Alibaba's Success: Strategies in China & Global Expansion Analysis

This case study analyzes Alibaba Group's strategies in China and its potential for global expansion. It examines how Alibaba achieved success by providing opportunities to small businesses and creating a platform for international trade. The analysis uses the Ansoff Matrix to understand Alibaba's market penetration, product development, market development, and diversification strategies in China. It further uses Porter's Five Forces to assess the competitive landscape of the e-commerce industry and the challenges Alibaba faces in new markets. The study concludes that Alibaba's diversification and market penetration strategies, which have been effective in China, can be adapted for successful operations in other countries, provided the company addresses the competitive dynamics of each market.

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Name of the Student
Name of the University
Author Note

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Introduction
Alibaba Group is a multinational conglomerate which has its base in China. The
organization mainly specialises in different areas which include, retail, e-commerce,
internet, technology and artificial intelligence. Alibaba Group was established in the
year 1999 and is known for providing different services including, consumer-to-
consumer, business-to-business and business-to-consumer. The services are thereby
offered by the company with the help of its web portal and the electronic payment based
modes (Alibabagroup.com 2018). Alibaba thereby owns huge variety of businesses in
different parts of the world. Alibaba has been provided the position one of the most
admired companies in the entire world. Alibaba Group has acquired an effective
position within the top 10 organizations in the world.
The analysis in the essay will be mainly based on the strategies that have been
implemented by Alibaba Group in its operations in China. The strategies which can be
implemented by the company in the other countries is also a major part of the analysis.
The strategies that will be used by Alibaba Group in different countries need to provide
the company with effective competitive advantage in the ecommerce industry.
Strategies implemented by Alibaba Group in China
Alibaba has been able to position itself at the topmost place in the ecommerce
industry with the help of its services and the opportunities which have been offered to
the small business organizations. The chairman was thereby able to provide effective
opportunities of operations to the small business organizations so that they are able to
stand out in the international market. The major aim which was developed by Alibaba
was based on the ways by which the company is able to provide a simple type of

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platform for performing business related operations all over the world (Buckley and
Ghauri 2015).
Ansoff Matrix analysis of Alibaba
The Ansoff Matrix analysis is based on the ways by which a business
organization is able to grow depending on the new or the existing products which it
offers in the market or the new or existing markets that it wishes to enter. The four parts
of Ansoff Matrix which are able to explain the operations of an organization include,
market penetration, market development, product development and diversification of
markets (Refer to Appendix 1).
Market penetration by Alibaba in China – Alibaba has penetrated the Chinese
market in an effective manner with of its website and portal. The sales channels that are
present in China were highly inadequate in nature for the local organizations before the
entry of Alibaba. The huge levels of economic growth which have been experienced in
the Chinese economy and the reforms in the economy have been able to provide
effective opportunities to the small organizations. This has become a major factor
behind the implementation of technology brought by Alibaba (Cuervo-Cazurra et al.
2016).
As discussed by Doz (2017), the company had thereby started growing in the
industry at high rates and its values had increased more than the total value which has
been created by Ebay and Amazon together. The major strategy that has been
implemented by Alibaba is based on the levels of communication that is developed with
the customers. The communication based services which have been formed by Alibaba
are operated under different names which include, alitalk, Yahoo Messenger,
Wangwang Taobao. The second major source of income of the customers comes from

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the different value-added services. Competitive pricing based strategies are
implemented by Alibaba in order to offer the products to its customers. However, the
company provides importance to the quality of products that are offered to the
customers. The prices are kept little lower than the competitors instead of creating huge
levels of differences (Hitt 2016).
Product development by Alibaba in China – The growth based strategy that has
been implemented by Alibaba for effective product development can be termed as the
diversification strategy for the sustainable growth. The strategy that has been currently
implemented by the company is based on the levels of growth which helps in increasing
the levels of customer engagement in an effective manner. The key to the profits that are
gained by Alibaba is based on the diversification which has been shown by the company
in e-commerce based marketplace in China (Holmes Jr et al. 2018). The growth based
model of Amazon.com is followed by Alibaba in order to increase its profitability based
levels.
Market development by Alibaba in China – Alibaba has thereby targeted two
major segments of market which include, global market that targets the different
international exporters and second is the Chinese market that focusses on the buyers and
suppliers. The increase in number of internet users in China has been able to provide
opportunities of growth to Alibaba Group. Discounting strategy has also been
implemented by Alibaba in order to attract customers and retain the loyal consumers as
well (Hotho, Lyles and Easterby‐Smith 2015). Alibaba is further aiming at developing
its market outside China in order to provide similar opportunities to the small
organizations that operate in different countries. The company needs to develop
effective distribution based channels in its operations outside the home country. This

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will play a major role in increasing the levels of revenues in the new market areas
(Jannesson, Nilsson and Rapp 2016).
Diversification by Alibaba in China - Development of competitive advantage in
the ecommerce industry has been an important part of the operations that have been
performed by Alibaba. The diverse range of businesses that have been developed by the
company have been able to increase the presence of Alibaba. The organization has
offered different services which are able to satisfy different needs in an effective
manner. The services of the company thereby include, entertainment, cloud computing,
mobile data and payment gateway. These services supported the company in such a
manner which has been able to stay ahead of the competitors (Leonidou et al. 2017).
As discussed by Lu et al. (2014), the Chinese market has proved to be highly
competitive in nature. The fast rates of growth of the market has thereby been able to
play a major role in the ways by which it is able to satisfy the needs of consumers in an
effective way. The huge population of China has also proved to be a major growth
opportunity which has been provided to Alibaba. The infrastructure of Alibaba Group
has thereby played a major role in the ways by which different strategies have been
implemented by the company in China. The strategies that have been developed and
implemented by Alibaba in China have been able to play a major role in its immense
success in the country.
Strategies that can be implemented in other countries by Alibaba Group
Alibaba can aim at increasing its profitability and revenues in the global e-
commerce industry with the help of new market areas and new countries. The analysis
of e-commerce industry will play a major role in deciding the ways by which the

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company wishes to operate in these areas. Porter’s five forces framework can be used
for analysing this industry in the following way, (Refer to Appendix 2)
Levels of competitive rivalry – Alibaba will face fierce levels of competition
from different organizations in the market which belong to the online and offline sectors
as well. The different distributors, retailers, search engines are able to provide tough
competition to the organization in other areas of the market. Different factors that are
able to affect the industry include, selection of products, services, price of the products.
The price based competition in the industry is able to increase the competition levels in
the industry (Morschett, Schramm-Klein and Zentes 2015). Alibaba will also face
payment based competition from different online and offline payment methods that
include, cheque, cash, mobile phones, money order, debit cards. The entry of new
payment options in the market is also a challenge which can be faced by Alibaba.
Bargaining power of the customers – The customers are able to play a major
role in the highly competitive e-commerce industry of different countries. The
competition levels have always allowed the customers in the industry to win and their
demands are to be fulfilled by the services and products offered by Alibaba. The options
which are offered to the customers are important factors that are able to affect the levels
of competition faced by Alibaba. The major demands of customers are based on the low
prices and the huge range of products as well (Raghunath and Rose 2017).
Threats of the new entrants – E-commerce market is mainly characterised by
the low levels of barriers based on entry of new companies. The ease with which new
players are able to enter the market is thereby able to increase the levels of competition.
However, the requirement of large amounts of capital in order to operate in the industry
and provide competition to the other organizations is able to restrict the entry of new

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companies. The market of online payments is able to provide effective levels of barriers
to new organizations that plan to enter the ecommerce market (Rugman and Verbeke
2017).
Bargaining power of the suppliers – Huge number of suppliers and small
organizations list themselves on the website of Alibaba. The sellers are able to showcase
their products on the website, which is considered to be an effective opportunity for
small businesses. The sellers and suppliers have low power in the e-commerce based
industry of different countries. However, in the new market area the pricing based
policies that are developed by Alibaba are able to affect the satisfactory levels of the
sellers (Yan and Luo 2016). The suppliers of Alibaba are able to generate traffic on the
website which is affected by the levels of prices.
Threats of the substitute products – The range of products that are offered by
Alibaba to the customers in China is huge. Alibaba thereby does not face high threats in
this case from the different online and offline organizations which operate in different
countries where it plans to expand (Yan and Luo 2016).
According to Raghunath and Rose (2017), the analysis of e-commerce based
industry is able to depict that Alibaba will be able to apply the strategies after expanding
its operations in different countries which have already been applied in China
effectively. The major growth based strategy that has been implemented by the
company is thereby based on the levels of diversification of different business based
operations of Alibaba. The product range that has been offered by the company in
Chinese e-commerce market has been helpful in the proper development of loyal
customer base.

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Alibaba is able to penetrate the market effectively with the help of its wide range
of businesses. The products that are offered to the customers with the help of different
businesses can be effective for its successful operations in the other countries as well.
The competitiveness of the e-commerce industry is thereby considered to be an
important factor that is able to have an immense effect on the ways by which Alibaba
will develop the strategies and policies in different areas of the market (Forbes.com
2018). The company has created competitive advantage in the industry with the help of
proper diversification related activities. This strategy will prove to be the most useful
for effective expansion based operations of the Alibaba in the other countries.
Conclusion
The essay can be concluded by stating that Alibaba has developed an effective
position in the e-commerce industry with the help of effective diversification and
market penetration. The organization has provided opportunities to small businesses in
order to showcase their products and reach a larger base of customers. The most
important part of the strategy which has been implemented by Alibaba is based on the
ways by which it has been able to grow in different parts of China. The organization can
thereby implement similar strategies in other countries in order to increase the levels of
profitability and revenues. The organization will be able to develop partnerships with
many other small businesses with the help of its international expansion plans.

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Appendices
Appendix 1
Appendix 2