“AnAlysis on the Business Model of AliBABA.

coM”
E-Commerce

Analysis on the Business Model

Roni Bhowmik
Shenyang Aerospace University, China

Abstract
A market analysis is a quantitative and qualitative assessment of a market. Research on
business models has attracted increasing attention in the scientific world. From a conceptual
perspective, business models describe in simple terms, what a company is doing in order to
create and commercialize value, whereas business process models describe how this can be
realized on an operational level. This study aims to help frame the field of circular business
model research, by clarifying the fundamentals of the concept from the perspectives of
resource efficiency and business model innovation. Here analyses the Alibaba business model,
they do their business fully internet based. The study contributes to theoretical advancement
and effective implementation of circular business models, specially internet based business.

Introduction:

Alibaba Group (simplified Chinese: 阿里巴巴集团; traditional Chinese: 阿里巴巴集團;

pinyin:Ālǐbābā Jítuán) is a privately owned Hangzhou-based family of Internet-based
businesses that includes online marketplaces that facilitate business-to-business international
and domestic China trade, retail and payment platforms, shopping search engine and data-
centric cloud computing services.

Alibaba Group and its affiliated entities now have more than 22,000 employees across some
70 cities and regions, including China, Hong Kong, India, Japan, Korea, Taiwan, the United
Kingdom, and the United States.

Jack Ma, the founder of Alibaba, is reportedly the first to have launched a commercial
website in China. Founded in Hangzhou in eastern China, Alibaba.com has four marketplaces.
The company’s English language international marketplace (www.alibaba.com) serves to
bring together importers and exporters from more than 240 countries and regions. The China
marketplace (www.1688.com) is developed for domestic business-to-business trade in China.
It also has a Japanese marketplace (www.alibaba.co.jp), which is focused on facilitating trade

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to and from Japan through an associated company. In addition, Alibaba.com offers a

transaction-based wholesale platform, AliExpress (www.aliexpress.com), which allows
smaller buyers to buy small quantities of goods at wholesale prices.

The company claims that together these marketplaces have more than 65 million registered
users. Alibaba.com was listed in the Hong Kong Stock Exchange at the IPO price of
HK$13.5 on 6 November 2007, raising HK$13.1 billion (US$1.7 billion) in the second-
largest initial public offering sale of an Internet company after Google Inc.

In September 1995 Chinapages.com, a directory of companies, goes online and within ten
years Ma grows it in one of the most successful Internet companies of China.

The initial business model of Alibaba was simple; facilitate a 24/7 meeting platform for
suppliers and buyers around the world. From the start Alibaba did not just connect Chinese
suppliers with international buyers, but it had the goal of connecting all importers and
exporters around the world to each other. Although other B2B websites have always said
“You cannot have a global company out of China, it makes no sense.” From the very
beginning Alibaba was “the first global Internet Company emerging from China.”

Unlike most other Internet companies, language was no barrier for Alibaba. Its membership
base has always been communicating in English even before Alibaba arrived on the scene, so
its non-English members were already used to communicating in a different language. Porter
points out: “We are lucky that our market is country independent, it is inherently global.”
Alibaba basically functions as a matchmaker and provides a cheap and efficient platform
where sellers from all over the world in practise mostly China can find appropriate foreign
buyers and visa versa. In a 2007 interview for Radio86, Porter comments on the growth of
Alibaba: “Alibaba really just getting started” and “given that the internet is growing and
international trade increasing and more and more people are coming online, there’s plenty of
room to grow for the next fifteen to twenty years.”

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“AnAlysis on the Business Model of AliBABA.coM”
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Alibaba Group Companies and Affiliated Entities:

Alibaba.com

Founded in Hangzhou in eastern China, Alibaba.com has four marketplaces. The company’s
English language international marketplace (www.alibaba.com) serves to bring together
importers and exporters from more than 240 countries and regions. The China marketplace
(www.1688.com) is developed for domestic business-to-business trade in China. It also has a
Japanese marketplace (www.alibaba.co.jp), which is focused on facilitating trade to and from
Japan through an associated company. In addition, Alibaba.com offers a transaction-based
wholesale platform, AliExpress (www.aliexpress.com), which allows smaller buyers to buy
small quantities of goods at wholesale prices.

Taobao Marketplace

Taobao Marketplace (www.taobao.com), previously known as Taobao, is the biggest C2C

online shopping platform in China. Founded in 2003, it provides a wide variety of product
offerings. The company claims that it served more than 370 million registered users as of the
end of 2010.

Taobao Mall

Taobao Mall (www.tmall.com) was introduced in April 2008 as a dedicated B2C platform to
complement Taobao’s C2C marketplace and became an independent business in June 2011. It
is now a major online shopping destination for quality, brand name goods in China.

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eTao

eTao was beta-launched by Taobao in October 2010 as an independent search engine and
became an independent business in June 2011. It is the most comprehensive shopping search
engine in China, covering product results from all major Chinese online shopping platforms.
Alipay

Launched in 2004, Alipay (www.alipay.com) is a third-party online payment platform.

According to analyst research report, Alipay has the biggest market share in China. The
company claims it had more than 550 million registered users as of the end of 2010. In China,
Alipay partners with more than 65 financial institutions including Visa and MasterCard to
provide payment solutions for Taobao as well as more than 500,000 Chinese businesses.
Internationally, Alipay helps more than 300 merchants and sellers worldwide sell directly to
consumers in China.

Alibaba Cloud Computing

Alibaba Cloud Computing aims to build an advanced data-centric cloud computing service
platform, including e-commerce data mining, high-speed massive e-commerce data
processing, and as well as data customization. It was established in September 2009 in
conjunction with the 10th anniversary of Alibaba Group.

China Yahoo!

In October 2005, Alibaba Group formed a strategic partnership with Yahoo! Inc and acquired
China Yahoo! (www.yahoo.com.cn), which is a Chinese portal with a focus on essential
Internet services including news, email and search.

Development History:

➢ In December 1998, Jack Ma and other 17 founders released their first online
marketplace named "Alibaba Online".
➢ From 1999 to 2000, Alibaba Group raised a total of US$25 million from SoftBank,
Goldman Sachs, Fidelity and some other institutions.
➢ In December 2001, Alibaba.com achieved profitability.

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➢ In May 2003, Taobao was founded as a consumer e-commerce platform.

➢ In December 2004, Alipay became an independent business.
➢ In October 2005, Alibaba Group took over the operation of China Yahoo! as part of
its strategic partnership with Yahoo! Inc.
➢ In November, 2007, Alibaba.com successfully listed on the Hong Kong Stock
Exchange.
➢ In April 2008, Taobao established Taobao Mall, a dedicated B2C platform, to
complement its C2C marketplace.
➢ In September 2008, Alibaba Group R&D Institute was established.
➢ In September 2009, Alibaba Group established Alibaba Cloud Computing in
conjunction with its 10-year anniversary.
➢ In May 2010, Alibaba Group announced a plan to earmark 0.3% of its annual
revenues to fund environmental protection initiatives.
➢ In October 2010, Taobao beta-launched eTao as an independent shopping search
engine.
➢ In June 2011, Alibaba Group reorganized Taobao into three separate companies:
Taobao Marketplace, Taobao Mall and eTao.

Vision:
To last 102 years
To be one of the world’s top 10 internet sites
To be an essential partner for all business people

Mission:
To make doing business easy

Values:
Customer comes first Customers are everything
Teamwork and Cooperation Team interests are always ahead of individual interests
Embrace changes Go beyond yourself and welcome changes
Integrity Honest and upright, honoring commitments
Passion Never give up and stay optimistic
Honoring your job Perform the extraordinary with a professional attitude and
an ordinary mind

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“AnAlysis on the Business Model of AliBABA.coM”
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Alibaba Stock Performance:

Alibaba.com Limited operates as a business-to-business e-commerce company in the

People’s Republic of China and internationally. It provides software, technology, and other
services connecting small and medium-sized buyers and suppliers, as well as offers Internet
content, advertising services, business management software, and Internet infrastructure
services. The company offers platforms for international, domestic, and retail trade. Its
products and services also include online payment platform, instant messenger development
and maintenance services, and keywords on Web sites for the promotion of its marketplaces.

The company’s listings displayed on its online marketplaces cover a range of products and
services in various industries, including agriculture, apparel, automobile, business services,
chemicals, computer hardware and software, construction and real estate, electronic
components and supplies, energy, excess inventory, fashion accessories, food and beverage,
furniture, and gifts and crafts. Its listings also cover products in industries, such as hardware,
health and medical, home and garden, home appliances, lights and lighting, luggage, bags and
cases, minerals and metallurgy, mechanical parts and fabrication services, office and school
supplies, packaging and printing, rubber and plastics, security and protection, shoes and
accessories, sports and entertainment, telecommunications, textiles and leather products,
timepieces, jewelry and eyewear, toys, and transportation.

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“AnAlysis on the Business Model of AliBABA.coM”
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Open $11.36 Previous Close $11.38

Day High $11.44 Day Low $11.26
52 Week High (02/17/11) - $17.70 52 Week Low (06/20/11) - $11.02
Market Cap 57.2B Average Volume 10 D 8.2M
EPS TTM $0.29 Shares Out Standing 5.1B
Ex-Date 12/23/10 P/E TTM 32.2x
Dividend -- Dividend Yield 1.95%

LAST $11.30 HKD CHANGE TODAY -0.08 -0.70% VOLUME 5.5M

1688: HK Historical Stock Quote

1688: HK Advanced Stock Chart

SWOT Analysis:
Strength(S)
The site has a team of three (Britain, China, Japan), to include broader customer base,
and conducive to information exchange, an increase of the amount of information, but
conducive to building momentum to expand its influence.
Alibaba increases segmentation of information and comprehensive, so that more
targeted and effective.
The world's largest Chinese Forum –“以商会友”, has created a great convenience for
traders around the globe to exchange, and also closer to the distance between the
various traders, but also to enhance the visibility of the website.
A large number of members, to enhance the visibility of the brand so that the set of
information Alibaba increasing coverage, the advent of attracting business.
To open the "Golden supplier", a web-based transactions to ensure security.

Weaknesses (W)

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Alibaba's Web site model is an intermediary form, and replicability of this model,
which other competitors from entering the industry to provide a sample; it increased
by competitors for itself.
2.Alibaba membership system to increase the fees in the process of transformation,
will lead to the loss of existing members, will create the opportunities for competitors,
the development of the site will be difficult.
Alibaba's business platform large and cluttered that it had 27 industries, 800 - 900
categories of industries as a business platform to optimize the greatest obstacles.

Opportunities (O)
In China, several large banks and credit companies to participate fully in the field of
e-commerce, which the depth of the development of e-commerce has created
opportunities.
China is now speeding up the development of e-commerce legal provisions, and
actively creates a safe and regulated business environment.
China's existing small and medium enterprises cannot afford to start their own b2b
business website, so that online intermediaries such as the popular Alibaba their
welcome.
The Internet continuous development and improvement, the popularization of
computers, there will be more companies have joined the online business.

Threats (T)
Alibaba profits mainly in China, but China b2b business environment has constrained
the further development of Alibaba, such as a sound law, loopholes in online payment
security, not so good infrastructure in some cities, which will hold back the
development of Alibaba.
B2B business site model, not only in the last few years with the rapid development of
the world, and gradually formed a trend - e-business alliance - that is, the trend of
mergers and cooperation, which will lead to more competitive.

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Macro environment:
According to the latest iResearch released "in 2007 China's small and medium-sized B2B e-
commerce study," data show that in 2006 the total number of Chinese small and medium-
sized 31518000, in the state system conditions gradually improved, well-developed macro-
economic environment, China has become the world's such as a manufacturing center, driven
by favorable factors, Ereli next 5 years will be for the expansion of China's small and
medium-sized, small and medium enterprises will remain 7% -8% annual growth rate, the
total number of SMEs in 2012 will reach 50 million.

The number of SMEs (ten thousand) the growth rate

Competitors Analysis:

Global Sources
Global Sources is a Hong-Kong based business-to-business (B2B) Media Company that
facilitates trade between Greater China and the world. It provides sourcing information to
volume buyers and integrated marketing services to suppliers. A wide range of media is used
to connect suppliers and buyers worldwide – online portals, magazines, research reports, and
trade fairs.
Global Sources advantage-
The promotion of more channels and market research reports and organize their own
event.

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Promote experienced Global Sources has been done for 38 years, is the old platform
to promote and experience.
Has its own fixed base of buyers, manufacturers

Global Sources disadvantage-

Less well-known domestic brands than Alibaba.
Less number of suppliers than Alibaba groups.
Publicity and advertising no better than Alibaba channels.
If the three channels at the same time promoting the relatively high cost.
Alibaba positioned to service small and medium-sized, Global Sources in the large
enterprises (SMEs are more).
Apart from the "world managers" journal, other magazine subscription needs to
reduce the number of the issue. With the rise of e-commerce, CD-ROM and paid
magazines will be gradually out the stage of history.

Made-in-China.com
China manufacturer directory and China products catalog, providing trade leads among China
factory, manufacturers, suppliers, and global buyers
Made-in-China.com advantage-
It is under the Focus Technology Co. ltd, has financial strength.
English name is made-in-china, a good Web site optimization, to some extent the
search engine to facilitate search.
The prices are cheaper.
The use of agent systems. Rapid accumulation of short-term source of funds to
expand the business scale.
Made-in-China.com disadvantage-
Less well-known domestic brands than Alibaba.
Less number of suppliers than Alibaba groups.
Publicity and advertising no better than Alibaba channels.

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Agents management uneven, and sometimes have a negative impact on Made-in

China.com’s services.

Five Forces Analysis:

Barriers to Entry
High returns will draw firms. This results in many new entrants, which will effectively
decrease profitability. With the development of B2B market and long time high profit of
Alibaba.com. There are more and more new websites try to copy the business mode of
Alibaba.com. The most common way to entry B2B e-market is try to position its target
market to a single industry. For example, in the recently 2 years, finechemical.com for the
chemical products and Textilehome.com for the textiles and so on. Although these firms
don’t have the broad market as Alibaba.com, in another word, they share the special market
of Alibaba.com because they are more professional and targeted.

Buyer Bargaining Power

The buyer bargaining power is the ability of customers to put the firm under pressure and it
also affects the customer's sensitivity to price changes. For Alibaba.com, the customers are
generally the medium and small-size firms which don’t have the ability or don’t need to build
up their own websites. To negotiate with the biggest B2B e-platform, these firms don’t have
too many advantages to fight for lower cost and nearly all the standards are decided by the
Alibaba.com. But with the development of B2B websites, the customers may have the
opportunity to choose the other platform and that will also be the opportunity to negotiate
with Alibaba.com for more rights.

Supplier Bargaining Power

Suppliers of raw materials, components, labor, and services (such as expertise) to the firm
can be a source of power over the firm. Suppliers may refuse to work with the firm, or e.g.
charge excessively high prices for unique resources. But for Alibaba.com, there are seldom
suppliers of raw materials, components and labor because it is not a manufacture firm but an
e-service one. The largest cost for this firm is cost for selling, so the most important suppliers
are the firms supply the advertise for Alibaba.com, such as the famous magazines,
newspapers and websites.

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Availability of Substitutes
The existence of close substitute products increases the propensity of customers to switch to
alternatives in response to price increases. The most important substitute service is the self-
websites of large companies. For the customers which prefer to make business with large
companies, they will not turn to Alibaba.com but directly contact with the companies
themselves.

Competition
For most industries, this is the major determinant of the competitiveness of the industry.
Sometimes rivals compete aggressively and sometimes rivals compete in non-price
dimensions such as innovation, marketing, etc. The most competitive firms of Alibaba.com
are the search-websites such as Baidu.com and Google.com. The potential customers may
search the results just through these free and simpler websites but not through the B2B e-
platform, which will lead Alibaba.com to lose lots of profit.

Business Model:

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Business Model:

Business Model describes details of planned activities in business that involve with purpose,
offerings, strategies, infrastructure, organization structures, trading practices, operational
processes, and policies designed to result in profits in a marketplace.

Business model is very important because business model is a main component of business
plan and every good business must have a business model. More than that, for independent
study and most of case study, student has to be able to identify the components of business
model.

Business Plan:

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Business plan is a formal statement that describes objectives of a company and how the
company will achieve those objectives. And business plan also describes the company’s
business model.

E-commerce business model:

E-commerce business model aims to use and leverage unique qualities of Internet and Web.

Key elements of business model:

Business model composes of different parts of activities that organizations use to earn
revenues and there are 8 key elements of business model as following: (for most of the case
study, students need to identify the following key elements)

Before you start any business you should take in consideration to a few pointers to kick start
your business properly and make it a successful one.

8 Key elements of a business model that you need to pay:

1) Value Proposition
Define how a company’s product or service fulfils the need of customers.
Examples of successful value propositions
Personalization/ Customization
Reduction of product search, price discovery costs
Facilitation of transactions by managing product delivery
2) Revenue Model
Define how the firm will earn revenue generates profits and produce a superior return on
invested capital

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Major types:
➢ Advertising revenue models: CNN.com
➢ Subscription revenue models: MATCH.com
➢ Transaction fee revenue model: eBay, E-Trade, Hotwire
➢ Sales revenue model: Amazon, LLbean, Gap.com
➢ Affiliate revenue model: E-pinions, Banner Exchange, Edmunds à sends traffic to
another website

3) Market Opportunity
Refers to a company’s intended market space and the overall potential financial
opportunities available to the firm in that market space
4) Competitive Environment
Refers to the other competition selling similar products and operating in the same
market space
-Influenced by
➢ How many competitors are active
➢ How large operations are
➢ The market share for each competitor
5) Competitive Advantage
Achieved when a firm can produce a superior product and/or bring a product to market,
at a lower price than most, or all, of their competitors.
-Types of competitive advantage:
➢ First mover advantage
➢ Unfair competitive advantage
6) Market Strategy
Plan that details how a company intends to enter a new market and attract strategy
7) Organizational Development

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Describes how the company will organize the work that needs to be accomplished
8) Management Team
➢ Employees of the company responsible for making the business model work
➢ Strong management team gives instant credibility to outside investors
➢ There are many types of e-commerce business models let’s take a look at all of them
and what are the difference.

Business to Business Models (B2B):

E-distributor
➢ Supplies products and services directly to individual businesses
➢ Owned by one company seeking to serve many customers
E-procurement
➢ Creates and sells access to digital electronic markets
➢ B2B services providers is one type
➢ Application service providers: a subset of B2B service providers
Exchanges
➢ Electronic digital marketplace where suppliers and commercial purchases can conduct
transactions
➢ Usually owned by independent firms whose business is making a market
Industry Consortia
➢ Industry-owned vertical market place that serve specific industries
➢ Horizontal market place, in contrast, sell specific products and services to a whole
range of industries
Private industrial networks
➢ Digital networks designed to co-ordinate the flow of communications among firms
engaged in business together
➢ Lobbying: influence the government as a group à Public policy access
Business models in emerging E-Commerce Areas
➢ Consumer to consumer: Provides a way for consumers to sell to each other, with the
help of online market maker (EBay)
➢ Peer to peer (P2P): Link users, enabling them to share files and common resources
without a common server (Kazaa, Cloudmark)

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➢ M-Commerce: E-commerce business models that use wireless technologies (EBay

Mobile)—To date, m-commerce is a disappointment in the united states however,
technology platform continues to evolve

Revenue Model:

Revenue model is the most important element of business model in professor’s opinion
because revenue model describes how the firm will earn revenue, generate profits, and
produce a superior return on invested capital.

There are 5 major types of e- business revenue model as follows:

➢ Advertising revenue model

➢ Subscription revenue model
➢ Transaction fee revenue model
➢ Sales revenue model
➢ Affiliate revenue model

Example:

➢ What would be the revenue model for Google?

AdWords and AdSense

➢ What would be the revenue model for HP?

Sales of products (PC) and service

➢ What would be the revenue model for Microsoft?

Software and service

The 8 Internet Revenue Model Options:

For a publisher or other media site owner, identify eight types of revenue model which are
possible online. Let me know of any I’m missing Of course, transactional sites have the
option of these also in addition to sales – online, everyone is a media owner.

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1. Revenue from subscription access to content

A range of documents can be accessed for a period of a month or typically a year. For
example, I subscribed to FT.com for access to the digital technology section for around €80
per year.
2. Revenue from Pay per View access to document
Here payment occurs for single access to a document, video or music clip which can be
downloaded. It may or may not be protected with a password or Digital Rights Management.

3. Revenue from CPM display advertising on site (e.g. banners ads and skyscrapers).
CPM stands for ‘cost per thousand’ where M denotes ‘Mille’. The site owner such as FT.com
charges advertisers a rate card price (for example €50 CPM) according to the number of its
ads shown to site visitors. Ads may be served by the site owners own ad server or more
commonly through a third-party ad network service such as Google AdSense as is the case
with my site.

4. Revenue from CPC advertising on site (pay per click text ads)
CPC stands for ‘Cost per Click’. Advertisers are charged not simply for the number of times
their ads are displayed, but according to the number of times they are clicked. These are
typically text ads similar to sponsored links within a search engine but delivered over a
network of third-party sites by on a search engine such as the Google Ad Network.

5. Revenue from Sponsorship of site sections or content types (typically fixed fee for a period)
A company can pay to advertise a site channel or section. For example, bank HSBC sponsors
the Money section on the Wanadoo/Orange portal (www.wanadoo.com) or
www.orange.co.uk. This type of deal is often struck for a fixed amount per year. It may also
be part of a reciprocal arrangement, sometimes known as a ‘contra-deal’ where neither party
pays.

6. Affiliate revenue (CPA, but could be CPC)

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Affiliate revenue is commission based, for example I display Amazon books on my site
DaveChaffey.com and receive around 5% of the cover price as a fee from Amazon. Such an
arrangement is sometimes known as Cost per Acquisition (CPA).

7. Subscriber data access for e-mail marketing

The data a site owner has about its customers is also potentially valuable since it can said
different forms of e-mail to its customers if they have given their permission that they are
happy to receive e-mail either from the publisher or third parties. The site owner can charge
for adverts placed in its newsletter or can deliver a separate message on behalf of the
advertiser (sometimes known as list rental).

8. Access to customers for online research

An example of a company that uses this approach to attract revenue from surveys is the teen
site Dubit. Considering all of these approaches to revenue generation together, the site owner
will seek to use the best combination of these techniques to maximize the revenue. To assess
how effective different pages or sites in their portfolio are at generating revenue, they will use
two approaches. The first is eCPM, or effective Cost per Thousand.

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Ad Server Market Structure:

Given below is a list of top ad server vendors in 2008 with figures in millions of viewers
published in an Attributor survey. Since 2008 Google controls estimated 69% of the online
advertising market.

Vendor Ad Viewers (Millions)

Alibaba 1,118

Double Click (Alibaba) 1,079

Yahoo! 362

MSN (Microsoft) 309

AOL 156

Adbrite 73

Total 3,087

Business Model and Revenue Model of Alibaba

Alibaba Group is a privately owned Hangzhou-based family of Internet-based businesses that

includes business-to-business international trade, online retail and payment platforms and
data-centric cloud computing services. Jack Ma, the founder of Alibaba, is reportedly the
first to have launched a commercial website in China. In September 1995 Chinapages.com, a
directory of companies, goes online and from then on there was no looking back.
Traditionally, they had to pass through a long chain of intermediaries:
Factories -> trading companies -> importers -> distributors -> retailers -> consumers.

Intermediaries
Trading
Factories Importers Distributors Retailers Consumers
Companies

Buyers always want to go up the food chain and find cheaper suppliers. Factories always
want to go down the food chain and find buyers who pay better. But the opaque process of

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traditional trade made it difficult for both parties to achieve their ends.
Low margins have long been a problem for small factories in China. Without a way of
marketing themselves globally, they are often at the mercy of a few large trading houses.

Market Opportunity:

Market Opportunity consists of 2 things which are market value and market share comparing
to your competitors. 5 Forces Model is one of the tools that can use to analyze market
opportunity. And market opportunity describes needs, wants, or demand trends that a
company can take advantage of because they are not being addressed by the competitors

Market space

Market space is area of actual or potential commercial value in which company intends to
operate.

Realistic market opportunity

Realistic market opportunity is defined by revenue potential in each of market niches in

which a company hopes to. Example of Market Opportunity

Insider Tips and Strategies for Sourcing Products from the World’s
Largest B2B Market place:

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Keep your Edge on Alibaba.com:

As you gather input about your products and business through your interactions with
customers, suppliers, and all the other people who will support your business, don’t forget to
come back to the Alibaba.com web site to research your next good product sourcing move.

This time, scroll down near the bottom of the page, and look for the “Trade Trends” heading

along the left-hand side. Find link for “Rising Demand Top 20”, “Hot Products Top 20”, and

“Popular Categories Top 20”.

Figure: Alibaba.com’s Trade Trends page gives you a glimpse of in-demand products and
popular categories.

Amazon and eBay can help:

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Let’s put aside for the moment the question of whether you’ll ultimately sell your products
through sites such as Amazon and eBay.

Figure: The search results page on Amazon.com can help you research best-selling products
for your business.

For example, you can search for your product idea on both of these sites. On Amazon search
for your product and then sort the result by “Bestselling”. Now you can see what the most
popular items are and then work to determine what exactly it is that makes them best sellers.

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Figure: Completed listings on eBay can show you which items are actually selling on the site

On eBay, you’ll do an “Advanced Search”, by clicking on that link from the home page,
entering your keywords, and limiting your results to completed listings. When you scan your
results, pinpoint items with prices that are in green because the only measure of success on
eBay is whether the item in question has actually been sold.

Market Strategy:

Market strategy is a detailed plan that describes a process of how a company intends
to enter a new market and attract customers, and concentrate on how its limited resources can
increase sales and achieve a sustainable competitive advantage by fulfilling the customers’
satisfactions. Best business concepts will fail if not properly marketed to potential customers.

STRATEGY

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BUSIN
ESS
ORGANIZATION
MODE
TECHNOLOGY
L
the business model’s place in
the company
Market Strategy is related to:

How do you plan to promote your products?

How do you target your customers?

Organizational Development

Organizational Development can be described as a plan from top-down that relates to how a
company organizes beliefs, attitudes, values, and structure of people and the company itself
for the positive changing or to accomplish the work. In order to have a good organizational
development, the company has to understand the nature of its structure and culture of the
company first, and then the company will know what aspects of the organization need to be
improved to get the work done and to achieve the success.

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Figure: Corporate Structure of Alibaba.com

Work is typically divided into functional departments.

Hiring moves from generalists to specialists as company grows.

Management Team

Management team refers to employees in the company who have control in making the
business model work. Before the company assigns the management team to work on the
business model, it has to know the management team’s background, strong points and weak
points in order to get the right management team to control the business model.

Strong management team gives instant credibility to outside investors.

Strong management team may not be able to salvage a weak business model, but
should be able to change the model and redefine the business as it becomes necessary.

B2B Electronic Exchanges:

Public e-marketplaces (public exchanges): Trading venues open to all interested

parties (sellers and buyers) and usually run by third parties

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Exchange: A many-to-many e-marketplace. Also known as e-marketplaces, e-

markets, and trading exchanges

Market maker: The third-party that operates an exchange (and in many cases, also
owns the exchange)

Systematic sourcing: Purchasing done in long-term supplier–buyer relationships

Spot sourcing: Unplanned purchases made as the need arises

Vertical exchange: An exchange whose members are in one industry or industry

segment

Horizontal exchanges: Exchanges that handle materials used by companies in

different industries
Dynamic pricing: A rapid movement of prices over time, and possibly across
customers, as a result of supply and demand
Process that results in dynamic pricing in most exchanges includes
A company posts a bid to buy a product or an offer to sell one
Anonymity is often a key ingredient of dynamic pricing
Buyers and sellers interact with bids and offers in real time
A deal is struck when there is an exact match between a buyer and a seller on
price, volume, and other variables such as location or quality
The deal is consummated, and payment and delivery are arranged

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Functions of exchanges
Matching buyers and sellers
Facilitating transactions
Maintaining exchange policies and infrastructure

Ownership of exchanges
An industry giant
A neutral entrepreneur
The consortia (or “third-party” co-op)
Revenue models
Transaction fees
Fee for service
Membership fees
Advertising fees
Other revenue sources

Governance and organization

Membership

The community in the exchange

Site access and security

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Information should be carefully protected

Services provided by exchanges

Provide many services to buyers and sellers

B2B portals: Information portals for businesses

Pure information portals include:

directories of products offered by each seller
lists of buyers and what they want
other industry or general information
Vortals: B2B portals that focus on a single industry or industry segment; “vertical
portals”
Thomas Register—information portal

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Sellers distribute information on what they have to sell

Buyers can find what they need and purchase over a comprehensive and
secure procurement channel
reduce costs
shrink cycle times
improve productivity
Alibaba.com—started as a pure information portal and is moving toward becoming a
trading exchange
Huge database is a horizontal information portal with offerings in a wide
variety of product categories
Reverse auctions
Features–free email, email alerts, etc
Revenue model—advertisement and fees for special

Figure: B2B concept

Third-party exchanges are characterized by two contradicting properties

they are neutral, not favoring either sellers or buyers
they do not have a built-in constituency of sellers or buyers and sometimes
have a problem attracting enough buyers and sellers to attain financial
viability
A major problem is:

Market liquidity: The degree to which something can be bought or sold in a

marketplace without affecting its price

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Buyer aggregation model

Buyers’ RFQs are aggregated and then linked to a pool of suppliers that are
automatically notified of the RFQs

Suitability
aggregation models work best with MROs and services that are well defined,
that have stable prices, and where the supplier or buyer base is fragmented

Consortium trading exchange (CTE): An exchange formed and operated by a group

of major companies to provide industry wide transaction services

Three basic types of environments:

1. Fragmented markets
2. Seller-concentrated markets
3. Buyer-concentrated markets

CTEs, defined by two main criteria:

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whether they focus on buying or selling

whether they are vertical or horizontal

4 types of CTEs
1. Purchasing oriented, vertical
2. Purchasing oriented, horizontal
3. Selling oriented, vertical
4. Selling oriented, horizontal

Purchasing-oriented consortia
Vertical Purchasing-Oriented CTEs

All the players are in the same industry

Horizontal Purchasing-Oriented CTEs

Owner-operators are large companies from different industries that unite for the
purpose of improving the supply chain of MROs used by most industries

Selling-oriented consortia
Most selling-oriented consortia are vertical
Participating sellers have thousands of potential buyers within a particular
industry
Other issues for consortia
Legal challenges for B2B consortia
level of collaboration among both competitors and business partners
antitrust and other competition laws must be considered
Critical success factors for consortia
Appropriate business and revenue models
Size of the industry
Ability to drive user adoption
Elasticity

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Elasticity: The measure of the incremental spending by buyers as a result of the

savings generated

Management of intensive information flow

Smoothing of supply chain inefficiencies
Harmonized shared objectives
Combining consortia and third-party exchanges
dot-consortia—large consortia + third-party owner
combination may bring about the advantage of both ownership and
minimizing third-party limitations such as low liquidity

Dynamic trading: Exchange trading that occurs in situations when prices are being
determined by supply and demand (e.g., in auctions)

Matching
supply and demand
quantity, delivery times, and locations
Auctions
Exchanges offer members the ability to conduct auctions or reverse auctions in
private trading rooms
auction services as one of its many activities
fully dedicated to auctions
Many-to-many public auctions—vertical, horizontal, run on the Internet or
over private lines
Building e-marketplaces is a complex process
usually performed by a major B2B software company
Commerce One
Ariba
Oracle
IBM
Integration issue

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Seamless integration is needed between the third-party exchange and the

participants’ front and back-office systems
In private exchanges the seller’s computing system must be integrated with the
customers systems
External communications
Web/client access
Data exchange
Direct application integration
Shared procedures
Process and information coordination in integration

How to coordinate external communications with internal information systems

Use of Web services in integration

Web Services enable different Web-based systems to communicate with each other
using Internet-based protocols such as XML

System and information management in integration

Management of software, hardware, and several information components, including

partner-profile information, data and process definitions, communications and security
settings, and users’ information

Directory services and search engines

Directory services help buyers and sellers manage the task of finding potential
partners

Partner relationship management (PRM): Business strategy that focuses on providing

comprehensive quality service to business partners

E-communities and PRM

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B2B application needs to provide community services such as chat rooms, bulletin
boards, and possibly personalized Web pages

Integration (as per Keenan Report)

Business-to-exchange (B2X) hubs connect all of the Internet business services
e-merchant services
exchange infrastructure
buying and selling
member enterprises
other B2X exchanges

Figure: The conceptual framework of a matchmaker for B2B e-marketplaces

Private vs. public exchanges

Private exchanges: E-marketplaces that are owned and operated by one company.
Also known as company-centric marketplaces

Problems with private exchanges

Transaction fees—required to pay transaction fees with existing customers
Sharing information—do not want to share business data with competitors
Cost savings—not great enough to attract buyers
Recruiting suppliers—lose direct contact with customers
Too many exchanges

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Supply chain improvers

Companies want to streamline their internal supply chains, which requires
integration with internal operations instead of “plugging in” to an exchange’s
infrastructure

Major problem is trust in the large corporation running the exchange

Software agents in B2B enable customized syndication of content and services from
multiple sources on the Internet to any device connected to the Internet
provide real-time, tighter integration between buyers and sellers
facilitate management of multiple trading partners and their transactions
across multiple virtual industry exchanges

Open standards mean that the technology can be incorporated easily with participating
firms’ back-end technologies, allowing full visibility of the supply and demand chains
Networks of exchanges (E2E)
Large corporations may work with several exchanges, and they would like
these exchanges to be connected in a seamless fashion

Commerce One and Ariba developed a strategy that allows them to plug a broad range
of horizontal exchanges into their main networks

Centralized management
Managing exchanges and providing services to participants on an individual
basis is expensive

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Build “families” of exchanges managed jointly in order to operate several

exchanges from a unified, centralized place
Manages all of the exchanges’:
Catalogs
Auction places
Discussion forums
Managing and centralizing:
Accounting
Finance
Human resources
IT services
New directions in B2B marketplaces
Early failures of exchanges were due mainly to the failure of these
marketplaces to foster a broad-based sharing of information
Recognize the fundamental asset provided by their member base is the unique
knowledge of the industry
e-distributors
Take title to the goods they sell
Aggregate those goods for the convenience of buyers
Advise buyers which to choose
Reach hard-to-find buyers
Result in extra value for buyers and decent profits for sellers

Value Propositions, Value Chains, and Supply Chains of Alibaba:

Alibaba’s main e-commerce activities in the framework of the conceptual model. It provides
an insight on the execution of the successful strategy utilizing the existing resources in the
current business climate of China. The main activities of this e-market in each phase of
transaction are outlined, and the complexity of controlling these activities to guarantee a
secure and trustable transaction is evaluated.

Personalized and Customized Services in Alibaba

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Figure: Rayleigh-Curve

In the information and the negotiation phases of the Model, Alibaba offers personalized and
customized services. Hundreds of product categories from 42 industries are presented in this
market. Members are offered a utility called “Ali-assistant” (or My Alibaba) to manage their
product listing and internal web sites. A wide array of trading functions are available for
buyers and sellers to choose from, such as online auctions, online categories hosted in each
member’s site, and real time negotiation conducted through “Trade Manager”. The staffs in
Alibaba are not as much involved in matching buyers and sellers. However, the less human
involvement of Alibaba is compensated by its three services: Ali-college, Ali-forum and
Trust Pass. So through these three services, Alibaba users can be better serviced with reduced
help from human agents.

Transaction Process Information Negotiation Payment Delivery

Controlling
Complexity
Low Personalized
and Customized
Services
Alibaba:
Products from
42 industries;
Ali-assistant;
Ali-college;
Ali-forum;
Medium Personalized and
Customized
Services
Alibaba:
Online catalogs
Online auctions

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TrustPass
TradeManager
High Risk Control of the Strategic partners
fulfillment Process network
Alibaba: Alibaba:
Supporting multiple The bank partner
payment methods alliances
Ali-pay, a third party Ali-pay partially
payment service, controls the risks in
effectively control the the
risk in the payment delivery
phases with lower TradeManager
operating cost

Figure: Alibaba’s e-commerce activities

Risk Control of the fulfilment Process in Alibaba

Alibaba’s payment process is intertwined with the delivery phase. It involves multiple players
from transportation and storage providers to customs agents and banks. Alibaba also focuses
on controlling of transactional risks presented in the payment and delivery phase. Alibaba
does not supervise the entire process and does not help arrange deliveries. However, by
offering Ali-pay (or called as Payment Bao), a third party payment service, Alibaba
effectively control the risk in the payment and delivery phases with lower operating cost. In
Ali-pay, money is held by Ali-pay before buyers confirm receipt and quality of goods.

Strategic partners network in Alibaba

Alibaba provide support in all four phases of transaction, increasing value either by
controlling transactional risks, or by reducing transactional cost and enhancing transactional
efficiency. Even though Alibaba has weaker support in the delivery phase, it cleverly allows
participant involvement from both sides in meeting the contract. Alibaba has matched beyond
the needs of users, so it is actually considered best successful e-market in China. It is also
noticeable that Alibaba’s transactional process design requires less human involvement; it
also increases the scalability of Alibaba’s network and reduces its operational cost.

The controlling complexity

The degree of controlling complexity varies along the four phases, from “low”, “medium” to
“high”. In the information phase, the degree of controlling complexity in facilitating

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information publishing and searching is low. Inexhaustible data about all sorts of buying and
selling business is aggregated and disseminated. It is simple and straightforward to fulfil this
function with Internet technology. Most e-markets in China have this basic capability.

Alibaba’s model is a modified one reflective of their entirely virtual service nature.
Traditionally, the primary activities of a company included inbound logistics or receiving
supplies, manufacturing the product, and shipping it out. Once the product is ready, the
marketing and sales team sells the product to customers and customer service works to ensure
the satisfaction of the customer. Each one of these steps increases the value of the final
product, from simply being a mix of supplies to a happy customer whose needs had been met.

The very first step to creating value for these companies is to have customers from with to
generate value with and for. It is true that value is relative to the user regardless of whether
the proposition includes a physical product, only an intangible service, or a combination of
both. The value proposition of virtual service companies, such as Alibaba, however, is that
they could never make an offering without an initial customer to serve and give value to. In
dealing with models that involve the production of physical products, such as a car, a car can
still be manufactured without a customer, and at least have value to the manufacturer.
Without first having a customer, Alibaba has no platform for which to add value and offer
value to other customers.
In light of this, the following model is proposed to incorporate the virtual value and
supply chain. For Alibaba, technology has incorporated operations on an expanded scale.
Technology for Alibaba is more than a way to work more effectively and add a few new
value-added services; it is fundamental for their business model to generate their value and
revenues. Because the entire value proposition is built upon the customers, marketing & sales
and customer service span the whole time of the value generating operations.

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The three operational steps are then the inputs, operation of information, and outputs. The
inputs are the customers who join the service looking for a matching company for their
supply chain needs. The operations of the website manipulate the information and generate
business connections the customers are using Alibaba for. These operations steps, done
through their technology, include gathering, organizing, selecting, synthesizing, and
distributing information. Outbound for Aliaba is when a supplier and a buyer have formed a
relationship and leave Alibaba to finalize their transaction. Of important note, the inputs and
outputs are the same: the customers. This is different than the operations of a manufacturing
supply chain because supplies are the inputs and a finished product is the output. As stated by
Alibaba, the workflow includes:
Suppliers and buyers post their listings, matching the inputs from the company’s
strategic perspective.
Listings are searched, contacts are made, and information is exchanged between the
suppliers and buyers. This will often include product specifications and capabilities.
This corresponds to the information manipulation the company’s servers and software
use to generate the value for the customers.
Customers then negotiate with each other, which is the “outbound” part of the
workflow.
All of the communications for suppliers and buyers is enabled through tools within
Alibaba’s software.

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Alibaba’s Role in a Customer’s Supply Chain

The result of this supply chain is the value generated by each of its steps. To better
understand the value generated, Alibaba’s role in the supply chains of their customers must
also be briefly analyzed.

The traditional value chain is again displayed, as the vast majority of Alibaba’s customers are
on either the inbound or outbound side of the manufacturing process. For buyers, Alibaba’s
role in their supply chain is connecting with suppliers who deliver a product. The buyer’s
company then processes their purchase according to their needs, markets it, and services the
customer. For Sellers, Alibaba shifts to the outbound and marketing aspects of a supply /
value chain. For sellers, marketing & sales is included because for many companies, their top
method of marketing is their presence on Alibaba.

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The Big Picture

Partner Network
• Buyer GPS, Ali loan Customer Relationship
• Keyword Purchase
• Premium Placement • Third-party exchanges
• Virtual Showroom • Ali loan program
• Ali-ADvance /Japan Link • Buyer to Buyer
• AliExpress /Ali-Institute • Personalized web profile
• Business Management Software • Newsletter
• Business Network Service • Team blog (RSS)
• China Wholesale Platform • VIP events with team
• Mobile China TrustPass • SMEs
• Online Translation • Free email, email alerts

Core Capability Activity Configuration Value Proposition Distribution Channel Target Customer

• Team management • Attractive soccer • Buyer to Buyer

• Agriculture • Event management • 360º event (match, • Online networks • Supplier
• Apparel • Venue management dining, shopping) • Alibaba website • Companies
• Automotive • VIP relationship • Exclusive VIP lounges • Alibaba Shops • Event/concert organizers
• Chemicals management • Merchandising • Ali-college • Advertisers
• Security and Protection • Renting out stadium • Ali-forum • Retailers
• Service Equipment • Trust Pass • Buyer
• Textiles and Leather
Products

Cost Structure Revenue Model

• Web cost • Pay per view access to document

• Team & maintenance • Advertisement and fees for special
• Infrastructure management • CPM display advertising on site
• Marketing • Sponsorship of site sections or content types
• Employee • Subscriber data access for e-mail marketing
• Advertising revenues
• Sales
• B2B revenues
• Transaction Fee

Value Creates Revenues

Partner Network

• Buyer GPS, Ali loan Customer Relationship

• Keyword Purchase
• Premium Placement • Third-party exchanges
• Virtual Showroom • Ali loan program
• Ali-ADvance /Japan Link • Buyer to Buyer
• AliExpress /Ali-Institute • Personalized web profile
• Business Management Software • Newsletter
• Business Network Service • Team blog (RSS)
• China Wholesale Platform • VIP events with team
• Mobile China TrustPass • SMEs
• Online Translation • Free email, email alerts

Activity Configuration Value Proposition Distribution Channel Target Customer

Core Capability
• Team management • Attractive soccer • Buyer to Buyer
• Agriculture • Event management • 360º event (match, • Online networks • Supplier
• Apparel • Venue management dining, shopping) • Alibaba website • Companies
• Automotive • VIP relationship • Exclusive VIP lounges • Alibaba Shops • Event/concert organizers
• Chemicals management • Merchandising • Ali-college • Advertisers
• Security and Protection • Renting out stadium • Ali-forum • Retailers
• Service Equipment • Trust Pass • Buyer
• Textiles and Leather
Products

Cost Structure Revenue Model

• Web cost • Pay per view access to document

• Team & maintenance • Advertisement and fees for special
• Infrastructure management • CPM display advertising on site
• Marketing • Sponsorship of site sections or content types
• Employee • Subscriber data access for e-mail marketing
• Advertising revenues
• Sales
• B2B revenues
• Transaction Fee

Creating Value Requires Infrastructure

Partner Network

• Buyer GPS, Ali loan Customer Relationship

• Keyword Purchase
• Premium Placement • Third-party exchanges
• Virtual Showroom • Ali loan program
• Ali-ADvance /Japan Link • Buyer to Buyer
• AliExpress /Ali-Institute • Personalized web profile
• Business Management Software • Newsletter
• Business Network Service • Team blog (RSS)
• China Wholesale Platform • VIP events with team
• Mobile China TrustPass • SMEs
• Online Translation • Free email, email alerts

Core Capability Activity Configuration Value Proposition Distribution Channel Target Customer

• Team management • Attractive soccer • Online networks • Buyer to Buyer

• Agriculture • Event management • 360º event (match, • Alibaba website • Supplier
• Apparel • Venue management dining, shopping) • Alibaba Shops • Companies
• Automotive • VIP relationship • Exclusive VIP lounges • Ali-college • Event/concert organizers
• Chemicals management • Merchandising • Ali-forum • Advertisers
• Security and Protection • Renting out stadium • Trust Pass • Retailers
• Service Equipment • Buyer
• Textiles and Leather
Products

Cost Structure Revenue Model

• Web cost • Pay per view access to document

• Team & maintenance • Advertisement and fees for special
• Infrastructure management • CPM display advertising on site
• Marketing • Sponsorship of site sections or content types
• Employee • Subscriber data access for e-mail marketing
• Advertising revenues
• Sales
• B2B revenues
• Transaction Fee

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Infrastructure Generates Costs

Partner Network

• Buyer GPS, Ali loan Customer Relationship

• Keyword Purchase
• Premium Placement
• Third-party exchanges
• Virtual Showroom
• Ali loan program
• Ali-ADvance /Japan Link
• Buyer to Buyer
• AliExpress /Ali-Institute
• Personalized web profile
• Business Management Software
• Newsletter
• Business Network Service
• Team blog (RSS)
• China Wholesale Platform
• VIP events with team
• Mobile China TrustPass
• SMEs
• Online Translation
• Free email, email alerts

Core Capability Activity Configuration Value Proposition Distribution Channel Target Customer

• Team management • Attractive soccer • Online networks • Buyer to Buyer

• Agriculture • Event management • 360º event (match, • Alibaba website • Supplier
• Apparel • Venue management dining, shopping) • Alibaba Shops • Companies
• Automotive • VIP relationship • Exclusive VIP lounges • Ali-college • Event/concert organizers
• Chemicals management • Merchandising • Ali-forum • Advertisers
• Security and Protection • Renting out stadium • Trust Pass • Retailers
• Service Equipment • Buyer
• Textiles and Leather
Products

Cost Structure Revenue Model

• Web cost • Pay per view access to document

• Team & maintenance • Advertisement and fees for special
• Infrastructure management • CPM display advertising on site
• Marketing • Sponsorship of site sections or content types
• Employee • Subscriber data access for e-mail marketing
• Advertising revenues
• Sales
• B2B revenues
• Transaction Fee

The Profit Zone

Partner Network

• Buyer GPS, Ali loan

• Keyword Purchase Customer Relationship
• Premium Placement
• Virtual Showroom • Third-party exchanges
• Ali-ADvance /Japan Link • Ali loan program
• AliExpress /Ali-Institute • Buyer to Buyer
• Business Management Software • Personalized web profile
• Business Network Service • Newsletter
• China Wholesale Platform • Team blog (RSS)
• Mobile China TrustPass • VIP events with team
• Online Translation • SMEs
• Free email, email alerts

Core Capability Activity Configuration Value Proposition Distribution Channel Target Customer

• Team management • Attractive soccer • Online networks • Buyer to Buyer

• Agriculture • Event management • 360º event (match, • Alibaba website • Supplier
• Apparel • Venue management dining, shopping) • Alibaba Shops • Companies
• Automotive • VIP relationship • Exclusive VIP lounges • Ali-college • Event/concert organizers
• Chemicals management • Merchandising • Ali-forum • Advertisers
• Security and Protection • Renting out stadium • Trust Pass • Retailers
• Service Equipment • Buyer
• Textiles and Leather
Products

Cost Structure Revenue Model

• Web cost • Pay per view access to document

• Team & maintenance • Advertisement and fees for special
•
•
Infrastructure management
Marketing < •
•
CPM display advertising on site
Sponsorship of site sections or content types
• Employee • Subscriber data access for e-mail marketing
• Advertising revenues
• Sales
• B2B revenues
• Transaction Fee

Transaction Process of Alibaba

Alibaba is the dominant e-market in China, with a market share of more than 60%. It has two
main sites, Alibaba International (www.alibaba.com) and Alibaba China
(www.China.Alibaba.com). Alibaba International is an English site with international trade
orientation. It now has 300,000 visits daily. Alibaba China is a Chinese site for domestic
trade. It has more than 7 million registered users. Its featured functions are product listing,
requesting for quote/information, real time negotiation (TradeManager), buyer/seller credit

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reporting (CreditDirect), news and business intelligence, online payment, online community,
online auction, search engine advertising, hosting trade shows, etc. Users are charged with an
annual subscription fee for the above services.

Alibaba.com offers an open environment for SMEs, who can join with minimum
requirements. It ensures reliable online payment process through a third-party payment
website- PayDirect Bao. Its premium TrustPass Membership is another notable credit
enhancing mechanism. Only members who have completed an authentication and verification
procedure conducted by a third-party credit agency are granted TrustPass qualification.
TrustPass serves to provide transparency regarding the identity and legitimacy of sellers and
seller’s potential trading partners with Alibaba.com.

Information quality for TrustPass membership is also guaranteed, and thus it increases buyer
confidence. More than 85% of buyers on Alibaba.com prefer to do business with members
who have the TrustPass qualification.

In the transactional processes Alibaba provides the credit mechanism through (1) TrustPass
member identity verification and (2) the third-party payment websites for the buyers and
suppliers to make their transaction directly with one another.

Figure: The transaction process of Alibaba.com

Impacts of Electronic Business

The Internet has changed the way we conduct business and the way we see the world and
ourselves in it. It has rewritten the rules of business and transformed many industries (i.e.,
book, travel, music, accommodation, internet phone, real estate, among many others). It has

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brought profound changes (including both negative and positive impacts) to individuals,
organizations, industries, governments and societies.
Impacts Positive Impacts
To Individuals Convenience; Personalised & customised products
& services; Ubiquity & mobility; Better and more
affordable communication and interaction (i.e., in
real-time and multimedia way); Greater flexibility
and better freedom of publishing ideas and views;
Better connection with other members
communities; Access to products, services and
information from all over the world (normally with
cheaper prices); Making fulfilling the dream of
being your own boss and of managing an
international business much more easier; among
many others.
To Organizations An additional distribution channel;
opportunities in existing and new markets; Better/
new products and services; Enhanced efficiency &
effectiveness; Time & cost reductions;
Better relationships with customers, with suppliers
and business partners, with government agencies,
with competitors and with employees; Enlarged
market share, Increased revenue; Improved profit,
Better image, among many others.
To Industries More effective and efficient industries and industry
supply chains more efficient & effective; Enhanced
cooperation and collaboration within and across
industries; Creation of new industries and addition
of new elements to existing industries; among
many others.
To Governments Better services to citizens, Reduced time and costs
of operations; Better relationships with citizens,
businesses, other government agencies,
employees; Quicker and Better responsiveness to
national security issues and unfortunate events;
Enhanced transparency of their operations;
Improved engagements from citizen, businesses,
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Negative Impacts
Privacy issues; Security issues (i.e., online
fraud, viruses, spam, etc); Individuality issues
(i.e., passwords and user names are used to
represent human beings on the internet); The
lost balance between work and leisure arising
of from the use of lap tops, mobiles and other
mobile devices; The loss of writing and other
language skills resulting
from overly using computer and the internet;
The lost human interaction with others by
excessively relying on e-mail, VoIP, instant
messaging, online chatting and other electronic
communication tools; etc.
New Channel conflict when doing both online and
offline operations; More intense competition
from existing competitors and new entrants;
Losses due to network failures and security
breaches; The wide and quicker distribution of
negative news on the organization; The
difficulties in maintaining 24/7 reliability and
accessibility of online
operations; etc.
Increased competition in many industries
(especially in serviceoriented industries);
Changed structure of many industries (i.e., many
traditional intermediaries will either disappear
or change their roles (e.g., providing more
value-added services and focusing more on
knowledge) while some new online players (i.e.,
online aggregators and distributors)
will enter the market; etc.
Security issues (both inside and outside threats);
The wide and quicker distribution of negative
and news on the government; The difficulties in
maintaining 24/7 reliability and accessibility of
e-government operations; Unclear and
inconsistent, and inexperienced governance of
and policies for the Internet; etc.
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other government agencies, and employees;

Improved cooperation and collaboration with
relevant parties; Diversified campaigns and
propaganda activities; among any others.
To Societies Better availability and accessibility of products,
services, information & knowledge from all over
the world; Better living (i.e., convenience of online
shopping): Better understanding of the world and
its history; Exposure of ideas to the global
audience; Faster distribution of
information and knowledge; Easier, less expensive
and more flexible education (i.e., via etraining/
learning, online universities); Improved health
services and medical advances; Reduced risks
associated with performing dangerous tasks; Better
crime prevention and control; Better
environment protection and sustainability; among
many others.
Digital divide (i.e., between developing and
developed countries); Health issues arising from
using the computer and access the Internet; Job
losses arising from automation; Public welfare
issues (i.e., Online gaming/- gambling
addiction); Public safety issues (i.e., Online
pornography, especially child pornography);
The loss of face-to-face social networking to
social networking sites and other online
applications; The e-waste (disposing computing
and internet equipments).

Table: Some positive and negative impacts of electronic business

Conclusion:

A strategy is very important for any kind of successful business model. With Alibaba’s
business model and value chains, the future strategy of the company includes strengthening
and securing their supply chain to increase their substantial market share, increase profits,
and hold off competitors. Many of these planned strategies will happen through various
marketing and customer service initiatives, such as targeting marketing to increase the
customer base, continuously adding tools and features to the software, monetizing a user base
that has been receiving many free services for years, and expanding their service platform
from trading to customer relationship management. As Alibaba expands out of China, it must
face fierce competition from Global Source and niche B2B service providers. If they can
expand while the competition threatens to move onto Alibab’s home turf, their future looks
very bright.

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References:

➢ Typical Trading Process on the Alibaba.com marketplace”. Asia Case Research

Centre. The University of Hong Kong. “Alibaba.com”. 2008.
➢ Virtual Value Chain”. http://en.wikipedia.org/wiki/Virtual_Value_Chain. Retrieved
Oct 29, 2009.
➢ www.alibaba.com
➢ E-commerce Development in China, State Economic and Trade Committee, 19
December.
➢ Alibaba, (2010a). Company Overview [Online]. Alibaba Group
http://news.alibaba.com/specials/aboutalibaba/aligroup/index.html
➢ "Critical success factors for B2B e-commerce use within the UK NHS pharmaceutical
supply chain". International Journal of Operations & Production Management
➢ Hsia, cliff (2005). About AliBlog. Retrieved October 9, 2009, from About AliBlog
Web site: http://aliblog.alibaba.com/aliblog/about.html
➢ The Largest B2B marketplace. Retrieved on September 21, 2009 from
http://aliblog.alibaba.com/aliblog/2008/12/sourcing-for-online-sales-think-
globally.html.

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