Group Leader: Liu Yuanxiu (Sn: 120198942)
Class-code: L42 – 2014
Submitted on: 05/10/2014
Alibaba Business Model
1.
Business
Value Proposition:
“To
make it easy to do business anywhere”
Alibaba.com was founded in 1999 and being a
B2B e-commerce site it now claims to
have 1.7 million users from more than 216 countries. Just by clicking on
the site and one can find numerous suppliers from China through one can find a
large variety of products ranging from electronics to automobiles and
computers. Almost every possible sector is included. Besides this, buyers can
also go through the company information section and lead trade in 27 industrial
categories and 700 product sub-categories. This provides a large range of
variety to the customers who need not go anywhere else for their needs to be
fulfilled.
An
example: 11 Main, a business wing of Alibaba Group.
11 Main will differentiate itself from
Amazon through its hand-picking of the independent shops and neighborhood
businesses available on the site. Based out of San Mateo, 11 Main will launch
in the US with over 1000 shops including small vendors such as Mabel Chong
Jewelry, AXL Brand, NV Blue, Featherweight Clothing Co., and others. Each
specialty vendor is selected by invitation to represent the “diversity of Main
Street” according to Mike Effle, the General Manager of Alibaba. The site will
strive to present innovative products and one-of-a-kind items not available
through mass retailers via a “beautifully designed experience.”
2.
Revenue,
Pricing & Cost Policy:
Alibaba’s profit in 2013 totaled 23.1 billion
yuan, which was helped by its relatively low cost structure. The company
doesn’t buy the products it sells, nor does it pay for the warehouses where
goods are stored, or the delivery and logistics infrastructure to get a package
to a person’s doorstep. Alibaba collects fees on some sales or sells
advertising for merchants who want to get featured higher when a customer
searches for products on main websites like Taobao, Tmall, and Juhuasuan.
3.
Market
Opportunity:
Alibaba.com has an English website that
caters to the SMEs in over 200 countries. Most of the people who visit the site
are either international sellers or buyers looking for business in china and
other manufacturing countries.
4.
Competitive
Environment:
Alibaba will compete most directly with
online retailers like Amazon, Ebay or Zalando in Europe, Rakuten in Japan, Kobo
in India, Wuaki in Spain and other major online providers with strong presence
in their home and adjacent markets.
Macro environment factors: Occasionally, in
the US market which Alibaba is making its presence, US lawmakers may implement
restrictions on foreign businesses in the name of protectionism. The frosty
relationship between US and China on certain issues like the South China Sea
dispute and the most recent Hong Kong protest, can hamper Alibaba’s public
acceptance in US.
5.
Competitive
Advantage:
Alibaba’s home country – China, has 1.3b
population. With 560 million Internet users spending 20 hours a week online,
China is by far the largest Internet market
in the world–twice the size of the U.S. market. And notably, China is
skipping traditional retailing in favor of e-tailing. As internet technologies are progressing
rapidly in China, the country may skip a generation of brick-and-mortar retail
build-out through aggressive e-commerce adoption. This generates great growth
opportunities for Internet retailers, especially for early movers like Alibaba.
6.
Market
Strategy:
Alibaba is playing an imperative role in
helping SMEs in China and around the world participate in global trade and
become more competitive at the global level. It is creating jobs and
opportunities for millions of companies and their employees by giving them a
cost-effective platform to market their products, find quality suppliers and
grow their business.
7.
Organisational
Development:
Build on six values – Customer First,
Teamwork, Embrace Change, Integrity, Passion, and Commitment. These values
enable Alibaba to establish and maintain a strong company culture and
community. Integrity, for instance, commit Alibaba on strong relationship with
its customers, business partners and shareholders.
8.
Key Management:
A strong senior management team with vast
experience in directorships. The CEO (Jonathan Lu) served as a chief executive
in Alibaba Group’s wings like Taobao, Alipay, and Alibaba.com. The founder,
Jack Ma, served as a director in Huayi Brothers Media Corporation, The Nature
Conservancy of China, and now Life Sciences Foundation.