Title: Alibaba project

Date: 30/03/2021

Table of Contents
Title: Alibaba project..........................................................................................................1
Introduction.......................................................................................................................2
Case Study.........................................................................................................................2
Legal Framework..........................................................................................................................2
Types of risks................................................................................................................................2
Legal risks........................................................................................................................................................2
Social risks.......................................................................................................................................................3
Technological risks...........................................................................................................................................3
Economic risks.................................................................................................................................................3
Political risks....................................................................................................................................................3

Stakeholders.................................................................................................................................3
External stakeholders......................................................................................................................................3
Internal Stakeholders......................................................................................................................................4

SWOT Analysis..............................................................................................................................4
PESTLE Analysis............................................................................................................................4
Evaluate and priorities risks..........................................................................................................5
Action plan...................................................................................................................................6
Conclusion.........................................................................................................................9
Bibliography......................................................................................................................9

Introduction
Alibaba, a major Chinese e-commerce powerhouse, is the world’s biggest online shopping site that
markets, sells and operates different businesses globally. Founded in 1999 and headquartered in
Hangzhou, China, Alibaba supports merchants, brands and other businesses with its technology and
helps them leverage their operations through internet.

The given case study is contextualised by the risks Alibaba has to face due to counterfeit goods and
both the consumers in China and across the globe considered it to be riddled with fake products. The
report identifies the risks associated with the case along with its evaluation.

Case Study
Legal Framework
The main legal framework concerning this case points to the intellectual property, cybercrime and
prevention of the counterfeit products, not only in China, but also all major countries that Alibaba
trades with.

Chinese e-commerce laws

Effective from 1 January 2019, this law covers the prerequisite for registration and licensing of online
businesses, tax collection, electronic payment and e-commerce dispute as well as protection of
intellectual property.

Chinese Market regulations

Comes from State Administration for Market Regulation, a regulator body in China, which announced
strict punishments for online trading platforms that fail to protect the rights of consumers and
trademark ownership since August 2018.

Cybercrime law in Australia

Online reporting system has been set up by Australian government to report cybercrime or new
threat that affects Australians. Computer and internal related offences should be reported to the
government for actions [ CITATION Itd21 \l 3081 ].

Types of risks
Risk management practices are really important for an organisation to meet its
organisational needs. Risk management is the identification of risks in advance, analysing
them and taking the required precautionary methods to stop them from advancing
further. For effective risk management, identification of risks and contextualising them is
important.

In this case, the following risks are found:

Legal risks: This risk mostly focuses on the regulatory and litigation risks. As Alibaba is based in
China, the regulatory rules and regulation in China plays a major role in regulating industry
development of Alibaba. Additionally, as it is exposed to companies with high profiles outside China,
it faces additional exposure to lawsuits both inside and outside China.

Operational risks: The operational risk of Alibaba is hidden in its established business ecosystem. The
ecosystem is formed by its business model and industrial chain. As the company is completely based
on internet enterprise, the business platform relies on the network consumption habit of the user. If
the habits of the user changes, the enterprise is also likely to be destroyed. Moreover, the
duplication of this kind of business model from other network platforms also pose certain
operational risk to it [ CITATION Wei18 \l 3081 ].

The other operational risks associated is the counterfeit products that are sold through Alibaba
platform. As Alibaba was setup to help small businesses sell online, an individual without any
business license or any knowledge of business ethics and law can open a store online. This raised
issues of user verification resulting in many fake merchants selling counterfeit products.

Social risks: Social risks with Alibaba are associated with the attitudes of the employees associated
with Alibaba. As the case highlights that the negative attitude of employees costed Alibaba to lose its
reputation. 100 Alibaba salespeople knowingly setup the fraudulent sellers who accepted the
payment but did not deliver any goods to the consumers. This caused a big scandal for Alibaba. Also
2300 fake stores were found in the investigation process which made consumers think of Alibaba’s
reputation.

The other social risk with Alibaba is also associated with the lack of customer centricity. Although
Jack Ma remarks that customers are the no. 1 stakeholders for Alibaba, there have been cases where
the complaints from the customers about the merchants were not accepted by Alibaba and the
customer has to take the help of media. This highlights that Alibaba does not take electronic word of
mouth (eWOM) seriously.

Technological risks: As Alibaba is an online platform, technology is an important part in its day-to-
day business. With the business growing exponentially, data computing, processing and storage are
bound to change as well. With too many users and merchants and fraudulent sellers, it is essential
for Alibaba to deal with real-time frauds and also to manage the big data[CITATION Che15 \l 3081 ].

Economic risks: With more than 80% of the online retail sales in China happening through Alibaba, it
poses a great risk in its economy due to selling of counterfeit products and sham goods. This might
reduce the consumers buying products from the company as a result of loss of its reputation.

Political risks: The change in the political parties does not seem to affect the operation of Alibaba.

Stakeholders
Alibaba is a business that has stakeholders globally.

External stakeholders:

a) Yahoo and Softbank: As a business-to-business company, the key external stakeholders of

Alibaba are Yahoo and Softbank. These companies are also the partners of Alibaba who have
supported Alibaba to spread its services all over the world. The relationships with these two
stakeholders are regulated by the contracts and the legal principles presented in the Alibaba
Group Code of Business Conduct. Despite the contracts, fraudulent issues and ignorance
were discussed while extending the cooperation with Yahoo in 2010 and 2011 [CITATION
Gro16 \l 3081 ].

b) Suppliers: Another large group of external stakeholders is suppliers. As Alibaba plays a

bridge between suppliers and customers, it effective for Alibaba to have good relationship
with the suppliers to provide customers with high-quality services and goods in time.

c) Customers: Customers are another major stakeholder. They are the ones to buy the
products and increase the revenue of the company. However, they are also the ones who
are greatly affected by the counterfeits and frauds happening through Alibaba.
 d) Government: Government are also external stakeholders for Alibaba. The company pays tax
to the government and contribute.

Internal Stakeholders
a) Employees: They are the internal part of the company and hence are the internal
stakeholders. They also play a major role in controlling the company’s reputation. Due to the
negative attitude of the employees working in Alibaba, the company has to go through
fraudulent charges and bear the consequences.

SWOT Analysis
SWOT Analysis is a framework to assess the internal and external factors influencing the company’s
environment. It is a handy tool to analyse the strength, weakness, opportunities and threats
alongside their impact on the current business model. The major strength of Alibaba is the market it
operates in, China, which is the most populated country and has the second largest economy of the
world. Other strengths are strategic partnerships, broad product portfolio created with the growing
demand for wholesale and retail businesses. One of the major weaknesses is the quantity of
merchants Alibaba has and the competition the merchants have within [CITATION PES20 \l 3081 ].

Overall, SWOT analysis for Alibaba can be presented in the following table:

Strengths Weaknesses

- Well segmented product portfolio - Decreasing Earnings Before Interest

- Growing demand for marketing (EBIDTA) margins affecting core
services competency.
- Taobao, China’s largest customer to - Over dependence on Chinese economy.
customer sales channel
- Strategic partnerships to create value
propositions globally
- Strong growth in wholesale and retail
business
-
Opportunities Threats

- Opportunity to capture greater market - Stiff competition in e-commerce.

share with Lazada and AliExpress. - AliPay may lose global market share to
- Potential of becoming market leader in pre-existing local players.
cloud computing. - Increasing number of fake products
may affect core competency.
PESTLE Analysis
PESTLE Analysis is a framework for understanding the impact of external factors on the macro
environment influencing the business of Alibaba. This analysis is handy to analyse external factors
such as political, social, technological, legal, economic and environment and their effect on Alibaba’s
business model.

E-commerce industry is booming in the recent years due to the high demand for online shopping.
China, being the second largest e-market in the world, after U.S; has been a competitive advantage
for Alibaba. 80% of online retail sales happens through Alibaba in China [ CITATION PES20 \l 3081 ].

The PESTLE analysis for Alibaba is presented below:

Political Economical

- Chinese Government’s push for AI and - Impact of macroeconomic factors on

digitalisation business
- Trade relationship between countries. - China, having second largest economy
in the world, the economy of Alibaba
has also flourished.
Social Technological

- Growing population in target markets. - AI and the big data-driven experience

- Effective CSR activities. - Technical advancements in core
- Aging Chinese population operations.
Legal Environmental

- Lawsuit against counterfeits. - CSR and sustainability a part of

business model [ CITATION Pra19 \l
3081 ].

Evaluate and priorities risks

In order to evaluate all the above-mentioned risks, they first need to be evaluated according to their
importance and impact. Risk matrix can be utilised to categorise the risks and also to find out the
likelihood of the risks happening in the future.
 Types of Risks Likelihood of risks Comments
happening

Legal risks Low Alibaba being a global market imposes

legal regulations not only of China but of
other countries as well. However, it is
compliant with all the countries for
trading following regulations of the
respective countries.

Operational risks High Due to counterfeit and sham goods and

poor management of user data till date,
there is high likelihood of the risk
occurring again.
Social risk Medium As thousands of employees are employed
in Alibaba, it would be difficult to filter
out the mole in the group.

Technological risks High As technology keeps on changing every

day, the likelihood of technological risks
happening again is high.
Economic risks Low/ medium The trust of the consumers for Alibaba is
higher than any other online retail seller.

Political risks Low The change in the political system of

China barely affects Alibaba for its
operation.

Action plan
As the operational and technological risks are the major risks with the high chances of occurring in
the future, risk action plans and risk treatment plans are created accordingly.
Action plan for operational risks

Description of identified situation of risk:

Counterfeit products and sham goods sold to the consumers.
Potential impact of the Comments on the risk:
risk: There have been cases of
Counterfeit products being fake accounts to make easy
sold in the market which money from the people by
arose problems not only accepting payment and not
with consumers but also delivering the goods.
with the brands. Due to this,
there has been cases filed
against Alibaba which
affects its reputation.
Recommendations: Proposed action:
- Proper techniques should - Strong user
be in place to manage the verification method
user verification. before opening the
-Taking actions on customer complaints. account.

Staff involved and responsibilities assigned:

-Administrative staffs to look after the user accounts.
-IT team members to manage the data and technical issues.

Timeliness:
1 month
Required reports:
Product information report
User report
Budget report
Authorised by: Date: 30/03/2021
Administration manager
Implementation comments: (To be confirmed)

Treatment plan

After categorising the risk and determining the likelihood, the best control methods can be
determined through the hierarchy of risk controls. In the operational risks, counterfeit and sham
goods sold to the customers are the major problems. This has caused Alibaba to go through many
lawsuits. Although strategies are in place for merchants to penalise with ‘strikes’ and ‘points’, there
is not much strong administrative examination from the company. Even if the fake accounts selling
sham goods are closed, the user can open another account under different name and sell the
products. Alibaba do not have the way to figure out if the users are different. This is to say that the
company has very poor validation and authentication process.
To minimise the risk, the company needs to have strong validation and authentication process for
the account holders while the accounts are being created. The company needs to ask for validation
proof and needs to keep track of the business certificate of the merchants as well. If any accounts
are found to be fraudulent, those users should be kept in isolation until found cleared of any charge.

Action plan for technological risks

Description of identified situation of risk:

Lack of proper big data management.
Potential impact of the risk: Comments on the risk:
-Probability of hacking of the Due to exponential growth
data of the users. in the business, data
-Loss of privacy. storage are bound to
-Fraudulent account holders change causing problems
in data management and
increase in frauds.
Recommendations: Proposed action:
- Fraud monitoring and risk -Using big data based fraud risk
management techniques management tool.
should be implemented.

Staff involved and responsibilities assigned:

-IT team members to manage the data and technical issues.

Timeliness:
1 month
Required reports:
User report
Technology report
Authorised by: Operation Date: 30/03/2021
Manager
Implementation comments: (To be confirmed)

Treatment plan

With the technological risks, the main issue is the fraud risks which comes in all shapes and sizes.
Although Alibaba already has a fraud risk monitoring system in place to sniff out counterfeit, it has
not been able to detect all the fraud cases. As technology is always changing, it is important to keep
updated with the latest technology.

Alibaba uses AntBuckler, a big data based fraud prevention product to help merchants and banks
identify cyber-crime risks and fraud activities. Merchants are often found to provide rewards to the
first users to attract customers. Hackers, in turn take this opportunity to create hundreds of
accounts. This product identifies similar fraud patterns and generates risk score to quantify the risk
and identify the fraudulent accounts [ CITATION Che15 \l 3081 ]. This software, however, should be
kept updated with the latest technological trends.
Conclusion
According to my view, Alibaba being the global e-commerce platform, it is very hard to manage all
the risks and eliminate them altogether. The major ones are the counterfeit and sham products.
Alibaba should start examining the sellers and products before allowing them to go online.
Document checklists should be created and made mandatory for the sellers and merchants. As the
company is growing exponentially, big data processing should be enhanced in order to check the
product quality on site. If required, collaboration from third-party quality controls might be a good
idea. Customers should also be educated about the importance of quality and encouraged to write
reviews on products. Alibaba should also focus on customer-centric approach and respond to the
complaints of the customers with immediacy. Transparency with the complaints and fighting with
the counterfeits helps in maintaining reputation of the company [ CITATION Rua19 \l 3081 ].

Although Alibaba has made efforts to crack down the bogus products, the vast number of dodgy
stores in the platform has made the task difficult to be solved once and for all.

Bibliography
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https://www.alibabagroup.com/en/about/overview

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https://www.lawteacher.net/free-law-essays/australian-law/cybercrime-laws-in-australia-
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Pratap, A. (2019). Notesmatic. Retrieved March 2021, from Alibaba Group PESTLE Analysis:
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