Table of Contents
1. The foundation of the Alibaba Group
2. The Alibaba Group’s structure
2.1. E-commerce market places
2.2. E-commerce services
2.3. Adjacent markets
3. Alibaba’s impact on the ASEAN region and its growth strategy
4. Relevancy of Alibaba’s Initial Public Offering (IPO)
5. Impact on the overall economy
6. Strengths and weaknesses
Although, everybody has heard about the cyber giant "Alibaba”, the majority is not familiar with the company’s business; therefore, this paper concentrates on giving some insights about the real impact of the Alibaba group. Firstly, the paper elucidates the company’s structure and its latest actions, especially the acquisitions in the ASEAN countries; secondly, the paper analyses the meaning of its IPO, as well as the company’s impact on the overall economy, focusing especially on Alibaba’s strengths and weaknesses; finally, the paper concludes whether the news are over- or underestimating the power of Alibaba, it answers if Alibaba actually have an influence on us and what additional value proposition Alibaba has, aside from being a Chinese version of Amazon.
Table of Figures
1. Figure 1: Alibaba’s structure of e-commerce market places
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The Alibaba Group and its Impact on the World's e-commerce
1. The establishment of the Alibaba Group
A Chinese entrepreneur Jack Ma and his 17 business partners founded Alibaba in 1999. The project was initiated in Jack Ma’s apartment in Hangzhou, a Chinese city, where the company is currently headquartered. The very first website was Alibaba.com, a business- to-business (B2B) online trading marketplace, which has become the world’s largest today. The chairman Ma Yun, who is widely known as Jack Ma, is a very charismatic leader. He had a distinctive vision; unlike other companies, Alibaba allowed not only the largest companies to participate and trade on the platform, but also smaller ones. He believed small and medium-sized companies to be the main drivers of economic growth. His mission was “offering convenient environments for business everywhere". He strived to resolve the challenges that small businesses often encounter: procurement, sales and marketing, management and financing through information technology. The Alibaba Group is a value-based company, which puts customers ahead of everything and encourages employees1 commitment, teamwork, passion, and integrity. As indicated in the company's vision statement, Jack Ma aspires the company to be a place where customers “meet, work, and live: a platform on which users can connect through social networks, sell and buy products, and use the services on a daily basis. Ideally he wants Alibaba to last at least for 102 years, benchmarking a few successful companies which has been operatingforthree centuries, hencethe number 102 (Chen, 2014).
2. The structure of the Alibaba Group
The Alibaba Group, commonly referred to as Alibaba, is a conglomerate consisting of multiple companies, which provide a variety of internet features. Alibaba is often seen as the combination of Amazon, eBay, and PayPal, however, it offers much more. Alibaba
primarily focuses on its function as an e-commerce marketplace, but is also involved in adjacent markets, such as cloud computing, mobile chatting, and personal financing. The subsequent paragraphs explain Alibaba’s key brands.
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Figure 1: Alibaba’s structure of e-commerce market places (Alibaba Group Holding Limited, 2014)
2.1. E-commerce marketplaces
Alibaba.com is a B2B marketplace; the website connects buyers and sellers around the world. In contrast to Amazon, Alibaba does not own any warehouse, and consequently does not offer any internally produced goods. Therefore Alibaba.com has significantly low fixed costs, and the suppliers add value to the website by offering products. Like Amazon and eBay, Alibaba also offers a wide range of items and brands, rather than focusing on specific groups of products. 1688.com, shown in the image above, is used by domestic, that is, Chinese small businesses. A major difference between Alibaba.com and 1688.com is that the latter only publishes sales information, but does not offer a possibility to purchase via Alipay: a third-party online payment platform, which is often compared to PayPal. Alibaba.com and 1688.com are very successful B2B marketplaces, however, these websites are only a small fraction of the Alibaba Group. Taobao.com is a customer-to-customer (C2C) online marketplace, but without a bidding function, which is offered on eBay. According to the Alibaba Group, Taobao's marketplace is among the world’s top 20 most visited websites. Aliexpress.com offers its services to small international businesses, and Tmall.com is a giant business-to-customer (B2C) online retail store. Additionally Juhuasuan.com is comparable to “Groupon”, a website where goods are sold at lower prices owing to purchases in larger quantity.
2.2. E-commerce Services
Besides AliPay, which even offers taxi booking and movie ticket purchases, Alibaba offers another e-commerce service; Etao.com is a shopping search engine, which compares prices and helps customers to find the best deal. Etao takes market shares of a competing Chinese search engine, Baidu, which is widely used due to the censorship on Google in China. (Lajoie & Shearman, 2014)
2.1 Adjacent Markets
Aliyun is a data-centric cloud computing service platform, which can be used by companies in combination with other services offered by Alibaba. Chinese banks already use this cloud system, and Aliyun is now planning on further expanding in the financial market. Alibaba is also investing on social network systems, as its focus is on purchases via mobile devices. Laiwang is a mobile chat, which allows people to find friends and form groups of up to 500 people. It is also possible to share maps, stickers and voice messages. In order to be deeply integrated into customers' everyday life, Yu’e Bao provides China with personal finance services. It has China’s biggest online money fund and attracts a lot of investors, as the expected rate of return, around 6%, is much higher than usual. (Alibaba Group Holding Limited, 2014)
3. Alibaba's impact on the ASEAN region and its growth strategy
The ASEAN region has been identified as a primary target for the Alibaba group. Alibaba is successful particularly in the Chinese market; the Alibaba group accounts for 80% of the online retail. “Singles Day", when a number of singles, due to the one-child policy in China, have a chance to purchase goods at reduced prices, well illustrates the success of Alibaba in China; Tmall and Taobao have generated a revenue of $575 billion only within 24 hours, which is greater than the revenue generated on the Black Friday and Cyber Mondaytogether (Wong, 2013).
Alibaba has a financial strength to consolidate a more concrete expansion in the ASEAN region. Increased investments are observed in the form of acquisitions, marketing activities, physical facilities, and product developments. Key investments have been made in Sina Weibo, AutoNavi, China Vision, InTime Retail, and ByeCity, which represent a very diversified investment portfolio. For instance, Sina Weibo, known as a Chinese version of Twitter, provides Taobao's sellers with a medium to communicate with their customers. This implies that Alibaba already successfully adapted to the increasing trend, namely the combination of e-commerce and social networking. AutoNavi, on the other hand, represents the branch of navigation and map services. Not only does it show maps but it also serves as a shopping assistant, as local services are of importance when it comes to shopping (Back, 2014).
A crucial component of Alibaba's strategy is its cooperation with the government and state-owned entities. For example, Alibaba invested in Singapost, a postal service in Singapore. This is beneficial because it attracts more businesses to the Alibaba's cloud system, let alone the gains from the investment. (Chen, 2014)
- Quote paper
- Anonymous, 2014, The Alibaba Group and its impact on the world’s e-commerce, Munich, GRIN Verlag, https://www.grin.com/document/358818