Strategic Management: A study on Alibaba.com

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Strategic Management: A study on Alibaba.com
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Table of Contents
Introduction 2
Task 1: Analysing Strategic Opportunities and Threats 3
Porter’s Five Forces Model 3
SWOT Analysis 4
Pest Analysis 5
Industry Timeline: Now and the Future 6
Task 2: Generic Strategy Analysis 6
Porter’s Generic Strategies: 6
Task 3: Evaluation of Strategic Capabilities 8
VRIN Framework 8
Task 4: Growth Strategy 10
Ansoff's Framework: 10
Suggestions: 11
Conclusion 12
References 13
1

Introduction
Alibaba, the Chinese e-commerce giant was founded in 1999. Its founder Jack Ma, after securing
loans from overseas banks and facing many hurdles was finally successful in founding the
organization (Tan, 2016). It eventually grew to be the largest e-commerce based organization in
China and also the largest in the world (Tse, 2015). In September 2014 Alibaba received an
initial public offering (IPO) on the New York Stock Exchange during which the company was
valued at an unprecedented $231 billion (McCarthy, 2014). However, it also marked the time
when Alibaba started facing various odds in its market. Its profit helved in the first quarter of
2015 and it also started facing fierce competition in the domestic market from JD.com.
Considering the precarious condition, the organization was in, the then CEO was fired and the
chair was offered to Daniel Zhang in May 2015 (JOHNSON et al. 2017).
The aim of this assignment shall be to carry out a detailed analysis of the condition of Alibaba in
the context of its present situation in the market. Both internal and external conditions of the
organization shall be given weightage in carrying out the study. It shall be a multi-pronged
approach where first, Porter’s five forces model shall be used to determine Alibaba’s position
with respect to the competition in the market. It shall also form the basis for further carrying out
the SWOT and PEST analysis which would help in revealing the opportunities that are open
before the organization and the necessary course of action that it can take in the present and in
the future.
Furthermore, Porter’s generic strategy analysis shall provide a conclusive idea about the strategy
that the management of Alibaba can formulate and implement that shall be appropriate with
regard to Alibaba’s current market position. Besides, the VRIN framework shall help in carrying
out a study of the resources available at the disposal of Alibaba and it can be known whether
they are sustainable in nature. Finally, Ansoff's framework shall lay the foundation of the
strategic decisions that can be taken by the managers and executives of the organization. It is
hoped that the current study shall provide valuable insights into the problems that Alibaba is
facing and subsequently recommendations shall be provided in order to overcome the same.
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Task 1: Analysing Strategic Opportunities and Threats
In order to determine the next course of action that an organization can take it must have to be
known whether it is in a vulnerable or advantageous position in the market. Its strengths and
weaknesses have to be rationally categorized and weighed against one another in order to
understand the nature of strategy that the management shall have to adopt. The following
sections shall contain the Porter’s five forces model, SWOT analysis and PEST analysis for
Alibaba.
Porter’s Five Forces Model
Competitive Rivalry (High)
Alibaba is currently experiencing high competitive rivalry both from international and domestic
e-commerce organizations. With respect to the international organizations like Amazon and
EBay, Alibaba has successfully surpassed them but at present the competition faced by domestic
giants is stiff. JD.com is especially giving a lot of trouble to Alibaba. JD has a far better delivery
network compared to Alibaba which uses China’s governmental postal service (Alibaba.com,
2018). Customer’s wishing for quicker delivery of their products are often opting for JD.com.
Threat of New Entrants (Low)
The threat of new entrants within the e-commerce sector is relatively less. Establishing an e-
commerce company requires a lot of investment and resources which cannot be easily acquired.
Moreover, with the existing companies in the market where their reputation still stands strong,
there can only be a thin possibility of new entrants emerging in the market.
Bargaining Power of Suppliers (Low)
It needs to be known that Alibaba’s international network creates an opportunity for retailers in
China to sell their products overseas which accounts for a substantial portion of their revenue
and compared to Alibaba their sizes are relatively small (Dongwei, 2016). Therefore, these
retails cannot afford to lose their relationship with Alibaba as this would mean a huge loss for
them. Thus, the bargaining power of suppliers is low.
Bargaining Power of Buyers (Moderate)
Previously, when there were not many sites like Alibaba where one could access various kinds of
products that could be ordered in lots, the bargaining power of buyers was very low. However,
specialized e-commerce sites have started emerging in various countries in the world
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