China’s Alibaba landed on Sakaar

Rizwan Asif
Oct 16, 2018 · 6 min read

The arrival of the e-commerce giant in the U.S, the impacts and lessons.

Alibaba is stepping up its game by entering into the United States as of 2014. Not a surprise since Jack Ma, the founder, has this personal desire to sought out new opportunities [3]. Alibaba has been operating in China since 1999 and became a behemoth enterprise. On February 2012, they took themselves off from the Hong Kong Stock Exchange, which was an indication for their future expansion plans.

Alibaba’s operations are mainly targeted towards small and medium enterprises (SMEs), which is the major mode of business in China. However, their American counterparts (mainly Amazon and eBay) are much more focused on individually owned business. Moreover, Alibaba’s core team consists of people who specialize in the Chinese market (Table 2 in [3]).

According to a study [4], foreign enterprises do bring a change in a country’s mode of business and shapes it’s institutions because of the diversified knowledge.

Which raises the question, can Alibaba survive along with innovating the current state of e-commerce in the United States or probably the globe? Will Alibaba be able to convert a Skaar like United States into something more, like the Hulk did? Given that they have a diverse experience of a completely different battle ground (aka market).

From a PESTEL analysis perspective we see that Alibaba has the capacity to tackle all the business components in the United States except for Economic and Social factors. The Chinese market is quite different due to a major share of SMEs [1]. Alibaba has thrived on that [2], using a B2B business model.

https://panelsarewindows.wordpress.com/2017/07/14/planet-hulk-armageddon/

This article explores several factors that influences the background of Alibaba which can turn into their strength or weakness.

Contents:

Alibaba’s Homeland

The republic of China and it’s form of governance is an interesting topic which fuels the rise of Alibaba. On one hand the Chinese government censors the internet, which becomes a question mark on the right to information. On the other hand, these policies have fueled the rise of innovative business and technological models. Giving the indigenous organizations a fighting chance against more resourceful foreign competitors.

Alibaba had it’s inception in this form for a closed system. The founder Jack Ma, at that time, discovered the power of internet while on a visit to the United States. Disappointed by the fact that he couldn’t search for Chinese Beer on this ‘internet’, he decided to start an internet company in his homeland.

One of the key properties of the Chinese market is that it is mostly run by small and medium enterprises (SMEs). According to China Statistical Yearbook 2015, 97.7% of all the registered companies are SMEs. Which naturally makes it a breeding ground [1] for service improvement technologies like e-commerce platforms.

Target Market

Alibaba enjoyed being brought in a competition free eco-system with the largest population of the world to it’s access. However, against popular belief, the business model of Alibaba differs from it’s western counter-parts. Alibaba specializes in connecting SMEs, instead of individuals.

Alibaba has a main site that goes by alibaba.com, however, the bussiness is divided into several other portals (Taobao, Tmall, Juhuasuan, Aliexpress, 1688, Alimama, Alibaba Cloud, Ant Financial Service Group, Cainiao Network). Out of which only one aliexpress.com matches the business model of companies like Amazon and eBay. This makes Alibaba a B2B and B2C company, with major share of it’s revenue coming from the former.

“ Alibaba opens sesame for small to medium sized businesses in China. ” - Jack Ma, Hahn (2006).

Moreover, with a tight infrastructure and less technological development at that time, Alibaba had to survive major business challenges [3] including payment services, government regulations and a less technology savvy society.

Seasoned Players

Let’s talk about the west, Amazon and eBay have been major players in the e-commerce industry for a while now. Both started off with completely different business models. The former was confined to selling low priced and quick delivery services (starting from books), while the the later was more or less an auctioning site. Later both launched parallel services inspired from each other. Nevertheless, both did put significant effort on their B2C model and generated revenue that way. This shows a stark difference between the Chinese and Western Markets.

“ eBay maybe a shark in the Ocean, but I am a crocodile in the Yangtze River. If we fight in the Ocean, we lose — but if we fight in the river, we win.” - Jack Ma, Mac (2014).

According to The World Bank 2016 report, as stated by [2];

“The China market offers opportunities for companies that can navigate its evolving sales and distribution landscape”.

The question arises, what does this mean for Alibaba in the U.S market?

https://www.quora.com/Which-are-the-best-entrepreneurship-quotes-by-Jack-Ma

The Crocodile in the Ocean

Analysis, experience and intuitions tell us that Alibaba is in alien territory. Moreover, their competition has been successful not only on its own soil but has already been exposed to internationalization. Both eBay and Amazon are multinational and have been operating in both developed and underdeveloped countries. Whereas Alibaba has very less experience in the global market, specially developed ones. The sharks are already standing at the top of the pyramid and the crocodile must do everything it can to make room for itself.

Can Alibaba offer something to the American and Global Markets, that Amazon and eBay haven’t thought of?

Chinese markets have been working really well with SMEs and have made an impact in terms of production. Many western institutions turn their head towards China for manufacturing. The massive and skilled workforce in China is no secret from the whole world. And Alibaba, is a recipe invented for these people.

One aspect we could look at is the changing landscape of markets. With the accessibility of technology, people are now more willing to invest is smaller products and build startups. That’s the motto of this century right? In that perspective, we see more and more small companies coming into existence and expect this rate to increase. Fertilizing the ground for Alibaba… such SMEs [4] are their field of expertise.

Conclusion

China has been a closed door market for too long. We don’t know how it would turnout if we Chinafy the global markets. Might there be something that Alibaba can teach us about business, particularly e-commerce. The landscape might turn on their side but, it could go the other way as well.

Nevertheless, I am excited to see what Alibaba can teach us about the online industry. This case study will either way become a shining star for the next generation of entrepreneurs.

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Rizwan Asif

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I'm best described as a Technopreneur, Roboticist and Artificial Intelligence Engineer. Find all about me here: https://www.rizasif.com