CASE01 Alibaba

Alibaba.com

INTRODUCTION

Having achieved its objective of becoming one of the three largest internet companies in the world and having executed a successful IPO, Alibaba.com Corporations strategic calculations will now determine whether the compan! proceeds on a path toward global domination in its industr! or becomes a prime ta"eover candidate in the d!namic e# commerce mar"etplace. Alibaba.coms recent IPO secured the capital and profile necessar! to position the compan! globall!, and recent management actions substantiate the firms intent to pursue a global growth strateg!. $he objective of this case anal!sis is to evaluate Alibaba.coms Alibaba.coms strategic choices and to direct the use of organi%ational resources to ensure success. &uring the anal!sis, it is critical to address the following strategic issues. 

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'hat are the implications of the compan!s new ownership structure and shareholder expectations( How important is a rapidl! expanding domestic mar"et in Alibaba.coms Alibaba.coms strategic assessment( 'hat are the merits of proposed changes to Alibaba.coms pricing strateg!( How can the compan! position itself competitivel! against )*) giant, +lobal ources(

ANALYSIS General Environment

Alibaba.coms general environment is primaril! defined b! the regional scope of Chinese mar"ets, which consist of heav! bu!er b u!er and supplier fragmentation and inefficient distribution and communication communication networ"s. China is an extremel! populous nation, and the booming domestic econom! is driven b! an explosion in -s, Alibaba.coms target mar"et. Anticipated growth in in -s coupled with continued government promotion of rd /  part! e#commerce platforms provide a fertile domestic environment for the compan!s operations. However, foreign foreign exchange controls and inade0uate credit s!stems s!stems do interfere with the trade process. Industr Environment

$he internet and e#commerce are emergent emergent phenomena in China. Although the! are onl! surpassed b! the number nu mber of 1.. users, Chinas 23* million internet users represent just 2*4 of the countr!s population. $he /4 annual increase in internet internet  penetration does not ade0uatel! reflect the rapid pace of technological change occurring in the industr!. industr!. Online purchases are experiencing double#digit growth each 0uarter. 'ith a current e#commerce utili%ation rate of onl! *54 in China and government

Alibab.com # 2

Alibaba.com encouragement for -s to promote their businesses with /rd part! online services, the  potential for )*) e#trade to grow dramaticall! in the upcoming !ears is great. ssentiall! a )*) e#commerce compan!, Alibaba.com is faced with limited domestic competition as barriers to entr! are high. $he mar"et is composed of small# and medium#scale regional and local enterprises. Communication channels for promotion of  products and services are limited. Heav! fragmentation reduces the power of individual suppliers and customers. $he threat of substitutes is industr!#specific, and competition with other mar"eting service providers is indirect. However, such a growth mar"et with a low level of competitive intensit! is li"el! to attract competitors. A case in point, the direction ta"en b! +lobal ources immediatel! creates competitive ris"s for Alibab.com. And maintaining dominance in its home mar"et is critical to the success of the compan!s global growth strateg!. Com!etitor Environment

Alibaba.coms triumph over e)a!s ach6et is a real domestic success stor!.  6onetheless, international competitor +lobal ources poses a direct challenge to the compan!s domestic position and international opportunities with its portfolio of )*) services. +lobal ources online revenues are increasing dramaticall!, despite the fact that the compan! is media#centric, originall! founded on the exchange of information rather than trade transactions. As the competitor grows its online revenues, it can be expected to expand into Alibaba.coms transaction arena unless somehow deterred. A direct comparison between the two companies can provide insight into the extent and nature of Alibaba.coms rivalr! with +lobal ources. $he following table has been constructed based on data from the case. Alibaba.com Online -ar"etplaces Products89istings Annual ales 9eads torefronts Auxiliar! Products8ervices