Reasons behind Flipkart acquiring Myntra
The rationale behind mergers and acquisitions is to gain competitive advantage and further speed up the growth of the company in emerging markets where the threat of new entrant is considerably high. The ideas supporting the acquisition in question are summed up below.
Greater revenues can be realized when market leaders in related segments combine their business. While Myntra was a market leader in the fashion segment, Flipkart enjoyed similar position in the overall e-commerce sector of India. A higher revenue gives the leverage to the company to draw IPO, which Flipkart is planning to go for in near future. Additionally, it’s also a weapon for attracting global investors …show more content…
This is a major contributor to the operating profit especially in a segment which is affected by supply chain management inefficiencies. Flipkart suffered consecutive losses prior to the acquisition; Flipkart losses widened to Rs 281 crore in 2012-13 from Rs 110 crore in 2011-12 and Rs 400 crore in 2013-14 according to Nomura research. Though related competitors faced losses too, the loss percentage of Flipkart was way higher with respect to sales. The following pictures shows the overall picture. So the acquisition was mainly to combine capabilities through reduction of cost of capital, expenses and inefficiencies in supply chain …show more content…
According to the Economic Times, in 2013, Flipkart lost Rs 281 crore (US$47 million) on revenues of Rs 1,180 crore (US$197 million) while Myntra lost Rs 134 crore (US$22 million) crore on revenues of Rs 212 crore (US$35 million). Since both the companies being market leaders in their related fields were facing huge losses, there was a chance to improve the situation for both of them by fusing individual capabilities and strengths, sharing supply chain management and technological infrastructure front. The belief was that such a major acquisition would bring back the lost fate of the market by nullifying the huge losses of the companies (both Flipkart and Myntra) in the recent years. If that happens then an infrangible monopoly will be achieved by the companies (together as a unit), contributing to high entry barrier of the E-commerce segment in India and preventing the expansion or emergence (in case of Alibaba) of global competitors in India like Amazon, Alibaba, etc. This was the major thought process behind the acquisition, though it sounds a bit too
The rationale behind mergers and acquisitions is to gain competitive advantage and further speed up the growth of the company in emerging markets where the threat of new entrant is considerably high. The ideas supporting the acquisition in question are summed up below.
Greater revenues can be realized when market leaders in related segments combine their business. While Myntra was a market leader in the fashion segment, Flipkart enjoyed similar position in the overall e-commerce sector of India. A higher revenue gives the leverage to the company to draw IPO, which Flipkart is planning to go for in near future. Additionally, it’s also a weapon for attracting global investors …show more content…
This is a major contributor to the operating profit especially in a segment which is affected by supply chain management inefficiencies. Flipkart suffered consecutive losses prior to the acquisition; Flipkart losses widened to Rs 281 crore in 2012-13 from Rs 110 crore in 2011-12 and Rs 400 crore in 2013-14 according to Nomura research. Though related competitors faced losses too, the loss percentage of Flipkart was way higher with respect to sales. The following pictures shows the overall picture. So the acquisition was mainly to combine capabilities through reduction of cost of capital, expenses and inefficiencies in supply chain …show more content…
According to the Economic Times, in 2013, Flipkart lost Rs 281 crore (US$47 million) on revenues of Rs 1,180 crore (US$197 million) while Myntra lost Rs 134 crore (US$22 million) crore on revenues of Rs 212 crore (US$35 million). Since both the companies being market leaders in their related fields were facing huge losses, there was a chance to improve the situation for both of them by fusing individual capabilities and strengths, sharing supply chain management and technological infrastructure front. The belief was that such a major acquisition would bring back the lost fate of the market by nullifying the huge losses of the companies (both Flipkart and Myntra) in the recent years. If that happens then an infrangible monopoly will be achieved by the companies (together as a unit), contributing to high entry barrier of the E-commerce segment in India and preventing the expansion or emergence (in case of Alibaba) of global competitors in India like Amazon, Alibaba, etc. This was the major thought process behind the acquisition, though it sounds a bit too