Group Members:
Leader: Teo Zhong Sheng (SN: 10082610)
Coordinator: Xiao Chen (SN: 120288232)
Secretary: Fang Zonghong Andrew (SN: 111145403)
Class-code: 1016
1)
Nature of the business
Alibaba was launched in 1999, founded in
Hangzhou, eastern China and till date it is the world’s largest online
business-to-business trading platform for small businesses. Alibaba.com has
three major marketplaces which consist of their English language marketplace
(alibaba.com), the China marketplace (1688.com) and lastly a transaction based
wholesale platform (aliexpress.com). Alibaba.com’s main nature of their
business is a pure play model (100% online, “click & click) and based on a
business-to-business (B2B) trading platform for small and medium businesses. According
to Wikipedia, “the company claims that together these marketplaces have more
than 79 million registered users.” In addition, Alibaba.com together with other
6 affiliated entities (Taobao, Tmall.com, eTao, Alipay, Aliyun & China
Yahoo!) are parts of a company named as Alibaba Group.
2) Key elements of the business model
A business model is part of business
strategy, it describes the basis of how an organization runs, creates,
delivers, and captures value for the business. Not a single identical business will possess
the same business model, as each and every business will have a unique set of
model in accordance to their strategy. 8 key elements of the business model are
needed for a business to be defined, which will summarize the organization’s
e-business strategy:
- Value Proposition
It is described as a promise of value to be delivered from the business and a belief from the customer that value will be produced. It is important for e-businesses to produce a clear online value proposition (OVP) to attract customers to utilize their specialized online services. Alibaba.com has certainly possessed these set of OVP which is portrayed by Chaffey’s 6C’s.Content – Alibaba.com has an in-depth information system, which allows consumers to understand the buying process for transactions much easier. See link, “http://www.alibaba.com/help/user-guide-new.html?tracelog=HP_quickguide_20121010.”Customization – Each seller at Alibaba.com is able to customize their product images, descriptions, prices, etc. which gives them a sense of belonging and identity to the account itself. With a good interface of the website, consumers are able to choose their preferred selected choices on what they wish to view during their visit to the website (E.g. Products are categorized in groups, Agriculture, Technology, Automobile, etc).Community – Alibaba.com allows its users to discuss issues or provide feedbacks together as a community with platforms provided like Trade Intelligence, Discussion Forums and Site Resources.Convenience – Online purchasing is one of the key positive points by Alibaba.com where transactions take place online and has made transactions more convenient for everyone. With just a simple click, purchases are made through space of flow. This factor contributes tremendously to people who does not have much time to travel and can just sit at the comfort of their homes to do purchases and comparisons.Choice – The online platform provides a wider choice of products and services as only virtual spaces are required compared to the traditional brick and mortar models which takes up too much space/inventory. With 42 main categories in Alibaba.com for consumers to choose from, consumers will be spoilt for choices.Cost Reduction – Consumers patronizing Alibaba.com will experience it as a lower cost place of purchase. Main reason is due to the fact that e-businesses will experience lower cost base as they have lower staff and distribution costs compared to a retailer who is running his brick and mortar shop. The maintenance of the server likely will be lesser than the rental of a departmental stall or factory.
- Market or Audience
Alibaba.com’s main market is targeting at businesses as it is operating a B2B trading platform for small and medium businesses. In regards to the range of businesses Alibaba.com targets, it has no particular product which is fixed. Alibaba.com allows a flexible range of products like Agriculture, Automobiles, Chemicals, Food & Beverages, Machinery, Sports & Entertainment, etc. In addition, Alibaba.com is looking at a global audience as it has various marketplaces targeted at different groups of people (E.g. English marketplace & Chinese marketplace). It has suppliers and importers over the five global continents (Asia-Pacific, America, Europe, Middle East and Africa).
- Revenue Models and Cost BaseIn accordance to businesswire.com, Alibaba.com’s revenue model is based on a subscription method (account subscriptions) and through Value-added services (VAS) (E.g. Listing fees, advertising, etc). Findings by Techinasia stated that in Yahoo’s Q2 financial report, Alibaba clocked up $1.38 billion in revenue in Q2 2013. Expenses will likely be on Servers, website upgrades, office spaces, employee wages which will be on low costs as of compared to its profits.
- Competitive Environment
Alibaba.com’s few main competitors would be Ebay and Amazon. Although both Ebay and Amazon are having business-to-consumer (B2C) models, they have an indirect competition with Alibaba as both deals with e-commerce activities. Alibaba.com will not have a direct competition with Ebay and Amazon as Alibaba.com is targeting at small and medium businesses (B2B) whereas Ebay and Amazon are both looking towards a consumer to consumer model (C2C) and business to consumer (B2C) model respectively.
- Competitive Advantage
Alibaba.com serves to bring together importers and exporters from more than 240 countries and regions. One obvious competitive advantage that Alibaba.com possesses is that it is one of the sole e-businesses in this world, which operates on a B2B model and has more than 5 million suppliers. In addition, Alibaba.com’s accessibility to the world makes it convenient for anyone in the global context to establish a transaction with Alibaba.com. Goods or orders can also reach places at a reasonable timing although in bulk amounts of orders. Also, Alibaba is the only chinese B2B in the early years, which allowed it to possess the first mover advantage, and getting to build good rapport with the chinese manufacturers (well referred to as factories of the world) very well and they speak both chinese and english eloquently. Thus, it gave them a strong advantage over major western competitors who were mostly english speaking B2Bs.
- Market Strategy
Alibaba.com’s main market strategy is to remain as the B2B market leader in the world, having a unique business model makes it stands out from the rest. Whenever businesses thinking of selling their products in bulk online, they will go to Alibaba.com. Alibaba.com has created a strong sense of branding to the businesses, businesses can find and have good trustworthy deals when their transactions are completed using Alibaba.com as their purchase medium.
- Organisational StructureAlibaba.com believes strongly in their mission which is “To make it easy to do business anywhere”. They also live by their six core values, Customer First, Teamwork, Embrace Change, Integrity, Passion and Commitment. All these structures enable Alibaba.com to be an organization which possess a positive quality which shapes the company into a moving forward entity, allowing it to grow further and more.
- ManagementHow well a business starts off and grows really is much dependent on the management team. Their knowledge, experience and innovations will bring the business to a whole new level. Teams, not an individual, did every successful business or concepts as they offset each other’s weaknesses.
Current management in Alibaba consists of the following key members:
Jack Ma (Executive Chairman)
Joe Tsai (Executive Vice Chairman)
Jonathan Lu (Chief Executive Officer)
Maggie Wu (Chief Financial Officer)
Zeng Ming (Chief Strategy Officer)
Trudy Dai (Chief People Officer)
Wang Jian (Chief Technology Officer)
Tiger Wang (Chief Marketing Officer)
Polo Shao (Chief Risk Officer & Group Secretary)
3)
Opinions of Alibaba’s model & strategy
Although www.alibaba.com is currently the biggest B2B website in China. However,
there are some other websites competing against it.
They are:
1. www.made-in-china.com: it does not have a lot of advertisements, but provides good services to the sellers, so although it may not be popular among the common crowd, it is in fact well known among the professionals.
2. www.hc360.com: the e-business started as a “yellow-page” like publisher, and did a good job in the internal trade industry. It started off as a focus on the export and import of businesses.
1. www.made-in-china.com: it does not have a lot of advertisements, but provides good services to the sellers, so although it may not be popular among the common crowd, it is in fact well known among the professionals.
2. www.hc360.com: the e-business started as a “yellow-page” like publisher, and did a good job in the internal trade industry. It started off as a focus on the export and import of businesses.
Besides, Taobao has just shut down
the interface between its platforms and Tecent’s
Wechat (or Weixin known in China). This is
Alibaba’s new move towards Tencent’s Wechat 5.0, which added payment solution
into its new version. Banks can bundle their accounts on Wechat platform. The
powerful scanner on Wechat allows users to scan product information, buy and
pay for it. Alibaba is afraid that Wechat might grow to be its strong
competitor in e-commerce. The competition in e-commerce is intense as once
there is a successful business model, other parties will be adopting almost the
same model, or better, to build their businesses. E-businesses must continue to
grow or create new strategies for their businesses or else they will be lacking
back from their upcoming competitors.
Alibaba.com’s business model
strategy is unique as even their main competitors like Ebay and Amazon do not
possess such a business model, business to business (B2B) model. Alibaba.com
can be said to be the main monopoly for B2B model. In addition, Alibaba.com has
42 over main categories for their suppliers and consumers to choose from.
Having such a large choice, both suppliers and consumers will not have any
restraints in setting up their transactions with Alibaba.com. Alibaba.com has
also ventured into both the English and Chinese market, in doing so this has
made Alibaba.com’s market audience relatively large. This is a very bright move
as they aim to conquer both the English and Chinese market in the e-business
industry. Having a large market is optimal for e-businesses as this will ensure
a larger pool of suppliers and consumers for the business. Lastly, Alibaba.com
has a very firm organizational structure. By having a strong mission and core
values, this will allow Alibaba.com to maintain their business structure and
also to impart the same mission and values to their employers and employees.
This will create a healthy working space for everyone, employers, employees and
also beneficial for the suppliers and consumers.
All in all, being the pioneer of e-commerce in the China market, Alibaba has led to the furious growth of the internet market in China. Alipay, an online payment, which accounts for roughly half of all online payment transactions within China, and the majority of these payments occur using Alibaba services. Alibaba has a firm stand in the e-commerce market. However, there is no guarantee in this fast developing world as there will always be a rapid growing number of competitors.
References