BUS804 International Business Strategy: Alibaba Case Study Analysis

This case study analyzes Alibaba Group's remarkable success in China's e-commerce market and its potential for international expansion. Founded in 1999 by Jack Ma, Alibaba's core business model focuses on facilitating business-to-business (B2B), business-to-consumer (B2C), and consumer-to-consumer (C2C) transactions through its various platforms like Alibaba.com and Taobao. The case study examines key factors contributing to Alibaba's triumph, including its unique business model catering to small enterprises, innovative pricing strategies, and exceptional service offerings. It also explores how these strategies could be applied outside of China, considering factors such as digital literacy, infrastructure, and socio-economic conditions. The analysis highlights the company's ability to adapt and seize opportunities, such as the development of the 'Double 11' shopping festival. The study concludes by assessing Alibaba's potential to replicate its success on a global scale, considering the importance of understanding local market dynamics and building a user-friendly ecosystem.

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Alibaba Group Holding Limited is recognized as one of the largest multinational
conglomerate holding company specialized in e-commerce, retile and Internet technology. Since
the very inception of the company which was in the year 1999 initiated by 18 people and led by
Jack Ma (Hoffmann), and every one shared the vision that Internet would help the brand expand
and emerge as a significant name in the global economies. Since then the company has been
evolving and experimenting with its online trade and today approximately more than half of
business to business (b2b) and 70% of online shopping has been captured and lead by Alibaba
Group in China (Alibabagroup.com, 2019).
Primarily based in Hangzhou, Alibaba Group is recognized to offer a host of interesting
services which includes an affluent and profitable online market place through its Alibaba.com
(Leong, et al. 2016), along with this an international business to business market place which
significantly has helped China gain strategic and profitable partnership for its small business
ventures. Along with these, the company has also expanded its service by offering online
payment services to its customers through their Alipay Service, a strategic internet-based
business management solution through Alisoft, online promotional and advertising service
through Alimama and an interesting entertainment portal named China Yahoo.
Reason for choosing China as the primary business land:
Choosing China as the prime market of operation was a very wise and sound decision
taken by Jack Ma after he witnessed a huge change in the economic condition of China, with
Leader Deng Xiaopenge passing away and Jiang taking over the leadership. China’s gross
domestic product (GDP), at that time grew by leaps and bounds with per capita income emerging

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substantially and a large inflow of foreign direct investment. Thus by the late 1970’s, Chinese
economy witnessed an unprecedented growth with more and more small businesses flourishing
and establishment of privately owned enterprises. Even the 15th Part Congress in the year 1997
acknowledged the necessity of private sector enterprises and how it helps to boost the economic
growth of the nation (Winans, Kendall and Deng, 2017). The private sector grew at an
unbelievable rate and by the mid of 2000s as reported by The Economist Magazine almost two
third of the Chinese economy was under the hands of private ownership (Ahlstrom and Ding,
2014). This was exactly when Jack Ma stepped in with his innovative business ideas.
Therefore from the above presented discussion it is very well understood that the success
of Alibaba was not a one day affair neither is a big secret. Aliababa Group identified how the
nature of China’s economy was changing, how day by day internet was penetrating into the
business market. In 2003 the number of potential Internet users reached 80 million and this was
exactly when Alibaba’s prospectus that is Taobao.com was launched as an online marketing
website. Again in the year 2007, where internet users almost amounted to 210 million (Zhang, et
al. 2017), Aliababa launched its online promotional and advertising platform named Alimama.
Similarly with each passing year and as the number of online users grew Alibaba also focused on
strengthening its online presence be it through its business to business online marketing platform,
or business to customer marketing platform or through its cloud computing facilities. In 2010,
the following three platforms were launched as part of Alibaba’s increasing focus on mobile
payment: Juhuasuan (a platform for C2B); AliExpress (a global consumer marketplace); and
Mobile Taobao App.

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Unique business initiatives adapted by Alibaba Group:
Thus, identifying the core reasons which made Alibaba Group achieve all its
success in China requires analyzing theses fundamental concepts which includes:
Extremely unique business Model adapted by this business house. Alibaba always
extended its support and services to small enterprises and individual. This in itself is a
very unique approach towards business which enables small business enterprises to
flourish equally and thus bring in a large variety of goods and services for customers. For
instance Be it 1688 (a B2B e-commerce platform), Taobao, or YiDaTong (the largest
Chinese professional import and export agent), all of these three core business
subsidiaries of Alibaba focuses on providing services to small enterprises, accumulatively
creating value that would not have been possible individually. Together, they represent a
complete e-commerce ecosystem (Zeng, 2018). The next big attraction is its
unconventional pricing strategy. Alibaba helps marketers market their product at
minimum cost using the online platform by only varying for services in marketing and
technical assistance rather than for admission. The main profit generation of Alibaba
comes from advertisements as well as online keyword bidding (Ter Chian Felix Tan, Tan
and Pan, 2016) and another major source of its revenue earnings is its extension of
technical services based on big data of consumer behaviors. Alibaba Group recognized
the price sensitive nature of the Chinese market and thus ensured to making the
registration of sellers free for all the online platforms which in turn gathered huge number
of sellers for Taobao and in turn brought in new customers as well. The next big factor is
its unbeatable service offering which ensures utmost comfort of the customers who
purchase online and provide extensive support services to ensure optimal satisfaction of

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the consumers. Alibaba Group understands and acknowledges the fact that there is severe
competition on online marketing platform as well and to gain that added advantage one
must ensure to offer something exclusive to the sellers as well as to the buyers. Therefore
some of these support service include: offering online business training for sellers,
followed by introduction of a special coding system to manage the large number of stores
on the platform, development of innovative and instant communication tool for better and
smooth seller-buyer communication exchange, and the reimbursement of any product
with refunds completed within seven days. These support services definitely helped
Alibaba generate more transactions. Alibaba has always been an opportunist and the
company heads have always made sure to make the best use of every opportunity
that comes in their way. Thus the company excels in identifying and seizing any major
business opportunity. For instance exclusive discounts and special offers on occasions to
pull in large amount of customers, the unbelievable success of ‘Double 11’ which was the
time period, between Chinese National Day and Christmas. Most customers typically
avoid shopping during that period but Taobao has successfully turned that day into an
actual shopping festival and generated CNY 1bn in total trading volume for Tmall within
the first three opening minutes in the year 2014 (Tan, et al. 2015). Reliability and
accountability associated with the brand has been another significant contributor towards
the brand’s success. The whole process of selling and busing is monitored and controlled
through lot of speculations. Extreme protection of online payment transfer and privacy is
ensured which was the reason that in 2013, the number of users in Alipay approached
almost to 300 million, while the number of transactions reached CNY 900 billion (EUR

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128 billion, $135 billion). Active users of the mobile terminal amounted to 100 million,
which exceeded the number of users on PayPal.
Moreover, Alibaba Group largely emphasize on building up a strong feedback
mechanism which would potentially justify the interactive nature of the online medium.
Therefore, the company arranged for special discount coupons and offers for all those customers
who reviewed and provided their valuable feedback on these online marketing platforms (Zhang,
et al. 2017).
Source: (Ahirwar, Ahirwar and Chourasia, 2016)

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How effective would be these strategies if applied outside the Chinese economy:
These new transaction business models which directly challenge the traditional
transaction patterns can only be applied to those economies which show an interest to change or
accept this digital revolution. As from the above cited discussion it is very clear that to initiate
and accept this change, it requires a collaborative approach on the part of the buyers, the sellers
and as well as the government. It is of no doubt that Alibaba can obviously use these online
expansion strategies to take its business across different countries and continents however what
needs to be considered is the digital literacy and awareness rate of the individuals of that region.
The landscape of the e-commerce industry is constantly changing which is both
scary as well as exciting. With more and more brands entering the online business platform the
line of differentiation between physical and digital environment will constantly get blurred. New
research studies claim that the worldwide retail business of e-commerce will witness new heights
by the end of the year 2021. The term social shopping will gain new acceptance and will become
profitable platforms for promotion and advertising of goods and services. All social media
portals be it Instagram, Twitter, Pinterest, Facebook or Youtube will be enabled with a buy
button and over all the rate of digital transactions will be on a rise.
Therefore in such a scenario Alibaba aims to build an integrated ecosystem of doing
business operation rather than just positioning the brand as an e-commerce company. Alibaba
has always aimed at easing the whole process of doing business both for the sellers and
emphasizing on building a positive purchasing experience for the buyers. The main business
strategy is ensuring globalization by connecting brands and small businesses all over the world to

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the Chinese consumers. Alibaba last year bought Lazada, an online marketplace selling to
customers in Southeast Asia, investing a total of $4 billion into the company (Rui, 2018).
Innovative consumer to business transaction model of Alibaba which particularly aims to reduce
cost of operations and aims at increasing consumer satisfaction will definitely turn fruit if applied
on a global basis. However what needs to be ensured is how user friendly is the whole online
marketing technique and what would be the exact system of absorbing more buyers to engage in
online trade transactions. The state of technology and infrastructure of a particular nation plays a
very crucial role in ascertaining the level of acceptance that the particular region ill show
towards these digital revolution.
It is of no doubt that the global ecommerce industry to growing and merging by leaps and
bounds however the major concern is the flow of information and the knowledge of the digital
transformation needs to spread equally so that the developing and underdeveloped countries can
also use these resource and increase their business potentials. Therefore Alibaba to replicate
these online marketing strategies and techniques to expand outside the geographical boundaries
of China need to consider and analyze the major micro and macro socio-economic factors
operating in that country or region.

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