Business Enterprise Report: PEST Analysis of Alibaba Group

This report provides a comprehensive analysis of Alibaba Group, a leading e-commerce and technology company based in China. It begins with an introduction to Alibaba, its founding, services, and market position, including its significant growth and global presence. The core of the report is a PEST (Political, Economic, Social, and Technological) analysis, examining the external factors influencing Alibaba's operations, such as the China-US trade war, economic growth in China, changing consumer behaviors, and technological advancements. The analysis identifies key challenges, including the impact of trade wars on revenue and the need for continuous technological investment. The report concludes with recommendations for Alibaba, emphasizing the importance of strengthening revenue through digital advertising, expanding into rural markets, and adapting strategies to navigate the evolving political and economic landscape. The report uses references like Clark (2018), Kim (2018), Rothaermel (2016), Wu and Gereffi (2018), Zhang and Wang (2018), and Zhong (2019) to support its findings.

RUNNING HEAD: BUSINESS ENTERPRISE
0
Business Enterprise

Business Enterprise
1
Introduction
Alibaba Group limited is a company based in China and offer services related to e commerce,
internet, retail and technology. The company was founded in 1999 by Jack Ma and provides business
to business, business to consumer and consumer to consumer sales services through web portals;
cloud computing, electronic payment services and shopping search engines. The company was started
with the investment of $80,000 from 80 investors. Alibaba partnership with Yahoo in 2005 and
Yahoo took 40 percent stake in the company. Alibaba operates 22 percent of its business in towns and
village in 2014. Alibaba ranked 9th at the global level for brand valuation and is one of the biggest
investment corporations and venture capitals firms in the world. Alibaba evolved as a digital
company and provide energetic, unique and innovative solutions to satisfy need and demand of
consumers (Clark, 2018).
Alibaba retail e commerce segment covered 58.5% market share in China but increasing competition
from big players make it difficult for the company to survive and grow across the world. The
company returns to growth as in 2019, revenue of the company grew up to 51% to $13.9 billion. The
monthly reach and active users of Alibaba increased significantly in 2018. In near future, the
company will plan to expand in Europe, Asia and Middle East. Inspite of strong position of Alibaba
in the Chinese market the company is facing challenges to operate at the global level because of
competitors like Amazon (Wu and Gereffi,2018).
PEST Analysis
Political Factors: Alibaba is a leading player and operates at the global level due to that facing many
political challenges. But in the China market the company can face issue because of China US trade
war and due to changing policies of Chinese government for encouragement of regional businesses.
The trade relationship between China and America affecting the world trade due to that Alibaba
services and operations may get affected or especially expansion of Alibaba in the European countries
might get affected (Zhong, 2019).
Economic Factors: The Chinese economy is the growing economy but due to various factors the
Chinese economy has been flourished and gained second position in the world economy. Alibaba
main factor of success is growth of China economy and due to that the company is able to succeed at
the global platform also. Any changes in Chinese economy affect the operations of Alibaba. Some of
the other factors that can affect the business of Alibaba are employment rate in China, disposable
income of people, and standard of living in China (Rothaermel,2016). Any changes in these factors
lead to issues for Alibaba at the global platform and in the Chinese market.

Business Enterprise
2
Social Factors: The social factors that can affect the operation of Alibaba are change in pattern of
purchasing, free or low cots access to internet services and technological advancement. These factors
provide opportunity for Alibaba in the e commerce segment to expand and grow as most of the retail
outlets changed their model to brick and click and try to expand internationally with the help of digital
technology (Kim,2018). Here Alibaba can take benefit and made strategy to cover the larger segment
at the global platform with its innovative and technological services.
Technological Factors: Technological factors plays a major role for Alibaba as in this industry
Alibaba is a leader. The company gained a strong position in such a short time span. Alibaba mainly
focus and invest on Research & Development and due to that the company attain a position in cloud
industry in China. Technological changes include use of internet, smartphones and increase in digital
technology. However, any technological changes will affect the cloud services segment of Alibaba
and also use of internet and mobile phones change the way companies operate.
Challenges
The challenges that are identified from the external analysis of Alibaba are impact of US and China
trade war on the Alibaba operations. Due to trade war employment rate of China is affecting and the
companies in which Alibaba invested struggle to get profits. Chinese tech companies are struggling
due to this political factor as Alibaba is able to compete but expenses of the company increases and
revenue growth get affected. On the other side, the company showed increase in its revenues but this
is because of the strategy that Alibaba followed of acquiring other small players in the market (Zhnag
and Wang,2018).
Alibaba can take advantage of opportunities that are; changes in technological and social factors such
as increasing use of internet by people and trend of online shopping. But due to these changes the
company may face challenges such as meeting and understanding the demand of customers on timely
manner in order to compete in the market. On the other side, technological advancement frequently
also leads to a challenge for Alibaba as when the company is struggling to maintain its revenue
growth huge investment to be done in updating technology that might affect the whole financial
performance of the company.
Conclusion and Recommendations
It is concluded from the above analysis that Alibaba is a strong player in the e commerce industry in
China and at the global level. But the company is facing challenges because of changing political
environment as US China trade war impacted on revenue growth of the company due to that other

Business Enterprise
3
economic factors such as employment rate and economic growth of China is also affecting and this
directly impact on Alibaba business operations at the global level and in China.
In order to overcome these challenges it is recommended that the company should try to stronger its
revenue through its digital advertising platform and by capturing rural people in China in order to
expand its business all across China as this helps the company to balance its international operation
revenue with domestic operations as because of all this political and economic factor the company is
struggling to operate at the global level and its cost of operations also increased. Hence, Alibaba need
to change its strategies in order to compete and operate in the market.

Business Enterprise
4
References
Clark, D., 2018. Alibaba: the house that Jack Ma built. HarperCollins Publishers.
Kim, Y.C., 2018. Alibaba: Jack Ma’s Unique Growth Strategy and the Future of Its Global
Development in the Chinese Digital Business Industry. In The Digitization of Business in China (pp.
219-247). Palgrave Macmillan, Cham.
Rothaermel, F.T., 2016. Strategic management: concepts (Vol. 2). McGraw-Hill Education.
Wu, X. and Gereffi, G., 2018. Amazon and Alibaba: Internet governance, business models, and
internationalization strategies. International business in the information and digital age, pp.327-356.
Zhang, Q. and Wang, Y., 2018. Struggling towards virtuous coevolution: institutional and strategic
works of Alibaba in building the Taobao e-commerce ecosystem. Asian Business &
Management, 17(3), pp.208-242.
Zhong,R.,2019. Alibaba Reports Slower Growth as US China Trade War Intensifies. Accessed From:
https://www.nytimes.com/2019/05/15/technology/alibaba-earnings.html