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Alibaba: Competing in China and Beyond

Gloria Sol
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Company summary: Alibaba was founded by Jack Ma in 1999. This company was created with

the sole purpose of internet-based business. It currently has more than 25,000 employees in 70

cities and reaches more than 79.7 million registered users in more than 240 countries/ regions. It

has become the leading ecommerce company in China by providing easy-to-use features

connecting buyers and suppliers. Its main concentration is on small and medium sized Chinese

firms focusing on B2B, B2C and C2C.

1. Critically analyze the factors that led to Alibaba sustaining its leadership position in the

Chinese ecommerce market.

During the late 1990’s and early 2000’s, the internet was not very popular in China and people

were ignorant to its proper use. Knowing this, Jack Ma decided to start this internet user-friendly

company that would allow his clients to perform business transactions with other

businesses/suppliers in China. He first started the company on a local level and as Alibaba has

seen success it has been expanding to the global market.

Initially, Alibaba had two websites one for international members and another one for China.

However, seeing that Japan is China’s biggest trading associate, Alibaba launched a Japanese

site for Japanese traders. The company has been successful in both China and Japan because they

have studied the markets and penetrated them with a local market structure.

Jack Ma realized that many SMEs distrusted the idea of online payment. Buyers refused to send

money to sellers before they had received the goods and sellers were unwilling to ship the goods

until they had received payment. To counter this problem, Alibaba launched an online payment

platform called “AliPay” based on lines of eBay’s payment system, PayPal.

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The company was originally free of charge but in 2001 Alibaba began charging its members for

the services provided. Alibaba started selling its advertising space, offering a customized online

marketplace for its members called “Alibabies” for a premium.

Jack Ma made plans to provide various products targeting the SMEs in various countries. They

have slowly become a global company with a local mindset. Because of their strong integration

in the Chinese market Alibaba has maintained its leadership in this country and is expanding

globally.

3. Critically examine Alibaba’s business model. Do you think it is sustainable? After having

captured the Chinese ecommerce market, what steps should Alibaba take to expand globally?

Alibaba has multiple business models as it is actually several different companies. It is divided

into 3 business units with the purpose of better serving their customers. These business units are:

 International Core Business Unit (ICBU)- Provides technology and services small

businesses to participate in international trade.

 China Business Unit (CBU)- Provides a Chinese online platform for B2B and small-

quantity wholesale transactions (Sales managing application, business network service).

 Ali-Institute- Established in 2004 to offer customer training and higher education

certification across China.

The company offers two platforms, one in Chinese for Chinese businesses and another in English

for the other international customers.

Alibaba focuses in helping sellers to meet buyers. It provides an Internet based business-to-

business (B2B) platform where sellers (suppliers/ manufactures) can meet buyers (outsourcers/

wholesalers) on a global scale. Customers are both the sellers and the buyers, who are able to

post “storefronts” to advertise their products or needs.

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Alibaba offers several services to aid the e-commerce, some of which are free and come with the

basic account, and others must be paid for. Income is primarily generated from suppliers who

purchased services to be listed on the site, such as priority placement in industry listings and

searches.

Alibaba has managed to surpass and exceed any competition presented by other international

companies (like eBay and Yahoo) in China. When it was first founded, Jack Ma established 3

basic strategies (Back to China, Back to Central, and Back to the Coast) with the main goal of

targeting the Chinese local market and penetrating it successfully. This company also managed

to survive the economic crisis in 2008 and has actually expanded globally ever since it was first

created. For all these reasons I believe that Alibaba’s business model is sustainable.

In order for Alibaba to expand successfully as a global company they need to know specifically

what their customers from each specific country demand and want. They could implement a

global geographic structure to cover specific geographic regions and penetrate the market in that

area. Alibaba has to think globally but act locally. Another way they could expand in other

countries with ease is by acquisition. By acquiring other ecommerce companies from different

countries they can learn the other company’s values and culture, and business methods that

company uses with their local customers. That way they will penetrate that country’s local

market successfully.
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Bibliography

Deresky, H. (2011). International management. (seventh ed.). New Jersey: Pearson Education.

Alibaba.com (2011). Our business units. Retrieved from

http://www.alibaba.com/about/en/AboutOurCompany/business.html

Alibaba.com (2011). “Company Overview” http://news.alibaba.com

Eric Jackson, Pulling Back the Curtain on Tabao and Yahoo’s Hidden Value. http://www.forbes.com

Gady Epstein. (2011). Alibaba’s Jack Ma Fights to Win Back Trust. www.forbes.com

Chua Chin Hon. (2006). “Yahoo! Jack Wants it To Be No. 1 in China,” www.asiamedia.ucla.edu

Elizabeth Millard. “The Mushrooming Chinese Internet Market” www.ecommercetimes.com