Strategies of Alibaba Group for Business in China and Overseas Markets

Running head: INTERNATIONAL BUSINESS STRATEGY
BUS804 International Business Strategy
Session 2, 2018
Individual Assignment (A)
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1INTERNATIONAL BUSINESS STRATEGY
Strategies of Alibaba Group to do business in China
Alibaba Group Holding Limited founded in the year 1999 and it does C2C, B2C and B2B
sales service through web portals. In e-commerce, Alibaba primarily does the business as B2C
(Business-to-Consumer) which enables the businesses to ship their products to the consumers
avoiding all the supply chain in the middle. In addition, Alibaba enables many small suppliers to
supply the products to other businesses which make the different final product procured as profit
(Martinroll.com 2018). The whole supply chain is managed by the suppliers, not Alibaba.
Alibaba Group is holding company and it includes AliExpress, TaoBao, Alipay, AliPictures,
AliCloud and AliMama. Alibaba uses the business model which is simple and precise as in the e-
commerce section, they take the commission on sold goods. This commission constitutes major
revenue for Alibaba. Three major web-portals provide core business to Alibaba, such as Alibaba,
TMall and Taobao. These are all e-commerce websites and they connect sellers and buyers and
Alibaba Group just acts as the middleman. However, target consumers of all three websites are
different which leads to the higher revenue. Merchants list their products on Alibaba website for
free; however, it has 2 types of subscriptions; first one is free where the sellers can list their
names in free; they need to pay commission after generating sales and the second one is Gold
seller where sellers have to pay fees to be ranked higher up (Dongwei 2017). Alibaba cannot
make money based on the products sold through e-commerce as the sellers sell the products at
lowest price. Therefore, the e-commerce does not provide high-margin services and to
counterbalance this, the service side of Ali comes to rescue this. The CEO of Alibaba Group Jack
Ma and Ant Financials control major companies. These service-based companies (AliExpress,
TaoBao, Alipay, AliTrip, AliPictures and AliCloud) get high investment, decent return and high
margin contribute huge money in the business model of Alibaba Group.

2INTERNATIONAL BUSINESS STRATEGY
In the Chinese market, Alibaba developed the company in five steps in the last 14
years. In the first stage, Alibaba brought information to the suppliers when entering the market
and during that period, the trade market of China made little progress which was circulating on
the internet. Jack Ma wanted the SMEs of China must enter the electronic market by accessing
the online services. The second stage of Alibaba came after 2002 after inventing the reliable
certification TrustPass. In this web-portal, Jack Ma guaranteed that the consumers would get the
products without deceit and fraud. The third stage of Alibaba came around 2004 when Alibaba
created TaoBao exceeding the US eBay. Alibaba also purchased Yahoo China in the year 2007
(Alibabagroup.com 2018). In the fourth stage, Alibaba also made its one of the largest IPO and
two main shareholders of the organisation are Softbank (36.7%) and Yahoo Inc. (24%) (Chiu et
al. 2014). During the fifth stage, Alibaba opened its Taiwan office and Switzerland office.
Alibaba management always thinks that this business model is B2C as the total numbers of
business registered has increased with the time. Alibaba understood that sales channels are
inadequate for local small businesses. Alibaba used economic growth and economic reform of
China and many of the SMEs were looking for expansion of the business. Therefore, Alibaba
brought its e-commerce portal to the SMEs so that they can enrich and Alibaba provides
communication through the blogs, forums and groups to the businesses (Forbes.com 2018). In
the Chinese market, Alibaba gathered two sources of profits, first from advertising costs and the
second source is the value-added services of the customers. Alibaba has always been using a
competitive pricing strategy.
As stated by Bowen et al. (2015) diversification strategy involves in widening the scope
across the different market sectors and product. Alibaba Group has taken the strategy of
Conglomerate diversification where they always launched new services that have no prior

3INTERNATIONAL BUSINESS STRATEGY
relation to the current offering. Alibaba adopts this strategy to appeal to all new-group of the
customers and this provides higher return-on-investment in the new market segment. Alibaba
Group has TaoBao which is B2C and C2C focused portal that enables small businesses and
individuals to open stores online. TMall makes money through offering branded products across
the world to attract Chinese growing middle class. TMall charges fee and commission on the
transaction from merchants (Alibabagroup.com 2018). AliPay is a third-party payment platform,
AliMama is an online marketing platform and AliCloud is cloud computing arm of Alibaba.
Reasons for Alibaba’s success in China
Alibaba is successful in China because of the unique business model through providing
diversified consumption selection for the customers. Alibaba Group has three core businesses
and they create e-commerce eco-system. Alibaba’s business model mainly focuses on SMEs and
Alibaba handled the transaction of CNY 3 billion in 2017 (Cnbc.com 2018). Another core factor
of success of Alibaba Group is an unconventional profit model as the profit comes from seller
listing, advertising, keyword bidding. Technological services provided by Alibaba Group give
the profit of 25% based on Big Data. Alibaba removed intermediate fees and they allow Chinese
sellers to register free on Alibaba. In China, Alibaba has 500 million registered sellers. Another
factor of Alibaba Group’s success is accurate credit model which helps to improve trustworthy
reputations. Alibaba asks the sellers to pass the online certification test so that they must not do
any illegal transaction. Alibaba provides excellent support services for satisfying the customers
and its web portal provides positive online experience and comfortable buying environment
(Shenkar et al. 2017). Alibaba does special coding system to have instant communication tool
and they reimburse the money within seven days if any refund required. The sensitivity of any
business opportunity is another reason behind the success of this group. Jack Ma excelled at