Alibaba Group Case Study: Strategies and Governance

This case study provides an executive summary of the Alibaba Group, tracing its evolution from its 1999 founding by Jack Ma to its position as a global e-commerce leader. The analysis covers Alibaba's diverse ventures, including B2B, B2C, and C2C sales, electronic payment systems, and cloud computing. The report examines the company's governance issues, including its initial rejection by the Hong Kong Stock Exchange and subsequent IPO on the NYSE, and the challenges posed by counterfeit goods and competition from rivals like JD.com. It includes a SWOT and Porter's Five Forces analysis to evaluate Alibaba's strategic decisions and international growth. The study also discusses potential measures to combat the ongoing issue of counterfeit products and the overall impact on China's e-commerce landscape, referencing various reports and financial findings.

Ali Baba Case Study

Executive Summary
Alibaba Group was established in 1999 by 18 people headed by Jack Ma. Their only belief
was the power of internet which would help them level the small-time businesses with
assistance of technology and innovation to grow and eventually have a competitive edge in
national and global economy in future. It is China’s and in some measures also world’s
largest dot com company. It’s first venture being Alibaba.com – a simple platform to connect
buyers with China’s small and medium scale manufacturers. It had just 24 items for sale then.
Today, this Chinese e-commerce giant has its hands in C2C, B2C, B2B sales, electronic
payment systems, shopping portals, luxury products site, cloud computing services, online
money transfers, digital media wing (Shih and Qi, 2016), entertainment group etc. Jack Ma
belonged to Chinese city of Hangzhou where he started his career early-first as a tour guide
and then as an English teacher. He wanted to make it big and dissatisfied with the salary, he
started his own translation business after some trips of US, where he learnt about computers,
internet etc. he created the Chinese Yellow Pages and eventually in his tiny apartment started
Alibaba. It is an amazing history of fast paced growth and quickly Alibaba branched out to
various other companies all under umbrella of Alibaba Group. Today, Alibaba has Tmall,
Taobao, AliExpress, Alipay etc. Alibaba, through various mergers and strategic deals has
been dominating the Chinese ecommerce industry. It has always been visionary in its
approach and has been successful in converting the organization into a sustainable ecosystem
in itself.
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In September, 2014, Alibaba came up with largest ever Initial Public Offering. It raised
US$21.8 billion @$68 per share on New York Stock Exchange(NYSE). This is after it was
denied to list itself on Hong Kong Stock Exchange (HKEx) in 2013(Wei and Young, 2015).
This was on the grounds that HKEx did not agree to its request to exempt ‘one share one
vote’ policy (Chow, 2014). That would have allowed all 28 members – former or current
Alibaba managers to have a holding on the process of nominating board members (Burke and
Eaton, 2016).
Alibaba face a lot of adversity in its tenure, first there was threat posed by eBay after its entry
in Chinese market in 2002 just when things had started to look up for Alibaba. Then after
launch of Taobao in 2003, the credibility crisis cropped up after counterfeit goods (Chen,
2016) started surfacing. It plagues Alibaba’s business even today. Threat of new entrants kept
on coming, everybody vying for the lions chunk in new market. Today JD.com stands as the
fiercest competitor for Alibaba in China. Rounds of ‘going public’ and being denied
(Descovich et al., 2017) listing on HKEx owing to governance measures unacceptable by
HKEx made it difficult for Jack Ma, he had to wait for some time more and prepare itself for
entry and listing on NYSE which finally accepted them (Nwogogu, 2016).
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The case report shall briefly outline the case of Alibaba and strategies followed by them. The
report shall try to shed light on the governance issues in Alibaba (Lin, 2017). It shall also
conduct a SWOT analysis and Porter’s five forces analysis for Alibaba which would indicate
us the benefits of altering strategies that Alibaba got, how it eventually assisted Alibaba in its
international growth. The report shall also discuss some of the measures Alibaba could take
up at present to arrest the imminent issue of counterfeit goods (Hu and Guo, 2015). Last of
all, the report shall also discuss counterfeiting scenarios where Alibaba’s fake good problem
has been disturbing for ecommerce of China as a whole and what is ahead for them. For
being able to present the facts and figures to support the views, lots of reports, financial
findings report etc. were referred to which is also attached as appendices for perusal along
with a reference list.
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Table of Contents
CHAPTER 1: INTRODUCTION 6
CHAPTER 2: CASE BRIEF 10
CHAPTER 3: PROBLEM STATEMENT, PLAN OF ANALYSIS 14
CHAPTER 4: ANALYSIS & FINDINGS 22
CHAPTER 5: RECOMMENDATION 28
REFERENCES 33
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Chapter 1: Introduction
The case study ‘Alibaba goes public’ is a presentation of journey of Alibaba from its modest
beginnings to opening the largest IPO offering in US of about US$21.8 billion (Chen et al.,
2015). In the year 2014, Alibaba got its much-awaited debut on the New York Stock
Exchange, crafting not only the largest IPO in record but this original aspiration to list on the
Hong Kong Stock Exchange was refuted owing to the firm's request to reserve its colleague's
power over verdict privileges.
After working as an English tour guide and a teacher in city of Hangzhou, China, Jack Ma
realised his entrepreneurial dream of opening a venture of his own in year 1999 along with 17
others. He had a vision of a global e-commerce company that would survive a 102 year.
Alibaba was born. Ma trusted in his tactic to form a prosperous commerce in the Chinese
setting – universal image, native victory. Dissimilar to numerous other Chinese
businesspersons who modified effective U.S. internet business models that managed
Business-to-Consumer (B2C) and Consumer-to-Consumer (C2C) transactions, Alibaba
shaped its individual commercial prototype. It fixated on the Business-to-Business (B2B)
segment and linked small and medium sized firms with several others and opened it for the
world to communicate with these Chinese manufacturers.
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The Alibaba’s ethos is around supporting small businesses. They have created a functional
ecosystem where everyone who participates, such as, – customers, dealers, third-party facility
benefactors and others – have a break to flourish (Romagnoli and Garbelli, 2017). Alibaba’s
proclaimed six values of doing business are (Tsui et al., 2017):
Customer First - The welfares of society of consumers and vendors. This is their first priority.
Teamwork – This is where they acknowledge the employees who come next to customers.
Alibaba encourages a good team culture and believe that through proper teamwork, miracles
could happen.
Embrace Change – Alibaba acknowledges the fact that change is constant and one must be
flexible enough to adapt and quickly change the situation as a favourable one. Only the fittest
could survive.
Integrity - Alibaba appreciates integrity and encourages its employees to hold this at the core
of every transaction. They should strive to do the right thing and not take up unacceptable
measures.
Passion – Alibaba encourages all its members to keep doing work with a fire within and not
give up hope.
Commitment – Employees are always rewarded with recognition and other perks to keep up
their motivation level
Alibaba could be rightly explained as a combination of Amazon.com, eBay and PayPal with a
trace of Google tossed in, all with some distinctively Chinese personalities. Alibaba has
always worked as an intermediary, unlike Amazon. It simply connects buyers and sellers
while simplifying businesses among them. This is similar to character of eBay except that it
is not an auction organization.
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It competed with eBay to finally overthrow and compel it to exit from Chinese market by
introduction of Taobao (Valero, 2016). Unlike eBay, the only money that TaoBao took from
its sellers was for advertisements and merchant bidding for keywords for routing through
search results. It also introduced its own escrow service which was fee-free called Alipay to
arrest the trust issues between buyers and sellers. Soon, it became plagued with issues of
counterfeit goods and premium brands wanted to detach themselves from such a platform
(Ransom et al., 2014). That is how Tmall came into existence. Yue bao came into existence
on a need basis but eventually catapulted itself as a money parking station which provided
interest rates much more than Chinese banks. TaoBao’s mobile app became very successful
and accounted for 86% of sales in Chinese market through mobile app (Ma, 2016). Alibaba,
after getting its first funding and initial partnership with Yahoo in 2005, had made lots of
changes and has had ownership issues. In preparation of getting itself enlisted in HKEx, it
opted for internal strategies to evade denial of enlisting but all failed (Chan and Ho, 2014).
Finally, after much wait, it took its IPO to New York and Nasdaq. It met with much
objections with many governance experts outright criticising and showcasing pitfalls but
finally Alibaba did have what it sought (Petry, 2014). Their governance measures were
accepted by both Nasdaq and NYSE and the rest is history (Lin and Mehaffy, 2015).
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There are certain questions here so as to - Why did HKEx turn down the e-commerce giant
like Alibaba? How come it denied the dual-class shares or deny its partners to have the rights
of nominating board members? Thereafter despite warnings from governance experts, how
did the governance measures came to be accepted by the American stock market?
The report shall also lay focus on researching strategies that could be adopted by Alibaba in
their international growth strategies. First the report shall present the findings from the case
study such as the positives and negatives in terms of strategies taken up by Alibaba. There is
a section of SWOT analysis (over various timelines) and Porter’s five forces analysis
conducted for Alibaba which highlights challenges faced by Alibaba at different timelines
and examining the strategies adopted for further growth. Alibaba is almost always associated
with fraud imports of fake products. Despite buyer protection programs (Yu and Shen, 2015)
and verified sellers (Sun, et al., 2017), fake products do end up on Taobao website. While
other countries take stringent action in this regard and organizations are pretty protective of
their image, Alibaba’s approach, on the other hand, is not protective at all. The counterfeit
good issue is quite old and has been tormenting them from many years. However, the actions
taken are half hearted what with only 2 lawsuits in 2017. The report shall also discuss the
counterfeit issue faced by Alibaba and what measures it could adopt.
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Chapter 2: Case Brief
E-commerce giant from China, Alibaba got enlisted on New York Stock Exchange (NYSE)
and Nasdaq after being rejected to be listed on the Hong Kong Stock Exchange (HKEx) (Lee,
2015) in 2013. This was following a dispute between Alibaba’s existing governance structure
and the regulations in HKEx. They stressed to support stockholder parity in publicly listed
companies (Nwogogu, 2015). However, the 28 partners of Alibaba wanted their control
‘only’ in nominating the board members in majority. Even though they held a collective
marginal shareholding of minus 15 per cent in the business. This was the controversy. The
HKEx mechanism of an essential public procedure requires that all listed companies’
shareholders must have parity. Hence, the dual share classes as required by Alibaba was not
permitted by Hong Kong Stock Exchange (Hein et al., 2016).
This is totally different to how things function in United States. The US policy for listing
permits dual share classes. There, a group of equity shareholders would have the power to
nominate as well as remove directors if they choose to. This could be done by them when
they need to ensure compliance with severe reporting necessities. Certain organizations even
consider restructuring their management arrangements as well so as to reap the advantages of
dual class policy existent in US (Xiao Hung, 2016). Alibaba is not a sole example, earlier
even Manchester United avoided listing on Hong Kong Stock Exchange and chose New York
Stock Exchange instead.
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Due to the dual-class equity ownership structure existent in US, leading to insider control.
Tech giants like Google, Facebook, both listed on Nasdaq, also take benefit of the two classes
of stocks. that lets insiders retain control. As is evident, US is more favourable for
organizations who may be interested in exclusive commercial arrangements proposing certain
regulatory entitlements (Xiao Hung, 2015).
Now let’s discuss the point of keeping 28 people at the wheel of Alibaba by Jack Ma.
Alibaba has a 28-man conglomerate arrangement, containing exclusively of forefathers of the
business and important older administrators. These 28 people do not sit in board of directors,
however; they could easily nominate most directors with their bestowed powers. They make
the nominations but all stockholders could vote for or against the nomination as their
holdings of the shares. Together, the 28 members own less than 15%, 13% accurately of total
shares of Alibaba. Whereas, Yahoo! Inc.(Yahoo!) and SoftBank Corporation (SoftBank) hold
24% and 37% correspondingly. The residual shares are detained by separate individual
smaller shareholders. Now, whenever the nominations are rejected by the shareholders, the
members could further nominate other people. This would continue till the board of directors
is complete. Jack explains that this is how he ensures that the organization is operated only
the group of people who are passionate about Alibaba and work towards materializing the
vision of the company.
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Joe Tsai, Group Executive Vice-Chairman, also openly supports this view. He deems the
conglomerate arrangement supports to preserve the enterprise's inventive ethos even if the
original creators depart from the firm (Li, 2015), ensuring the firm of a long-term tactical
emphasis rather than bigoted or short-term profits. Just weeks after application submission to
HKEx, in September 2013, Alibaba’s plea got rejected. Negotiation did not help the situation.
As discussed this was owing to HKEx’s mandate to provide parity to all shareholders - “one
share, one vote” code. Alibaba’s proposal for listing provided the 28 partners with extra
power to nominate board of directors. HKEx asserts that such a framework would provide
shareholders who collectively hold a small margin of shares more powers. Charles Li, CEO
of HKEx, strengthened this stance by clarifying that HKEx does not approve of a structure
like DCS except in exceptional cases. He also insisted that just for one applicant rules could
not be bended.
The prerogative of this research report is to investigate the choices make by Alibaba in opting
for NYSE. How is it going to chart its path of further future growth. What are the challenges
in environment for Alibaba at present and what are some recommendations it could follow.
The report shall also attempt to conduct a SWOT and PESTLE analysis for Alibaba and
deduce actions that could be taken by it.
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Also, a major issue in front of Alibaba is the counterfeit goods issue. The report shall try to
look for ways in which Alibaba could attempt to resolve the issue. It is however wise to hold
realistic expectations in this regard. This is because soon after the Govt. of China accused
Alibaba Group of allowing counterfeiters to conduct business through its website, SAIC and
Alibaba, both joined hands ASAP. They are to devise plans to safeguard the consumers
interests against counterfeits on the online platform (John, 2016). Alibaba has agreed to
investing 300 employees (all new hired) to form a taskforce to counter the issue of fake goods
(Ebel, 2016). The pace is however very slow. This actually, puts consumers in doubt if this
delay is skill or will issue for Alibaba. It is however, not to be forgotten that in poor
countries, owing to weaker buying strength, people openly use fake goods and it is a thriving
black market (Werner, 2017) (Sui, 2015). Strict policing by governments have seldom
yielded results (Harris et al., 2015). Alibaba has however, shown its enthusiasm in
participating in this fight against fake goods (Han and Kim, 2017). It has spent millions of
dollars in 2013 & 2014 to arrest the problem. Nevertheless, the directives of digital
commerce have converted itself into a game of “spiralling saucers.” As quickly as one
hawker of copy merchandises is jammed another originates to take its room (Berman and
Dong, 2016). Alibaba carries on casual checks exploiting data-mining knowledge and runs an
online forum to put down complaints for regulation of fake goods (Liang and Gai, 2015).
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Chapter 3: Problem Statement, Plan of Analysis
After opening the business doors of Alibaba to the world in 1999, the Alibaba group just
focused on creating a B2B website for Chine small – medium manufacturers and connect
them. Over the years, it has only extended its range in many ways. As of today, they have
over 10 businesses, more than 25,000 employees and are valued at approximately $8 billion.
In such a dynamic and fast paced dot com industry and China’s e-commerce boom market
(Micklethwait and Dimond, 2017), this was possible only because Alibaba constantly kept n
retuning its strategies at every stratum. When Alibaba commenced its setups, in China,
internet was only about 1%. As the marketplace changed, the business's frontrunners re-
examined their concepts, examining their theories against actuality and reviewing them as
suitable.
In early stages, Alibaba’s goal was simply to become an e-commerce organization serving
China’s small-medium scale manufacturers and opening to them the trade doors of the world.
They sincerely built a sales platform. With times, market conditions altered and they revisited
this previous vision and realized the power of direct customers, thus, came Taobao in 2003.
On realizing that the trust factor is the hindrance to many customers buying goods online (Ali
and Li, 2015), they created Alipay in 2004 – an online payment service. By offering together
an escrow service and a supplier rating system, Alipay presented the components for
transparency and reliance. This helped them penetrating further into Chinese market. Further,
in 2008, it dreamt of creating a commercial eco system in e-commerce industry. Then, it
offered cloud computing programme, microfinancing, and a clever logistics programme. By
consistently rearranging its ideas, Alibaba has been successful in responding without delay to
new market and their conditions simultaneously restructuring the manners of interactions of
customers and businesses.
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Primary turning point to success of Alibaba also came when it chose to go for NYSE and
Nasdaq IPO listing (Dolvin, 2014). The challenge to Alibaba was the turning down of
Alibaba owing to DCS system it wanted to follow (Chan and Ho, 2014). The problem
scenario discussed in the case study shall be:
1. Challenges faced by Alibaba in it growth period
2. What retuning of strategies were adopted to penetrate the international market
3. What are current challenges to its growth
Steps taken to address the scenarios are:
a. Revisiting the case
b. Looking up case history of Alibaba in various reference books and journals
c. Conducting SWOT analysis for Alibaba in the inception, growth and maturity phase
d. Conducting a Porter’s five forces analysis to review the current scenario
e. Discussed recommendations
Post launching its commercial operations in 1999, Jack Ma and his team of 17 people created
a giant e-commerce dot com company it is today through lot of hard work and perseverance.
On the way, different hurdles came up time and again showing up on doorsteps but the
simplicity of Jack Ma’s vision stood the test of time. Also, the team wanted Alibaba to be
flexible and respond to changes immediately without losing any competitive advantage. This
was possible only with the help of a robust corporate level strategy. A robust corporate level
strategy at Alibaba had 3 key components against the issues that need to be tackled.
Figure 1 – Corporate Strategy
Key Components Major issues
Portfolio Analysis  Right mix of business
 Cash generators and cash users
 Positioning the company for growth
 Stable returns vs. risk taking and
high returns
 Eliminating ‘deadwood’
Diversification  Analysis of industry attractiveness
 Return on invested capital
 Integration of acquisitions
Resource allocation to business  Internal vs external source of
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investment capital
 Performance expectations of
different businesses
 Review of business performance and
future allocation of resource
Figure 2 - The business strategy for tackling issues could be represented as:
Major issues
Industry Analysis  Size/concentration of industry
 Number of strategic group existing
in industry
 Buyer power
 Industry supplier power
 Substitutes available
 Existing rivalry
Competitor Analysis  Competitors Resource and
capabilities
 Competitor’s size and market power
 Competitor strategies
 Competitor’s previous defense and
offence moves
Resource and Capabilities  Using own resources, tangible or
intangible
 Competitor capabilities
 Existence of core competencies
The SWOT analysis for Alibaba on launching could be represented as below:
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Figure 3 - SWOT Analysis of Alibaba on launching from 1999-2000
Strength - Leadership, free
services, website simplicity
Weakness - infant stage industry,
limited focus area
Opportunities - e-commerce
industry was upcoming (Julia-Igual
et al., 2016), power of broadband
slowly becoming reality
Threats - new entrants in industry,
apprehensive usage of credit
cards, banks not networked
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Figure 4 - SWOT Analysis of Alibaba in period between 2000-2003
Figure 5 - SWOT Analysis of Alibaba in period from 2003 – 2007
S - Was able to
withstand the dot
com crash, leadership
W - revenue model
was weak
O - C2C & B2C
markets
T - Fall of industry,
Entry of eBay
SWOT
S - Diversification, finanacial
structure, understanding of
local markets
W - Yahoo! China brand
ambiguity, under
positioning, management
dilution
O - IPO, Untapped market
sections(Lee, 2013)
T - Google and Baidu, New
Entrants
SWOT
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Figure 6 - SWOT Analysis of Alibaba from present (Hu, 2017)
S - largest online-trading
website, Trustpass.com
reliability, strong position in
global market
positive cash flow, large
conglomerate of online
companies (Zuccaro, 2016)
W - slow delivery time of
items, chinese culture
influence, ow brand
recognition, lack of mass
advertisements
O - market share
possibility in new markets,
large untapped market
segments, possibility of
increasing profits
T - rapid growth of industry,
threat of rivals, global
economic crisis,
competition among rival
websites
SWOT
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Figure 7 - Porter’s five forces analysis of Alibaba –
Rivalry - Trade-
India.com,
Europages.com,
eBay
Eachnet.com
New
Entrants -
competition
is welcome
Power of
Customers -
company
depends on
it
Substitute -
none yet
Supplier's
power -
VerSign
Inc.,China's
AIU, A&V
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Trial with business prototypes
Alibaba might not have constructed a collection of businesses that covered almost the
complete digital range minus making a promise to commercial prototypical testing from very
initial days. Nevertheless, when they initially started outside its central B2B e-commerce
stage to introduce Taobao, the choice was fiercely discussed in the business, as it meant
going head-to-head with a seemingly enormous eBay. To minimalize interruption at the
potential B2B business, Taobao was set up as an autonomous business, with an individual
office and individual money (a 50/50 joint venture between Alibaba and SoftBank). At each
stage in its development, Alibaba continuously generated innovative business models as well
as let them have a solo run (Fan and Liu, 2015). After examination, Alibaba ventured to scale
them up if it looked potential winner. In 2006, for instance, seeing two new developments,
Alibaba decided to unveil two units. To get an entry to B2C market, it created the Taobao
mall. It became the podium for recognised brands to extend to Chinese customers. This was
the idea of Tmall, today, it is a major part of Alibaba’s portfolio. Alibaba launched Alisoft to
cash in on the software-as-a-service wave. This however did not have much audience and he
shut it down. Additional driver of Alibaba’s accomplishments has always been the aptitude to
moderate its degree of business model research to fit the situations. For instance, after 4 years
of its launch Taobao had spread to 80% of Chinese consumer market (digital). In 2011, it had
converted into a countrywide miracle. Several establishments would have reserved this
management situation as validation and concentrated on adjusting the popular model. In its
place, Alibaba foresaw the non-stop speedy growth of China’s connected people and the
growing complexity of buyers and vendors as pointers of pronounced ambiguity in the
market and a threat to the present-day prototype.
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Chapter 4: Analysis & Findings
For Alibaba, Chinese e-commerce market comprises of over 85% of revenue, compared to
about 8% of international business. Alibaba has plans to expand further into China by
improving the reach in rural regions as a strategy to dominate domestic market. With an
expanding population, China is a good opportunity for Alibaba considering it is also home
ground. They propose to grow the national market by using recognised working centres in
backdated areas to fetch and endorse agrarian goods that will be marketed and sold online.
Despite its major haul of groups within China, Alibaba cannot ignore the potential it has
when it comes to international markets. The current setup of Alibaba is to cater to Chinese
market and China, within itself is also a large untapped market. Alibaba has intentionally
augmented its worldwide existence at a slow stride thoughtful that international markets have
diverse sets of wants when matched to China. In 2007, at Geneva, Alibaba opened a
European office with intention of capturing the European market. In 2013, also in US, as part
of strategic expansion and overtaking US companies. This was hastened by Alibaba’s
sturdiest world-wide participants Amazon and eBay, both situated in the United States.
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Now, let’s discuss the SWOT analysis for the origin years of Alibaba, 1999-2000. This was
the time when Alibaba raised money from Venture Capitalist & SoftBank. It had built its
initial platform to cater to B2B. By the time the year ended, it had about 2 lac memberships.
Alibaba made other companies get interested in the e-commerce business. It stood quite
sturdily the dot com bubble. The primary objectives of Alibaba in that phase was to create an
employee base, create a customer base and chalk out a name for itself. Upon analysing the
SWOT (Figure 3), findings are as below:
a. Market was new and players were still figuring out the commerce (Addai et al., 2017)
b. Leadership is strong with 18 members all focused and like minded with same dream
c. With broadband still in a nascent stage, e-commerce industry was still to find out its
potential
d. Use of banking systems and specially online not very popular, people had
apprehensions
Post 2000, Alibaba’s focus was to withstand the dot com burst, consolidate position of the
company, build a strong image and retain employees. The SWOT analysis (Figure 4) points
out:
a. Unstable industry, people are still figuring out how to make the ecommerce work
effectively
b. Entry threat of eBay
c. New opportunities showed itself as C2C and B2C untapped market segments
d. Revenue model was still weak, needed more funds
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In Phase 3 from 2003 to 2007, Alibaba successfully took opportunity up and ventured into
C2C and B2C business. Finally, eBay had to exit the China market owing to successful
strategies by Alibaba. It also acquired Yahoo! China’s partnership. Alibaba had also set its
targets to expand further into China. It had also strategized to make a global presence and
work on its revenue model to achieve more. Analysis of Figure 5, SWOT analysis shows:
a. Diversification proved beneficial for Alibaba and it should be continued
b. Hard work on improving the financial models moved to the strengths corner and
benefitted Alibaba
c. Yahoo! China links became quite ambiguous for Alibaba’s own identity
d. The relationship undermined Alibaba in the eyes of its customers
e. Google and Baidu slowly rising up the ladder to pose themselves as threats for
Alibaba
f. IPOs seemed fairly new scheme for growth and was an opportunity for Alibaba to
cash in
The current SWOT analysis of Alibaba as per Figure 6:
Strengths of Alibaba – Strong strategies and quick retuning has assisted Alibaba in its strive
for growth and expansion. Today, it is a global company with businesses spread to many
countries. This is also a great strategy for earning profits. Several acquisitions are usually
great strategies to gain entry into unchartered territories. The e-commerce industry is still
growing with large untapped segments and Alibaba is strategizing to enter them as well. The
fact that it brought together the community of buyers and sellers and also implemented
measures to gain trust of customers and suppliers alike to do business without any fear is
commendable and is firmly placed in its strengths (Forgione, 2016).
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Weaknesses of Alibaba – The technology is still the low level or a weakness for Alibaba.
Other ventures’ sites are lot more attractive unlike Alibaba. That apart, the organization is
labour intensive. Its advertisements are hardly to be seen and that could be reasons of
determent of growth. Due to incompetent technology, Alibaba’s deliveries are slow. This
becomes a reason of weakness for Alibaba. Also, instead of an international approach to its
operation, they still have a huge influence of Chinese culture (Yan and Chun Yu, 2013).
Opportunities of Alibaba – Lot of untapped potential within domestic grounds as well as
international markets. Plus, there are also lot of segments of ecommerce which are
unchartered.
Threats – The rapid and dynamic growth of e-commerce industry is an imminent threat at all
times. There are many competitors new and old who have reformed their strategies and are
even more clever or have dominance in other markets than Alibaba. This raging competition
needs to be worked upon in favour by Alibaba. There is also an impending doom of global
economic crisis that takes a long time to recover.
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The competitive force analysis, specifically the Porter’s Five forces analysis of competitive
environment for Alibaba was used as a key tool to gauge Alibaba’s environment. The
findings are:
Threat of new entrants – Alibaba has never shied away from competition. Alibaba’s
spokesperson has stressed that competitors enhance the market and hence are welcome.
There is always threat of new opponents but as in the past, these threats have always pushed
Alibaba to come up with something new. With its global influence at present, Alibaba has
attributed the credibility to new entrants/competition in business.
Rivalry – Eachnet is fast becoming a good player in industry. Apart from them, there are lot
of other global giants focused on gaining a permanent top stop in the industry toppiling over
some other contender by finding a weak spot. Just like Alipay, Eachnet is also focussed on
getting an online payment system operational. ‘Escrow’, a service by Eachnet on lines of
Alipay has already gained lot of customers and some even from Alibaba’s kitty
Supplier power of Alibaba – With the help of various partners Alibaba has been successful in
keeping the e commerce auction sites up. VeriSign, a well known player in helping
companies and customers’ alike in commercial dealings. Alibaba’s suppliers are backbone of
Alibaba’s business. They also ensure that customers’ interests are protected at all times.
Buyer power of Alibaba – The auction site caters to suppliers and buyers alike. The success
of the organization could be largely attributed to customers who buy online on Alibaba.
There is opportunity for small scale businesses to grow using Alibaba, as well as, expand
globally. Despite rising competitors, Alibaba has proven loyal customer base
Threat of substitutes – to most of the small-medium scale manufacturers of China, Alibaba is
the easiest way to reach out to the world. In case a substitute were to arrive, they would
require a further simpler and effective system to rival against Alibaba. The online auction of
Alibaba is the simplest and most effective of all.
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Competitive Advantage of Alibaba – Alibaba enjoys a competitive position in China. Before
Alibaba, there were no players to provide the Chinese buyers and suppliers to provide the
benefits that Alibaba is giving them. It was the first mover in Chinese dot com market and
hence, has huge competitive edge. The business structure of Alibaba has the benefit of
economies of scope. It also possesses benefit of economies of scale.
Barriers to entry – high – there are new entrants coming in but now where is the threat a
danger yet for Alibaba. To be successful in the e-commerce industry it is vital to have a good
supported chain network of suppliers, distributors, logistics etc. which is gained only after
spending considerable time in the industry, i.e. with experience (Alderson, 2016).
Threat of substitutes - low – Through establishments of brick-and-mortar, there is a threat to
online retailers. These retailers however lack economies of scope and hence they do not
become anything like Amazon or Alibaba.
Bargaining power of buyers – medium – Customers using Alibaba to sell have strong
bargaining power. By choosing not to use the platform of Alibaba, they may affect the market
dynamics for Alibaba
Bargaining power of suppliers - low – In the Alibaba business structure suppliers usually
have least bargaining power.
Industry rivalry – high – Within the online retailing business the competition is tough. The
differentiating factor being just ‘price’ and ‘customer service’
27

Chapter 5: Recommendation
The International Anti-Counterfeiting Coalition describes forging (also known as intellectual
property theft) as an offence involving developing or distributing products under pretence of
being someone else. Without taking appropriate permission. They are prepared using quality
deprived components and sell cheap as imitation goods. Fake merchandises cross manifold
trades comprising goods such as clothing, music, software etc. Fake merchandises are a tricky
situation for several reasons. Firstly, because it is completely illegal and buying these goods
knowingly implies that, there is support of illegal trade. Then, fake merchandises can present
itself as a health and safety risk to customers. Counterfeit goods are made with low-priced,
subnormal, and sometimes hazardous components. Moreover, clients are offering fake
suppliers with personal info and are at tremendous hazard for identity theft and credit card
racket. Most notably, forging injures authentic establishments which have devoted
meaningful period and monetary funds in R&D of products along with building a reputation.
Criminals endeavour to benefit from exploiting other enterprises’ trustworthy names. Such
imbalanced contest effects in less wage, loss of jobs, sky high prices for consumers. It is
unfortunately bleak to see that the counterfeiting business would go down any time sooner in
near future.
After contemplating the results of SWOT Analysis of Alibaba as well as market in US, it is
safe to give following recommendations:
a. Acquisition of US based web company
b. Include mass advertisements, specially on internet
c. Stick to differentiation and get benefits
d. Participate in sponsorship to let the world know its presence
e. Tap emerging markets – Brazil, Russia, Chile, UAE, Mexico, Malaysia, Uruguay etc.
28

Alternative strategies that could be taken up by Alibaba to nitro boost domestic market
competitiveness. Alibaba Group definitely could focus on getting a good footing in the
domestic market before venturing out in the world, into international markets. Some
advantages of this strategy could be this that, dominating domestic market in terms of
competition will strengthen the tactical skills required to overthrow threats which could be
present in various shapes and forms in international markets. One disadvantage of this could
be this that in case this leads to Alibaba losing focus of venturing out into global markets and
stay coiled into complex domestic market. It cannot be denied that international market entry
challenges are quite strong. All in all, Alibaba must venture out of China and attempt
penetrating the world market to increase their market capture. Owing to their record success
in China and the name it earned, World is already aware of Alibaba and it may be little bit
easier to penetrate new markets. Alibaba group is poised and they have funds to venture into
new markets to support their activities. It is a possibility though that due to its heavy presence
in China, people may stereotype them as a Chinese organization synonymous with counterfeit
goods as well. Some experts have also recommended Alibaba choose the brick and mortar
policy.
29

These would be the places where customers who do not have access to the power of internet
or have time to check things online could visit, physical check the products and then
purchase. This way Alibaba could be even visible physically. Alibaba could choose to set up
these stores in areas where they do not get much active users or even in new markets as a
penetration strategy. That could assist in increasing the visibility, awareness and trust factor
directly with customers. The flip side to this could be managing the numerous suppliers it has
membership. In terms of price, could lower where feasible and offer the customers with
ample choice and breaks. Alibaba is a brilliant example of a B2B e commerce organization
allowing the manufacturers and suppliers to easily sell on their platform to the world. It
should venture out of its comfort zone and enter new international markets. The risk of
investing and expansion of their domestic services customized as per world; be offered by
them. Alibaba has a fierce determination to find out ways to advance as well as enter global
trade markets. This is also for a challenge with their rivals but before attempting to win
ground in the country where rival is strongest, they could attempt to win over a market. In
this case though, there are risks. Alibaba, however; needs to ensure growth and brand
awareness anywhere they choose to start.
30

After a successful IPO, for any newly listed company, things change, especially if it is a fast-
paced company just like Alibaba. The executives must not stop themselves from pushing
ahead to face new challenges brought in by IPO. Till IPO, the organization was privately
owned but after IPO, key members would also need to deal with investors (Tan, 2016),
deliver their commitments, stick to the growth pace and manage risks appropriately (Ke,
2014).
When Alibaba was privately managed, it was only answerable to Jack Ma and 17 others.
Upon becoming a public company, Alibaba’s situation would radically change. There would
be thousands and thousands of shareholders they need to cater to and build constructive
relationship with. All of this could be achieved only through effective strategic planning and
proactive measures to cultivate the relationship. Throughout the IPO process Alibaba would
have made a convincing fable around the company’s intended chart of growth and strategies
it would deploy to gain position in market – it needed to stick to that projected vision as the
organization would be under public scrutinization always. The management now needed to
arrange their energies to nurture an association with important analysts. The management
would need to guide the investors into understanding the business model and encourage
positive growth oriented conversations.
31

Keeping promises and delivering on them – Alibaba should not forget that public market is
challenging place. Alibaba would require showing the investors that it is competent in its
ways of execution of business plans, maintaining compliance at all levels. Key metrics that
will motivate the business to go ahead needs to be properly defined, not only that, it requires
to be checked at every milestone appropriately. These results would also be utilized in public
analysis of the organization to make sure that all discussions are as per Alibaba’s terms. The
firm will also require conservation on top of any threats and could derail the business plans.
Upholding the stride of growth – getting through a successful IPO also means that the team of
Alibaba would now require to keep a pressure on team to continue moving ahead and help the
team charter the growth path as shown to shareholders. The IPO is always an important
milestone on the road to continuous growth.
To summarise, Alibaba has shown an impressive trend till now in forming new strategies,
treating the threats to its environment, chartering new growth paths, entering new markets,
diversifying the organization etc. in its journey. Limitations of this research report is that the
strategies mentioned in recommendations could be time consuming and could only be tested
against time. Further research could also be done in terms of competitive analysis when
entering new markets, intrusive environmental analysis as well. Alibaba has sustained
commercial evolution through China and is testing waters in international markets as well
just to be the leader there as well. It has not been easy for them as expected, they have faced
innumerable challenges over the years, rivals, IPOs, counterfeiting charges, scams etc.
Alibaba’s responses to these experiments are conversed beside the company’s viewpoint for
the imminent future.
32

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