Alibaba Group's Innovation Strategies and Competitive Advantage

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Innovation business strategy
Word count: 2, 524

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Executive summary
Innovation is the process of bringing about a change or introducing a new thing into a product to
make it look new and attract customers. Alibaba group was found in the year 1999 by around 18
people and the group was led by Jack Ma. They had started this company with the goal of
enabling small scale business firms to provide them with support to come up with innovative
strategies and technology to grow efficiently and compete effectively in the business
environment (Kyhnau & Nielsen, 2015). This report is going to discuss various innovation
strategies that have been taken up by Alibaba group to face the competitive world. A SWOT
analysis will be performed further in the report to analyze the strengths, weakness, opportunities
and threats of Alibaba group. The business model canvas will also be discussed and the
innovation strategy will be discussed.

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Contents
Executive summary.........................................................................................................................2
Introduction......................................................................................................................................3
Conclusion.....................................................................................................................................11
References......................................................................................................................................12
Appendix........................................................................................................................................14
Introduction
Alibaba group is a Chinese multinational amalgamation that specializes in retail, e-commerce,
technology and internet. The company was established on 4th April, 1999 and it provides sales
through online platforms and follows rules that any other company follows that is registered
online (Gomes et al, 2010). It is one among the largest retailer and e-commerce Company in the
world. Alibaba has the 9th highest global brand value and is well known to all its customers
worldwide. There are a wide range of products Alibaba serves its customers with which are the
reason for it to be so popular among the customers globally.
SWOT analysis of Alibaba group
In this technology driven era technology is the main element and feature that helps Alibaba
group to gain a competitive edge in the international business market. The SWOT analysis of
Alibaba group will provide information about the strength, weakness, opportunities and threats
of the company.

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Strengths
 One of the main strength of Alibaba group is high customer satisfaction. The customer
relationship department of Alibaba group has made it possible for the company to have
high level of customer satisfaction that builds brand image and brand value that attracts
other potential customers to the company.
 They have been quite successful in the mergers that the company has performed in the
past in which the company has integrated many technological companies together and
built a strong supply chain.
 They have been very successful while entering new markets and have created their image
even in the new market by providing optimum products and services.
 The marketing strategies undertaken by Alibaba group are very successful in marketing
the products both online and offline and gain the attention of customers.
Weakness
 The Alibaba group has invested a lot in research and development but still it is not been
able to compete with the research methods of other competitors in the business market.
 The company is not been able to face the new challenges that is presented to it by its
competitors and have lost their share in the niche categories in the market.
 The company is not successful enough to collaborate or integrate with other companies
that have different work culture than Alibaba group. It is failing to merge or collaborate
with firms that are following different work culture.
Opportunities

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 Since the company economy is in good condition it can invest in new technologies that
can help to enhance the productivity of the company. By this, it will also open a wide
range of opportunities to the company that will enhance the sales of the company largely.
 New environmental policies should be introduced in the company that will enable to open
new categories in the company and will be able to attract more customers with their wide
range of products (Geissdoerfer et al, 2018).
 The new invented taxation policy will help the company and will impact the company’s
business to gain more profits and enhance the productivity of the company on a greater
level.
Threats
 Scarcity of skilled workforce within the market can affect the steady growth of profits for
a global company like Alibaba.
 The rising level of salary in China has pressurized the Alibaba group greatly and it’s
going to impact the profit share of the company too.
 The company is operating in numerous countries because of which it can face issues with
the currency fluctuation rates especially in the countries that strongly follows political
power.
Organizational culture of Alibaba: the organizational culture of Alibaba is very nicely
structured that give weightage to the opinions of their employees and all are treated as family
members where all of the employees have a right to express their opinions and issues they are
facing in the company. The communication platform of Alibaba greatly helps the employees to
out their thoughts and speaks openly and also criticizes the departments that are doing unjust

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things to the company or the employees in any way. This platform is the main reason for the
company to grow eventually and come out stronger than before.
Innovation trend: the innovation trend of Alibaba has evolved greatly with time and
requirements of the market successfully (Greeven et al, 2017). The company started up with an
ecosystem that linked the sellers and the buyers and later as the advancement of technology took
place the company moved to an online platform that proved to be the most successful
bandwagon for the company because through this platform it could reach out to customers
globally without much manual effort of counter or retail selling in person. The innovation trend
followed in Alibaba is the lean startup trend.
Innovation strategy: there are various innovation strategies that are used by Alibaba to enhance
their profits and productivity. The innovation strategy used by Alibaba is external resource
integration where in it developed a partnership with Starbucks and handled key businesses of the
ecosystem like Tmall, Alipay, and Ele.me which are all food delivery platforms that created an
unmatched version of online site that the company got to offer its customers and give them a
more contended and personalized experience. Another innovation strategy used by Alibaba is
generation of content. As the company is providing the customers with exquisite and innovative
products they are engaging the customers with their creative and catchy content and making
them attracted to the product.
Innovational capabilities or abilities of Alibaba group: the innovative abilities of Alibaba
group are defined to be the capabilities of technology department, its operational abilities,
transaction and payment capabilities and management capabilities that are practiced within the
organization to make the process more effective and innovative (Davenport et al, 2018). The

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innovation capabilities of Alibaba are very strong because of the skilled and expertise labor they
have and it is known to be a bundle or factory of innovation. The company is presently applying
artificial intelligence that includes concepts like deep learning and machine learning that helps to
enhance innovation capabilities within the employees of Alibaba group. It gives the employees a
deeper understanding of the needs and requirements of customers, their behaviors and
appropriately respond to the needs of the customer and fulfill them to provide extreme customer
satisfaction.
Fig: Innovation capabilities. Source: (Zawislak et al., 2012)
Innovation value creation and capture: one of the primary activities of Alibaba is to
experiment with things taking a risk that brings about new innovation within the company. This
helps them serve the customers with something new all the time (Du et al, 2013). Alibaba has a
very strong and broad supply chain globally where it gets its raw materials from. The supply
chain of innovation for Alibaba is never ending with the caniniao network it has built in shanghai

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which has various numbers of offices, stores and warehouses that are used for storing products of
their company. This logistics center is fully automated and has robots that operate and take care
of the packaging of the products according to the orders they have received from customers.
With the help of artificial intelligence and internet of things the robots will be able to handle the
process of picking and packaging along with 500 guided vehicles, infrared sensors, and cameras
that are capable of capturing the real time storage of products in the warehouse.
Fig: Innovation supply chain. (Source: www.alizila.com)
Strategic alignment: the strategic alignment of Alibaba group is the feature that is effectively
incorporated that creates a shared vision for the company. This element helps the company and
its management team to effectively in inventing the innovation rather than taking ideas from their
competitors and applying them in their company (Chen, 2014). The innovative ideas that are put
forth by Alibaba are often the voices of the individuals that are a part of the company. The
company also greatly promotes an active participation of cross functional portion of the
company.

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Business canvas model that Alibaba follows is very simple. It is the middlemen between the
buyers and sellers all over the world. It provides online facilities and facilitates the sale of goods
and products between two parties that can be connected through the extensive network of online
websites (Chui and Francisco, 2017). The largest online website by Alibaba, taobao helps and
operates as a fee-free market platform that enables the buyers and sellers to connect to each other
without having to pay any kind of fee. They are not even charged for making transactions
through this website. The majority of sellers that are connecting through this online website are
small merchants Alibaba has a larger retailer website where large scale merchants can get in
touch with each other and do business. Tmall is a e-commerce site that is operated by Alibaba
that has well-known brands like Gap, Nike, Apple etc. these are all large scale merchants that
can connect to buyers through this online platform.
Fig: business canvas model. (Source: www.researchgate.net)

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The opportunities and threats to the organization are explained below.
Opportunities
 Since the company economy is in good condition it can invest in new technologies that
can help to enhance the productivity of the company. By this, it will also open a wide
range of opportunities to the company that will enhance the sales of the company largely.
 New environmental policies should be introduced in the company that will enable to open
new categories in the company and will be able to attract more customers with their wide
range of products.
 The new invented taxation policy will help the company and will impact the company’s
business to gain more profits and enhance the productivity of the company on a greater
level.
Threats
 Scarcity of skilled workforce within the market can affect the steady growth of profits for
a global company like Alibaba.
 The rising level of salary in China has pressurized the Alibaba group greatly and it’s
going to impact the profit share of the company too.
 The company is operating in numerous countries because of which it can face issues with
the currency fluctuation rates especially in the countries that strongly follows political
power.
Organizations innovation strategy to respond to innovation trend
Alibaba is always organizing and innovating its products to provide customers with something
new all the time. There is a large scope for Alibaba to develop and gain a competitive edge with

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the help of artificial intelligence by offering unique settings to the customers to make the process
feasible (Clark, 2018). To make innovation better, Alibaba should focus on its innovation
strategies and which can be done by giving importance to machine learning process within the
company which will help to support the computer based robotic model. It can develop strategic
models and frameworks that cater to the needs of buyers and their potential customers from the
various online platforms that they possess.
Recommendation
The strategic alignment used by Alibaba is the artificial intelligence that has greatly helped the
company to bring about innovation within the products that they serve to the customers. Alibaba
can ensure that the strategic alignment used by the company addresses the innovative trend that
the company is following by ensuring the functions of the company sync with the innovation
trend chose by the organization.
Conclusion
Alibaba is one of the most successful largest retailers that operates worldwide and has a long list
of potential customers. In this report, we have discussed various innovation trends of Alibaba
and have also discussed various innovation strategies that have been taken up by Alibaba group
to face the competitive world (Andreassen et al, 2018). A SWOT analysis is performed in the
report to analyze the strengths, weakness, opportunities and threats of Alibaba group. The

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business model canvas is also discussed and the innovation strategy that the company uses to
sync with the innovation trend is also been discussed.
References
Andreassen, T. W., Lervik-Olsen, L., Snyder, H., Van Riel, A. C., Sweeney, J. C., & Van
Vaerenbergh, Y. (2018). Business model innovation and value-creation: the triadic way. Journal
of Service Management, 29(5), 883-906
Clark, D. (2018). Alibaba: the house that Jack Ma built. HarperCollins Publishers
Chui, M., & Francisco, S. (2017). Artificial intelligence the next digital frontier?. McKinsey and
Company Global Institute, 47.
Chen, W. (2014). DEVELOPMENT CONDITIONS AND PROBLEMS OF ALIBABA IN
CHINESE E-COMMERCE MARKET.