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Managing Organisations Project

To study Flipkart

Team members:

Gandhi Kevin Dharmesh 1711014 kevin.gandhi17@iimb.ernet.in


Kishore Balaji R 1711029 kishore.rajan17@iimb.ernet.in
S Karthikeyan 1711044 sundararaju.karthikeyan17@iimb.ernet.in
S Pavithra 1711045 pavithra.seshadri17@iimb.ernet.in
Thomas Pegu 1711059 thomasp17@iimb.ernet.in

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Index

1 Introduction
2 Organization structure
3 Need for new structure
4 Structural dimension
A. Formalization
B. Hierarchy
C. Centralization
D. Specialization
5 Size, Goals and strategy
6 Environment
7 Culture
A. Meritocracy
B. Flexibility
C. Innovation
8 Technology
9 Funding, power and politics
10 Acquisitions and organization structure

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1. Introduction
Flipkart is a homegrown Indian e-commerce commerce, which entered the Indian market in 2007,
early by 2-3 years as compared to the rivals like Amazon, Snapdeal, Paytm and Big Basket. It was
founded by Binny Bansal and Sachin Bansal and started with selling books. Later it expanded in
other products like electronics, apparels, home, and kitchen appliances, etc.1
Operating in India, Flipkart in 2016 became the first Indian App to reach 100 million registered
customers and 80 million users. Flipkart also has 100 thousand registered sellers, 21 state of the
art warehouses, 10 million-page visits daily, technology that enables shipping of 8 million
shipments per month. It works on the market place model where multiple third parties provide
product or service information, whereas transactions are processed by the marketplace operator
which in this case is Flipkart. Flipkart used to operate on an inventory based model with its fully
owned subsidiary WS Retail but to drastically increase its presence Flipkart moved into the market
place model by selling its stakes in WS Retail.2

2. Organization structure
Organization philosophy:
The organizational structure of Flipkart will continue to evolve, and you could see a new
structure every few years, or possibly even sooner. The rate of change that technology is driving
in our lives is very rapid"
Flipkart philosophy is to be realistic to the changing environment and to stay agile during faster
growth. As the biggest start up, Flipkart has tremendously built an organization with over 30000
employees in a short period of time. People in Consultancies believe that primary enabler of agility
is investments from venture capitalists. Flipkart has been open to M&A and had restructured their
organization to remain as the biggest e-commerce player.

In alignment to their organizational philosophy they recently made a change to their organizational
structure. The current organisational structure is shown below.

1
Flipkart website
2
http://economictimes.indiatimes.com/small-biz/startups/flipkart-says-it-has-crossed-100-million-registered-
customers/articleshow/54439599.cms

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Executive
Group CEO Group CFO
Chairman

Myntra/Jabong
Phone Pe CEO Flipkart CEO
CEO

Commerce
Ad Group Ekart
Platform

Flipkart organization was formed to administer Flipkart and its acquisitions (Myntra, PhonePe).
Group CEO, Executive chairman and Group CFO posts were newly created and Flipkart was
headed by Kalyan Krishnamoorthy. Under Flipkart were three major heads Ad Group, commerce
Platform and Ekart. Ad Group manages the seller network, commerce platform is where the actual
business happens and Ekart takes care of delivery. 3Based on our discussions with people inside
the organization we learned that Ad Group was recently formed as a separate head due to the
growing importance of Seller Relationship Management.
4
Most of our discussion was about the major block of Flipkart The commerce Platform, the
market place model where buyers and seller come together make trade happen. The commerce
platform is further divided into Product, Design, Engineering, Analytics, and HR division. Flipkart
Commerce platform has functional structure, where each function is headed by a VP. This helps
Flipkart achieve skill development and depth of competence in each function.

3
Based on discussions with following Company personnel:
- Rinku Stephan, Product Manager
4
Based on discussions with following Company personnel:
- Sarthak Parashar, Supply Chain Manager

4
Here the Product team works on Product development that Flipkart envisions and maintenance of
existing products. Design holds the important task of maintaining website and mobile app.
Engineering function innovates and implements technological advancements and keeps the system
up to date. Analytics function works on the data and provides valuable inputs to each of the
function for process improvements. HR function serves to get people along and have their
motivational levels high by recognizing and rewarding achievers.
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Each function has serval hierarchical levels which is headed by a director and who reports to VP
of that function. Presence of hierarchy is a motivational factor that drives employees. The same
position has varying level of grades. An employee must achieve highest possible grade to be due
for promotion. Number of layers vary in each of the functions. The structure facilitates high
domain expertise. Based on primary research we found that certain product launches over the years
failed because of it was kept independent from the actual process line.

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Based on discussions with following Company personnel:
- Sarthak Parashar, Supply Chain Manager
- Rinku Stephan, Product Manager

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3. Need for new structure

Legal WS retail to tackle FDI norms


Size- Increase in Size. Its now a 30,000 big an organization
Formation of new entities like the ad group for seller management.
Growth in no. of acquisitions
Due to increase in power of the investors
Depth of skill that functional structure brings along is one main perceived benefit. Also, creation
of new posts like Group CEO, CFO and Executive chairman might help Flipkart org to have more
control over all its acquisitions than before, and that might help in integrating processes.
4. Structural Dimension6
A. Formalization:
Rules and regulations are in place but it has highly flexible work culture. The employees are given
both maternity and paternity leaves. There is no strict rule that all the employees must work from
office. The working system is flexible. They can even work from home if they want to. Of course,
there is limited number of days where the employees can leverage on this benefit.
Flipkart like any other online e-commerce retailers should follow the regulation of the government
so that they don't affect the product prices. The government has introduced this law to save the
retail stores in the market which are highly affected by the online retailers who sale their products
at much lower prices.
HR and Legal team look after the rules and regulation. They are horizontally distributed across the
teams. They make sure that the employees who are introduced to a flexible work culture also
follow the company policies. Flipkart has a dispute resolution process to resolve disputes between
buyers and sellers.
B. Hierarchy:
There is structured hierarchy which helps the organization to progress. The grading system is based
on the meritocracy.
C. Centralization:
The decision-making authority is in the hands of the CEO. The decision-making is highly
centralized. Overall, it is high-moderately centralized. It has merged departments in the past for
cost cutting. The engineering department of Ekart and the advertisement and ecommerce sections
are merged into one group for better control. Independent categories like home decor kitchen,

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http://www.hindustantimes.com/india/e-commerce-rules-flipkart-amazon-snapdeal-play-safe-put-sales-on-
hold/story-uMDho42nPzfBZA0S6OmY0L.html
http://economictimes.indiatimes.com/industry/services/retail/flipkarts-new-centralised-procurement-process-
aims-to-cut-costs/articleshow/52998561.cms

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furniture and furnishing are grouped into a single unit. The sales and marketing of all these units
are run by one single team for better control.
It has also merged media buying, IT, promotions, warehousing and supplies. It aims to have a
better negotiation with the vendors with the new group than individual units. The supply chain of
Flipkart Ekart, Commerce Platform and Ad group directly reports to the CEO who closely
monitors their functioning. It faces challenges in this centralized functioning during the time of
major acquisitions like Myntra, Jabong etc.
Flipkart is evolving as an organization and it doesn't shy away from making organizational changes
whenever required to adapt to the environment.
D. Specialization:
Flipkart is highly specialized with horizontal communication in place.
We interacted with Hiren who is a product manager in Ekart division of Flipkart. Based on the
discussion, we have tried to project the functioning of Ekart.

Ekart Operation Team

Operation Design

Technology Team

Product Team

HR, Legal Team

Ekart looks after supplier reliability, warehouse maintenance, operational process in warehouse,
inventory planning, logistics. There is no rigid work curriculum. It is a flexible working
environment. There is work from home facility once in a week. Design team guides the operation
team and there is co-ordination for smooth running of the Ekart division.
The design team comes out with new changes. It is somehow inclined to organic structure. They
interact with operation on an everyday basis. Product team acts as mediator between design and
operation. COO of Flipkart is the head of Ekart. The technology team is in constant process of
hacking and finding security vulnerabilities in its own system to make the payment method as
secure as possible. HR and legal team works as the support function of all the Ekart divisions. HR
is horizontally linked to every team. Every HR is dedicated to each team.

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The functioning of the supply chain like Ekart is challenging due to the introduction of new
customers every day. There is also fierce competition among its rivals. The challenge is better
product delivery which stands apart from the competitors.
5. Size, Goals and strategy7

A. Size
Being Indias largest e-commerce firm, with over 100 million registered customers, in across
80+ categories, it offers more than 40 million products with over one lakh plus registered sellers.
The company earns INR 100-500 billion revenue per year and has 10,000+ employees.
But lately, due to its latest set of acquisitions and discount offers, Flipkart is facing severe funds
crunch. With around 400 layoffs recently in the name of non-performing employees, the
company is facing the heat of costs. The number of layoffs is expected to increase to 700 and it is
expected that the company will delay joining of us IIM graduates.

E-commerce industry has less than 2% business of the overall retail in India and it has not even
gotten close to reaching its vast potential. The available market for online retail alone is valued at
USD 100 billion in India. Flipkart hence aims to grow dynamically with careful consideration to
costs.

B. Goals/Strategy
The mission of Flipkart is to transform commerce in India through technology. The company
focuses on continuous adaptation and improvement and hence functions dynamically. From its
organisation structure to its internal processes, relationships, power and resource sharing to
functioning, one thing that can be highlighted is the dynamism. Looking at the recent major
restructuring that the organisation went through, the objective of reorganisation is to enable an
"increasing focus on Flipkart Group, creation of top-team with clear accountabilities and
consolidate to simplify organisation". The structure revamp is to enable better functioning and
improved efficiency in handling market operations and those of Ekart logistics Myntra, Jabong
and PhonePe wallet.

According to latest developments, Flipkart has set itself 3 key goals. They look to reach there by
September 2017. One is achieving an NPS of 55, where NPS is net promoter score, a measure of
customer satisfaction. They aim to get there by improving their product returns managements

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Based on discussions with following Company personnel:
- Sarthak Parashar, Supply Chain Manager
- Rinku Stephan, Product Manager
http://www.firstpost.com/business/flipkart-rejigs-top-deck-may-go-for-bigger-shakeout-post-big-billion-sale-in-
oct-2982716.html
http://profit.ndtv.com/news/corporates/article-flipkart-to-grow-with-careful-considerations-to-costs-binny-
bansal-1679790
http://www.livemint.com/Companies/0QVh0MDqR8ZW5w9CmbFwdO/As-clock-ticks-Flipkart-races-to-achieve-
three-key-targets.html

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and by improving the consistency and speed of their product deliveries. Another goal is to
expand sales, mainly of fashion, large appliances and smart phones to generate ~Rs. 3,700 crore
monthly gross sales. And third, avoid discounts, cut staff costs and other expenses and try to
break even at the gross profit. Flipkart, apart from these has set itself a broader goal of getting to
INR 60 billion overall monthly sales.

Sales has been Flipkarts actual and biggest problem. The main strategy of top management to
revive sales is winning trust of customers by hitting ambitious quality levels by undertaking
some tough measures, make purchases easier for the customer and sell high-value goods better
by penetrating deeper in the market.
Flipkart has switched to customer loyalty as a measure of its progress moving over its focus on
GMV. Placing its bet on affordability for revival of sales and eliminating the threat of losing
market share, the company has come up with various initiatives to achieve that. For example,
using Flipkart Assured to conduct stringent quality checks, selling products under its own
brands, low-interest monthly payments, attractive exchanges on smartphones, etc.

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6. Environment8
Retail sector has become one of the fastest growing sector in India. It has been one of the
protected sectors due to political mobilization of small retailers and industrial bodies. India
started liberalizing wholesale trade (1997) and have moved to 100% FDI in single brand retail
and 51% FDI in multibrand retail. Flipkart operates in a rapidly changing environment. It must
design its organizational structure in line with Indian regulation and norms. We found that
VUCA (volatility, Uncertainty, Complexity and Ambiguity. Business environment model can be
used to summarize the working environment of Flipkart.

Complexity Volatility

how well can you


predict the situation?

Ambiguity Uncertainty

How much do you know about the situation?

Few key events:


Flipkart predicted that all online shopping will be on smartphones. The company tried to
be an app-only platform in 2015. At the same time, Flipkart was trying to shift to a
marketplace model, where third-party sellers would sell to customers. Flipkart lost out on
the desktop to Amazon, a shift that also had some spill over effects on its mobile

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Based on discussions with following Company personnel:
- Rinku Stephan, Product Manager
- Hirankumar Gunashekharan, Graduate Trainee
- Faizan Ahmed Hashmi, Intern
http://www.caravanmagazine.in/vantage/flipkart-dodged-laws
http://gadgets.ndtv.com/internet/features/ten-years-on-is-flipkarts-culture-due-for-an-overhaul-1658137
http://www.indiaretailing.com/2017/09/08/retail/indian-retail-may-almost-double-by-2021-report/
https://www2.deloitte.com/content/dam/Deloitte/in/Documents/CIP/in-cip-konnected-to-consumers-noexp.pdf

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commerce business. Its push to marketplace model hurt its product quality, product
delivery times and overall brand image with customers
Flipkart has experimented with lot of product launches and have taken it back due to
miscalculations and unpredictable demand
Flipkart has altered its organization structure - Like creating WS retail (selling to high net
worth individuals) as a separate entity to leverage the loopholes in Indian FDI norms
Volatility - Flipkart went through times of undervaluation due to losses. It managed to
diversify financing partners and this influenced the leadership and organizational
structure

Demographics:

Rising middle class and per capita income


Government initiatives - Digital India, Financial Inclusion
Internet penetration is increasing and there is substantial increase in online purchases

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Technological Environment:
"I think, we are a technology company that tends to do e-commerce," Binny Bansal, 2013
The above statement indicates the strong focus on technology by Flipkart It has tried to adapt to
changing environment - like experimenting with technology (mobile app only), building new
products (like pay zippy) and have been investing in latest technology
Recently Flipkart strategy in technology can be summarized as:
Hiring top executives from Google, Microsoft to lead the technology platform (Example:
Peeyush Ranjan, Ex CTO)
Investing in latest technology - Machine Learning, Artificial intelligence; Microsoft-
Flipkart partnership for cloud platform.
Acquiring new tech companies like PhonePe

7. Culture
Based on our interviews with employees, we see the following points as important elements of
Flipkart organization culture
A. Meritocracy:
Flipkart provides immense opportunities for its employees to learn and grow in the organization.
Exceptional performers can report directly to senior people in the hierarchy by passing
the regular hierarchical setup
Performance rating (Stars) is done to incentivize hard work and result orientation among
employees. Employees with higher number of stars (at same level) are rewarded with
higher salary, perks
Even top executives are asked to resign or reshuffled for under-performance.

B. Flexibility:
The 2017 Diversity and Inclusion Summit held by NASSCOM recognized Flipkart for
having the Best Practice on Support for Returning Mothers a testament that Flipkart
has a well-thought-out benefits program that can support the lives of employees.
There are not many companies that provide bereavement leave. The difference at Flipkart
is that they provide bereavement leave to Flipsters to grieve for an immediate family
member.
Sabbatical leave is provided for Flipsters to pursue personal interest.

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C. Innovation
"Flipkarts work culture is the most unique in India. The environment is very much employee-
focussed. We ensure that employees can do what they want to do." Surinder Bhagat, VP, Human
Resources
Flipkart claims that it follows entrepreneurial culture, and ownership, respect, audacity
and customer-first are its pillars.
Employees have the independence to innovate and own their work. Few years ago, an
intern had approached the CTO, to suggest a mobile site as Flipkart only had desktop site
then.
Flipkart entrepreneurial culture has given to rise to many start-ups - that are founded by
former employees of Flipkart (Flipkart gang akin to PayPal mafia)
Negative opinion:
We also encountered few negative reviews also while studying about Flipkart They are
Job insecurity due to layoffs for cutting costs
IIT mafia - IIT-ians have an edge in gaining more power in the organization
Flexible working hours and a culture of work from home would not get people on time or
face-to-face for a meeting and thus, decisions gets delayed.
Employees find it difficult to cope with frequent organizational changes.

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8. Technology9
The e-commerce giant believes in dynamic functioning evolving continuously with respect to the
latest industry standards and market scenario.

Recently few of its big bets turned out to be disastrous like the app-only push, the shift to
marketplace in a sudden and abrupt move and getting a new leadership team by replacing the
entire team in one go. While these were reversed and the company aggressively cut the cash burn
rate by close to 40%, monetized its logistics, bought PhonePe to build payments, platform,
increased revenue of its advertisements unit and did three management reshuffles, the gap
provided by the slip for Amazon to come in and capture the market in multiple senses. For
instance, it had 80 million products against 40 million products of Flipkart.

Flipkart, facing such crisis and losing battle to Amazon, brought in Kalyan Krishnamoorthy,
managing director of Tiger Global, largest shareholder of Flipkart. His first move was increasing
budget of digital marketing to leverage technology. He played an instrumental role in gaining
back edge in smartphone sales, an area which makes close to 50% of Flipkarts sales. Flipkart is
focussing now on payments and logistics. It is pushing its users to switch to PhonePe as their
digital wallet which it acquired. While its slowly crawling its way back, the company continues
to aggressively cut costs, continuously innovate and ensure cautious dynamic growth.

Figure 1 : Perrow's Framework

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Based on discussions with following Company personnel:
- Rinku Stephan, Product Manager
- Hirankumar Gunashekharan, Graduate Trainee
- Faizan Ahmed Hashmi, Intern
http://economictimes.indiatimes.com/articleshow/54594803.cms?utm_source=contentofinterest&utm_medium=
text&utm_campaign=cppst

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The above figure classifies an organisation based on two factors variability and analysability.
Variability is a measure of the exceptions to standard procedures while applying given
technology. While analyzability is how objectively we can do a task by breaking it down to
sequential steps and the employees can just follow the sequence of steps to perform the task.

Flipkarts processes are high on analyzability and they have standardized procedures for their
employees to follow to handle various problems and situations. There is support resources which
has clear operational guidelines to face and handle effectively various market and customer
situations. Also, being the dynamic organization that it is, it is an organization high on variety.
More to do with the industry in which it operates itself, the company faces an unexpected and
highly volatile market with different types of situations and functioning requirements every day.
Starting from transactions of large volumes of customers to ensuring proper functioning
throughout the day through different volumes of sales and customer traffic, the operation of the
company accommodates high variety and volatility.

Figure 2: Reciprocal Interdependency

To handle the scale and transient nature of the business and the thrive in the dynamic industry
scenario, Flipkart ensures that its departments work together and share information, resources
and power and work flow leveraging technology. There are mutual adjustments, rules and
regulations and adequate planning and scheduling as they share their specialized abilities of
multiple experts. For instance, its product, design, engineering and analytics divisions work
together closely and share strong interdependency.

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9. Funding, Power and Politics10
As stated above, Flipkart was founded in 2007 with cash of USD 6 thousand. The two founders
took key leadership roles with Sachin Bansal heading as Chief Executive Officer (CEO) and
Binny Bansal as the Chief Operations Officer (COO).
The initial organisation structure was simple with one company named Flipkart Online Services
Private Limited owning Flipkart.com, which was initially formed to sell books to customers.
Through various interviews and online research, we have outlined the changing structure,
leadership roles and informal politics observed within the institution. We disclaim that these
were based on informal discussions and do not constitute any proof of politics.
The increase in value from USD 6 thousand to over USD 10 billion in 2017 has been after
several rounds of investments received from various Private Equity firms. This has helped
Flipkart sell all kinds of products on its ecommerce portal and employ more than 20 thousand
employees.
The original entity named Flipkart Online Services Private Limited no longer does significant
business and the business has been sold to Flipkart India Private Limited and a complex structure
involving the following entities own the operations of Flipkart. 4 out of 8 companies listed below
are incorporated in Singapore for funding and FDI regulatory reasons.
Flipkart Private Limited, the ultimate holding company incorporated in Singapore
Flipkart Payments Private Limited (incorporated in Singapore)
Flipkart Logistics Private Limited (incorporated in Singapore)
Flipkart Marketplace Private Limited (incorporated in Singapore)
Flipkart India Private Limited
Flipkart Internet Private Limited- it owns the website Flipkart.com
Flipkart Payment Gateway Private Limited
Flipkart Digital Media Private Limited

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Based on discussions with following Company personnel:
- Anirudh Suresh, Senior Product Manager
- Sarthak Parashar, Supply Chain Manager
- Rinku Stephan, Product Manager
- Hirankumar Gunashekharan, Graduate Trainee
- Faizan Ahmed Hashmi, Intern
http://www.firstpost.com/business/flipkarts-sachin-bansal-says-he-was-removed-because-of-performance-
2970224.html
http://www.livemint.com/Companies/VXr8oJzNJ4daOYSO5wNETN/Inside-Flipkarts-complex-structure.html
http://www.livemint.com/Opinion/9jYZyiFhhTSMksYebC62WK/Flipkart-Tiger-Globals-unlikely-burden.html
https://www.theofficialboard.com/org-chart/flipkart-com-2
http://www.livemint.com/Companies/7i4dqvxfz16nfBfboE9f1K/Why-Flipkart-has-turned-to-Kalyan-
Krishnamurthy.html
http://indianonlineseller.com/2017/07/flipkart-bansals-to-reclaim-reins-to-their-ecommerce-company-from-
krishnamurthy/

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Since India bans FDI in ecommerce retail, Flipkart has created a complex organization structure
involving multiple independent entities to receive huge funds for its business.
Unlike other market players, who just offer technology platform to the sellers, Flipkart operates
in the business, by way of sourcing products from various manufacturers, selling the products to
third party sellers, who then offer the products to buyers. It also provides the technology
infrastructure and assistance in logistics needed for such sales and is remunerated by way of
commission for such sales.
The first investment was received from Accel Partners, receiving USD 1 million in 2009. Since
then, Flipkart has received 12 rounds of funding till date, with the ownership staying as under:
Tiger Global 29.5%
Naspers 18.4%
Accel Partners 11.5%
Binny Bansal 8.7%
Sachin Bansal 8.7%
Numerous other investors 23.2%
In 2013, Flipkart went into trouble with the entry of Amazon in the marketspace. By then, it had
received over USD 200 million from various PE / VCs and had fetched a valuation of USD 1
billion. However, there was a difference in ever-increasing valuation and business operating
losses. The co-founders had promised few revenue and profitability estimates, which they were
unable to meet; it was in the middle of investigation by the Indian Government on issues relating
to the FDI laws and the entry of Amazon with huge cash-pockets into India compounded the
trouble.
By 2016, the Company increased the staff to 30 thousand; had raised more than USD 3.5 billion
in capital and had a valuation of over USD 15 billion, making it the most valued Indian internet
based retailer. However, Flipkart was losing millions of dollars every day, primarily because of
its operating model of offering discounts and cashbacks to excite buyers.
As an operating model, Flipkart suffers from a defect, where the customer loyalty gets shifted
once the seller stops offering discounts and the customers get better offers from the competitors.
This is the very reason why the operations of Flipkart and other ecommerce players like
Amazon, Snapdeal, etc is different from that of Paytm.
The way Paytm and Flipkart became popular is through customer discounts. If this discount was
offered as cash backs offer instead of discounted sales prices, with a mechanism of integrated
mobile wallet like the Paytm s, the cash back would have been credited to a Flipkart mobile
wallet, to be of use for subsequent transactions. This would then have a linear transaction chain,
with one transaction leading to another, with the help of cashbacks as a sustainable alternative to
cash discounts.
As quoted on the Economic Times in an interview of Amit Sinha, VP, Business of Paytm; Paytm
doesnt believe in giving random deep discounts to attract customers. Paytm doesnt depend on

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festive sales of 3 days or 10 days and is rather focused on offering a sustainable business with an
outlook of over 15 to 20 years. Rather than by way of offering huge discounts, Paytm s sellers
offer great transaction deals, by investing in technology, logistics and platform; which then
enlarges customer experience more than customer discounts. This is a business model that
Flipkart can follow, which as per our project group, can be more sustainable.
As a PE investor, it was evident on their part of representation to the board and management of
Flipkart to bring Mr. Kalyan Krishnamurthy as one of the decision makers.
As his first stint, he was brought in as the PE investors representative and was appointed as
interim finance chief. He was then appointed as the sales head, where he won over the Flipkart
employees with his background. As quoted in one of the interviews with Flipkart employees, he
became formulator rather than analyser and strategizer.
In his second role at Flipkart, as the sales head, he removed 4 senior executives that were
responsible for generating sales. This was his way of conveying to the employees to focus on
better delivery of services or be removed.
The firing had a positive impact on the company with brining the company back on track from
an initial directionless journey, that helped Flipkart outperform Amazon in October 2016 festive
sales. 11 This also helped restore confidence against the growing competition from Amazon.
In early 2017, there was a restructuring within the company where Kalyan Krishnamurthy was
appointed as the CEO by the board. Binny Bansal, the erstwhile COO was given the
responsibility of Group CEO. Even though the title seemed fancy, Binny Bansal as the Group
CEO was a nominal designation with Kalyan Krishnamurthy controlling all the operations.
Sachin Bansal, the erstwhile CEO of Flipkart, ever since the company was founded in 2007 was
given the position of Executive Chairman. As quoted by Sachin Bansal in a townhall, his
removal from the post of CEO was stated to be of performance.
Kalyan Krishnamurthy has played his role in a turnaround, particularly at the time of years of
making losses and business valuations declining from USD 15 billion in 2013 to around USD 8-
10 billion by 2016. This restructuring was essential to get fresh competition, because Flipkart
operates on owners funds whereas Amazon had huge cash surplus from its Cloud computing
services in Bangalore.
Learning:
What is important we learned is how an investor has played a critical role in turnaround and in
that process, brought the founders to a nominal role in their own companies.
We believe that a CEO appointed by investors signals a breakdown in the basics of the
companies and diverts from the very beliefs the founders had in the company. It might also have

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http://www.livemint.com/Companies/7i4dqvxfz16nfBfboE9f1K/Why-Flipkart-has-turned-to-Kalyan-
Krishnamurthy.html

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a negative impact on the return and profitability of the company that the investor would have
thought of getting.
10. Acquisitions and Organization structure12
In the last 7 years, Flipkart has made numerous acquisitions like Myntra, Jabong, Letbuy,
PhonePe, etc, which have contributed towards improvement in product offering and operations.
When Flipkart acquired Myntra in 2014, they kept the organisation structure of Myntra,
including the leadership separate from that of Flipkart. The only common role between both the
entities was that of Head of Commerce for both the units.
As per the article in Businesstoday, the head of commerce of Myntra felt - the leadership
believed that making Myntra a part of bigger organisation would slow Myntra down in terms of
taking decisions quicker. Hence, the collaboration was just of the vision, not of the structure.
This helped make, Flipkart-Myntra deal, of INR 2,000 crores, the biggest consolidation in e-
commerce industry, a tie-up more than a merger.
In 2016, Flipkart acquired Jabong with a focus on value creation. There are about 15 million
customers who shop on Flipkart, Myntra or Jabong differently for fashion segment. With a focus
on growth and synergy, all the entities operate under a common parent, but as separate entities,
with a possibility of leverage wherever possible.
Jabong is strong on women and international brands, Myntra has a range of private brands and
Flipkart has a series of product offerings within the fashion segment. Jabong s website has
Mantras private brands, some of Jabong brands are sold on Myntra, with indication of leverage
on each brands upsides, while continuing to operate independently.
To strengthen transactional efficiency in wallet transactions, Flipkart acquired PhonePe app, a
competitor of Paytm wallet in 2016. The operations of PhonePe work independently, with a
separate technical and research focused teams, sitting in Bangalore office. An advantage of using
an inhouse payment gateway is to avoid transaction charges in the range of 1.4% to 1.6% of
transaction value applicable in case of Net banking and card payment. Given the history of
Flipkart of making losses, reducing this cost will add strength to Flipkarts profitability.

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http://www.businesstoday.in/opinion/interviews/mukesh-bansal-on-myntra-flipkart-business-strategy-
forward/story/219035.html

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