and keep up with competitors.Indias retail
market is expected to cross 1.3 trillion USD by 2020 from the current market size of
500 billion USD. Modern retail with a penetration of only 5% is expected to grow
about six times from the current 27 billion USD to 220 billion USD, across all
categories and segments.India is set to witness proliferation of the fourth-generation
wireless data services, or 4G services shortly with slashed data plans. Being the
second largest mobile market in the world, India needs to take its place in the
forefront of providing innovative services and applications to its citizens. Recent
eMarketer study, by the year 2017 more than 25% of all online retail transactions will
happen in the mobile paradigm. Adweek explains that statistic with information that
18-34 year olds are very likely to use their mobile devices as a shopping tool. Their
process is to visit their favorite retail stores not to shop but to view a product and
compare prices, and then to compare prices at various online locations using their
phones. They then buy the product using their mobile device. The future looks very
bright for mobile commerce, although businesses are still experimenting with how to
use the mobile commerce concept to their best advantage

1.5 FLIPKART-THE AMAZON OF INDIA

Online shopping has to do with the Western nations for quite some time and Indians
are very restrained to online shopping. The quality of goods, credibility of shopper,
payment options, delivery time etc are the most important things that stand in the
minds of people wanting to do any online shopping. With users of internet increasing
multiple folds every year, people want to do miracles by sitting before their laptops or
home PC. Though Amazon is one of the earlier players in the industry, it is

FLIPKART which is one of the Indian players in this industry which really brought
about the great change in the mindset of Indian population.

Flipkart is an Indian e-commerce company headquartered in Bangalore,

Karnataka. It was Sachin Bansal and Binny Bansal, alumni of IIT,Delhi who started it
in 2007. In its initial years, Flipkart focused on online sales of books but it later
expanded to electronic goods and a variety of other products.

TYPE

Private

INDUSTRY

Internet

FOUNDED

2007

FOUNDER

Sachin Bansal

Binny Bansal

HEAD QUARTERS

Bangalore, Karnataka, India

AREA SERVED

India

KEY PEOPLE

Sachin Bansal

Binny Bansal

E-commerce

(online shopping)

SERVICES

REVENUE

2,846 crore FY2014,(US$ 1 billion in gross

merchandise value 2013-14

NO. OF EMPLOYEES

33,000 (2015)

SUBSIDIARIES

Myntra

SLOGAN

Ab
Har
Wish
Hogi
Every Wish Gets Fulfilled now!

WEBSITE

www.flipkart.com

Poori

1. New product introduction

In 2007, Flipkart started with selling books. The first book sold at flipkart.com was
-John Woods' Leaving Microsoft to Change the World Today. In 2010, they added to
their catalogue, media (including music, movies and games) and mobile phones and
accessories

The cash-on-delivery model adopted by Flipkart has proven to be of great significance

since the credit card and net banking penetration is very low in India.

Initially word of mouth marketing was used to popularize their company

In 2011, product launches included cameras, computers, pens & office supplies,
computer accessories, home and kitchen appliances, personal care, health care,
gaming consoles, audio players and televisions. Flipkart is currently the only
authorized online reseller of iPods in India.

In October and November 2011, Flipkart acquired the websites Mime360.com and
Chakpak.com Later, in February 2012, the company revealed its new Flyte Digital
Music Store. Flyte, a legal music download service in the vein of iTunes and
Amazon.com, will offer DRM-free MP3 downloads. Flyte offers browse by language
options where users can download international as well as regional songs. Flipkart has
listed the music based on its genre on the new music store and has given a lot of
variety. Users can shop for tracks from various albums starting at 6 on the store. A
purchased song can only be downloaded maximum 4 times on an internet enabled
device. Flyte garners 600K downloads in 5 months

In 2012, product launches includes health & beauty products, Life style products
which includes watches, belts, bags & luggage.

As far as future is concerned, Flipkart will be looking at bigger investments in our

supply chain and technology. In terms of sales they were earlier looking at a figure of
$1bn by 2015. But this can be achieved in the next one to two years. Flipkart will also
be looking at entering new categories. Additionally, Flipkart Self-Delivery, which
currently operates in 27 cities, will be further scaled up.

In a landmark move, NH7.in, a platform to discover independent music and leadingedge culture created by Only Much Louder (OML), has partnered with Flipkart.com
to create an exclusive section dedicated to independent music on the Flipkart digital
music store, Flyte. The store will enable independent artists across the country to sell
their music digitally to their fans.

The NH7.in store on Flipkart will be a game changer. Up until now, independent
artists had limited avenues to retail their music to the ever-growing fan base for indie
music. The NH7.in community represents the largest group of indie music lovers in
the nation. Now, along with promoting independent music, NH7.in creates an avenue
for artists to sell music directly to their fans, which is the crucial next step for
independent arts to grow. In addition to this, four million monthly users of Flipkart
will have access to a wide selection of independent music from India and around the
world at their fingertips.

In July 2012 Flipkart announced the launch of its in-house brand Digiflip. Digiflip is a
brand of digital accessories with products like laptop bags, laptop sleeves and camera
bags among others

2. Acquisitions

The following are the acquisitions by Flipkart

YE

ACQUISITI
ON

DISCRIPTION

20

We Read

We Read, a social book discovery tool.

The stated goal was to give Flipkart a social

recommendation platform for buyers to make
informed decisions based on recommendations from
people within their social network.

20

Mime360

Mime360,
company.

digital

content

platform

20

Chakpak.c
om

Chapak.com is a Bollywood news site that offers

updates, news, photos and videos. Flipkart acquired
the rights to Chakpak's digital catalogue which
includes 40,000 filmographies, 10,000 movies and
close to 50,000 ratings. Flipkart has categorically said
that it will not be involved with the original site and
will not use the brand name.

20

Letsbuy.co
m

Letsbuy.com is India's second largest e-retailer in

electronics. Flipkart has bought the company for an
estimated US$ 25 million.Letsbuy.com had been
closed down and all the traffic of Letsbuy is diverted
to Flipkart.

20

Myntra.co
m

Acquired Myntra.com in an estimated 20 billion

(2,000 crore, about US$319 million) deal

20

AdiQuity

Flipkart acquires a Bangalore-based global mobile

network AdiQuity for an undisclosed amount

20

Appiterate

Flipkart acquires a mobile marketing start-up

Appiterate as to strengthen its mobile platform

3. Acclaims and accomplishments

Flipkart is among the top 30 Indian Web sites and has been credited with being India's
largest online bookseller with over 11 million titles on offer. Flipkart broke even in
March 2010 and claims to have had at least 100% growth every quarter since its
founding. As of today, Flipkart employs over 4500 people. Flipkart is the third largest
online shopping store after EBay and Amazon.

From a start-up with an investment of just four lakhs rupees, Flipkart has grown into a
$100 million-revenue online retail giant in just five years.

Flipkart's reported sales were 40 million in FY 2008-2009 200 million in FY 20092010 and 750 million for FY 2010-2011. In FY 2011-2012, Flipkart is set to cross the
5 billion (US$100 million) mark as Internet usage in the country increases and people
get accustomed to making purchases online. At average, Flipkart sells nearly 20
products per minute and is aiming at generating a revenue of 50 billion (US$1 billion)
by 2014.

Flipkart.com, the country's first billion-dollar-valued Internet Company, is surely in a

state of perpetual excitement. With 2500 people, daily sales touches a crore. Flipkart
has become synonymous with online book retail and large-scale e-commerce in India.
And the key to the company's success lies in its payment-on-delivery model, which
helped overcome the average Indian consumer's misgivings and built trust.

4. Product Strategy

Flipkart is set out to create something for the Indian market - a service that was
specifically built keeping the Indian consumer in mind. For them, the biggest
inspiration continues to be the constant learning process that has been a part of their
journey. The other has been the ability to realize our dream of doing something for the
Indian consumer.

As far as entrepreneurship is concerned, Flipkart believes that the core focus for every
start-up, regardless of the industry, should be the same - and that is customer focus.
By putting the needs of their customer first and listening to what they have to say, is
the only route to building a large, loyal customer base - the blueprint to any business
success story.

Consistent customer service is the hallmark of Flipkart. Discounts cannot replace the
customer's satisfaction of being serviced promptly and efficiently. Similarly, the trustbuilding exercise is accorded a lot of importance. Flipkart connects with customers in

real-time, through Facebook and Twitter. Honesty is the best policy for this ecommerce trailblazer.

Flipkart is rapidly expanding its network of warehouses, distribution centers,

procurement operations and 24/7 customer support teams. The company has its own
delivery network in 37 cities and is set to expand this in the current financial year.
With a team of around 4,800 members, the company operates from offices and
warehouses in seven Indian cities.

5. Operational strategy

Flipkart began operations on the consignment model - goods were procured from
suppliers on demand, based on the orders received through the website. However,
eventually, the books-to-electronics e-shop adopted the warehouse model. The
company has its own warehouses, and maintains its own inventory. Sales projection
determines the inventory, and the available inventory accounts for the sales made; it's
a self-feeding cycle of sorts. Nearly 60 to 70 per cent of deliveries take place through
their own network as this model provides for better control over the entire logistics
management piece.

On the operational front, issues faced by the company pertain to delay in deliveries, or
faulty products. As a customer-centric, none of these issues can remain unresolved for
long. They faced significant challenges in reverse logistics. It's a big task to track
unsuccessful orders, which are quite costly to manage. Hence, Flipkart stresses on
customer service - it aligns with the firm's philosophy of making better our service
promise'. Their bigger objective is to redefine the way India shops.

Flipkart will continue to expand its categories in order to meet the growing consumer
interest in the e-commerce market. They have recently added computer peripherals,
kitchen appliances, televisions and home theatre systems and selected stationery items
to their product range. They will continue to add more products / selection to their
existing categories as well.

6. Branding

Flipkart went for a major brand makeover, making it look more 'up market'. There
have been large newspaper ads, TVCs and a lot of web ads. But unlike other
ecommerce companies the inorganic marketing kicked in only when the product was
strong. Flipkart already had a proven model execution with books and extending to
other verticals did not need infrastructural changes. Flipkart's real achievement has
been in solving the pain points in Indian ecommerce that most well funded players are
still complaining about.

"No Kidding, No Worries"

No Kidding, No Worries, the recent advertising and branding campaign of Flipkart is

a unique example of "Trap Them Young". An in-depth analysis of recent
advertisement campaign of Flipkart strongly conveys Indian youth's sentiments and
their desire. The story board of adverts, features kids in adult situations, like a beauty
parlor, a cafe, and an office. The Hinglish language & the happening places is the
heart of No Kidding, No Worries advertisement series. The creative director succeeds
to keep KOOLNESS of Brand Flipkart.

flipkart attacks the online fears

Flipkart carefully chooses their way forward. For now, Flipkart seems to be playing
their cards right. Flipkart.com has aired three TVCs. Each of the ads attacks a distinct
fear in the consumer's mind towards online shopping, and how Flipkart solves that
problem.

Fear of wrong product - 30 day replacement guarantee

Fear of giving credit card details online - Cash on Delivery feature

Fear of not getting the original product - Original products with original warrantee

The creatives using kids to break through the clutter, and the consumer worry and the
solution offered by Flipkart is clearly communicated. The brand 'Flipkart.com' at the
end is also very clear to be missed, which gives the branded breakthrough.

30 day Replacement guarantee

Flipkart.com offers you REPLACEMENT WITHIN 30 DAYS FROM THE DATE OF

DELIVERY ON THE product/s ordered on Flipkart.com i.e. if at the time of delivery
and/or within 30 days from the date of delivery of the product/s, if any defect is
found, then the buyer of the product/s can ask for replacement of the product/s subject
to some terms and conditions:

Order cancellation

Cancellation of orders of products is permitted before the product gets shipped and
the entire payment amount is refundable. But products such e-Gift Vouchers, Wallet
Top-Ups, etc are non-refundable.

Free shipping

Flipkart provides free delivery on all items if your total order amount is Rs. 300/- or
more. Otherwise Rs. 30/- is charged as delivery charges.

7. Flipkart's strategy in solving problems in E-commerce

1. Discoverability:

It is the case with any venture on the web, "How does the customer find us?" Answer:
Organically! Flipkart has been the "baap" of SEO. This has been the most important
contributor to their success. Only when you see people coming to you, you get
encouraged to deliver more and keep adding. There is no fun (motivation) in adding
features to a product that no one is using.

SEO did not come the straightway. There were particularly 2 things that are worth
mentioning.

a. Yahoo News:

Until last year Flipkart had a feed of Yahoo News on its product pages. From what
SEO means, this is to increase the keyword density and introduce 'original' content on
the page, as the product description across all books sites is same.

b. We Do Not Sell Used Books:

We DO NOT sell old books or used books. All the books listed at Flipkart.com are
new books.

The books listed at Flipkart.com are NOT available for free download in ebook or
PDF format.

The magic of this text is that if searched for "<book name> free eBook"or "<book
name> pdf download" you would always get Flipkart among the top results. These are
very popular search queries and Flipkart had nothing to do with it but still they cashed
in. This was also the time when Flipkart had Ad-sense embedded. People would come
to the site, see nothing like a "PDF download" button, and then see an ad for PDF
download and click. This meant more revenue for Flipkart. Given that the margin on
books are very small after the discount, Flipkart was probably earning more by saying
what they did not do than by doing what they actually were suppose to do.

2. Payments:

No credit card/net banking, fear to transact online, repeat transaction failures, no

access to web - these are the common problems with online payments. What Flipkart
is doing to overcome these?

Flipkart had at least 4 different Payment Gateways integrated. They introduced Cashon-Delivery. Then they are also doing order on phone. Payment via DD/Cheque is
also accepted.

2 basic things that they are currently doing that take little technical effort but quite
some product management 'will':

a. Auto redirection to banking site: Unlike most other ecommerce sites, Flipkart never
lands you on CCavenue page, you are auto redirected to the banks page where the info
is required to be filled. Flipkart by-passes 1 unnecessary page by passing the required
parameters directly to CCavenue and not through a user interface.

b. Banks Status: Flipkart maintains its own real time status if the bank's net banking is
working or not. So there are no surprises after you have chosen the bank and then go
to the net banking page.

3. Inventory:

In the world of eCommerce, the players keep a standard list of products and then go
out procuring it only when there is an order placed. There is no inventory on
their end and there is no live status of inventory from their supplier. Remember The
Alchemist, "Never Promise something that you don't have".

After placing an order, they would keep looking for the product at multiple places.
After a week you might get a call saying that either the product is not available and
we will do a 'favor' by refunding your money or if the product is there, it is not the
color/size that you asked for.

Flipkart was no different in 2009, many customers used to get similar calls after days
of ordering. But for the last 1 year at least Flipkart maintains its own inventory (or at
least it seems so). They are selling what they have. From pure hearsay, Flipkart is
taking up a big warehouse in Bangalore and is in talks for one in NCR as well. One of
the few companies that is using the funding to build a business and not spend it like a
FMCG company on ads

4. Delivery:

Flipkart is exploiting the delivery problem as a cashable need gap and building its
own delivery backend. Flipkart is seen delivering through their own delivery boys in
Bangalore and at times within 12hrs from order.

Flipkart has started putting fliers in newspapers in Bangalore with a product listing,
call-to-order phone number and a promise of delivering 'tomorrow'. This means more
discoverability, no payment problem and no delivery delay.

Flipkart is looking to build its own courier company. The recent $20Mn funding from
Tiger Global was only part of a larger sum they are known to be raising. Flipkart is
looking to raise $100Mn at a valuation of $200Mn.

8. Marketing

It is very difficult to sell a product which has been offered intentionally high to a
middle customer in India. But then the customer is getting that offer at the comfort of

their home. Any customer will like this and will pay the amount tagged by retailer.
But how can this idea are promoted. Flipkart used Word of Mouth as their best
marketing tool to sell their product. A satisfied customer tells others also about a good
experience, and this how the business of Flipkart depends. Flipkart has been using
different Social Networking Engines to promote their product. Promotions
on Facebook, twitter and other social sites helps in gaining some attention, but to
some extent, the rest has been done by Services offered by Customer.

Customer satisfaction has been their best marketing medium. Flipkart very wisely
used SEO (Search Engine Optimization) and Google Ad-words as the marketing tools
to have a far reach in the online world. Flipkart.com official Face book page has close
to 9 lac 'likes'. Flipkart recently launched a series of 3 ads with the tag line - "No
Kidding No worries". Kids were used to create the adverts to send out the message - if
a kid can do it, you can also do it.

The message is very clear to make people more comfortable with Flipkart, to generate
a great customer relationship and loyalty on the basis of great product prices and
excellent customer service. All in all to create a great customer experience.

9. Pricing strategies

Without going into the theoretical and the management theories, pricing can be set on
the following points:

1. Operating Margins - Essentially determining what the company earns to sustain

business and turn a profit

2. Strategic pricing - Basically overall pricing strategy where some products are given
at a higher discount in order to capture market share or consumer mindshare.

So individual product pricing can be higher or lower while the overall picture is kept
in mind so that the company as a whole can sustain itself on an overall profits or deep
enough pockets to work on losses for sometimes.

Price is optimized best when the overall cost to the company per product is optimized.
So that means here the contributing factors have to be looked at and the costing there
has to be optimized.

So looking at the major cost factors that affect the E-Commerce that are taken care of
Flipkart:

1. Supply Chain (procurement and shipping):

Flip kart's core competency lies in their Supply chain and logistics which has been
perfectly monitored and managed by professionals. This involves a deep
understanding of where the suppliers are and where the end consumers are so that
when a customer orders a product, it can reach him by the shortest route in the
shortest time and minimum manpower time being spent.

This also means that customer demand is anticipated and pre-emptive steps are taken
so that products are ready to be shipped from the point closest to the consumer before
he even places the order.

This helps in reducing the overall cost of moving the product to consumer's place. The
overall cost of Flipkart has been reduced to great extent, all thanks to Blue Dart, the
logistics partner of Flipkart. It is so because the transportation cost has been
reduced and therefore Flipkart is able to earn a reasonable margin on the sale of
product, belongs to the actual producer

2. Manpower and time spent on each order:

We must understand that all operations have to be made sustainable and more
importantly scalable for ultimate long term growth. So all process from what route a
person takes to pick up material to how much time it takes to pack a product have to
be looked at and it is when a company works toward optimizing all these processes
that a company really starts to take the lead.

10. Competition

Competition is increasing day by day and by the end of 2015, there will be huge
number of players in E-commerce in India. With the rise in Internet users, the

numbers of e-commerce companies are also increasing. So Flipkart will definitely

face tough fights in future and they should be ready for it. Snapdeal is currently the
biggest competitor of Flipkart. Other close competitor includes Groupon, best deals
etc.
11. Tackling competition

Great website:

Flipkart's website is great, easy to use, easy to browse through the products, add
products to wishlist or to a cart, get product reviews and opinions, pre-order products,
make payments using different methods, in short hassle- free and convenient.

Great Delivery system

When user places an order, the postal address has been tracked. And the order goes to
nearest warehouse. And it is being packed, picked up and delivered by local courier
company. The advantage of cash on delivery is no fraudulent activities or anything.
When the item is delivered makes sure the item is there and then pays. And also user
can track the routine of item through email. And the company informs about the status
of item.

Great books and hot deals

Flipkart offers excellent collection of books, DVD's, movies, electronics items, home
appliances, and life style and health care products. Flipkart promo coupons and
discount coupons are also available. One another feature of Flipkart is best deals and
offers. When you place an order greater than 300 INR, you'll get free shipping.

Excellent communication system

Flipkart is renowned by their relationship with the customer. If you are facing any
difficulties getting the product you can contact them via telephone (like everyone
24/7), email or through website.

India is a hard place for delivering any item but Flipkart is managing to deliver the
item in 2-3 business days. If the order you placed is not available don't worry. The

enquiry goes to nearest supplier and the item becomes available It will delivered
within 24 hour. Flipkart is aiming to bring down the delivery time of regular orders to
24 hour. An excellent marketing strategy by Flipkart marketing team to increase the
sales

Great customer retention rate

Flipkart's reason of success is that it has a great customer retention rate, it has around
15 lac individual customers and more than 70% customers are repeat customers i.e.
they shop various times each year. The company targets to have a customer base of 1
crore by 2015.

Credible and Easy Payment system:

Flipkart offers many modes of payment such as

Credit/debit card

Net banking

Cash on delivery.

0% EMI

Online Wallet

Also Flipkart offers 0% EMI on transactions made on credit card payment where the
whole amount can be paid in 3 monthly installments without any extra charge. For
installment greater than 3 months, a minimal charge is levied.

Flipkart Adds Online Wallet to Ease Payment Woes

Flipkart has added a new 'Wallet'feature to enable customers store money in their
Flipkart account and redeem it on future purchases. Flipkart Wallet works on a
prepaid credit system: you can top up your wallet with any desirable amount up to Rs
10,000 by using any one of its regular payment modes like credit card, debit card, and
net-banking. This amount will then be reflected as prepaid credit on your account and

can be used as a payment mode for all forthcoming purchases on the portal.
Expectedly, this amount will be deducted from the balance in your account's wallet.
Flipkart allows you to make a partial payment using your Wallet and pay the
remaining amount using other payment modes like credit card, debit card, and netbanking. Flipkart does point out that cash-on-delivery payment mode cannot be
combined with a Wallet payment. This is Flipkart's way of bypassing payment
gateway problems and also facilitates frequent shoppers
12. Pros and Cons of Cash on Delivery model

E-commerce works on the principle of negative working capital. In other words the
vendor does not use his capital in procuring the goods rather uses your payments
made in advance to procure the goods and deliver it. Let me take an example, just
imagine you bought an iPad on line, and you paid for it using your credit card. Now
the money from the credit card is debited immediately while the delivery of the iPad
takes about a week or 15 days. Now most firms can procure faster and deliver but
they take that extra few days as they retain the payment and can put it to other use or
simply generate interest for those few days. This model was pioneered by Dell when
they sold their laptops extensively through Dell Direct and it had worked very well for
them earlier.

Now this model is under threat as consumers in India work on the cash on delivery
model. Now in the global scenario Cash on delivery accounts for almost 15% of
transactions according to a Nielson report. But in India it is almost 80%.

Apart from locking up working capital, cash on delivery also adds to the complexity
of the supply chain. Plus there is an added threat as collection is done by the delivery
agents and often there is an element of hazard while using external collection agents.

Despite these challenges "Cash on Delivery" has led to the boom in the ecommerce in India and does not look like the model is going away soon. So what
can e-retailers do to sustain themselves in this environment?

1. Have cash on delivery (COD) only for select categories. Often using COD for all
categories may not make logistical sense. Some of the categories like books etc may

not need COD model. While electronics is something that COD model would work
better.

2. Keep a minimum purchase limit for availing COD. Now I have had many
experiences on setting limits and not too many people in India have been very happy
with it. But in the US and Western Europe there have often been limits on setting OD
facilities.

3. Start a small charge for COD, maybe a tiny amount to begin with but sooner or
later the charge could potentially off set the working capital deficit.

13. Future strategy for Flipkart

Overnight successes usually last just that one night. Strategy has got to lay out a more
forward-looking roadmap for a company that spans multiple years. To make things
simple, lay the future out into three phases - Build, Pull Away and Transform. These
do not need to - and indeed should not be - distinct phases but rather overlap each
other to benefit from positive momentum that each phase builds and hands over to the
next.

Build: A solid foundation is half the good work

In its first phase of transformation Flipkart must build deeper engagement with its
customers. It needs to both build a deeper relationship with its buyers and provide
those touch points that are more omnipresent than the web-based Internet.

Loyalty: It is strange that for a service that is not vividly distinguished from me-too,
Flipkart chose not be build loyalty programs. Loyalty need not have just the old
school implementation of co-branded shopping appliances like credit cards. Loyalty
programs need to be deeper, where someone who has greater wallet spends at Flipkart
feels rewarded both monetarily and - more importantly - otherwise. Flipkart Coupons
is another loyalty device conspicuous by its absence. As gifting increasingly strives to
put last-mile choices back in the hand of the recipient, a loyalty program based on
redeemable coupons will deepen association with the customer. Corporations spend a
lot of money in fine tuning their Rewards & Recognition programs to make them
suitable for the young demography - a space that Flipkart can immediately capture

(and since corporations buy coupons in bulk, a part of working capital management
can also be taken off in the process).

Touch points: Ecommerce is shifting from the browser to applications that sit on
devices. Flipkart can regain its first mover advantage by introducing iOS and Android
apps that make shopping much easier than on native browsers.

Ring fencing customers and pampering those who return for more is crucial in the
build-out phase. For years, Flipkart has focused on internal effectiveness and not so
much on the customer and it is about time to change that. There is also an important
mindset change that needs to happen at this phase - increasing value for not only
buyers but also sellers who would benefit the most in having access to the Flipkart
platform. The outcome of such thinking will play an important part in the late-second
and third stage of this transformation

Pull Away: Inorganic growth and building the ecosystem

Exploit adjacencies: Having built a solid foundation where the customer has been
placed at the focus of future planning (in addition to internal effectiveness, which
Flipkart has always excelled in), opportunities in adjacencies need to exploited.
Category expansion, which Flipkart has been at, is one way to provide buyers with all
their needs on a single platform and leverage scale. There are adjacent categories
however that have already matured into full-fledged businesses with similar - not
exact - contours. Take travel for example. The basic fabric of the business is similar
- acquire inventories from suppliers, build a technology platform for delivery, squeeze
out a bit of margin and deliver the product by careful customer segmentation minus
the added headache of physical deliveries. Standing where we are, categories such as
these are too difficult to build grounds up for Flipkart. Hence an acquisition is the best
route to increase momentum on the ecommerce flywheel Flipkart has already built
and set in motion.

Build the ecosystem: When a business model has successful equivalents in developed
markets, the role of a local strategist becomes easy - import ideas. How successful
will a Flipkart handheld device or Flipkart Web Services become? What is interesting
however is building a supply ecosystem where original creators are encouraged to
participate on the platform without losing value to intermediaries. Authors are a very

obvious target audience in this category, which itself has a very wide range
encompassing text books, animated books, restored (and retold) classics, fiction, nonfiction, graphic novels - the list can go on. Besides the content, form has diversified
significantly, thanks to bloggers and journalists. Developing relationships with
producers directly (building the relationship is not entirely easy) and co-creating
products increases the value of the Flipkart platform for those who were perhaps disintermediated or losing too much to make authoring a successful profession ('authors'
has been used metaphorically somewhat. This strategy holds good for any original
producer of content/merchandise. For example, this can work as well for art and
handicrafts as it will for books).

Inorganic expansion and building ecosystems should herald a different thinking

process for Flipkart - a line of thinking that transforms the business from being a
service providing ecommerce to becoming an electronic marketplace and platform.
Platform companies (Eric Schmidt named Facebook, Amazon, Apple and Google as
the 'Gang of Four' Platform Companies) are ones that come with a core and then
combine complements from a variety of other providers to add disproportionate value
to the service. Platform companies are difficult to build but once done (and there are
important technology and business considerations) are in the long-term more
successful than pure-play product or service players.

This phase of pulling away is the most important phase in Flipkart's strategy, in both
design and execution.

Transformation: Onwards to Flipkart 2.0

The vision for a transformed Flipkart is where Flipkart is a platform inviting multiple
entities to participate not only as part of the supply chain, catalogues and consumption
but most importantly in innovation. Think of it this way: where in a fast-forwarded
world Flipkart is a platform for providing online education content to a vast majority
of institutions in India. Creators of content will always strive to innovate and Flipkart
being a platform will reap the benefits of that innovation without having to explicitly
participate in it. On the same platform innovators will bring newer ways to present the
content and perhaps another participant will make learning more social.

Leveraging scale becomes easier for a platform company. Continuing with the earlier
example,

investments

in

building

incremental

ecosystems

can

present

disproportionate rewards to business outcomes for Flipkart. The same (or very closely
related) content for education could be as applicable in Southern Africa as is it is
India, opening up immediately vast business potential. The true unlocking of scale can
easily happen in a world where Flipkart is a platform rather than an ecommerce
service.

A large-scale program that takes a product or service company and transforms it into a
platform play is not simple. For some it could be a life's dream. But it certainly is a
dream worth living. For a company like Flipkart that has already transformed the
ecommerce market in India, this could be the second calling for a chance of inclusion
in history's wall of fame.

Conclusion

Flipkart is a story that comes from smart work and an 'it is possible' attitude. There is
a need to for a couple of more stories like these and there would be no cribbing about
Indian E-Commerce not working.

Their aim is to make Flipkart synonymous with the shopping experience in India.

E-commerce in India has a huge potential going forward and this is just the start. They
have a lot of work ahead of us if they are to fully realize this potential - they feel it
will be some time before they actually look overseas

The USP of Flipkart is to provide the consumers with the best online shopping
experience. The company aims to provide its customers with good value and wants to
be regarded as one of the most friendly service providers in the domain.

It is also looking to become the biggest e-commerce organization of India while

retaining its focus on serving the customers to the best of their abilities. It will also
look to innovate in this domain and try to expand its offerings so that customers have
more to choose from.

These are the reasons why many love Flipkart. Some people calling it as Amazon of
India which fits to Flipkart.

1.6 Objective of study

To study the concept of virtual organizations.
To determine the strategies of virtual companies.
To make suggestions on the strategies undertaken by virtual organizations in
India.

CHAPTER 2 REVIEW OF LITERATURE

2.1 Review of literature- Meaning

Review of Literature helps to identify the concepts relating to the research topic &
potential relationships between them. It also helps to identify appropriate
methodology, research design & techniques used for analysis of data. In addition to
this, it helps to identify data sources used for research. It also finds out some gap in

earlier literature and provides new insight for conducting new enquiry. In this chapter,
an attempt has been made to review the literature relating to the growth of retail cafe
business in India and how our sample subject virtual organization has fared since
inception.

2.2 Literature Reviewed

I have reviewed the academic literature to gain insight into E-Commerce in India.

So, various articles, journals, books, websites etc. have been used to study the evolution,
conceptual framework, definitions, key players, present trends (relating to internet
penetration, growth prospects, modes of payments preferred etc.), future prospects and
barriers of E-commerce. All the data included is secondary base and proper references have
been given wherever necessary.

E-Commerce/e-business research articles done in Indian context Raven et al.

compared India and Chinas approaches in adoption of e-business. Based on the
literature survey and secondary data, the study analysed various factors influencing
the growth of e-businesses in the two countries. The factors examined include
government policy and focus, existing technology infrastructure regulatory
environment, experience and understanding of business operations, and culture,
among others. The study concludes that China appears to be ahead of India in the
infrastructure, but India is ahead in e-readiness. Further, it states that both countries
are poised for rapidly increasing e-business, however, problems of poverty and
inequality between urban and rural connectivity must be resolved to really take
advantage of e-business in both the countries.

Malhotra and Singh studied the determinants of Internet banking adoption by banks
in India. Panel data of 88 banks in India covering the financial years 1997 1998 to
20042005 was collected through CMIE (Centre for Monitoring Indian Economy)
database. Logistic regression analysis was used, the dependent variable is categorical
with a value of 1 if a bank adopted Internet banking during the study period and 0
otherwise. Independent variables included in the study are firm size, firm age, bank
deposits ratio, average wages, expenses (fixed assets & premises), ROA (ratio of
average net profits to average assets), market share, average number of branches,
percentage of banks adopted Internet banking. The results of the study prove that
Bank type (Private), firm size, bank deposits ratio, firm age, market share, average
number of branches, percentage of banks adopted Internet banking and expenses, are

found to be significant in adoption decision. Wage and ROA are found to be

insignificant. This study contributes to the empirical literature on diffusion of
financial innovations, particularly Internet banking in Indian context. Most of the
study on adoption of technology was related to developed markets like US and
Europe, this study is an important contribution to evolving literature as it dealt the
problem of technology adoption in developing country context.

Study by Tarafdar and Vaidya examined the factors that determine the
organizational inclination to adopt E-Commerce (EC). The study proposes a
framework based on the qualitative data on four financial firms in India collected
through multiple case study design. Face to face interview was used to collect primary
data and existing database, company documents, press reports and websites are used
to collect secondary data. The framework describes two broad factorsleadership
characteristics and organizational characteristicsto explain the influence of
organizational factors on the propensity to employ EC technologies. The study found
that both leadership and organizational characteristic influence EC adoption. It
establishes that leadership characteristics influence adoption of EC technologies in
centralized organization organizational characteristics influence EC adoption in decentralized organization. The study also found that characteristics of Information
Systems professional and organization structure influence EC adoption.

Another study by Tarafdar and Vaidya, analyses organizational and strategic

imperatives that influence Information System (IS) assimilation in Indian
organizations. IS assimilation here refers to the extent to which a system or
technology becomes diffused in organizational processes. The study is based on
multiple case study method. Data on nine firms which have deployed IS was collected
through face to face structured interview involving middle managers, senior managers
of IS and other departments. The study examines the nature of the system present
data processing/transaction oriented, operational, strategicand how these systems
affected key operational processes. Strategic imperatives are examined by analysing
the environmental factorspresence or absence of government regulation, pressure
from customers, suppliers and competitors, and strategic stancewhether product and
process changes, and the consequent IS deployment were proactive or reactive
Organizational imperatives were investigated by qualitatively assessing six factors
top management support; IS department knowledge of business, technology and
involvement in IS deployment, IT literacy of managers, management style; presence

of IT champions and availability of IT resources. Data was analyzed across-case and

within-case. The study identifies three categories of organizationsinnovative IS
users, enlightened IS users and reluctant IS userswith respect to IS assimilation, and
describes strategic and organizational factors characteristics of each group. The study
also traces the evolution of the IS application portfolio in each of the studied firms
and analyses accompanying changes in strategic and organization factors. In short, the
paper presents an integrated and first level analysis of strategic and organizational
imperatives that have influenced the assimilation and evolution of IS in Indian
organizations.

Viswanathan and Pick examined the issue of e-commerce in India and Mexico from
the framework of developing countries as suggested by Tallon and Kraemer. The
framework included critical factors that might impact the diffusion of ecommerce.
The factors are government policy, legal framework, technology infrastructure,
relationship with developed economies and extent of e-commerce usage by
individual, corporate and government. The studys primary focus is on India. Mexico
is analyzed more briefly, and compared with India based on common international
datasets. The analysis and the data presented in this paper represent a synthesis of data
from secondary research and data from interviews conducted with senior executives
in the IT industry in India and Mexico. The study suggests that substantial efforts
have to be made to invest in telecommunications infrastructure, and to create a culture
of electronic payments and e-commerce usage that will support economic growth.

Dasgupta and Sengupta paper on e-commerce in Indian insurance industry discusses

the features of e-insurance in comparison with the traditional offline insurance
service. The authors put forth that e-insurance offers benefits such as reduction in
search cost and hidden cost, price comparison for customers, and benefits such as
opportunity to have niche market, first mover advantage and product bundling for
insurance companies going online. Further, it discusses that status of e-insurance in
India is still formative stage, but stands to gain particularly from the rural markets
since the availability of insurance agent is very less compared to urban markets. The
study is conceptual in nature and offers insights based on market reports and data
from secondary sources.

Vishwasrao and Bosshardt used a theoretical framework developed by Katz and

Shapiro (1987) to examine the ongoing technology adoption behavior of
foreignowned and domestic firms. Firm level data on 1400 medium to large Indian

firms from 1989 to 1993 was used to test the model. Probit and Poisson estimation
was used to analyze the data and model.

Apart from the studies mentioned above, there are quite handful of research
reports and survey based studies done by Internet and Mobile Association of India,
IMRB International, Data monitor, and Internet and Online Association which
presents with quantitative figures, the status of e-commerce existing in the country.

2.3 CONCLUSION
Several important phenomena are associated with e-commerce. E-Commerce has

unleashed yet another revolution, which is changing the way businesses buy and sell products
and services. New methodologies have evolved. The role of geographic distances in forming
business relationships is reduced. E-Commerce is the future of shopping. With the
deployment of 3G and 4G wireless communication technologies, the internet economy will
continue to grow robustly. In the next 3 to 5 years, India will have 300 to 400 million internet
users which will equal, if not surpass, many of the developed countries. Internet economy
will then become more meaningful in India. With the rapid expansion of internet, Ecommerce is set to play a very important role in the 21st century, the new opportunities that
will be thrown open, will be accessible to both large corporations and small companies. The
role of government is to provide a legal framework for E-Commerce so that while domestic
and international trade are allowed to expand their horizons, basic rights such as privacy,
intellectual property, prevention of fraud, consumer protection etc. are all taken care of.

 CH.3 RESEARCH METHODOLOGY

3.1 Universe

The universe under this project report is all the virtual entities founded by Indians or
registered under Indian corporate law

3.1.1 JUSTIFICATION OF THE UNIVERSE

The universe for the purpose of this research is focussed on companies / organizations
which have virtual existence and carrying on business in India.A major research has
been conducted on the strategies adopted by flipkart.its financial strategies are broadly
studied as well as stated in this report.challenges faced by the company is stated

3.2 Sample

Due to time and cost constraints, the research would be limited to one company /
organization. Here, we have considered Flipkart, for the purpose of our study.

3.2.1Justification of sample

The sample selected for the purpose of the research is justified on the following
grounds:

1.

The sample size is large and adequate.

2.

The sample size fairly represents the population under study.

3.

Considering the sample size the various statistical techniques such as mean, median,
mode, etc can be applied.

4.

The sample considers all the outlets, in various formats, existing across India.

3.3Method of collection

Data collection is the process of gathering and measuring information.data is broadly

classified as primary data and secondary data.meaning

3.3.1Meaning and significance of primary data Primary data consists of a

collection of original / primary data directly collected by the researcher himself /
herself, from the source. It can be accomplished through various methods, including
questionnaires and telephone interviews in market research, or experiments and direct
observations. Primary research / data are used in academic research, market research
and competitive intelligence. There are advantages and disadvantages to primary data.

ADVANTAGES OF PRIMARY DATA

Researcher can focus on both qualitative and quantitative issues.

Addresses specific research issues as the researcher controls the search design to fit
their needs
Greater control over the relevance, focus, quality and collection method of data

DISADVANTAGES OF PRIMARY DATA

Primary data may be very expensive and time-consuming in preparing and carrying

out the research.

Low response rate has to be expected.

3.3.2. MEANING AND SIGNIFICANCE OF SECONDARY DATA

Secondary data involves the summary, collation and/or synthesis of existing research
rather than primary research. Sometimes secondary research is required in the
preliminary stages of research to determine what is known already and what new data
are required, or to inform research design. At other times, it may be the only research
technique used.

Secondary sources could include previous research reports, newspaper, magazine and
journal content, and government and NGO statistics.

ADVANTAGES OF SECONDARY DATA

It is economical and time saving. It saves efforts and expenses.

It helps to make primary data collection more specific since secondary data helps
identify the gaps and deficiencies and what additional information needs to be collected.
Improves the understanding of the problem and provides a basis for comparison for

the data that is collected by the researcher.

DISADVANTAGES OF SECONDARY DATA

Secondary data is something that seldom fits in the framework of the marketing

research factors.

Accuracy of secondary data is not known.

Data may be outdated.

3.3.3. COLLECTION OF DATA

Due to the time and resource constraint, secondary data has been considered for the
purpose of this study. The data was sourced from various textbooks, as well articles
hosted online as well as those found in print in various business newspapers, business
magazines and their websites. A detailed list of citations can be found in the
bibliography section towards the end of this report.

CH.4 ANALYSIS AND INTERPRETATION

4.1 CHALLENGES FACED BY VIRTUAL ORGANISATIONS IN INDIA

While the growth in this sector excites entrepreneurs and financial investors alike,
some serious challenges are beginning to weigh down on the sector. eCommerce
players in India need to address eight key aspects of their business, both internal and
external.

External challenges External forces impact how eCommerce companies plan their
growth strategy and provide seamless customer experience onsite and posttransaction.

Product and market strategy: eCommerce companies have to address issues

pertaining to rapidly evolving customer segments and product portfolios; access
information on market intelligence on growth, size and share; manage multiple
customer engagement platforms; focus on expansion into new geographies, brands
and products; and simultaneously tackle a hypercompetitive pricing environment.

Customer and digital experience: Companies have to provide a rich, fresh and
simple customer experience, not geared towards discovery; manage inconsistent brand
experience across platforms; manage proliferation of technologies; and handle timeto-market pressure for new applications. In the recent past, social media has become
more influential than paid marketing.

Payments and transactions: eCommerce companies may face issues around

security and privacy breach and controlling fictitious transactions. Further, RBI
restrictions for prepaid instruments or eWallets act as impediments. From a

transactions perspective, cross-border tax and regulatory issues, and backend service
tax and withholding tax can have serious implications.

Fulfilment: Companies will need to check if the physical infrastructure gets affected
by the internet speed. Also, the lack of an integrated end-to-end logistics platform and
innovation-focused fulfilment option could cause delivery issues. Challenges around
reverse logistics management and third party logistics interactions could also act as
barriers to growth.

Internal challenges Internal forces impact how eCommerce companies can organise
to drive and sustain growth.

Organisation scaling: eCommerce companies will have to make sure organisation

design keeps pace with the rapidly evolving business strategy, along with fluid
governance, strong leadership and management development. From a growth
perspective, identifying acquisition opportunities, fund raising and IPO readiness
becomes necessary. From a technology perspective, it is important to transform IT as
an innovation hub and address the lack of synergy between business, technology and
operations functions of the enterprise.

Tax and regulatory structuring: Companies will need to address issues around
sub-optimal warehouse tax planning; imbalance between FDI norms vis--vis
adequate entity controls; inefficient holding, IPR or entity structures; and international
tax inefficiencies. Future challenges include the new Companies Act, policy on
related-party transaction pricing, and the uncertainty around GST roadmap.

Risk, fraud and cyber security: From a risk perspective, eCommerce companies
could face issues around brand risk, insider threats and website uptime. Issues around
employee-vendor nexus, bribery and corruption make companies vulnerable to fines.
Cyber security also raises some concerns around website exploitation by external
entities.

Compliance framework: eCommerce companies have to comply with several laws,

many of which are still evolving. Potential issues around cyber law compliance,
inefficient anti-corruption framework, legal exposure in agreements or arrangements,
indirect and direct tax compliance framework and FEMA contraventions and

regularisation could pose problems. Also, uncertainty around VAT implications in

different states due to peculiar business models could cause issues.

ANALYSIS
An analysis of the demographic profile of internet users further testifies that

eCommerce will rise rapidly in India in coming years. Around 75% of Indian internet users
are in the age group of 15 to 34 years. This category shops more than the remaining
population. Peer pressure, rising aspirations with career growth, fashion and trends encourage
this segment to shop more than any other category and India, therefore, clearly enjoys a
demographic dividend that favours the growth of eCommerce. In coming years, as internet
presence increases in rural areas, rural India will yield more eCommerce business.
Demographic profile of India online users (as on September 2013)

Other

35-44 year olds

16

25-34 year old

38

15-24 year olds

0

37
5

10

15

20

25

Source: Statista website accessed on 9 Dec 2014

Geographical distribution of internet users in India (million)

30

35

40

urban

rural

99

130

165

216

38

60

92

138

41061

41426

41791

42156

Source: IAMAI-IMRB

By 2020, eTail in India is expected to account for 3% of total retail. Further, orders
per million are expected to more than double from five million in 2013 to 12 million
by 2016, which will mean more opportunities for both consumers and eTail
companies. While the share of online shopping in total retail has increased at a fast
pace in the last few years, it is still miniscule compared to the figure in China, where
the share is 8-10%.
100%
90%

0.4
8

3
14

80%
70%
60%
50%
40%

91.6

83

30%
20%
10%
0%

2014
independent retail

2020
brick and mortar retail

e tail

Orders

per

month

2016 (est)

million)

12

2013

2012

(in

Source: Technopak; Accel Partners

INTERPRETATION

The e-commerce is one of the biggest things that have taken the Indian business by
storm. It is creating an entire new economy, which has a huge potential and is
fundamentally changing the way businesses are done. It has advantages for both
buyers as well as sellers and this win-win situation is at the core of its phenomenal
rise.
Rising incomes and a greater variety of goods and services that can be bought over
the internet is making buying online more attractive and convenient for consumers all
over

the

country.

Trends

in

Feminization

of

M-commerce
Online
After

Change

Buying
VCs,
in

Hiring

Industry

Social

Group

Industry:
the

Mounting

the

Media

new

Explosive
Now

the

Business
the

wave!
growth!
Celebrities
Model
best

The Industry is expected to grow at a CAGR of 40%, from US $ 5.9 billion in 2010 to
US $ 34.2 billion in 2015E. As Indian e-commerce market is in nascent stage but it
will surely amplify in years to come. Though there are some weak links, with
improvements in technology, they will be ironed out, making the e-commerce easy,
convenient and secure. The ecommerce is certainly here to stay.

CH.

FINDINGS,SUGGESTIONS,CONCLUSION

5
OF

THE STUDY

5.1 FINDINGS OF THE STUDY

The last year has seen several developments that have given a fillip to the eCommerce

industry
Mobile to be the most influential aspect of eCommerce

With mobile apps being developed by most eCommerce websites, smartphones are
increasingly replacing PCs for online shopping. In 2013, only 10% of the mobile users used
smartphones, and only 5% of the eCommerce transactions were made through a mobile
device. This figure has more than doubled, and more than 13% of all eCommerce transactions
today happen via mobile3 . According to some industry players, over 50% of the orders are
being placed through mobile apps, which is not only leading to substantial customer
acquisition but also building customer loyalty for various brands. However, most mobile
transactions so far are for entertainment, such as booking movie tickets and music
downloads. This trend will change soon with more and more merchandise being ordered
online.
More business coming from smaller towns

eCommerce is increasingly attracting customers from Tier 2 and 3 cities, where

people have limited access to brands but have high aspirations. According to eCommerce
companies, these cities have seen a 30% to 50% rise in transactions.
Enhanced shopping experience

Besides general online shopping, customers are also shopping online for weddings
and festivals, thanks to wider range of products being offered and aggressive advertisements.
The free and quick shipment and wider choice of products, along with the ease of shopping
online as compared to in-store shopping, is also helping eCommerce gather momentum.4
Further, eCommerce companies are doing rapid business due to sales. New concepts such
sales on weekends, holidays and festivals are attracting a lot of new customers and building
customer loyalty among existing customers. Television and social media, particularly
Facebook, are playing a proactive role in promoting eTailing through aggressive
advertisements. This has helped several eCommerce companies build substantial brand
image.
Exclusive partnerships with leading brands

Over the year or so, there has been a trend of exclusive tie-ups between eTailers and

established boutiques, designers, and high-end lifestyle and fashion brands. For instance, in
2014, Jabong added international fashion brands such as Dorothy Perkins, River Island, Blue
saint and Miss Selfridge, along with local fashion brands through Jabong Boutiques.
Similarly, Myntra benefited from exclusive tie-ups with brands such as Harvard Lifestyle,
Desigual and WROGN from Virat Kohli.
Expanding the product basket

There is a recent trend of relatively newer products such as grocery, hygiene, and
healthcare products being purchased online. Similarly, lingerie and Indian jewellery has also
been in great demand among customers outside India. Export comprises 95% of cross-border

eCommerce, with the US, UK, Australia, Canada and Germany being the major markets.5

5.2 SUGGESTIONS OF STUDY

In 2015, eCommerce players see mobile commerce as the most preferred route with
mobile wallet as the preferred way of payment. With 4G services expected to be
launched in 2015, internet penetration is likely to take a significant leap, which is
likely to give another boost to mobile commerce. Changes in lifestyle and shopping
choices will see buyers preferring online and mobile channel over physical channel to
save time and seek wider range and possibly comparative pricing. For mobile wallets,
improvements on the payments front with multiple payment instruments and increase
in payment gateways aided by enhanced security with multiple authentication layers
will help the consumers with a seamless mobile experience. Niche categories are also
expected to gather momentum including cars and real estate. Premium and
international brands are likely to join eTail, purchases from Tier 2 and 3 cities will
continue to rise and differentiated products such as exclusive brands by designers will
grow. Riding high on the growth prospects eCommerce companies will look at more
ways to raise funds such as IPOs. Some consolidation will also happen with the
leaders focusing on high growth and smaller players finding their own niche.

Top 10 things the eCommerce companies need to do to accelerate growth

1.customer experience

As the customers progress from research to purchase to fulfilment stages, their

expectations change fast. eCommerce companies need to understand these change drivers and
adapt their proposition accordingly. Easy transitions between ordering on tablets, mobile

phones or PCs will have to be facilitated. Besides, convenient multichannel returns and
delivery options need to be developed along with the provisions of touch and feel the product
before buying. They should also ensure sufficient after sales service and support. Online
product reviews and ratings, videos, more advanced sizing and fitting tools should be
provided.
2. Technological advancements

eCommerce companies constantly have to upgrade their offerings with changing

technology. For instance, shopping through mobiles have truly arrived, they need to devise
easy to use mobile apps for their websites. They need to ensure that their websites have the
required speed to do fast business, especially during sale, deals and discounts. Solutions
enabling seamless integration of back-end and front-end infrastructure, customer experience
enhancement initiatives, integrated inventory management and analytics would be crucial for
the eCommerce firms.

3. Convergence of online and off line channels

As the customers progress from research to purchase to fulfilment stages, their

expectations change fast. eCommerce companies need to understand these change drivers and
adapt their proposition accordingly. Easy transitions between ordering on tablets, mobile
phones or PCs will have to be facilitated. Besides, convenient multichannel returns and
delivery options need to be developed along with the provisions of touch and feel the product
before buying. They should also ensure sufficient after sales service and support. Online
product reviews and ratings, videos, more advanced sizing and fitting tools should be
provided.

4. Delivery experience

With lack of integrated end to end logistics platform, the eCommerce industry is
facing issues related to procurement operations and transportation. Online purchases from
Tier-2 and Tier-3 cities are expected to significantly increase, thanks to the emergence of low
cost smartphones, however, poor lastmile connectivity could act as a deterrent. Keeping
control on logistics and on ground fleet management, especially courier companies, is
essential for growth.

5. Payments and transactions

India continues to be a cash-based society due to limited banking and credit card
penetration. This, combined with a lack of consumer trust in online merchants, has forced
companies to offer CoD services, which imposes significant financial cost for firms in the
form of labour, cash handling and higher returns of purchased items. Data protection and the

integrity of the system that handles the data and transactions are serious concerns. Companies
should take necessary action for management even if this imposes a cost on them.

6. Tax and regulatory environment

Laws regulating eCommerce in India are still evolving and lack clarity. Favourable
regulatory environment would be key towards unleashing the potential of eCommerce and
help in efficiency in operations, creation of jobs, growth of the industry, and investments in
back-end infrastructure. Furthermore, the interpretation of intricate tax norms and complex
inter-state taxation rules make eCommerce operations difficult to manage and to stay
compliant to the laws. With the wide variety of audience the eCommerce companies cater to,
compliance becomes a serious concern. Companies will need to have strong anti-corruption
programs for sourcing and vendor management, as well as robust compliance frameworks. It
is important for the eCommerce companies to keep a check at every stage and adhere to the
relevant laws, so as to avoid fines.

7. Operational framework

Business models have been evolving rapidly in the eCommerce sector largely due to
heightened competition and the inability of players to sustain high costs. Companies in
eCommerce will need to adapt and innovate constantly to sustain their businesses.
Furthermore, several of these companies entered into the eCommerce industry as startups and
have grown to a huge size aided by the continuous growth in the market but lack well defined
capabilities and organisational structure. System building, financial and talent management
become key.

8. Customer acquisition

The customer acquisition costs in Indian eCommerce have been climbing rapidly due
to intense competition between multiple well-funded players. Only 2% of website visits
currently result into transaction. Thus, there is a gap between potential and actual buyers.
Coupled with high transaction costs, this area could pose serious problems. In the US, 75% of
consumers have stated that they will usually switch between brands, and for the rest of the
world, this rate is 60%, according to Ecommerce Foundation.7 This suggests companies
should constantly work on their brand positioning

9. Digital infrastructure

Digital disruption has driven change in the eCommerce industry with shoppers
embracing multiple touch points in their purchase journeys. Companies should spend enough
resources on technology development as also advertising and branding, especially because

the younger population is demanding. In the journey toward digital business transformation,
embedding SMAC technologies in the business becomes crucial.

10. Addressable markets

To grow their businesses, the Indian eCommerce sector needs to closely watch the
growth of their markets in the Tier 2 and 3 cities. They need to improve their logistics and
supply chain management in these cities, do an effective demand management to keep an eye
on what products are being sought in these cities. With eCommerce largely being a borderless
activity companies need to keep in mind that customers always have the option to buy across
the border if they cannot fulfil customers expectations.

5.3CONCLUSION TO STUDY

Indian e-commerce market is distinct that it has a large illiterate population, riskaverse consumer behaviour and difficulty in tracing postal addresses that challenges delivery
system, especially in semi-urban and rural areas. Additionally, consumers here are found to
be wary of the quality and after-sale. But, this trend is fast transforming with increasing
penetration of mobile and internet in semi-urban and rural areas. In order to realize the true
potential of the E-commerce all the stakeholders including Banks, Aggregators and online
merchants need to contribute in building a conducive environment. All e-commerce
companies, be it small or large understand the importance of going mobile and started
offering mobile commerce solutions to their customers. M-commerce to contribute up to 70%
of online shopping in India: experts '70% of e-commerce sales to soon come via smartphones'
- The Times of India. The intrusion of information communication technology in our lives has
changed our life completely. The whole world is coming closer. The mobile commerce is the
future of globalization. The Issues in mobile commerce are numerous. Only a few are
discussed here. The complication arises due to mobile commerce need newer cyber laws.
Corporate good governance is evolutionary in nature. Hence, Mobile commerce is just
towards the stage of corporate good governance. The paradigm shift from management to
governance is taken ahead by the Mobile commerce.

Broadband and digital services will no longer be a luxury item - a scarce

commodity - to be rationed amongst the privileged few," Forbes magazine

Several important phenomena are associated with e-commerce. E-Commerce has

unleashed yet another revolution, which is changing the way businesses buy and sell products
and services. New methodologies have evolved. The role of geographic distances in forming
business relationships is reduced. E-Commerce is the future of shopping. With the
deployment of 3G and 4G wireless communication technologies, the internet economy will

continue to grow robustly. In the next 3 to 5 years, India will have 300 to 400 million internet
users which will equal, if not surpass, many of the developed countries. Internet economy
will then become more meaningful in India. With the rapid expansion of internet, Ecommerce is set to play a very important role in the 21st century, the new opportunities that
will be thrown open, will be accessible to both large corporations and small companies. The
role of government is to provide a legal framework for E-Commerce so that while domestic
and international trade are allowed to expand their horizons, basic rights such as privacy,
intellectual property, prevention of fraud, consumer protection etc. are all taken care of.

REFERENCES

1. 3G subscription in India, Avendus, 2013

2. Barnes, S. J. (2002a). The mobile commerce value chain: analysis and future

developments. International Journal of Information Management, 22 (2),91108.

3. Barnes, S. J. (2003a). Pocket money: banking on mobile devices. E-business

Strategy Management, 4 (4), 263271.

4. Barnes, S. J. and Scornavacca, E. (2005a). Cases in mBusiness. Idea Group

Publishing.

5. Datacomm (2002). Winning Business Strategies for Mobile Games. Datacomm

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7. Dickinger, A., Scharl, A. and Murphy, J. (2005). Diffusion and success factors of
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