Alibaba's UK Expansion: Opportunities, Challenges, and Strategies

This report examines Alibaba Group's international business strategy, specifically focusing on its potential expansion into the UK e-commerce market. It begins with an executive summary and an introduction to international business, defining key terms like import, export, and globalization. The report then provides an overview of Alibaba Group, detailing its e-commerce operations, services, and historical growth. A significant portion of the report analyzes the opportunities and challenges Alibaba faces when entering the UK market, including the UK's position as a leading e-commerce market, the increasing internet usage, and the decrease in e-commerce share. The report also identifies key competitors in the UK market and the importance of efficient delivery logistics. The report concludes with a discussion of strategic alliances as a suitable market entry strategy for Alibaba in the UK, highlighting the need to mitigate risks and adapt to the local business environment.

INTERNATIONAL
BUSINESS

Executive summary
International business is the way by which venture can enter into international market in
order to purchase and sell their products and services to international customers. The report
includes different ways by which domestic firm can enter into international market that are
exporting and importing, Licensing, Strategic Alliances, Acquisition, Foreign Direct Investment
and Subsidiaries, Contract Manufacturing and Outsourcing. For this report Alibaba group have
been selected which is e-commerce organisation in China. The organisation want to expand their
business in any European country so they are expanding in UK. This is because UK is the third
largest country who deal in e-commerce. The report includes different challenges and
opportunities when the venture is entering in UK. They have selected strategic alliances as a way
to enter in UK because it helps them to reduce different risk such as political, legal, economical,
social etc.

Table of Contents
Executive summary .........................................................................................................................2
INTRODUCTION...........................................................................................................................1
About the organisation Alibaba group...................................................................................2
Different opportunities for the venture...................................................................................4
Different Challenges for the venture for expanding in UK....................................................6
Ways by which Alibaba can enter into UK............................................................................9
Best way by which Alibaba group can enter UK.................................................................10
CONCLUSION AND RECOMMENDATION.............................................................................11

INTRODUCTION
International business is the process by which organisation trade and do transaction in all
around the world of some specific international countries. This trade or transaction includes
trade of different goods and services, information, idea, technology and capital. International
business consist of two general terms that are import or export. Import is the process by which
good and services is delivered by some international countries to home country. Export refers to
the process by which goods is transferred from home country to other international countries. In
simple words it can be said that international business is the way by which cross border
transaction related to goods and services takes place between two or more countries. Transaction
always take place of economic resources that are capital, skills, and people in order to make
international production of physical goods and services for example finance, banking, insurance,
and construction (Kim and Peterson, 2017). Other term which is given of international business
in 1990 was globalisation. Which state that free entry and exit of goods and services between
two or more countries. It reduces different barriers such as tariff and non tariff. Globalization
refers to the tendency of international trade, investments, information technology and outsourced
manufacturing to weave the economies of diverse countries together. There are two major factor
which helps to enhance globalisation that are micro and macro. The first macro-factor is falling
of barriers to make cross-border trade easier such as the free flow of goods and services, and
capital. The second macro-factor is technological change, particularly the developments in
communication, information processing, and transportation technologies. The report is all about
the expansion of business in European country. For this report Alibaba Group have been
selected, the organisation is e-commerce which deal in china. They provide consumer to
consumer, consumer to business and business to business sales with the help of online portals. It
also provides electronic payment services, a shopping search engine and data-centric cloud
computing services. Now the venture want to expand their business in UK so that they can
acquire large target market and earn more profit (Johnson and Nodd, 2017). The key problem in
the report is that the organisation want to expand their business in European country, but they
are facing lots of challenges. The report includes different opportunities and challenges faced by
the venture when they are expanding their business in China.
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About the organisation Alibaba group
Alibaba group is the venture which deal in e-commerce which deals in selling products
and services in different countries with their web portals. They sell products and services from
consumer to consumer, business to consumer and business to business. With that they also
provide some additional benefits such as shopping search engine, electronic payment and data-
centric cloud computing (Leong and Cui, 2016). The venture was introduced in 1999 by Jack
Ma. They have their own website where all these transactions take place that is Alibaba.com. In
2012, Two of Alibaba's portals handled 1.1 trillion Yuan ($170 billion) in sales, the organisation
is mainly operating in People's Republic of China (PRC). On 19th September 2014, Alibaba's
market value was US$231 billion. It was the world's largest and most valuable retailer of April
2016 as well as it is the one of the largest web company in the world. In 2017, Alibaba became
the first Asian company to break the US$400 billion value mark. They have now created new
live entertainment business unit under Digital Media and Entertainment Group which have key
focus over the ticketing platform (Xu and Read, 2016).
Now the venture want to expand their business in European country that is in the UK.
This is because there is huge technology advancement in UK, most of the people buy products
and services with the help of web purchase.
Illustration 1: Impact of technology on UK
(Source: How technology advances empower social changes.2016)
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It has been analysed that technology have great impact over the large business, said by
most of the CEO in UK. 95% of the CEO are changing their working pattern related to how they
use technology to deliver and access on the wider expectation of their stakeholders. With that
86% of the CEO states that technology advancement will have great impact over whole global
trend that how they transform the stakeholder's expectation in coming five years (Idris and
McDonald, 2016). This is the reason the venture have selected UK to expand their business.
There is increase in the usage of internet, where 68% of the UK people use internet in 2015 but
now 72% of the population use internet. This state that there is increase in UK Internet usage.
This is how the venture think that they can grasp this opportunity and expand their business in
UK.
Other than that UK has the third largest e-commerce market in the world in 2016. The
most recent UK governmental figures placed the value of UK e-commerce sales at 533 billion
British pounds in the same year. It has been estimated that the value of retail sales with the help
of online in UK at 60 billion euros in year 2016. Whereas Business to business e-commerce sales
with the help of different web sites have been announced at 96.5 billion British pound. UK
roughly 80 percent of UK internet users did online shopping, the highest online shopping
penetration rate in Europe (Cano, 2016).
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Illustration 2: Number of digital shoppers
(Source: E-commerce in UK, 2017)

Illustration 3: Strong online sales in 2016
(Source: E-commerce in UK, 2017)
From these graphs, it has been analysed that, there is rapid growth in online shoppers in
UK, people have started buying different products and services with the help of e-commerce
websites. This is the biggest opportunity for Alibaba as they are also dealing in the e-commerce
sector. People will definably buy their products as well they also dales in consumer to consumer,
business to business dealings and transactions (Turban and Outland, 2017). This will serve them
a great advantage because there are less number in the UK e-commerce companies who deal in
C2C and B2B.
Different opportunities for the venture
 United Kingdom is the third largest country who are dealing in business to customer e-
commerce in year 2015 and 2016 after china and United States. As the venture want to
expand their business in any European country, UK will serve them the best opportunity
as they are only Country in Europe which have the highest e-commerce market.
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Illustration 4: Countries with the largest e-commerce
(Source: E-commerce in UK, 2017)
 This image shows that UK is the third largest country which deal in Business to customer
e-commerce market after china and US. This will serve them opportunity because the
market is already set up, so they need not make it set up again (Stahl and Zellmer-Bruhn,
2016). The expenses for setting up the positive perception regarding e-commerce will be
reduced because people have already adopted different online purchasing.
 Other than that there is rapid increase in the sales of e-commerce in UK, in year 2008
was 334.6 billion dollars, whereas it has been increased up 473.6 billion dollars in year
2012. Further, in year 2016, it has reached to 533 billion dollars. This state that there is
growth in sales through different e-commerce (E-commerce in UK, 2017). Thus, this will
also serve as opportunities for Alibaba, as they are also dealing in same industry.
Other opportunities
 Other than that, expansion in international market helps the venture to increase their
market size. Alibaba can invest their fund in proper research and development when they
are entering in UK, this will help them to gain competitive advantage. Alibaba have
proper knowledge about the country and different e-commerce organisation in UK which
helps them to make optimum use of research and development in order to have
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competitive advantage. Ultimately this will help them to capture large market share and
this will serve great opportunity to the firm when they are expanding to UK (Beugelsdijk
and Roth, 2017).
 To be international brand: this is also another factor which motivates the organisation to
expand their business in international countries. Alibaba group are already existing in
more than 200 countries but this will help them to add more country in their portfolio.
Thus, with the help of expansion Alibaba can become renown international brand,
Different Challenges for the venture for expanding in UK
Competition
The biggest challenge for Alibaba in UK is different competitors, there are large number
of rivals in UK who are also sailing in the same boat. AO, ARgos, Holland & Barrett, Topshop
and Next are among the leading e-commerce players in UK. These companies will give huge
competition to Alibaba. In year 2016, the leading e-commerce organisation in UK are Amazon,
Argos, Boots, House of Fraser, John Lewis, Mothercare and Screwfix. On the basis of delivery
time taken, it has analysed these top e-commerce companies. Alibaba have co-operated with
JD.com to further evolve China's parcel transportation efficiency, investing US$330 million into
its Chinese logistics partners to build more facilities for the purpose of delivery different goods
and services (Hood and Birkinshaw, 2016). But when they entering into international market in
UK they need to identify different partners who deal with them in order to deliver goods and
services. This will serve them a great challenge to them in to find those companies who can deal
with them in order to deliver goods and services to the customer on proper time and with proper
security. Competition level in UK have been judged by delivery time taken by e-commerce
companies. The company which take less time to deliver goods to customers will have
competitive edge. Thus, Alibaba need to find this logistics company who can deliver goods as
fast as possible to gain competitive advantage.
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Illustration 5: E-commerce share of total business turnover in UK
(Source: E-commerce in UK, 2017)
Decrease in E-commerce share
Other than that there is decrease in E-commerce share of total business turnover in UK in
year 2015 as compare to 2014. In year 2014, total turnover from e-commerce was 19.4% but in
2015, it has been decreased to 19%. This will be another challenge for Alibaba because they
need to increase total share of turnover of e-commerce in UK which helps them to gain
competitive environment. They need to motivate people of UK to purchase different products
and services from e-commerce websites and portal (Kim and Peterson, 2017). Hence, this will
increase expenses of the company because different promotional activities venture need to do in
order to generate awareness about the importance of online purchase and how it can enhance and
develop the country.
Customer awareness
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With that they are new to UK, people are not aware about the organisation. In order to
generate awareness, they need to do several advertisements and promotional activities. This will
be challenge for them to find that culture and traditions of people that what type of
advertisement they like. In order to analyse that, they need to analyse different environmental
factors that can affect the venture (Johnson and Nodd, 2017). They need to promote their
company and their products on different social media platforms, creating different marketing
campaigns, advertisement on TV, radio and films etc. this will cause huge cost to them. Thus,
cost will be challenging factor for the venture to expand their business in international country.
Reaching new customers and clients
Expanding business in other country which means reaching new customers and clients
and boosting the profits. Organisation needs to identify needs and wants of the customers of the
country where they are going to expand their business. Customers needs and wants plays very
significant role when the venture is going to expand their business any unfamiliar country.
Customers are the only base by which company can stable in the market in initial stage. If the
venture is serving optimal satisfaction to the customers them he can success in new or
international country (Leong and Cui, 2016). Now the biggest challenge for Alibaba is to
identify needs and wants of the target market on the basis of different factors such as
psychological, personal, social, cultural and economical. Thus, venture need to identify that how
these factors can affect the consumer behaviour and perception for Alibaba. Other than that firm
need to identify involvement rate of customer in decision making process. If customer is highly
involved in decision making, in that case customer will evaluate all the alternative in deeply
manner. Thus, venture need to serve differentiate services from the competitor so that customer
can select their organisation for purchasing products and services when they are analysing
different alternative (Xu and Read, 2016).
Foreign rules and regulation
Other than that foreign rules, laws and regulation also a great challenge for the
organisation need to set up their structure on the basis of foreign rules and regulation. From tax
implications through to trading laws, navigating legal requirements is a central function for any
successful international business (Idris and McDonald, 2016). When the firm is entering into
new country, there are some other factors related to legislation that influence the venture that are
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potential tariffs and the legal cost. It is very significant for the venture to analyse the different
labour and employment requirements because it different country to country. European
countries stipulate that a minimum of 14-weeks maternity leave be offered to employees. Thus,
this should be noted bt Alibaba when they are entering to UK (Cano, 2016).
Political risk
Political risk is also another factor which is challenging to Alibaba when they are
expanding their business to UK. This is because there is huge amount of political uncertainty and
instability. When the venture is entering into unknown and new market, they need to asses the
risk of political and economic landscape and this task is very much critical for the organisation
(Turban and Outland, 2017). There are several issues related to politics such as unstable policies,
corrupt practices, change in governmental policies due to change in government, interest rate.
These practices damage international companies because due to these practices there is lot of
risk, that need to be bear by the venture.
Supply chain complexity
When the organisation is going to expand their business in new , managing supply chain
and suppliers can be trick process. Complexity and length of the supply chain increases when the
venture have selected unethical and illegal suppliers. Thus, Alibaba need to analyse all their
suppliers on timely basis so that they do not need to increase their supply chain (Stahl and
Zellmer-Bruhn, 2016). If supply chain increase, cost of company also enhance. Thus, it very big
challenge for the firm to find and select the best supplier so that they can reduce their cost.
Ways by which Alibaba can enter into UK
There are several ways by which venture can enter into international market of UK, that
are exporting and importing, Licensing, Strategic Alliances, Acquisition, Foreign Direct
Investment and Subsidiaries, Contract Manufacturing and Outsourcing.
Importing and exporting: Importing is the process by which the organisation can buy products
and services from different countries and then sell into domestic country. Whereas exporting is
the way by which domestic products and services can be sold to foreign or international
customers. It is very oldest method by which venture can enter into international market
(Beugelsdijk and Roth, 2017).
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