Rocket Internet Com217 Research Paper
Rocket Internet Com217 Research Paper
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1.0 Introduction
Founded by the Samwer brothers since 2007, Rocket Internet (RI) is one of the fastest growing
technological “startup factory” (Baumann et. al., 2018). RI is notorious for their method of
replicating companies, which has earned RI the reputation of a “clone factory” (Baumann et. al.,
2018). The company functions as a business incubator; accelerating the growth of consumer and
service-centric tech startups through the extraction of already-proven business models and
replicating them in emerging markets (Mance, 2013). It was found that RI was not just any other
business incubator organization, but rather a hybrid of a corporate incubator, venture capitalist
and diversified holding company (Baumann et. al., 2018). Hence, RI’s operations include mainly
the following: incubation, investment, and growth. As the name of the company would suggest,
RI was founded to build market-leading companies in the internet and technology space. The
company’s access to investors makes RI a key player in the internet business landscape, enabling
many businesses through the partnership between businesses and potential investors and venture
capitals. Lastly, RI’s operational support accelerates the growth of the various ventures through a
dynamic and scaling process. RI focuses predominantly on four industry sectors of e-commerce,
namely in Food & Groceries, Fashion, General Merchandise and Home & Living, of which make
conglomerate, RI bases its global operations in Berlin, Germany and has multiple business
entities across the globe, mainly the Asia Pacific Internet Group and Middle East Internet Group.
Region-specific groups enable RI to understand each region’s technological and business outlook
and tailor its operations to each region’s context. Since its inception, RI has been one of the
fiercest competitors in the startup landscape and has come out with many familiar big-name
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brands like Zalora, Lazada, Foodpanda, Vaniday and many more in the Asia Pacific (APAC)
region.
Moving forward, we will be focusing more on RI’s strengths and weaknesses, organizational
management style and theories, impacts on the global community, and finally our evaluation of
RI as a whole.
Rocket Internet’s strengths and weaknesses are identifiable through its multifaceted portfolio.
The company exerts its presence in the global market through a variety of internet business
subsectors. Within the Southeast Asian market landscape, where global e-commerce giants like
eBay and Amazon have had limited access to, the Zalora Group, a subsidiary of RI, has
successfully positioned itself as a key player in the fashion vertical within the APAC region. RI’s
successes in its replication approach has been largely attributed to the ability to avoid mistakes
that a conventional startup growth process would usually experience. Oliver Samwer, CEO of
RI, claims that the company has efficiently solved most of the problems a startup would usually
encounter in its pilot phase (Maier, 2015). For an incubator like RI where businesses are
replicated at a rapid rate, it is essential that the concern for production is at its peak. According to
Channel News Asia (2019), RI is aiming to build even more businesses than before in 2019, on
top of the 100 over entities that RI has helped build. The nature of RI’s business - where existing
business models are copied and replicated elsewhere, also means that there is little room for
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2.1 Strengths
Rocket Internet’s organizational success as Europe’s largest tech investor has accounted 85 per
cent of the market capitalization of all German IPOs since 2014, with global office expansion in
various countries and has accumulated around 3.8 billion euros in liquid funds (Schröder and
Tuma, 2017). Factors that contributed to the company’s success are how RI mitigates start-up
venture risks, and the spread of improving existing services through high investor confidence.
Rocket Internet uses a thundering herd approach that allows the company to expedite a startup’s
growth in a matter of weeks instead of the average process of taking months (Kahn, Nicola,
Ricadela and Satariano, 2016). After selecting a business idea, a team of existing workers is
assembled to start working on the new venture idea using existing contacts with lawyers to
facilitate initial administrative processes and provided usage of existing IT assets that can be
tailored to the startup needs, thus enabling the ventures to begin operations quickly (Baumann et.
al., 2018). The centralized functions of the organization mitigates the costs and time-consuming
processes of recruitment and financing, thus enabling a “rocket-like” growth at the pace at which
new ventures are grown (Baumann et. al., 2018). David L. Preston, states that the “inherent
genius” approach that RI takes eliminates technical risk, market risk and team risk (Baumann et.
al., 2018). According to Samwer, the company takes lessons from one successful startup and
applies the knowledge to their own ventures, followed by recruiting the talent necessary for its
portfolio companies (Kahn, Nicola, Ricadela and Satariano, 2016). Team risk is reduced as RI
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investors hand-picks and micro-manages the new venture team (Baumann et. al., 2018). It is
difficult for business operations in a competitive and saturated market, therefore launching an
already successful business model from one market to a different geographical market is a more
efficient option (Tolentino, 2017). Hence, according to Wharton management professor David
Hsu, the RI model helps to “push down market risk by tailoring or importing a model that works
in one part of the world” (“Can Cloning Businesses Work? Ask Rocket Internet”, 2015).
2.1.2 Spreading out and improving existing services through high investor confidence
On November 2017, Zipjet – a laundry and dry-cleaning company backed by RI- formed a
merger with its French competitor Cleanio (Ohr, 2017). Previously, Cleanio only specialized in
France, while Zipjet was already one of Europe’s leader in on-demand laundry and dry-cleaning
service. With the amalgamation of Zipjet and Cleanio, users from Berlin, London, and Paris can
enjoy better functionality in regards to the service provided by Zipjet. For instance, Zipjet has an
application and a website to allow potential customers to engage their services, which includes
picking up and returning the laundry all within 24 hours (O’Hear, 2018). As a result of their
success, big brands like Bosch and Siemens have invested more money into Zipjet to bring better
quality products for consumers who use Zipjet (O’ Hear, 2018). This shows that RI has the
power to attract investors, which in turn helps to fund the business and allow further
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2.2 Weaknesses
Despite all the strengths that RI possess, several inadequacies have been identified, hindering
them from greater success. Factors that contributed to their weakness includes high turnover
Despite one of the approaches to deploy managerial talent from a steady stream of the talent pool
at will, it has been found that RI faces a surprisingly difficult issue of retaining staff. According
to the Economic Times, a number of new recruits use the company as a springboard in boosting
portfolio for a couple of years before venturing on a non-rocket startup (Kahn, Nicola, Ricadela
and Satariano, 2016). For RI, it was not unusual for a 24 year-old to be managing the whole
venture and to bear the responsibilities of building a business from scratch, of which many MBA
graduates dribble at the opportunity to prove their capabilities (Chong, 2018). However, despite
the great career growth opportunity, the crucial factor for the high turnover rate in the company
has been attributed to the long hours and demanding environment of the company (Kahn, Nicola,
Ricadela and Satariano, 2016). These factors are also reflected in the review site, Glassdoor.com
from current and past employees, where many reviewed that the company lacked the “personal
touch” and had a “stressful work environment that was fast-paced and demanding”
(Glassdoor.com, 2019). Rocket Internet scored relatively low for its work culture and values, as
well as in employee’s perception of work-life balance; 2.8 and 2.9 out of 5 respectively, and only
56 per cent of employees were in approval of the company’s CEO, Oliver Samwer
(Glassdoor.com, 2019).
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2.2.2 No room for Creativity
Although, through this “copycat” approach where Brauman and Köhler imitate promising
business models into their own businesses which is deemed to be successful for RI. In doing so,
it “separates the creative process of ideation from the operational process of execution.”
(Baumann et. al., 2018). It inhibits their employees from being innovative about their own
business models and the motivation of possibly coming up with a better one. “Further, very few
fundamentally new technologies will be created when the founding impetus is copying someone
else’s innovation” (Baumann et. al., 2018). This would mean that these firms sets back from
other companies by not having an intellectual property that is defensible if the proposed business
model does not work. Hence, the lack of space for creative ideation pose as a weakness by
hindering creative thinking and further improvements that could potentially be beneficial for the
business.
Given the success of numerous companies under RI, the company has an abundant amount of
capital to support all its operations including its rapid expansions. The financial capacity and the
rationale of proven winners enabled RI the power and confidence to expand into new industries.
RI’s incubating process is known to be coherent where they would strive to preserve a certain
burn rate before selling it to its potential buyers to evaluate the measures to make the business
more lucrative (Parr, 2016). Some establishments were forced to shut down as it failed to attract
that the higher management decided to shut down OfficeFab; an e-commerce website retailing
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office stationeries despite its success, as it was deemed to be significantly less attractive to
Every organization has a few specific organizational management style that shapes its identity.
For RI, it is clear that profit is key over employee welfare. Further elaboration on the kinds of
One management style that was prominent of the top brass of RI was the authoritative
compliance style under the Blake and Mouton’s managerial grid theory. Authoritative
compliance is characterized by high concern for production and low concern for people (Miller,
2015). Is is without surprise then, that RI suffers from very high turnover rate, as mentioned in
the earlier sections of this paper. In an article, it states that the “average turnover at RI’s ten
largest companies has grown more than 200%” (Looveren, 2015). Parr (2016) also says that
Oliver “burned through people like crazy… top management was coming and going”. Thus, it is
shown that RI does not take into account the welfare of their employees, therefore leading to
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The application of democracy in workplace is inevitable and ethically preferred. In the process of
instituting a participative and autonomous workplace, it is not uncommon for paradoxes to occur
autonomy and have agency over their own tasking is especially observable in RI’s operations.
RI’s approach of selecting business venture ideas to clone and execute, followed by tasking
(Baumann et al., 2018). Thus, despite RI statement of “enabling entrepreneurship”, where the
company provides startup founders with resources to kick-start the launch of the venture, it runs
counter to the reality that the founders are not given the full autonomy to actualize their vision
when RI selects ideas that they deem best. In addition, it was noted that the CEO, Oliver Samwer
was a “micromanaging and domineering boss, calling startup founders at all hours to pepper
them with questions”, showing that every autonomous action that was taken would be heavily
As seen in RI’s organisation, it is exemplified in Likert’s System I. Within the Likert’s System I,
and fear where communication flow takes on a top-down directional flow. Top-level decision
making and control is also displayed in an organization (Miller, 2015). This is observable within
RI’s outlook towards staff retention. As mentioned in the earlier portion (2.2.1), many employees
of both past and present cited that the workplace culture was harsh and working hours were long,
thus it is observed that RI values production over concern for staff well-being. Employees of the
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various entities by RI risk losing their jobs if they are classified to be substandard as compared to
their colleagues (Parr, 2016). Key Performance Indicators (KPI) are often demanding at RI
companies, and underperformance does not go unnoticed. Employees with KPIs unmet, no
matter hierarchical seniority, are dealt with critically. This is a pressing concern due to
employee is removed from his or her post prematurely, they also risk losing their share of equity
where it comprises of components alike organs in a human body that work independently in
order for the organization to function and exist. Requisite variety is a system property which
states that an organization’s relationship with its environment must be as intricate as the
problems of the ecosystem it exists in (Miller, 2015). RI’s network of companies has brought
about a multitude of services within the technological space across globe. Businesses and
services that were once native to North America and Europe were brought to the then-developing
APAC region. In particular to Singapore, where online merchandising giants such as ASOS and
Amazon were exclusive to the western part of the world, the penetration of RI in the local
landscape had since brought similar services which were lacking in this part of the world. Zalora
and Lazada are just some of the entities by RI that had populated this part of world with
e-commerce and e-retail services. These services were unprecedented prior to circa 2012, when
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the said brands officially entered the local e-commerce scene. Thus, it is conclusive that RI had
Rocket internet has included measures that is ethical in the global community. They have
exemplified their worth through several factors that has positively impacted the environment.
These includes coming up with standard guidelines for their business ventures, introducing new
services into new markets and cultivating a startup culture within each region.
First of which would be taking into account of environmental matters which they have
considerably requested indications from their targeted companies if their business activities are
involved in any adverse impact on the environment. They also encourage initiatives that would
technology. As seen in the Non-financial report, it is stated that RI has taken measures to ensure
that all their businesses are environmentally friendly and exclusively deals no notable
environmental damage. Therefore, it shows how they have vastly contributed in making an
environmental impact in their organisation globally. RI’s notion of advocating for greater
environmental awareness has trickled down to its subsidiaries such as Zalora. Job positions such
as the ‘Regional Sustainability Manager’ were created in efforts to place emphasis on the
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organization’s high ethical standards, pertaining specifically to adhering to ethical trade, concern
One example of this can be linked to Singapore. Before local online retail shops were available,
Singaporeans only had access to older platforms like Ebay to buy items from other people online.
With Zalora and Lazada- both started by RI- the online retail industry in Singapore and
Southeast Asia as a whole has really boomed. In a report from the US Department of Commerce,
the online marketplace in Singapore is growing faster than ever and is expected to have a 10.1%
annual growth rate by 2022 (Singapore- eCommerce, 2018). The ease of purchasing items from
these online marketplaces followed by swift deliveries makes shopping online a breeze.
Furthermore, Zalora and Lazada encourages people to spend by having bumper sales such as the
Single’s Day sale and the “11.11” sale, which has led to huge jumps in sales figures (Tee, 2019).
and is notable for incubating businesses by providing it with the necessary capital and resources
until its establishment. Oliver Samwer mentioned that the business structure of the company has
been greatly recognised and valued for its efforts invested to nurture a startup culture in various
countries all over the globe, especially in Berlin, Germany (Schröder and Tuma, 2019). Aside
from contributing capital, RI also provides aspiring entrepreneurs the security to establish a
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experiences which may be obtained from setting up their businesses at Silicon Valley (“Can
Conclusion
Rocket Internet has been hugely successful in the tech space, affirming its foothold in the
entrepreneurship in the process. It is worth noting that the company has had its downfalls. At the
pace RI duplicates businesses, it is no surprise that despite the advocation for startup culture, it
leaves a limited capacity for creativity from employees to innovate in their respective roles.
Employee’s satisfaction can then be correlated to RI’s volatile rate of staff retention. Despite the
bad press and negative connotations that come with ‘copying’ successful businesses, RI’s
business model has been proven as an effective and efficient method - through its portfolio that
encompasses numerous business entities that have successfully gone public. RI’s swift hiring and
firing processes and structured methodology to run a business are attributable to the company’s
progress and these factors will continue to pave the road of success for RI in the years to come.
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