Alibaba Development Strategy

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Global Player

Alibaba is a global player with presence in more than 240 countries and regions, including China, South-East Asia, the United States and Europe.

Being a global player, Alibaba has a diversified base that ensures low business risk as the company is not vulnerable to country specific or client specific risks.

Weaknesses

Intermediary

Alibaba has a huge potential for growth. However, some factors seem to slow-down their progress. The group serves as an intermediary company between many businesses. That means the businesses can easily replace them with cheaper substitutes. This also encourages a lot of new competition.

Charges

This site charges a membership fee which initially was a free service. They were free because they wanted to rapidly penetrate the markets. The act of charging a once free service can make them less attractive to the potential consumers. The existing business can also lose interest in having transactions with the company.

Opportunities

Globalization and the Demand for Services

Globalization has been an advantage for Alibaba. They have been able to reach wider markets owing to the advent of globalization, notably with cross-border platforms like Aliexpress. The development of eCommerce trade around the world will be an ideal factor for the growth of the company. Many countries are investing more and more in online transactions. A company like Alibaba that is already established will seem to be a very attractive company in the eyes of the businesses.

They can focus on growing economies like Russia, India, Brazil, Vietnam, and south-East Asian countries. In these countries, the livelihood and the buying power of the people has increased dramatically. If Alibaba invests in these unchartered territories, they can increase their profit margins and have significant growth. The government of China has also been keenly interested in bringing in more business to the country.

Favorable Government Rules and Regulations

The government of China has been revising their business rules (lower cross-border taxes or online payment limitations, for example) and enforcing more streamlined process for easier business to happen in the country. This will prove to be very useful to the company.

Alibaba is already an established brand, and the Chinese government could help them to grow even more.

Economical Partnerships

The financial crisis that has been happening in the US and the European countries has been a factor for the growth of this Chinese company. The attractive factor of Alibaba is the low-cost transactions that they can provide in times of financial crisis. Businesses that are attempting to work with Chinese businesses or enter the Chinese market will need the help of third-party logistics services that help them control costs and all.

Alibaba is a good economical partner that can help them in managing their costs. The use of the Alibaba marketplace tools could give them more exposure to the existing market segment of consumers that shop online. The new business will not need to find and manage the consumer segments and hence will be able to directly launch products to the required target consumer.

Threats

Intermediary

The company has an effective B2B model that has enabled its growth. However, in the current modernized world if they do not adapt and change their business model they will be phased out by the competition. Globalization is a double-edged sword for this company.

Since this company is an intermediary business it can be easily replaced as once business use Alibaba services to first reach the consumer segment, then they can go on to having dedicated services.

JD.com

JD.com is China’s second-largest online retailer, a B2C marketplace competing with Alibaba’s Tmall. JD buys products and resells them to customers, and this gives JD more control over product quality than Alibaba, but also a thinner margin.

JD also has an edge over Alibaba with logistics, with a strong delivery system in place that gives JD more control over fulfillment. Alibaba, on the other hand, must rely on third parties for delivery. Alibaba is playing catch-up, joining with other firms in 2013 to form Cainiao, which operates a logistics network. Speed of delivery is important to Chinese consumers, and 80% of JD orders were delivered either on the day the order was placed or the next day. JD’s advantage in logistics makes it a powerful competitor. Alibaba will have to invest more in this fulfillment infrastructure if it wants to keep pace with JD, and Cainiao is planning on spending 100 billion RMB in the years to come.

JD-Tencent Alliance

Tencent Holdings, owners of mobile instant-messaging apps such as WeChat (Weixin) and QQ, took a 15% stake in JD in 2014. At the end of 2016, WeChat had around 890 million monthly users. This alliance gives JD a powerful platform on which it can market its products and a wealth of data about the shopping habits of mobile users.

Traditional Retailers Moving Online

Brick-and-mortar retailers in China have been going through difficult times and are moving to eCommerce. This means more competition for Alibaba and potentially thinner margins.

The Dalian Wanda Group, the largest owner of shopping malls and cinemas in China, has formed a joint venture with Baidu and TCEHY known as “Ffan“. Ffan is an O2O services platform where users can do things such as buy film tickets and find local deals and promotions. This new eCommerce platform is both B2B and B2C, challenging Alibaba. Wanda seems to be adapting to the changed retail environment, closing stores and moving to eCommerce.

Competition Analysis

Company Strategy

Historical Strategy

Key Organizational Strategies for Phase 1 (1999–2004)

Alibaba’s first goals was to leverage unique insight of unmet needs in Chinese SME Market. They originally wanted to cater exclusively to the needs of SMEs. As a result,