Alibaba: The World’s Largest

E-tailer is not Amazon

Case Study Analysis

1/1/2020
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Part I
Case Summary
This is a case about the marketing strategy of e-commerce giant Chinese group Alibaba.
The case talks about the rapid growth of e-tailer giant Alibaba within Chinese markets and across
the globe. It starts with the introduction and background of Alibaba's founder Jack Ma and talks
about how he became one of the leading entrepreneurs and a visionary businessman against all
the odds despite his initial struggling career. Jack Ma founded one of the biggest e-tailers and
converted an underdog market into one of the world's most significant marketplaces. The case
further discusses the size of the Chinese market and the growth potential of Alibaba compared to
its US counterparts such as Amazon, eBay, and Walmart. It also discusses the different market
factors such as economic, geographic, and demographic factors of both the markets as a
comparison. It tells how the Chinese market has more growth potential because of its immaturity
compared to the US market, which is more established and explored. Finally, the case talks about
the diversification of the Alibaba group and how Alibaba intends to expand in the future. Alibaba
focuses more on its customers by giving them opportunities to run an e-commerce business,
which reduces the operational costs for Alibaba to earn more profits with lesser risk. Alibaba
group focuses on increasing the entire market's size and getting more market shares through
diversification and investments in startups to replace services such as Netflix and PayPal. The
company also aims to expand its presence to international markets, but first, it has to serve its
substantial domestic market, which has enormous potential.

Part II

A) Microenvironment

Alibaba is the leading Chinese e-commerce group that has emerged as a leading e-tailer
brand in the Chinese market and is rapidly expanding into international markets. The company
has been exponentially growing since its inception, and it has been able to change the dynamics
of the Chinese market through various initiatives. Today, Alibaba group has a strong financial
position and has invested in the platforms such as Taobaoo.com, Alipay, and many more, which
offers many opportunities to the Chinese locals to do business, not only in the local market but
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also across the borders. The company has a strong influence on the country because of its
performance and national impact.

B) Macroenvironment

The Chinese economy has flourished over the past few decades, and the country has been able to
export millions of products because of its industrial revolution, huge workforce, and economy of
scale. This growing economy has helped Alibaba to expand its business in new dimensions. The
better economic conditions give the consumers more buying power, resulting in higher sales and
profits for the company. Secondly, with the growing internet penetration in China, which is 52%,
and with the increasing use of technology, the Chinese e-commerce market is growing, which is
a promising sign for future potential. Thirdly the Chinese government is encouraging regional
business, makes policies in favor of SMEs and other e-commerce businesses. Also, the political
representation of china is vital in the global perspective, which helps firms like Alibaba to
expand across the borders. Lastly, Chinese people's social and cultural aspects are changing as
they move from poverty to middle-class status; their online buying behavior is improving, as
Alibaba has more than 420 million active users, which is a positive factor for the company’s
growth.

C) Brand Equity

Alibaba has high brand equity has compared to its competitor, e-tailers. The company is more
customer-centric as its value proposition is not to do e-commerce business but to facilitate
Chinese people to do their online e-commerce business. This way, it enables consumers to start
their online businesses. The company has more than 420 million active Chinese users, way
higher than any other e-commerce business, reflecting the brand image and association of the
consumers with Alibaba group and the scale of opportunities the company is creating for Chinese
people. Alibaba is different from its competitors as the company does not own or operate
massive distribution centers neither keeps the inventory of the sold products, unlike its
counterpart Amazon, and it only employs about 36,000 people, a fraction of Amazon's 230,000
employees. It creates values through helping the small businesses and private parties to sell
merchandise to customers, and instead of charging commission, it only charges for an advertised
promotion. It is also filling the many gaps in Chinese consumers' lives through its tech startups
such as Alipay, Tmall, and TBO. The consumers have massive respect for the brand as they have
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kind regards and emotional sentiments for the founder Jack Ma. So, this patriotic sentimental
brand association for Alibaba is influential and hard to crack.

Part III

A)

Alibaba's fundamental values are a high-quality shopping experience and low prices than
other e-tailers such as Amazon and eBay. The brand offers a wide variety of products
catering to all the segments of consumers from low economic class to high class. Moreover,
Alibaba group has expanded into other businesses, which not only offers investment
opportunities to local Chinese but fills the existing gaps in the market through innovation and
technology.

B)

The business model of Alibaba is unique and rightly according to the needs of Chinese small
businesses. It facilitates myriad Chinese companies to develop business and marketing
strengths to excel in the dynamic e-commerce marketplace. It is a facilitator between the
suppliers and the consumers. If Alibaba had kept its sellers' inventory in its warehouses like
Amazon, it would have to take the entire responsibility on its own shoulders, which is less
profitable and riskier. The current model reduces operational costs significantly and allows
market forces to set the prices where the company earns its profit more conveniently. This is
the reason company's profit has been more than 40% for the past three years.

C)

Unlike its counterparts, Alibaba has focused more on diversification by developing and
acquiring many e-commerce websites to meet consumers' different needs. Taobao.com is a
platform to help small businesses to sell their merchandise. The company also offers
financial services through Alipay, which is similar to PayPal and Tmall, is the Chinese
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Amazon that sells products of a big corporation like P&G, and TBO is a service similar to
Netflix. Different individual startups cater to different needs in the USA, such as streaming,
online payments, video gaming, and social networking; however, in China, Alibaba is taking
all these areas.

D)

Yes, given the success and experience of Alibaba in the Chinese market, it can succeed
anywhere in the world. It can grow because of the wide variety of products and low prices
through the economy of scale, where it can outperform any other company in the world.
Their ability to mass production and low costs can make Chinese retailers excel anywhere in
the world.

Reference

Kotler, P., & Armstrong, G. (2018). Principles of marketing (Seventeenth edition), Company case,

Alibaba: The World’s Largest E-tailer Is Not Amazon. Pearson Higher Education.