Strategic Management for Alibaba: Analysis and Recommendations

This report analyses the external and internal environmental factors of Alibaba, along with business and corporate level strategies. It recommends new strategies for the development of the company's business, evaluated using SAF Framework.

Running head: STRATEGIC MANAGEMENT
Strategic Management
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Executive Summary
The report has helped in analysing the external environmental and internal environmental
factors of Alibaba that has helped in understanding the factors that has affected the tasks of
Alibaba. Proper analysis has been done that has helped in understanding the issues with
proper implementation of different kind of strategies. The business and corporate level
strategies have been analysed and the strategies has been provided wherein proper digital
marketing has been chosen as this will help the company in gaining competitive advantage in
the entire market. Certain strategies have been recommended for the development of the
company`s business. These strategies have been evaluated using SAF Framework, followed
by risk assessment and detailed description of the strategy.

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Table of Contents
External Environment Analysis.................................................................................................3
Industry Analysis using Porter’s 5 forces..................................................................................6
Overall market prospects and competition - this should be based on the SBU analysed in
Porter’s five forces.....................................................................................................................8
Opportunities and Threats..........................................................................................................9
Strategic Position of Alibaba...................................................................................................10
Corporate Strategy of Alibaba.............................................................................................10
Business Strategy of Alibaba...............................................................................................11
Identification of possible new strategies..................................................................................11
Corporate Strategy...............................................................................................................11
Market Prediction on Strategic Business Unit – China........................................................13
Screening of Options using SAF Framework..........................................................................13
Marriage Introduction Strategy............................................................................................16
Full description of recommended strategy...............................................................................18
Key issues in implementing the strategy – risk assessment and management.........................19
References................................................................................................................................20

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External Environment Analysis
Proper PESTLE analysis is required and it is essential in nature for analysing the
Political, economic, social, technological, environmental and legal factors that will create
huge impact on the environment. Alibaba Group Holding Limited is one of the Chinese
multinational e-retail markets and the respective food chain has its own challenges both
externally and internally. In order to follow the standards along with the different kind of
contemporary trends, it is essential in nature to conduct the PESTEL analysis that will assist
in understanding the different kind of current market demands and trends (Alibabagroup.com,
2018).
Political Factors is one of the major factors that play a significant role in determining
the different kind of factors that impacts the long-term profitability of Alibaba retail store.
Alibaba Group is operating in speciality retail department in more than dozens of countries
and there is different kind of political system risks as well (Mastropieri and Scruggs 2017).
Alibaba needs to closely analyse the different factors in entering or investing in certain kind
of market that includes the following:
 Risk of the invasion of military
 Favoured kind of trading partners
 Regulations relating to pricing along with other tariffs
 Labelling of the product along with mandatory kind of employee benefits
 Industrial safety kind of regulations in the company as well
Economic factors are the other element wherein Alibaba can use the economic factor
of the country that includes the rate of growth along with inflation and economic indicators as
this can impact the competitive advantage of the company (Lasserre 2017). Alibaba needs to
analyse the different kind of economic factors that includes the following:

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 Rate of unemployment in the country
 Level of education in the economy
 Labour costs along with productivity in the entire economy
 Quality of the infrastructure in the speciality retail store along with gaining
comparative advantage
 Exchange rates along with stability of the currency of the host country
Social Factors is one of the other factors that are required to be analysed in an
effectual manner wherein the culture of the society along with performing other things
impacts the culture of the organization along with the environment. Alibaba needs to
understand the customers of the market and design the marketing message for the speciality
retail and it helps in analysing the following factors:
 Skill level of population along with culture of the society
 Class structure along with hierarchy in the entire society
 Interests of the leisure
 Attitudes that include environmental consciousness
Legal Factors is one of the factors wherein the different kind of institutions and legal
framework are not robust in nature as this helps in protecting the intellectual property of the
organization. The firm carefully evaluate the before entering into the market. The different
kind of legal factors that Alibaba limited wherein leadership should consider while entering
the new market are as follows:
 Protection of data
 Health and safety laws
 Employment law
 Discrimination law

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 Antitrust laws in speciality retail
Environmental factors are the other factor wherein there are different kinds of norms
and environmental standards that can impact the entire profitability of the company in an
ineffective manner (Grant 2016). Before entering into the new markets, proper evaluation is
required to be done in order to evaluate the environmental kind of factors that are required in
operating in the market. The environmental factors include:
 Climate change
 Weather
 Laws regulating to environment pollution
 Endangered species
 Waste management in services sector
Therefore, it can be concluded that PESTLE analysis is essential in nature as this
helped in understanding the rules and regulations that is required to be followed by Alibaba
in gaining competitive advantage and gain customers.

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Industry Analysis using Porter’s 5 forces
Ali Baba is one of the biggest online retail stores. The company offers various goods
and services to the given target market. The company is a giant in the given industry and
thus, it sees to it that it is able to cater to the needs of the target market and provide premium
goods to its customers. The given section will undertake the Porter`s Five Forces analysis of
the given industry in China (Jarzabkowski and Kaplan 2015). The Porter`s Five Forces is an
external environmental tool which helps in the analysis of the industry factors that exist in the
business environment.
Competitive Rivalry in the Industry
The competitive rivalry is encouraged by the players who are present in the given
industry and serve as the competition to it. There are various online retailers in the given
industry ranging from Amazon, Wish.com and others. The companies engage in
international competition with one another and offer services like free delivery, online offers
and all goods required. The competition is extremely high in the given industry and each
company wants to perform well by providing various offers and coupons so that they are able
to attract the maximum crowd (Morschett, Schramm-Klein and Zentes 2015).
Along with the extensive international brands, Ali Baba also competes with the local
brands. The local brands provide cheaper prices with better goods (Johnson 2016).
Threat of New Entrants
The threat of new entrants in the given industry is comparatively very high. This is
because the given industry is offering consumer goods which are basic necessities and the
market is very attractive. This is because of the nature of the goods involved. The
competition is also very fierce in lieu of which the companies offer comparatively lower

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prices (Hill, Jones and Schilling 2014). The current retailers have also developed a first
mover’s strategy which is then again a disadvantage for new companies.
Threat of Substitutes
The threat of substitutes is very high. This is because there are various other one retail
products which are present in the industry and act as a substitute. This options which are
substitutes include options like alternative options. The switching cost for the customer is
very easy. And there is no differentiation involved hence it leads to substitution threats.
The power of customers
The bargaining power of the buyers is comparatively very low. This is because the
number of customers purchasing the products is generally large and a shift in the change of
one consumer would not affect the other consumer. The customers are less sensitive to price
fluctuations which are relatively inelastic and therefore, the sellers enjoy the power.
The bargaining power of suppliers
The bargaining power of the supplier is comparatively very low and weak because the
raw materials required in the industry are basic commodity products which are easily
available.
Therefore, it can be concluded that the threat of substitution and the competition
rivalry is the highest in the given industry.

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The Porter`s Five Forces of E-commerce Industry (Source: Grant 2016)
Overall market prospects and competition - this should be based on the SBU analysed
in Porter’s five forces
The e-commerce market in China continues to grow largely and the singles day
celebrated in China witnessed the growth of the electronic commerce which has been
evolving digitally. The giant Alibaba experienced a growth of 39% in comparison to 2016,
which suggests that the consumers are confident and the consumption will e continuously
rising.
The economy of China is growing steadily and is at a GDP of 6.8% which is a
positive momentum. The healthy disposable income growth is 7.5% which can be observed
as a positive sign ( Hahn 2015). The consumers in China have been spending more and the
spending percentage has been increasing to more than 43% annually. The given rate is more
than other global rates.

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The e-commerce market in China is on an upward slope and there are various trends
prevailing in the given industry like the shopping festivals of e-commerce websites, online
and offline merging, Digital payment options, media platform usage and the consumer
upgrade option. The various competitors present in the industry are Group on, JD.com and
EBay.
 Alibaba- Alibaba operates in the present market through channels like Tmall, Taobao
and online which sells almost every product available in the market.
 JingDong( JD)- is the primary competition to Alibaba which focuses on electronics
and other consumer goods. However, the give n website is famous for its electronic
range.
 Suning- The suning is another e-commerce platform which again sells electronics.
 Yihaodian is an e-commerce website selling daily groceries and food products.
 Jumei- This e-commerce industry is selling cosmetics online, and has been growing
cross border selling recently.
 WeiPinHui- The e-commerce retailer also sells discounted cosmetic products which
stores mostly international brands.
 Xiao Hong Shu is selling imported fashion, products and related cosmetics.
Opportunities and Threats
There is different kind of opportunities of Alibaba:
 Alibaba has the proper opportunity to capture the greater market share in the entire
market with AliExpress and Lazada (Serra and Kunc 2015)
 Potentiality of becoming the entire market leader in the computing of cloud
 Strong growth in the retail and wholesale business as well

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There is different kind of threats of Alibaba:
 There is huge and stiff kind of competition in the E-commerce market (Carroll, Primo
and Richter 2016)
 Alipay may lose the entire global market share as there are different kind of other
existing other players in the entire market (Jarzabkowski and Kaplan 2015)
 There has been increase in the number of the fakes that can affect the entire core
competency (Chang 2016)
Strategic Position of Alibaba
Corporate Strategy of Alibaba
Alibaba has tried to popularize the selling of One-Click wherein the customers can
buy different kind of goods and services with just a click on the mouse or the mobile
application (Bromiley et al. 2015). Furthermore, it has been seen that the current corporate
strategy of Alibaba Group is basically built around the convenience aspect wherein the

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different customers do not need to go the physical store and purchase different items as well.
Apart from this, Alibaba Group Holding Company has focused on the overall cost leadership
strategy with little kind of product differentiation and this helped them in competing with the
different customers in the market as well (Koseoglu 2016).
Business Strategy of Alibaba
Alibaba Group Holding needs to regularly enter into the new niches and segments
wherein they made (Baker and Saren 2015). The sophisticated global kind of logistics helps
in representing the solid bases in the terms of the other competitors in the market and this
helped them in gaining competitive advantage. Presently, the company has launched the
home services in a simple manner that has assisted them in focusing more on the leadership
approaches and this created huge strengthening of the ecosystem of Alibaba Group Holding
Company as well. The senior kind of leadership helps in engaging in deriving maximum
benefit from each of the component in the ecosystem of the company in an effectual manner
as well.
Identification of possible new strategies
Corporate Strategy
 Ali Pay- As the technology has advanced, the digital payment options have become
increasingly popular whereby the companies have restoring to no cash options of
payment. This no cash option will increase transparency and decrease the potential
risks involved in the black money market. To combat with this, Ali Baba can come up
with options like a digital payment option named AliPay. AliPay were act more like
an online wallet and payment system which will allow the different users to use the
AliPay portal and platform to make the different payments online. This will provide

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consumers with an option to save money when they resort to online options and
increase ease of working on the company`s side.
 Development of a new SBU- Virtual Reality is the new future. The company should
try and see to it that, it is able to enter into a new segment and develop stores based on
virtual reality. The virtual reality allows the users to shop by venturing into a new
mode of technology whereby the consumers will be able to view the online store and
make purchases accordingly. The customers will be displayed different products and
the different customers who will hold a gaze at a particular product for more than a
few seconds, that particular product will be put into the basket. This will allow the
company to save costs and invest in other better opportunities.
The market share of Ali Baba`s of 2016 (Source: Merat and Bo 2013).

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Market Prediction on Strategic Business Unit – China
Firstly, Alibaba Group Holding Company needs to develop different kind of
introduction of marriage along with introduction of dating of the individuals in their website.
This strategy is interesting and this will help Alibaba Company in gaining more competitive
advantage in the market in an effectual manner as well (Helfatand Martin 2017).
Furthermore, the dating introduction along with marriage will help them in competing with
other online e-commerce companies as this is the complete new introduction that can attract
the youngsters and this is generally for the young generation itself.
Secondly, elderly care can be provided by Alibaba to the individuals who need proper
care and different kind of services in an effectual manner (Zott and Amit 2015). Proper
ascertainment can be made by them as this will help the company in gaining strong customer
base. It has been seen that there are different kind of old individuals who are in need of
proper care and support as they live alone and their children stay outside, for them this is the
best possible option and this can be easy for them to access such elderly individuals as well
(Gomes, Barnes and Mahmood 2016).
Screening of Options using SAF Framework
Ali Pay
Framework Components Strategies suggested
Suitability As the firm has been in the
business since a long period
of time, the company can
manage to invest the give
amount in extending its

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operations and investing in
the Ali Pay domain.
Acceptability The idea will be highly
acceptable by the customers
and the customers might get
a new payment option
which they would like to
invest in and give it a try.
Feasibility The strategic option is
highly feasible as it goes a
long way in helping the
firm to compete with its
other competitors in the
given market and develop a
new private payment option
(Kalkan and Bozkurt 2013).
Virtual Reality
Framework Components Strategies suggested

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Suitability The firm has no prior
experience in the given
scenario and hence, there
exists a major doubt whether
the company will be able to
easily execute the given
strategy or not.
Acceptability There are high chances that
the customers will not be able
to accept the given offering
by the company. This is
because the customers might
find it very difficult to adhere
to the new style.
Feasibility There are few chances that
the company might be able to
achieve success in the given
strategy as the company lacks
experience and the execution
might not be completely
successful (Lasserre 2017).

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Marriage Introduction
Strategy
Elderly Care
Framework Components Strategies Suggested
Suitability The suitability is not high in
nature as the elderly
individuals may not be able
to use the different
Framework Components Strategies Suggested
Suitability The idea is suitable in nature
wherein the young
generation will be attracted
towards the app and this will
help the company in gaining
competitive advantage in the
market as well. The
suitability is huge in nature
as the marriage and dating
app introduction by Alibaba
Group Holding Company in
solving the different kind of
other options and attract
customers as well
Acceptability This strategy is acceptable in
nature wherein this will help
Alibaba Company in
managing the different kind
of other competitors in the
market. Proper analysis of
the strategies is essential in
nature as this helped them in
gaining huge customer base
Feasibility The feasibility is strong in
nature as this will help the
entire company in making
the customers use the app in
an effectual manner. Alibaba
needs to analyse the

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applications in mobile phone
and this can create hassles
for them as well. This kind
of strategy is not up to the
mark and this causes huge
issues in the Alibaba
Holding Company as well
Acceptability The application may not be
suitable for the elderly
individuals in the market as
this is based on
technological advancements
and usage of the app by
them is not easy. The
strategy has to be reframed
by the company in an
effectual manner as this will
help them in gaining
customers
Feasibility The feasibility is low in
nature as there are
individuals who do not have
the proper knowledge about
the different kind of
applications that are on the

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mobile phones. Proper
analysis is required to be
done as this will help them
in making the system
competitive in nature
Full description of recommended strategy
The strategy that has been recommended is the strategy to develop the financial
services and invest in the AliPay option. As the technology has advanced greatly, the firm
can take advantage of the advancement and digitalise its services. This shall go a long way in
making the firm successful in the eyes of the customers. Adhering to the digital way of
making payment online, the company will be able to easily track the revenue it has been
earning and avoid circulating of cash in the economy. This will ensure that all financial
payments which are made, have an easy re ord. On the other hand, the customers will also
find it easier to avail the given service and make payments in an easy method.
Key issues in implementing the strategy – risk assessment and management
The key issues in implementing the given strategy are given as follows:
 Increased research and development costs- Ali Baba will be required to engage in
proper research and development activities to come up with the new payment option
for the users which can take time and large funds as well.
 Increased technological costs- The digitalised payment options is very expensive to
implement and generally quite expensive which will then increase the costs of the
firm.
 Risk of unacceptability - The new may or may not be accepted by the customers.

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Management:
Ali Baba needs to manage these risks by indulging in a proper scanning of the
external environment. This will ensure that the company is able to match with the needs of
the external environment and make decisions correctly.

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