Alibaba in China: Strategies for Success
Alibaba Group is a multinational conglomerate which has its base in China. The organization mainly specialises in different areas which include, retail, e-commerce, internet, technology and artificial intelligence. Alibaba Group was established in the year 1999 and is known for providing different services including, consumer-to-consumer, business-to-business and business-to-consumer. The services are thereby offered by the company with the help of its web portal and the electronic payment based modes (Alibabagroup.com 2018). Alibaba thereby owns huge variety of businesses in different parts of the world. Alibaba has been provided the position one of the most admired companies in the entire world. Alibaba Group has acquired an effective position within the top 10 organizations in the world.
The analysis in the essay will be mainly based on the strategies that have been implemented by Alibaba Group in its operations in China. The strategies which can be implemented by the company in the other countries is also a major part of the analysis. The strategies that will be used by Alibaba Group in different countries need to provide the company with effective competitive advantage in the ecommerce industry.
Alibaba has been able to position itself at the topmost place in the ecommerce industry with the help of its services and the opportunities which have been offered to the small business organizations. The chairman was thereby able to provide effective opportunities of operations to the small business organizations so that they are able to stand out in the international market. The major aim which was developed by Alibaba was based on the ways by which the company is able to provide a simple type of platform for performing business related operations all over the world (Buckley and Ghauri 2015).
The Ansoff Matrix analysis is based on the ways by which a business organization is able to grow depending on the new or the existing products which it offers in the market or the new or existing markets that it wishes to enter. The four parts of Ansoff Matrix which are able to explain the operations of an organization include, market penetration, market development, product development and diversification of markets (Refer to Appendix 1).
Market penetration by Alibaba in China – Alibaba has penetrated the Chinese market in an effective manner with of its website and portal. The sales channels that are present in China were highly inadequate in nature for the local organizations before the entry of Alibaba. The huge levels of economic growth which have been experienced in the Chinese economy and the reforms in the economy have been able to provide effective opportunities to the small organizations. This has become a major factor behind the implementation of technology brought by Alibaba (Cuervo-Cazurra et al. 2016).
Implementing the Ansoff Matrix
As discussed by Doz (2017), the company had thereby started growing in the industry at high rates and its values had increased more than the total value which has been created by Ebay and Amazon together. The major strategy that has been implemented by Alibaba is based on the levels of communication that is developed with the customers. The communication based services which have been formed by Alibaba are operated under different names which include, alitalk, Yahoo Messenger, Wangwang Taobao. The second major source of income of the customers comes from the different value-added services. Competitive pricing based strategies are implemented by Alibaba in order to offer the products to its customers. However, the company provides importance to the quality of products that are offered to the customers. The prices are kept little lower than the competitors instead of creating huge levels of differences (Hitt 2016).
Product development by Alibaba in China – The growth based strategy that has been implemented by Alibaba for effective product development can be termed as the diversification strategy for the sustainable growth. The strategy that has been currently implemented by the company is based on the levels of growth which helps in increasing the levels of customer engagement in an effective manner. The key to the profits that are gained by Alibaba is based on the diversification which has been shown by the company in e-commerce based marketplace in China (Holmes Jr et al. 2018). The growth based model of Amazon.com is followed by Alibaba in order to increase its profitability based levels.
Market development by Alibaba in China – Alibaba has thereby targeted two major segments of market which include, global market that targets the different international exporters and second is the Chinese market that focusses on the buyers and suppliers. The increase in number of internet users in China has been able to provide opportunities of growth to Alibaba Group. Discounting strategy has also been implemented by Alibaba in order to attract customers and retain the loyal consumers as well (Hotho, Lyles and Easterby?Smith 2015). Alibaba is further aiming at developing its market outside China in order to provide similar opportunities to the small organizations that operate in different countries. The company needs to develop effective distribution based channels in its operations outside the home country. This will play a major role in increasing the levels of revenues in the new market areas (Jannesson, Nilsson and Rapp 2016).
Alibaba’s Competitive Positioning with Porter’s Five Forces Framework
Diversification by Alibaba in China – Development of competitive advantage in the ecommerce industry has been an important part of the operations that have been performed by Alibaba. The diverse range of businesses that have been developed by the company have been able to increase the presence of Alibaba. The organization has offered different services which are able to satisfy different needs in an effective manner. The services of the company thereby include, entertainment, cloud computing, mobile data and payment gateway. These services supported the company in such a manner which has been able to stay ahead of the competitors (Leonidou et al. 2017).
As discussed by Lu et al. (2014), the Chinese market has proved to be highly competitive in nature. The fast rates of growth of the market has thereby been able to play a major role in the ways by which it is able to satisfy the needs of consumers in an effective way. The huge population of China has also proved to be a major growth opportunity which has been provided to Alibaba. The infrastructure of Alibaba Group has thereby played a major role in the ways by which different strategies have been implemented by the company in China. The strategies that have been developed and implemented by Alibaba in China have been able to play a major role in its immense success in the country.
Alibaba can aim at increasing its profitability and revenues in the global e-commerce industry with the help of new market areas and new countries. The analysis of e-commerce industry will play a major role in deciding the ways by which the company wishes to operate in these areas. Porter’s five forces framework can be used for analysing this industry in the following way, (Refer to Appendix 2)
Levels of competitive rivalry – Alibaba will face fierce levels of competition from different organizations in the market which belong to the online and offline sectors as well. The different distributors, retailers, search engines are able to provide tough competition to the organization in other areas of the market. Different factors that are able to affect the industry include, selection of products, services, price of the products. The price based competition in the industry is able to increase the competition levels in the industry (Morschett, Schramm-Klein and Zentes 2015). Alibaba will also face payment based competition from different online and offline payment methods that include, cheque, cash, mobile phones, money order, debit cards. The entry of new payment options in the market is also a challenge which can be faced by Alibaba.
Conclusion
Bargaining power of the customers – The customers are able to play a major role in the highly competitive e-commerce industry of different countries. The competition levels have always allowed the customers in the industry to win and their demands are to be fulfilled by the services and products offered by Alibaba. The options which are offered to the customers are important factors that are able to affect the levels of competition faced by Alibaba. The major demands of customers are based on the low prices and the huge range of products as well (Raghunath and Rose 2017).
Threats of the new entrants – E-commerce market is mainly characterised by the low levels of barriers based on entry of new companies. The ease with which new players are able to enter the market is thereby able to increase the levels of competition. However, the requirement of large amounts of capital in order to operate in the industry and provide competition to the other organizations is able to restrict the entry of new companies. The market of online payments is able to provide effective levels of barriers to new organizations that plan to enter the ecommerce market (Rugman and Verbeke 2017).
Bargaining power of the suppliers – Huge number of suppliers and small organizations list themselves on the website of Alibaba. The sellers are able to showcase their products on the website, which is considered to be an effective opportunity for small businesses. The sellers and suppliers have low power in the e-commerce based industry of different countries. However, in the new market area the pricing based policies that are developed by Alibaba are able to affect the satisfactory levels of the sellers (Yan and Luo 2016). The suppliers of Alibaba are able to generate traffic on the website which is affected by the levels of prices.
Threats of the substitute products – The range of products that are offered by Alibaba to the customers in China is huge. Alibaba thereby does not face high threats in this case from the different online and offline organizations which operate in different countries where it plans to expand (Yan and Luo 2016).
According to Raghunath and Rose (2017), the analysis of e-commerce based industry is able to depict that Alibaba will be able to apply the strategies after expanding its operations in different countries which have already been applied in China effectively. The major growth based strategy that has been implemented by the company is thereby based on the levels of diversification of different business based operations of Alibaba. The product range that has been offered by the company in Chinese e-commerce market has been helpful in the proper development of loyal customer base.
Alibaba is able to penetrate the market effectively with the help of its wide range of businesses. The products that are offered to the customers with the help of different businesses can be effective for its successful operations in the other countries as well. The competitiveness of the e-commerce industry is thereby considered to be an important factor that is able to have an immense effect on the ways by which Alibaba will develop the strategies and policies in different areas of the market (Forbes.com 2018). The company has created competitive advantage in the industry with the help of proper diversification related activities. This strategy will prove to be the most useful for effective expansion based operations of the Alibaba in the other countries.
Conclusion
The essay can be concluded by stating that Alibaba has developed an effective position in the e-commerce industry with the help of effective diversification and market penetration. The organization has provided opportunities to small businesses in order to showcase their products and reach a larger base of customers. The most important part of the strategy which has been implemented by Alibaba is based on the ways by which it has been able to grow in different parts of China. The organization can thereby implement similar strategies in other countries in order to increase the levels of profitability and revenues. The organization will be able to develop partnerships with many other small businesses with the help of its international expansion plans.
References
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