Running head: B2B E-COMMERCE IN CHINA: THE STORY OF ALIBABA.

COM 1

Fatima Hussain

Hassan Javaid

Humaira Amir

Ibad Aslam

Mahnoor Riaz

Murad Ahmed Niazi

Talha Omer Butt

Presented to:

Miss Zainab Qaiser

Industrial Marketing
B2B E-COMMERCE IN CHINA: THE STORY OF ALIBABA.COM 2

Abstract

The following document consists of an overview of the case of Alibaba and Jack Ma’s (its founder)

struggles in making the company a giant in the Chinese and international e-commerce market place.

It also points out any problems that have been identified and aims to discover its core problem. Six

different questions have been answered below as well as an analysis of the case study, following

the recommendations for it at the end of the file.

Keywords: Analysis and recommendations.

[Title Here, up to 12 Words, on One to Two Lines]

B2B E-Commerce in China: The story of Alibaba.com

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Question 1: Does the “bird cage” theory when applied to Chinas Internet policy constitute a

serious threat to the development of the B2B e commerce industry?

Chen Yun was one of the most influential leaders of Peoples Republic of China. He came up with

the bird cage theory which states that the economy should be allowed to fly flee like a bird but

only within the confines of a good strong cage. This means that the content on information should

be controlled and supervised and be adjusted with time. According to Chinese e commerce policy

the internet information, its flow, economics and key players are to be controlled. The policy is a

serious threat to the e commerce industry as many Chinese agencies have tried to regulate and

supervise every aspect of country’s e commerce but there has been greater confusion and increased

bureaucratic hassles for business. The policies have hindered the growth and development of B2B

e commerce industry in China, they are only exposed to the caged information meaning that

information provided to the Chinese people is limited. This will not allow B2B e commerce

industry to flourish and provide the people or businesses its complete advantages.

Q2. What is the focus of Alibaba's business and what makes it so different from some U.S. e-

commerce companies?
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The focus of Alibaba is quite different from that of the U.S. companies as they follow the new

method of business rather than the traditional business methods. The target market of Alibaba is

different from others such as eBay and Amazon as it focuses on smaller businesses rather than

those large giants who dominate the industry. It focused more on B2B businesses unlike the B2C

model. The strategy the company use is “shrimps rather than whales" and this ideology has been

the main reason for Alibaba’s success. Besides this these businesses do not only include firms from

China, instead companies from all over the globe are included for a better globalized business

environment. Whereas the U.S. companies focus on large clients, this is also beneficial especially

for marketing purposes. However, many small companies collectively can be bigger than those

bigger corporations. Thus, Alibaba with their excellent skills targeted this market and filled the

gap which no one else was able to. Beside this, unlike Amazon, Alibaba does not sell goods to

customers directly instead it has a virtual marketplace where the transactions take place. Alibaba

charges only 2% to 5% commission on each transaction which is very less as compare too Amazon.

Q3. Would Alibaba have been as successful today without the leadership of someone like

Jack Ma?
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Jack Ma has put his heart and soul for creating Alibaba and making it successful. Jack Ma visited

the United States in 1995 where he realised that the world had advanced technologies in the form

of the internet and computers that Chinese lacked and when his friends in Seattle introduced him

to the internet, he did not find any searches to ‘China’ and ‘beer’. Therefore, he was determined to

start a company to help Chinese firms get on the internet. It was his constant endeavors to make

and instruct new clients, and to steadily push the Chinese government for more prominent Internet

changes to spike the development of the whole Chinese B2B industry. He is a successful

independent Asian business visionary who approaches life from an altogether different perspective

than the more preservationist western businessmen. His own charms charmed China as well as

admirers from top of the world. For a business to support in a quick paced industry dependent on

stages, for example, the web; where advancements and thoughts are consistently expanding and

introduced, it is perpetually essential to keep pace with the commercial center, customer needs and

contender contributions. He launched China Pages, an online directory of Chinese firms which

was believed to be the country’s first commercial website. Also, Jack Ma created the first

government Website by the Chinese Ministry of Foreign Trade and Economic Cooperation in 1997.

Jack Ma created Alibaba in 1999. Alibaba enables an interactive community of millions to

meet, chat, trade and work online. Alibaba main mission is to make it is easy to do business

anywhere. The Chinese organization, Alibaba, is changing the manner in which worldwide

business is directed. This quickly developing B2B organization has profited by the blast in data

innovation and has created is an interesting plan of action. The Alibaba culture is tied in with

supporting private small companies. Jack Ma found that small-and medium-sized enterprises

(SME’s) are the one who really need e-commerce, stating that, “there are more shrimps (SME’s)

in the ocean than whales (big corporations)”. Another experience that helped Ma extend Alibaba
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into a worldwide site is his experience as a visit guide and his visits abroad. This has comprehended

the various societies and adjust his site to the worldwide societies and market needs. This makes

Alibaba different from US ecommerce companies who’s main focus are on big corporations only.

Furthermore, he also promoted the “Trust Pass” plan on the website, which created the world’s

first online credit platform for companies. Alibaba was not able to get additional government

support, it was Ma's own charms that pulled in capital as well as help from the corporate world.

The executive of Goldman Sachs and the CEO of Softbank put resources into Alibaba as well as

sit on the board of directors of the organization.

Based in Hangzhou in eastern China, Alibaba now has sixteen regional sales and service centres

across the country, as well aas corporate offices in Beijing, Hong Kong, the United States and

Europe. Jack Ma recognized the potential target markets and design services that catered to the

speicific needs of their customers. Their English-language website alibaba.com speacialises in

B2B trades, especially for international buyers trying to get into contact with Chinese sellers. The

Chinese-language chinese, alibaba.com focuses on B2B trafes within China while TaoBao is a

website that caters to consumer to consumer (C2C) trade site for Chinese customers. Jack Ma made

Alibaba become the worlds largest online B2B global trading marketplace, with 25 million

registered users and 225,000 paying members in its international and Chinese domestic

marketplaces.

Ma’s main mission is for the website to be both global and horizontal across all products

and without Alibaba, B2B would have a different outlook than it has now. It is believed that

Alibaba would be in the top three internet companies in the coming years. Ma’s philosphy stated
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two things which were, one; hire people who are smarte than you, and second; focus on getting

them to work together.

Along these lines, there is no uncertainty that Jack Ma has achieved a great deal and has

set a standard in B2B web based business in China, yet around the globe also. In this manner

without the pioneer of Jack Ma, in the present, Alibaba would not have had the option to thrive as

it has it now under the authority of Jack Ma.

Question 4: What are the benefits of strategic cooperation with China Post?

Since the inception of Alibaba, this strategic cooperation between two successful organizations has

been very beneficial and productive. There are some matters in B2B dealings that have to be taken

care of such as the relationship and trust matters more than what cost is being advertised.

Previously Alibaba used several privately run express delivery companies whose networks catered

only specific regions and not the whole country which had many short comings. Traders

complained damages and losses of goods during delivery for which they were compensated only

three times that too based on the company’s policy.

China Post, the postal service of People’s Republic of China established in 1997 by the

government, is one of the most confided brand in China. This agreement between both the

organizations helped develop china’s e-commerce infrastructure and take it to the next step. As

china post is a trusted brand it helped enhance traders trust in online business, as customers were

additionally offered full compensation if there should arise an occurrence of harm or loss of item

during transportation, which reinforced their trust.

Moreover, the private parcel delivery services didn’t cater the whole nation but teaming up

with china post allowed Alibaba reach out to wider locations which helped develop china’s
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infrastructure and online services. This partnership worked mainly on parcel delivery and money

remittance.

Both the organizations launched an economical online postal service “e-Youbao” which is

cheaper than china posts standard mail service to help Alibaba save costs and penetrate

underdeveloped rural areas using its extensive delivery services. It enabled the customers to use

both the organizations combined online portal “e-Youbao” to fund their Alipay account at any of

china posts 66,000 locations without the hassle of getting a debit card or a bank account.

Furthermore, China Post's Green Card Debit Service will extend with working together with

Alipay's online payment service.

This strategic partnership between two of the most successful companies in china will help

Ali Baba become a partner of the fifth largest depository institution in china that is china posts,

Postal Savings Bank attracting more traders and customers. Like china post itself began selling

their stamps and books using taobao.com (Alibaba’s C2C trading site). This would help Alibaba

reach out to customers all over china with china posts extensive delivery services.

Question 5: What are the current and future benefits of the cooperation with Yahoo?
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Yahoo! China (www.yahoo.com.cn) is a leading Internet search engine and portal serving China’s

consumers and businesses. On August 11, 2005, Yahoo! Struck a deal with Ali Baba by investing

a huge amount of US$1 billion for a 40% ownership in the Chinese company. In addition to this,

Yahoo also handed over Yahoo! China’s assets to Ali Baba’s Chief Executive Jack Ma, which had

a total worth of approximately US$700 Million. The assets included Yahoo’s search technology,

Yahoo’s China’s Website, it’s communication and its advertising business. It has given Ali Baba

the exclusive rights to use the Yahoo! Brand in China and use the technologies to enable a less

technology-oriented search engine for the Chinese people who don’t know how to ask the right

questions to a search engine, making the Yahoo! Search engine more human, more interactive.

This is very crucial for Ali Baba as the future of E- Commerce depends on online searching and

this integration would allow Jack Ma’s company and its Chinese users a world level searching

engine, helping it creating a search engine even powerful than that of Google’s. The deal will now

make Alibaba a $4Billion giant, helping it directly compete with eBay and Google over the

Chinese internet market, thus undermining their influence in the region.

Moreover, the deal will help the company to come up with the technological and business

innovations for its own domestic market, through Yahoo and its technical know-how, talent

overseas and the extra one-billion-dollar investment. This would also help generate extra profit for

the Chinese originated company as the partnership also hands Alibaba the exclusive rights to

advertising revenue from mainland companies on Yahoo!’s international sites. Even if other

Chinese businesses have to advertise on Yahoo! UK, their revenues would automatically go to

Yahoo! China, proving knockout blow for eBay, an international rival for Alibaba’s B2B

operations.
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Thus, if we look over the deal as whole, it was not a bad deal after all. The deal gave

Alibaba a healthier future, helped the company cash out many small venture capitalists, and the

most important factor was how it helped Alibaba not to go public, as the company had no plan to

list itself in the short term, helping it to strengthen its customer to customer site, Taobao, instead

and competing with the US online marketplace, eBay. This was all for an expense of 40% of

ownership, 35% voting rights and an additional member in the board of directors, alongside

Alibaba and SoftBank directors.