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Letter to BS: For Amazon, deal with Flipkart was a non-starter, and how

Amazon knew it was out of the race because of the very likely administrative barrier

Business Standard 

This is with reference to “For Amazon, deal with was a non-starter, and how” (May 21). I wish to congratulate Nivedita Mookerji on her brilliant reporting. The story makes eminent sense as it suggests a very creative strategy on part of Amazon, which is consistent with the history of the firm and more so, Jeff Bezos. knew it was out of the race because of the very likely administrative barrier, but its well-thought out strategy ensured that its great rival in the US, Walmart, would start its India adventure with two strikes against it. Amazon's well publicised interest till the end meant that the price that paid would be prohibitive. This has already had an effect in the US, as the otherwise sticky stock dropped nearly 5 per cent after the news of the deal. In India, if is to eventually expect a 10 per cent return on the investment, as another Business Standard recent report (“Is Walmart chasing a mirage in with the $16-billion acquisition?”) pointed out, a $2 billion profit would mean a $100 billion turnover, as against a $3 billion current turnover, a very tall ask. That would also require a cash infusion. Net-net, is the winner, laughing all the way to the proverbial bank.

This is reminiscent of the strategy captain cool M S Dhoni followed in the final IPL league game against Kings XI Punjab (KXIP) on May 20. He saw that the ball was swinging prodigiously, his own swing bowlers having inflicted enormous damage on KXIP. So while batting, after early loss of wickets, he promoted Harbhajan Singh and Deepak Chahar ahead of himself and Dwayne Bravo, guessing rightly that the not-so cool KXIP skipper would hold back his swing specialists. That worked and Chahar faced some ordinary bowling, against which he hit a match-winning 20-ball 39. Moral of the story: In IPL and M&A, outguessing the rival well in time is the key!

Shreekant Sambrani Baroda

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First Published: Tue, May 22 2018. 22:42 IST