ASSIGNMENT SUBMISSION FORM

Global Strategic Management

TERM 5– Alibaba goes public

MEMBER NAME PGID

Mayank Singh 62110751

ISB Honour Code

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 What is the business model of Alibaba (and E-commerce in general)?
Alibaba group, founded by Jack Ma in Apr’1999 is a Chinese conglomerate company in e-commerce space.
They majorly operate via 3 business models: C2C, B2C, and B2B. The company facilitates sales through its
web services which include e-payment services, cloud computing, shopping search engines etc. Its major
business comes through e-commerce which it runs by partnering with key stakeholders in banks, government,
TMALL, network sellers etc. The partners facilitate the company to extend e-credit lines, inspection services,
payment processing, IT infra, and logistics. The company maintains customer relationships by making it easier
to do business anywhere and offering a wide range of products, serving digital shoppers, wholesalers, exporters
through its websites and subsidiaries.
What are the key factors behind Alibaba’s success in China (vs. Ebay, Amazon)?
Key factors behind Alibaba’s’ success in China are:
- Chinese government places lots of restrictions on foreign companies to operate in China, which gives
Alibaba an edge over other giants
- Alibaba and Amazon are both e-commerce giants without physical stores but Alibaba charges merchants
to appear higher on its search ranking on shopping search engines while Amazon just takes a cut out of
sales on its platform
- Alibaba operates through a host of websites in diverse spaces, the largest of which, Taobao, operates as a
fee-free C2C marketplace incentivizing both sellers and buyers.
- In addition to e-commerce, Alibaba has extended its presence in Chinese financial system through
Alipay, which protects buyers and sellers in case delivery of goods is affected
What is the role of stock exchange institutions (e.g., NYSE, HKEx) in the financial market?
A stock exchange is a marketplace where buyers and sellers trade securities such as bond and stocks. Bonds are
majorly sold via OTC model and allow companies to fund long terms investments. Stock exchanges also allow
companies to raise capital but in addition provide real time pricing information to investors to take more
informed decisions. Typically, these are physical platforms but with the advent of technology many exchanges
now operate online too. These exchanges handle both primary market trading and secondary market trading.
Other purposes serve by exchanges involve:
- Raising capital for IPOs
- Corporate Governance
- Economic efficiency
Why did NYSE allow Alibaba to list while HKEx would not?
Though NYSE allowed Alibaba to list, HKEx had reservations owing to following reasons:
- Its share price has been falling in NYSE, reflecting badly on company’s image of handling challenges in
operations
- Poor Governance: Since its inception, the company was run by its founder Jack Ma. However, after he
stepped down in May’13, Jonathan Lu became the CEO and took several steps to mitigate corporate
governance issues but could not allay fears around some crucial issues:
o Alibaba’s shareholders are powerless in appointing board directors
o Instead, a group of 36 people called “Alibaba partnership” have the power to take majority of
decisions
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 o The kind of insider ownership at Alibaba disadvantages shareholders by taking away (or diluting
them) their voting rights who own significant share in the company but still have less decision
power compared to founders who hold a smaller share of equity capital
- The firm can appoint its successors without necessarily taking buy-ins from major shareholders

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