Alibaba: Competing in China and Beyond

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Alibaba: Competing in China and Beyond
Individual Report

Intercultural Management
Professor: Dr. Jacobo Ramirez

Aalto University
School of Economics
Bachelor´s Degree Program in International Business
Mikkeli Campus

September 3, 2012
Matti Uusivirta

Introduction

In this report I will examine the case “Alibaba: Competing in China and Beyond.” Alibaba under the leadership of Jack Ma, its founder has transformed into one of the most successful e-commerce companies in China. In the 2000s Alibaba had emerged as the largest e-commerce company in China. The company tailored its strategies to meet the needs of the customers and made a mark because of its understanding of the Chinese language and culture. However, some experts have also raised doubts over the sustainability of Alibaba's business model.

In my report I will critically analyze the factors that led to Alibaba sustaining its leadership position in the Chinese e-commerce market. I will Discuss the rationale behind Ma establishing Taobao.com. I will examine the factors that led to Taoboa's success in the Chinese online auctions market. Furthermore, with Baidu's entry into the e-commerce market, I will discuss the challenges that Alibaba faces with regard to sustaining its position in the growing e-commerce market in China. Finally I will critically examine Alibaba's business model, possibilities of global expansion and the overall sustainability of the company.

Questions 1.

One of the most significant factors that lead Alibaba Group sustaining its leadership positioning in the Chinese e-commerce market was its ability to understand the Chinese market itself. Jack Ma, Alibaba Groups founder understood that Chinese consumers and their preferences distinguished them selves from those in other countries. Other companies such as eBay did not appreciate the local market circumstances in China; instead, they were using the strategies that were working in the United States. I believe for this reason Alibaba Group was able to sustain its leadership position.

Many of the competitors lacked understanding of the Chinese language as well as the culture. Moreover, Alibaba.com made its services extremely easy for its customers to use. Ma, himself, was a non-technical person and this helped him keep the websites more user-friendly. In the article Ma refers to this stating: (Deresky, 2010). "If you follow Google’s way, you always be a follower… We have to make the Yahoo! Search engine more human, more interactive... something for the 1.3 billion people in China who aren't technology-oriented, who don't know how to ask the right question to a search engine -- for people who are like me." (p.320)

An added factor is the services that Alibaba.com offered. The company believed that the first thing to do was to build a devoted customer base. Therefore, before adding any charges, a lot of the services were free of charge. Alibaba.com offered many services such as email and listings of products/services free of charge. In addition, e-commerce was vulnerable due to the fact that sellers and buyers did not trust the idea of sending money before receiving their products and the sellers wanted the money before they shipped their products. For these purposes, Alibaba.com launched Alipay in 2004, which was an online payment solution that allowed the users to make money transactions in an easy, quick and safe way. All and all Alibaba.com basically concentrated greatly on increasing costumer satisfaction even on the expense of not gaining maximum profitability. The company made its customer and getting to know what customers want its number one.

Question 2.

Jack Ma established Taobao.com in May 2003 to enter the profitable e-commerce market. Taobao.com also symbolized a part of Ma's Alibaba.com business model of joining SMEs, customers together, and helping SMEs grow. Taoboa’s goal was to generate an online trading platform for both B2C and C2C models....
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