Alibaba.com, Essay Example

Introduction

Open Sesame, a well-known line that has been engrained in pop culture references and vocabulary since the tale of those memorable words. Even more so is the story from which it came from, the journey of a poor man who stole money from a magical cave. The man’s name is apart the famous medieval Arabic literature Ali Baba and the Forty Thieves. The story of the man with the infamous name has been told throughout the world. However, now his name is synonymous with the global company, a privately owned internet based E-Commerce businesses that cover B2B online marketplaces, retail and payment platforms, shopping search engine and data-centric cloud computing service.

The founder Jack Ma was born in Hang Zhou in 1964. When he was 12, he became interested in learning to speak English. In order to practice his English, he pretended to be a free tour guide in the Hang Zhou West Lake district for foreigners. The eight years in the West Lake district help him broaden his mind on the world. Ma entered the Hang Zhou Teacher University in 1988 and soon became an English teacher after he graduated. By then his English was superbly sufficient that he started a translation company that help to create some of the first business relations with China and the United States. Soon he traveled to the US in 1995 as an interpreter. Ma did not know particularly much about the internet until he visited his friend in Seattle. He was so inspired from his time using the internet. When he search for beer on the internet, he found several results. However, when he search for China, he did not receive any in his search results. His time spent on EBay, motivated him to make a similar platform for Chinese citizens. From that point, he had discovered the many business opportunities the internet could have for China. Later on in 1995 he set up the web yellow pages in China. He competed with China Telecom for about a year and set up a joint venture with them. He was then later able to sell the business to China Telecom. He soon starts the B2B e-commerce company Alibaba.com in 1999. He chose the name after getting some coffee in San Francisco and realized that it was already a memorable name, after speaking with patrons he realized that it was not only easy to spell and say, but already universally well-known from literature. With the gathered support from 17 staff members, he started the business with US $60,000 capitals.

Alibaba.com main focus is operating as the premier B2B marketplace for retail and payment platforms. Alibaba.com is able to connect Chinese manufactures with overseas buyers, better than any other site within China. Since its inception in 1999, Alibaba.com has sold over a billion products and has 20 most visited sites globally. One of their business objectives is to help the SMEs to make money. Alibaba.com is the online middleman which provide trade platform to allow the SME to trade online with companies and people in China. SME have the opportunity to list their business features and functions such as, what they supply or produce, their contact information, and other useful information easy to find for the potential buyer. The information of the SME is divided in to different categories of the industry. The users of Alibaba.com are able to search through the user friendly platform to identify potential trading partners, and interact with other companies to conduct business.

Their payment method is an online third party platform, AliPayment that provides an escrow service, where customers are able to verify whether they are happy with goods brought before paying the seller. Similar to eBay, Alibaba’s Alipay teamed up with Visa, MasterCard, and over 100 financial institutions and other major credit card companies to provide payment solutions to all of their companies within their network of websites, called Alibaba Group. Alibaba Group is the world’s biggest e-commerce company comprised of Tabao.com launched in 2003, Ma strategy moved towards a more consumer approach, an auction site that is particularly similar to eBay, however, quickly bested eBay as China’s homegrown favorite. Other networks include, Taobao Mall, China’s leading business to the consumer market online for quality name brand products. eTao, the comprehensive search engine comparable to Google, and of course China’s own China Yahoo, one of their leading search engine portals. “Alibaba Cloud Computing, a developer of advanced data-centric cloud computing services and
technologies.”(Business Wire, 2012) Alisoft which is the provider of web services to the Chinese SME marketplace. Alimama serves as an online advertising exchange company, which allows web publishers and advertisers to trade online advertising inventory. China Civillink, a firm that provides domain name registration, and lastly Alipay. Altogether Alibaba Group consists of 25 business units and is focused on fostering the development of an open, collaborative and prosperous e-commerce ecosystem. (Alibaba.com, n.d)

Alibaba’s Mission

Alibaba’s mission is “to make it easy to do business anywhere.”(Alibaba.com, n, d) Their vision includes, “to become the first platform of choice for sharing data, to be an enterprise that has the happiest employees, and to last at least 102 years.”(Alibaba.com, n.d) Alibaba follows a set of core values that differentiate them from other global companies by focusing on SMEs. Also, their imitative to put customers first, have good teamwork within their working environments, embrace change within the fast paced moving industry and economy, integrity of the company to deliver on their commitments, passion for their work, and commitment for the company and employees to continually strive for excellence and professionalism in every aspect of the business. Their outlined core values, mission, and vision statement are what drives the company to continue to grow and expand within the market.

SWOT Analysis

As the leading e-commerce company, Alibaba faces continued outside threats that challenge its competitive and overall business strategy. It is necessary for any company competing within the global market or any market to continue to fine-tune their competitive advantage in order to keep ahead of their competitors. Threat of new entrants is possible in the market that Alibaba operates in so revamping their strategy is best outlined by comparing their strengths and weaknesses.

Strengths

Alibaba’s strengths include, their reputation of success since their beginning Alibaba has grown continuously adding on subsidiaries and business units to rival global companies that cannot break into China’s niche market. Their effective growth strategies such as utilizing the internet to reach businesses and customers has allowed Alibaba to grow rapidly. Alibaba operates as a global company that does business in over 240 countries throughout the world, because of their growth they are able to see a larger profit opportunity. Their second strength is their established strong relationships with world leaders. Alibaba has formulated a strategic approach of developing smart acquisitions with other leaders within the industry. An example is their acquisition of Yahoo! China, Ma realized that the acquisition of Yahoo represented an overwhelming opportunity to grow and gain a larger market share. The third strength that Alibaba has are their global marketplaces. The e-commerce market within China is growing and the reach of their acquisition of Yahoo! Has given Alibaba considerable global market influence. It puts Alibaba in the position to control a large percentage of Chinese market, and compete on a global scale with companies in their biggest markets including China, Japan, and Great Britain. Their brand recognition and brand loyalty allow the freedom to develop other business units to better serve the needs of their consumers.

Weaknesses

Alibaba however is not without its weakness, as their strengths have helped them grow, their weaknesses have the potential to hold them back. Their first weakness is their low technology. Although Alibaba operates considerably on the internet, Alibaba has low-level technology. Other business in the market has more complex and attractive e –commerce sites, but Alibaba’s is basic and not as memorable to consumers on first look. The low quality is only reflected more in their loss of membership due to rise in fees. Once offered for free it now has increased the fees of their members. The second weakness is that Alibaba is labor intensive, where it has 4,000 employees it means a large amount of expenses paid in salaries. These expenses only hurt the company instead of helping them with the increased man-power, yet the expenses subtract from the overall profit and budget.

The third weakness is that Alibaba has greater Chinese cultural influences. Although the organization is known as a global company, it still not well known in the United States, which is one of the largest economies in the world. Alibaba within the US market has to compete with its global rivals of Google, Amazon, and eBay.

Opportunities

As Alibaba continues to grow in the global market they have several opportunities that allow them to stay ahead of the competition. The first opportunities include growth in profits.

Alibaba is the largest e-commerce organization in the world, but the industry will get more competitive as the market grows. Their expanding portfolio of different business units gives them the opportunity not only acquire more customers but also add more businesses to Alibaba’s Group. By helping other companies within China break into the market it can help to increase their market share and profit. The second opportunity that is presented is the market share in the United States. Alibaba has grown rapidly than other rivals. It entered the market earlier than most US and global companies. It has the opportunity to infiltrate the U.S market by conforming to their style of business, quality in the website, and marketing and advertisement campaigns.

Threats

Like opportunities the threats to Alibaba international reign is expected. The first threats are the growth of China’s e-commerce industry. The main threats that exist in Alibaba’s external environment are from highly competitive companies. The CEO. Mr. Wei welcomes competition on any scale because competition makes other company work harder to improve business that the industry will growth. The second threat is EBay’s new subsidiary. EBay is a competitive rival, and it has been developing Alibaba’s similar operations in order to compete better within China and Japan. The third threat is the global economic crises. Alibaba’s CEO said, “The global economic crisis provided a great opportunity to help more small and medium-sized enterprises move online, and expand our market leadership and investment for growth”.  The recent focus has been to increase the growth of B2B AND B2C business within China and abroad.

Competitive Analysis

Alibaba’s competitive analysis is focused mainly on its main rival, EBay. Both companies are internationally known and operated and are a popular source of C2C and B2C offerings. EBay started as an auction site and has quickly planted itself as the leader and monopolized the market within the United States. Alibaba in most international markets has surpassed the competitor as the number one auction side for global trade as they have acquired eBay’s Eachnet to position themselves at a global competitive advantage. Their business are similar as their product lines that both offer similar if not the same products, services, and goods. What Alibaba has that eBay is trying to get is the advantage of being a home favorite within the Asian market. Their business models are different as Alibaba’s goals are strategically outlined and centralized to expand within the global market. EBay’s business model is not as clearly defined, and not as centralized as Alibaba’s.

Strategy

One of Alibaba’s business strategies that will help to work toward their goals of growth, profit, and market share are to first expand their user base and active listings. Not only does it help with providing the best quality and quantity for their products, but also move to expand their active listings also helps to increase marketplace size. The second strategy that the business uses is that it introduces new features and tools. One of the key new features is the addition of the instant message system onto its home web page for buyers and sellers to better communicate. These key features and changes help to enhance community experiences, improve customer loyalty to generate increased revenue, and business growth. The third business strategy is for Alibaba to monetize their user base. Since their inception they have provided membership at different levels for their users to operate their own business. Each membership level as different features and benefits that include filtering, listing permission, and premium listing. The method of offering different memberships provides the company with the opportunity to generate more revenue and provide their users with more benefits.

The fourth factor in their business strategy is to selectively expand its sales and customer services capabilities to into international markets. Alibaba has the opportunity as a private tech company to operate without the same regulations as most global markets, and their already have the brand recognition and reputation to enter into different markets with their wide array of business units within Alibaba Group. The fifth feature is that Alibaba believes that their marketplace platform could be extended beyond pure trade marketing to address users’ daily business processes including customer management and user operations. The last feature is to expand its business through acquisitions, investment, licensing, arrangements, and partnerships. Alibaba has made several trade agreements, partnerships, acquisitions, and investments that have help to propel it further in the global market and value the company at well into the billions, including acquiring Yahoo! China, and eBay’s Eachnet, among other acquisitions.

Look towards the future

The outlook for the future is to expand in the opposite direction by creating Export to China, a system which allows non-Chinese firms to establish Chinese language storefronts to export their products to China. According to Alibaba, they are dedication to a complete transformation and upgrade of its business model. (Alibaba, 2012)Their focus is to overhaul their platforms and businesses to present a quality service and business model. “In particular, Alibaba.com has shifted away from aggressive membership acquisition to concentrate on providing a higher quality user experience.”(Alibaba, 2012)  They will continue to invest in performance and transaction based services that will affect their revenue growth, but will help it deliver long term value for their customers. By following their core values illustrated in their business model, they will continue to focus on the customer instead of the shareholders. Provide quality service, and make needed changes to compete better in international markets not yet infiltrated.