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Alibaba

Alibaba is the leading worldwide electronic marketplace in the globe with many users. It has demonstrated to be one of the world’s leading business to business e-commerce corporations in China. It offers several business ventures for both small as well as medium enterprises. Thus leverages advanced technology to contend more proficiently globally as well as domestically. Alibaba runs retail as well as wholesale trade and supplementary services like platforms which enable dealers, consumers as well as other participants to business in their network. Yahoo and Japan Softbank are the primary stakeholders (Merveen & Yazdanifard, 2014). The worldwide marketplace (www.alibaba.com) concentrates on the global network for consumers and deliveries of raw materials, components as well as finished goods. In contrast, the domestic market (www.alibaba.com.cn) focuses on merchants and customers, mostly in China.

Yun Ma (Jack Ma), previously an English trainer, founded Alibaba Group in 1999 at Hangzhou. He purposed to make internet accessible, reliable as well as beneficial to all. This company has seven corporate groups, which include; Alibaba small business operations, Tmall, eTao, Taobao, Alibaba international business, and Alibaba.com, a cloud computing company. Taobao and Tmall emerged to be the most outstanding subsidiary companies (Blystone, 2019). Alibaba’s dream is to build the prospective infrastructure of commerce and where consumers will meet, live as well as work at Alibaba (Naidu & Alfahad, 2019). It aspires to be a good company that can span for at least 102 years, but not pursuing power or size. Its over-all mission and aim are to build a more robust and commercial consumer connection.

 

 

 

Alibaba’s business strategy.

Alibaba follows a transnational approach. It profits from the strengths of both global as well as a multi-domestic approach. The organization gives sovereignty to a local office; however, consistent backing from the headquarters is provided. The organization ought to upsurge its brand credit and consciousness in developing nations. A company may opt to customized local advertisements instead of mass advertisements (Buckley & Cross, 2018). For this reason, the consciousness of the firm amongst masses will rise, and its transnational approach will be more operational.

Alibaba’s alternative methods of international market entry

The global corporate-level strategies include:

Multi domestic Strategy

It focuses on attaining maximum local awareness. Maximum local awareness can be reached by modifying a business’s product by offering the marketing approach to match the numerous national conditions. Additionally, a devolved management structure enables the local office to make judgments concerning the local market (Lorenzo & Garcés, 2018). Based on regional preferences, a product is modified. Merits

• Facilitation of the global brand consciousness of the business enables the company to generate leads, build confidence among the audience, and to stand out in the competition.
• Local firms have authority to work individually thus reaching target consumer in a particular  region easily
• An increase in import-export activities and global marketing in business helps to more sales and grow economy

 

Demerits

• Economies of scale aren’t enabled thus the cost of production will not reduce as a result of  small units of output
• It doesn’t back up low operating cost in commerce since shipment cost has been incurred thus cost goes up

 

Global Strategy

It’s an approach used by companies to enlarge and contend in the international markets. The management structure is centralized, and the head office makes most of the judgments. It’s ensured that the product offered is standardized globally (Zeng, 2018). Political uncertainties’ are always higher in this kind of approach.

Merits

• It enhances market coverage of the product. The products will be widely distributed, targeting different segments within a region.
• Business diversification is eased. It is achieved through the introduction of new product in new markets which can be sold to consumers
• It facilitates economies of scale through buying goods and products in large quantities enabling a reduction of cost per unit

Demerits

• The cost of business may rise due to an increase in global oil price, inflation or rise in the cost of  imported raw materials  and  demand-pull and cost-push
• It leads to the higher financial risk of business  as a result of the increase in fixed operating costs  thus debts rises  significantly resulting in operation challenge
• Product acceptance in a foreign nation has a high possibility of failure. It may occur as a result of the inability to differentiate product lines and the local markets in other counters.

Transnational Strategy

The worldwide operations are carried out by cooperation between the local office or subsidiary and the head office. This strategy caters to the structures of global as well as a multi-domestic approach (Vaast, 2017). It aims to provide local responsiveness and centralized benefits.

Advantages

• It offers both global incorporation and local responsiveness. These are where a foreign product is customized to fit local conditions.
• It enables a company to maintain its worldwide brand image in the local marketplace. It is achieved through the sending of the same message worldwide.
• Provide efficient transfer and distribution of resources across the nations to local distributors and retailers.
• Since it runs on cooperation hence more flexible, it allows intercompany and agent services where they get paid.

Disadvantages

• Exposure to legal and operational risk. It involves security threats in electronic payments and data misuse
• The firm may experience loss of control over the business as a result of weak internal controls and security issues.
• Inadequate knowledge of the general market leads to limited information on customers’ needs and preferences may lead to reduced yield.

Organizational structures used to implement international corporate strategies.

The modes for entering the international market include:

Licensing: Alibaba provides licenses to its companies to use its procedures, trademark, and manufacturing, among others, in another state for operation.

Partnering: Alibaba offers superior value to its partners, market diversity, as well as sustainable returns opportunities, with public relations and marketing support, which allow cohorts to maximize its contributions. For instance, the Dyneton group partnered with Alibaba in software solutions.

Franchising: Alibaba established a business model as well as a system that reduces risk while starting a business. Alibaba provides support to its franchisors by enabling them to access excellent training programs, market strategies as well as operational quality control

Direct exporting: Alibaba makes direct exports through small and medium enterprises that are the agents as well as distributors.

The use of joint ventures: it opens opportunities as well as cost savings and selling to several customers. When Alibaba wanted to expand beyond borders, they assimilated the joint venturing technique. Alibaba provided e-commerce while its partners offered market knowledge needs as well as customs. It led to success in business.

The use of piggybacking, this is where a single company rides on its consumer company and through the consumer company trade, sends its products in the global market. For instance, Alibaba selling its products to an MNC ABC has operations spread across various international markets’ may deal with ABC to include its inventory along with the original inventory of ABC, designated for the foreign market. Risks and costs associated are quite low. However, the company does not hold its identity in the international market

Alibaba structure aligns with the chosen strategies because it has a joint venture with Dubai based cloud computing data center. It intends to have twelve more data centers globally. Further, Alibaba is focusing on a differentiation focus approach by offering unique cloud computing services to enterprises. It also uses a preemptive attack to counter competitors.

In conclusion, Alibaba’s achievement in e-commerce is due to its several benefits and ability to boost businesses for small-medium enterprises (SME’s), attracting a lot of suppliers to invest in them. Going through alibaba.com gave an understanding of how Alibaba network works as well as what enables it to succeed. For instance, effective and efficient real time communication in addition to quick offline message replies to suppliers; moreover, their promotional strategy makes Alibaba more popular globally. Therefore from Alibaba, it can be learned that determination, perseverance, and dedication influence success. Jack Ma was not an expert in technology, but he was an ordinary man with a vision. He managed to pioneer e-trade with high quality, fair prices; as a result building a secure connection between SMEs in China and around the world.

 

 

 

 

 

 

 

 

 

 

 

References

Blystone, D. (2019, October 20). Understanding the Alibaba Business Model. Retrieved from Investopedia: https://www.investopedia.com/articles/investing/062315/understanding-alibabas-business-model.asp

Buckley, P. J., & Cross, A. R. (2018). International Business. London: Oxford University Press.

Lorenzo, J. R., & Garcés, S. A. (2018). The competitive advantage in business, capabilities, and strategy. What are the general performance factors found in the Spanish wine industry? Wine Economics and Policy, 7(2), 94-108.

Merveen, H. L., & Yazdanifard, R. (2014). The review of Alibaba’s online business marketing strategies which navigate them to present success. Journal of Business-to-Business Marketing, 1(1), 1-6.

Naidu, G., & Alfahad, A. (2019). Studying the E-commerce based Business conglomerate ( A Study Case: Alibaba.com). Journal of the Community Development in Asia, 2(1), 1-9.

Vaast, M. (2017, January 27). How Alibaba’s Diversification Strategy Made Way For Half A Million Users. Retrieved from E-Commerce Nation: https://www.ecommerce-nation.com/how-alibabas-diversification-strategy-made-way-for-half-a-million-users/

Zeng, M. (2018, October). Alibaba and the Future of Business. Harvard Business Review., 88–96.