Ethics

From Customer-To-Manufacturer to Farm-
To-Customer: Pinduoduo’s Business Model

Transformation for Sustainability
Presented By:- Meehi Vijayvergiya 23GSOB2010824
Divyansh Gupta 23GSOB2011008

Amit Kumar 23GSOB2010906
Priyanshi Parmar 23GSOB2011176
Shreya Priyadarshni 23GSOB2010835

INTRODUCTION
Launched in 2015, Pinduoduo is a social e-commerce app that's based

on "team buying," where customers can use social media to build a
"shopping team" to get a better price on a product. The bigger the
shopping team, the bigger the discount. Users can also earn free
shipping, free products, and other rewards by playing games and
entering competitions all of which are geared toward encouraging
customer referrals and social sharing.And that's the main unique
selling point of Pinduoduo: It's designed to incentivize customers to
share products via social media and, in turn, increase sales for the
brands that sell on the platform.
SUMMARY
Pinduoduo (PDD) is a leading e-commerce platform that has transformed its
business model from C2M to F2C. This transformation has helped PDD to gain
competitive advantage in the e-commerce industry, as well as create economic and
social value. Pinduoduo has transformed its business model from C2M to F2C to
gain competitive advantage, create economic and social value, and provide the
"best value" to its customers.
 PDD is able to maintain its competitiveness in price by directly linking customers
with small-scale farmers in remote rural areas.
 PDD has improved its image by focusing on selling fresh produce that is healthy
and high-quality.
 PDD has enabled consumers to access fresh, high-quality produce at competitive
prices.
 PDD has helped to promote the development of rural areas and improve the
livelihoods of rural farmers.
 PDD has attracted customers from tier 1 and 2 cities by offering a wide variety
of products at competitive prices.
 PDD has created business opportunities in rural areas by providing a platform
for small-scale farmers to sell their products to consumers in cities.
 PDD has attracted young talent back to their home towns by offering high-
paying jobs in the agricultural sector.
 Overall, PDD's business model transformation has been a success in terms of
gaining competitive advantage, creating economic value, and generating social
value. Pinduoduo has transformed its business model from C2M to F2C to gain
competitive advantage, create economic and social value, and provide the "best
value" to its customers.
BUSINESS
MODEL
DRIVER’S OF PINDUODUO’S
BUSINESS MODEL TRANSFORMATION
This can be discussed from different perspectives based on ’ choices of strategic tools,
such as with a PEST analysis. For example, I use PEST analysis, we can discuss the drivers
from economic, political, social-cultural, and technological perspectives. The case
information indicates how economic, political, social-cultural, and technological changes
in the macro-environment may encourage the transformation of the business model.
Table 1. PEST Analysis
Political (P) Economic (E) Social-cultural (S) Technological (T)
• Policies on • The growth of e- • The left-behind children in • The spread of e-
poverty business rural areas business
alleviation
• Disparity in • Disparity in shopping • The use of
disposable incomes behaviors/demands of technologies in
between cities in customers between cities in logistics
different tiers different tiers
Alternatively, I also use SWOT analysis, that is considering the particular
circumstances of the case organization to establish its strengths, weaknesses,
opportunities, and threats and how these may act as the drivers of business model
transformation. The drivers can be further considered as internal strengths and
weaknesses and external opportunities and threats.
Table 2. SWOT Analysis
Strengths (S) Weaknesses (W) Opportunities (O) Threats (T)

• Price • Quality of products • Sufficient supply from • Competition from
farmers Alibaba and
JD.com
• C2M business • Limited scope of • Potential human • Negative brand
model customers capital image and
criticism from
customers
• Lack of business • Support from local
diversification government
PINDUODUO’S ENGAGEMENT IN STRATEGIC
CORPORATE SOCIAL RESPONSIBILITY
 Adoption of the F2C model is strategic CSR, unlike the adoption of

C2M.
 With the transformation of its business model from C2M to F2C,
PDD incorporated a commitment to the wellbeing of farmers, rural
revitalization, and the development of new industries
 The most significant signal of engaging in strategic CSR is that PDD
has now redefined itself as the agriculture platform.
 Business model transformation helped to revitalize the agriculture
industry, relieve poverty in rural areas.
PINDUODUO’S VALUES
A company can create both economic and social values (Chandler, 2019). Regarding
economic values, for example, the rapid growth of PDD created more job
opportunities for employees, best prices for their customers, more tax for
governments, larger volume of orders for manufacturers, and new business
opportunities for farmers. In terms of social values, business model transformation
helped to revitalize the agriculture industry, relieve poverty in rural areas, and foster
a healthier social norm: farm-to-table. The values created also vary from stakeholder
to stakeholder. we are encouraged to discuss the different values for different
stakeholders (e.g., customers, suppliers, employees, government, etc.). They may
also discuss value destruction for some particular groups of stakeholders, such as
intermediaries.
ROLE OF TECHNOLOGY IN PINDUODUO’S
BUSINESS MODEL TRANSFORMATION
This is an open-ended discussion question. From the case information, we should be
able to identify that technology enabled PDD to create a new business model by
providing a digital platform that directly con-nects manufacturers and customers
(technology in an enabling role for PDD). Moreover, we may find that technology
also empowers farmers using the platform to successfully transition to online selling
and build a successful business (technology in an empowering role for stakeholders).
Further, technology then facili-tates the development of rural areas by creating new
business opportunities and attracting young people back (technology in a facilitating
role for local areas). we are also encouraged to discuss the negative aspects of
technology. For example, R&D investments in new technologies are normally very
high and R&D strategy is risky, especially for small, young firms seeking to make
profits and meet their earnings benchmarks in a short time. If we think of
themselves as in-vestors, or directors on boards, what should they evaluate to
decide whether the investment in technology is a wise one or not? The discussion
could be supported by including the article recommended in Further Reading.
Q. Is it appropriate or ethical for PDD, as a for-profit
company, to profit from poverty?
We could discuss the ethics of business according to a triple bottom line of
sustainability (i.e., economic, social, and environmental). To achieve sustainability, a
business cannot merely focus on economic outcomes, even if it is a for-profit
company. While it is appropriate for PDD to target customers in tier 3 and 4 cities
and rural areas to avoid direct competition with Alibaba and JD.com (i.e., economic
bottom line), it is unethical to sell defective products, even if the majority of
customers are price sensitive and not brand conscious. PDD’s innovative business
model allows it to achieve profits for itself while also having broader social value in
cre-ating new business opportunities, training young people, and helping to alleviate
poverty in rural areas. This business model innovation shows that it is possible to
achieve both economic and social value.
CONCLUSION
Pinduoduo, a prominent player in China's e-commerce industry, has successfully
transformed the shopping experience from intent to scene. However, the rise of AI-
based algorithms has reduced consumers' ability to actively choose online, with only
42% of users using the search function. Most consumption needs are motivated by
sharing links, page pushes, and discounts. Pinduoduo faces challenges such as low
customer unit prices and high marketing expenses, as well as reputation issues due to
fakes and poor commodities. The external environment has become more severe, with
Tencent's promotion traffic restricted, and e-commerce giants like Taobao and JD.com
focusing on the low- and middle-income market. To better respond to fierce
competition and changing market demand, Pinduoduo needs to focus on long-term
development. The senior management is focusing on formulating the company's long-
term strategy, stabilizing and strengthening its development advantages through
corporate organizational structure and governance adjustments. Pinduoduo prioritizes
finding new profit growth points and establishing a sustainable business model in the
future.

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From Customer-To-Manufacturer to Farm-

To-Customer: Pinduoduo’s Business Model

Presented By:- Meehi Vijayvergiya 23GSOB2010824

Divyansh Gupta 23GSOB2011008

Priyanshi Parmar 23GSOB2011176

Shreya Priyadarshni 23GSOB2010835

Launched in 2015, Pinduoduo is a social e-commerce app that's based

Strengths (S) Weaknesses (W) Opportunities (O) Threats (T)

 Adoption of the F2C model is strategic CSR, unlike the adoption of

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