Alibaba Development Strategy

Development strategy analysis

Market Distribution

        As mentioned previously, the Alibaba Group divides its revenues into four categories in its annual report. Those categories are: China commerce, International commerce, Cloud computing and Others. In the following part, we will first illustrate the most important sections of the Alibaba group and display their respective segmental profits while taking a deeper look at the company’s regional appearance.

        The Alibaba group is the world’s largest and even considered the most dynamic eCommerce company, outpacing giants like Walmart in 2016. Globally, Alibaba holds roughly 27% of eRetail market share, while Amazon takes 13%. Both companies are leaders in their home countries (even though to a lesser extent abroad). For instance, in 2015, Alibaba represented a 78.5% eCommerce market share in China, against 11.3% for its main competitor JD.com.[pic 1]

The World’s Top 10 Largest e-Retailers

        Those results are possible thanks to an integrated set of strategies that give consumers a giant selection of products, with low prices and fast delivery. The platforms attract other merchants to sell on their marketplaces by allowing them to access to a wide pool of loyal shoppers and convenient options to help them fulfill orders and sell to consumers around the world.[pic 2]

2015 e-commerce market share in home country

Segmental Profits

Alibaba Business Segments

Alibaba’s activities can be divided into four main business segments:

• China Commerce. Two subsegments constitute Alibaba’s China commerce segment:

• China Retail Marketplaces including Taobao Marketplace (litteraly “search for treasure”), Tmall, and Juhuasuan. Chinese online consumers buy massively on those marketplaces. Taobao marketplace includes Tmall products, the latter being only a B2C platform while Taobao also provides C2C transactions.

• China Wholesale Marketplaces. This service is provided on 1688.com platform. China wholesalers and manufacturers can supply retail merchants in China on this marketplace.

• International Commerce. Two subsegments constitute Alibaba’s International commerce segment as well:

• International Retail Marketplaces, with the AliExpress platform. China wholesalers and manufacturers can supply directly to global online consumers on AliExpress.

• International Wholesale Marketplaces, with Alibaba.com. China wholesalers and manufacturers can supply global wholesale buyers on alibaba.com.

• Cloud Computing, Digital Media and Entertainment, Internet Infrastructure. Alibaba offers a complete suite of cloud computing services to sellers on its marketplaces and other third-party customers such as start-ups in mobile gaming and Internet applications. Through platforms like Aliyun, Alibaba can offer services ranging from database services and storage to web hosting and domain name registration. Media is also a major point with services like Youku Tudou.

• Innovation Initiatives and Others. This category consists of Alibaba’s loan service to small and medium enterprises (SMEs). The group can provide micro loans to the sellers on Alibaba retail and wholesale marketplaces. This segment also includes services like Alibaba’s operating system and mapping service.

Alibaba Segmental Profits

        Each segment is part of Alibaba’s total revenue. However, China commerce is the biggest contributor to Alibaba’s global profit. The segmental profits are represented as follows:[pic 3]

Alibaba’s Segmental Profits 2017 (source: statista)

        It is interesting to compare the evolution between 2016 and 2017. We can notice that China Commerce Retail is slightly declining (-7 points), while the Cloud Computing, Digital Media and Entertainment, Internet Infrastructure segment is increasing, notably thanks to Alibaba’s investment strategy in digital content for its media platforms like Youku.

SWOT Analysis

Strengths

Strong market position

        Alibaba enjoys significant market position. The company is the largest eCommerce company in China. Alibaba has a strong portfolio of Internet assets: Taobao Marketplace is among the world’s top 20 most visited websites, Tmall.com is the most visited B2C online retail website in China, Alipay is the most widely used third-party payment solution in China, etc.

        Strong market position indicates the appeal the company’s services enjoy among the customers.

Presence across the eCommerce value chain

        Since its origin, Alibaba developed one of the leading businesses in eCommerce, online payment, B2B marketplaces and cloud computing. Among the Internet giants, the group includes a broad product offering and thereby can reach a wider audience. In addition, Alibaba is also equipped with cross-selling opportunities.

        The strength of the Alibaba Group is that it provides a comprehensive set of services when compared to other local alternatives. It offers services for both the local and the international shoppers. Most of the service suppliers in China are targeted solely on local service provisions and therefore would not have sufficient exposure to world standards.

        The comprehensive suite of services that Alibaba provides is all up to world standards, and to effectively compete with massive established competitors like Amazon and eBay.

Loyalty and Consumer Base

        Alibaba’s online shopping properties have more than 450 million cumulative active buyers in 2017 (Statista). The platforms offer a wide array of merchandise, and the group has been able to garner a good brand image. Alibaba is a trusted platform. In addition, the company focuses on continuous improvement to increase their customer base.

Networks and Human Resources

        The group have skilled labor that gives them a strong advantage compared to their competitors. They are also ahead of new technologies, which makes them more efficient than similar platforms. Their security protocol ensures the safety of the customer’s information on the Internet.

They have been effectively able to connect retailers and suppliers in many countries worldwide. Since their merchandise is not concentrated in one arena they have been able to create a larger customer base. All those factors provide the company a huge potential for further growth.

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