Alibaba Porter Five Forces Analysis

Published by MBA Skool Team, Last Updated: February 17, 2022

Alibaba Porter’s Five Forces analysis covers the company’s competitive landscape as
well as the factors affecting its sector. The analysis focuses on measuring the
company’s position based on forces like threat of new entrants, threat of substitutes,
bargaining power of buyers, bargaining power of suppliers and competitive rivalry.

Five Forces analysis of Alibaba helps to analyze its current position in the market based
on multiple internal and external factors like competitors, customers, suppliers (vendors
and partners), financial strength, future scope & alternate solutions.

Let us start the Alibaba Porter Five Forces Analysis:

In this article:

 Threat of New Entrants

 Threat of Substitutes
 Bargaining Power of Customers
 Bargaining Power of Suppliers
 Competitive Rivalry

Threat of New Entrants:

The threat of new entrants in the Alibaba Porter Five Forces Analysis can be explained
as follows:

The eCommerce marketplace model works on economies of scale to become a

profitable and sustainable business model. As Alibaba and other eCommerce players
have massive capital investment and distribution networks, it is difficult for new players
to enter this market. Merchants would not be willing to lose their volume buying profits
as they enjoy Alibaba or certain e-commerce players. Also, due to economies of scale,
Alibaba or more prominent players would provide cost-benefit to both merchants and
consumers, requiring switching costs to shift to a new marketplace. However, existing
players like Amazon expand their reach in broader markets and dive in to analyze
consumer purchases and make its product. Amazon also has a warehouse model for
faster delivery, offering a threat to the Alibaba model by expanding its reach among the
markets with speedier delivery time. So, the threat from new entrants is low, but existing
players remain a threat in the future.

Image: Wikimedia

Threat of Substitutes:
Below are the threats of substitute products of Porter’s Five Forces analysis of Alibaba:

Many substitutes in the e-commerce marketplace give competition to Alibaba, including

Amazon, eBay, Walmart, Tencent, etc.

All these players have a large flow of investment behind them and offer the global
marketplace to the consumers. But these platforms are less focused on the wholesale
segment. Due to the broader reach of Alibaba in the Chinese market and its suppliers, it
enjoys a more cost-competitive product and supplier network. Another set of substitutes
for the eCommerce site can be the domestic manufacturers or retail outlets that provide
direct products to the consumer. Others can be the big Chinese firm with their
distribution networks and deal directly with the customers. But through the unique set of
offerings, Alibaba is still the most significant player in this segment, growing its
presence day by day making the consumer loyal towards them. The threat of substitutes
products is medium to high.

Bargaining Power of Customers:

In the Alibaba Porter Five Forces Analysis the bargaining power of the customers can
be explained as:

Alibaba works on both models, B2B and B2C, and it enjoys a significant stream of
revenue through its B2B business. Let's look towards the option available to the
consumers that it has several options in the B2C marketplace, in which the primary
player is Amazon. Walmart can provide the choice and great offers to the consumers to
shift. Also, they tend to offer faster delivery due to a warehouse type of model, so
consumers in their B2C segment have the bargaining power to change to another
marketplace. On the other hand, in the B2B marketplace, Alibaba enjoys a monopoly
and has no main competitor. Consumers on Alibaba can buy the wholesale product for
their production units at the lowest price globally and have no significant incentives to
shift to other things. So, consumer bargaining power in the B2B segment would be
lower.

Overall, the bargaining power of consumers would be low to high.

Bargaining Power of Suppliers:

Following is the bargaining power of suppliers in the Porter’s Five Forces analysis of
Alibaba:
Alibaba is a global marketplace generating a significant chunk of revenue through its
b2b wholesale goods sale worldwide. This is the only platform with a worldwide reach
and broader distribution network for a bulk deal worldwide. Alibaba's primary suppliers
are the merchants that sell on this platform and pay a commission to Alibaba for their
sale and listing of their product. It facilitates a global marketplace between merchant
and consumer, and it offers customers to buy at the best place with premium quality and
lower prices. Their distribution network also enables the easy delivery of bulk goods at a
minimal cost. All of these help the merchant get the better price as it would have gained
in their domestic market and give them the volume sale with delivery support, thereby
increasing their profit. So, merchants would have low bargaining power with Alibaba as
it enjoys several merchants ready to provide them the commission they want.

Competitive Rivalry:
The impact of key competitors in the Alibaba Porter Five Forces Analysis is as follows:

Rivalry in the eCommerce industry is high among the players. China is one of the
largest eCommerce markets globally (even larger than the US) and the middle-class
segment, which is the major part of the customers, is growing taste for more
international brands. Companies like Target, ASOS, Amazon and Walmart provide
competitive B2C products with different varieties to attract customers. Alibaba on the
B2B segment enjoys the low-cost Chinese manufacturers and is price competitive for
the business segments but being connected to Chinese products as substandard quality
has made consumers deal with other countries like Japan at certain higher prices.

So, rivalry among the eCommerce is medium to high.

To conclude, the above Alibaba Porter Five Forces Analysis highlights the various
elements which impact its competitive environment. This understanding helps to
evaluate the various external business factors for any company.
This article has been researched & authored by the Content & Research Team. It has
been reviewed & published by the MBA Skool Team. The content on MBA Skool has
been created for educational & academic purpose only.

Browse analysis of more brands and companies similar to Alibaba Porter Five Forces
Analysis. This section covers many brands.« Pepsi Porter Five Forces AnalysisUnited
Important Companies:

 Apple Porter Five Forces Analysis

 Samsung Porter Five Forces Analysis
 Honda Porter Five Forces Analysis
 Nike Porter Five Forces Analysis
 More Companies

The names and other brand information used in the Five Forces Analysis section are
properties of their respective companies. The companies are not associated with MBA
Skool in any way.

Alibaba PESTLE Analysis

Published by MBA Skool Team, Last Updated: March 08, 2020

Alibaba PESTLE Analysis assesses the brand on its business tactics across various
parameters. PESTLE Analysis of Alibaba examines the various external factors like
political, economic, social, technological (PEST) which impacts its business along with
legal & environmental factors. The PESTLE Analysis highlights the different extrinsic
scenarios which impact the business of the brand.

PESTLE analysis is a framework which is imperative for companies such as Alibaba, as

it helps them to better understand market dynamics & improve their business
continuously. PESTLE analysis is also referred to as PESTEL analysis.

Let us start the Alibaba PESTLE Analysis:

In this article:
  Political Factors
 Economic Factors
 Social Factors
 Technological Factors
 Legal Factors
 Environmental Factors

Political Factors:
The political factors in the Alibaba PESTLE Analysis can be explained as follows:

One of the major macro-environmental threats to Alibaba’s business is the uncertain

political situations. Recently, Alibaba decided to list its share in the Hong Kong Stock
Exchange. But the recent direct show of power from China in Hong Kong has made it
difficult for Alibaba to flourish in the Hong Kong market as it raises questions over the
company’s Initial Public Offering. Also, China being an authoritarian nation, its
Government can seize power anytime and take control of the company which is a cause
for some of the investors and can be the reason behind experts valuing Amazon’s stock
more than the BABA’s (Alibaba’s) stock. Another concern for Alibaba can be the
departure of its founder Jack Ma; this can shake the investor and stakeholder’s
confidence and can have short term as well as long term repercussions. Apart from the
mentioned threats, it cannot be denied that Alibaba enjoys the Government support and
it is one of the prime reasons behind Alibaba’s expansion and success.
Image: Wikimedia

Economic Factors:
Below are the economic factors in the PESTLE Analysis of Alibaba:

China is currently going through an economic slowdown and the latest Gross Domestic
Product (GDP) growth rate has been dropped to 6%.

The E-Commerce sector has also shown poor results. This is a major cause of concern
for Alibaba. Although its revenues have increased but the company is witnessing the
slowest growth rate since 2016. This hints that the customer confidence is going down.
Alibaba, with the hope to acquire new customers is heavily investing in other fields like
advertising, cloud computing etc. But this can lead to some other competitor attacking
the company’s core competency i.e. E-commerce and capturing a chunk of its customer
base. The company should focus on the rural or tier 3 cities as this sector has a huge
potential. The company has itself recognized that more than 70% of its new customers
come from these areas only.
Social Factors:
Following are the social factors impacting Alibaba PESTLE Analysis:

Alibaba’s mobile application, Taobao, is a commercial platform where people can shop
from the line of products listed on the application. The application provides users
attractive social-media like features which increases user engagement and pushes
them to spend more. The company proudly claims that an average user visits Taobao
more than 7 times a day. The application also allows its customers to be a part of the
live sessions where people can come and share their experiences and give their
opinions about a product.

Technological Factors:
The technological factors in the PESTLE Analysis of Alibaba are mentioned below:

One of the prime reasons behind why Alibaba is thriving is because of its extensive use
of various technologies like Artificial Intelligence, Cloud Computing, and Machine
Learning etc. Alibaba’s customers are able to track and check the delivery status of their
imported orders from its portal “Tmall Global”. The company has also invested huge
money in a Logistics platform, Cainiao, for the handling of products. The Cainiao
platform also makes use of a Cloud based RMS (Remote Monitoring System). Also, the
AI Chatbot launched by the company helps buyers and sellers to communicate with
each other by translating the other party’s text in their own language.

The Chatbot supports languages like English, Russian, Chinese, Indonesian, Thai etc.

Legal Factors:
Following are the legal factors in the Alibaba PESTLE Analysis:

Alibaba is a company which is globally infamous for ‘Counterfeiting’. The most affected
by this counterfeiting are the American brands. There were also reports of fake GUCCI
wardrobes that were listed on one of Alibaba’s portals. In order to do the damage
control, Alibaba has come out with new changes in its current Intellectual Property
Protection Platform so that proper action can be taken in case of any infringement. In
order to make its presence in other nations and attract more investments, the company
should lay down strict reforms to protect Intellectual Property. Otherwise, it will have a
hard time convincing the investors.

Environmental Factors:
In the Alibaba PESTLE Analysis, the environmental elements affecting its business are
as below:

Alibaba is doing its part to contribute to the environmental sustainability. The company
claims to be supporting towards the following corporate social responsibility programs
like job creation, rural development, poverty alleviation, environmental sustainability. As
per the company’s website, the company claims to have provided more than 8 lakh
health insurances till now.

The company boasts of contributing more than $37 million dollars as donations to
charitable organizations. 4 years back, Alibaba started encouraging its employees to
serve atleast 3-4 hours in community service. Alibaba needs to maintain these initiatives
in the coming years in order to increase its customer’s loyalty.

To conclude, the above Alibaba PESTLE Analysis highlights the various elements which
impact its business performance. This understanding helps to evaluate the criticality of
external business factors for any brand.

This article has been researched & authored by the Content & Research Team. It has
been reviewed & published by the MBA Skool Team. The content on MBA Skool has
been created for educational & academic purpose only.

Browse analysis of more brands and companies similar to Alibaba PESTLE Analysis.
This section covers many brands and companies.
«»Important Companies:

 Adidas PESTLE Analysis

 Cadbury PESTLE Analysis
 Honda PESTLE Analysis
 Puma PESTLE Analysis
 More Companies

The names and other brand information used in the PESTLE Analysis section are
properties of their respective companies. The companies are not associated with MBA
Skool in any way.

Alibaba SWOT Analysis 2022: Hail to the

eCommerce King
FEB 1, 2022 BY ABDUL MOMIN

When you think of online shopping for different items, Alibaba has to be in the top five
considerations in your mind, especially if you want to save money on the shopping. It is
undoubtedly one of the most successful businesses in the world. In this Alibaba SWOT
analysis, we will see what sets the company apart from its competition.

Before we move on, let’s learn a bit more about the company. Starting in 1999 in
Hangzhou, Zhejiang, China, Alibaba is a company that specializes in e-commerce,
retail, Internet, and technology. At the moment they offer all three types of business
options; business to consumer (B2C), business to business (B2B), and consumer to
consumer (C2C).

Alibaba is one of the most widely recognized names in the online retail space,
recognized by even those who don’t purchase from them.

Everyone around the world turns to their business to buy literally all sorts of
commodities at some of the cheapest prices found anywhere. Moreover, by allowing
consumers to sell directly to other consumers, people have the option to compare items
to find the best prices for their needs.

Now it is no secret that it is doing really well. But conducting this SWOT analysis will
help us in understanding exactly where the business is standing in terms of four major
factors. You might be familiar with the acronym, but you should also know a bit more to
understand the analysis better.

The first two letters of the term i.e. strengths and weaknesses are also called as internal
factors of an entity being analyzed which in this case is a company. The latter two i.e.
threats and opportunities are called external factors. Allow me to explain why.

Internal factors are the ones that can be controlled and influenced by the company
whereas external factors cannot be controlled. They are basically out of the hands of
the company and must be dealt with as they arise. This can be explained better using
an example.

If Alibaba has a global presence, it is a strength for them because they have the control
to make that strategic decision possible for themselves; this is why it is an internal
factor. Now if some competitor came into the market and took their share by offering
better alternatives, this would be a threat.

Alibaba cannot just control their competitors nor can they avoid them; this is why threats
are external factors. Now that you have some clarity regarding SWOT and its four
factors, let’s see where Alibaba currently stands in the business domain.
 Contents
 What are some of the strengths Alibaba currently has?
o They are Huge
o Huge Customer Base
o Research and Development
o Growth During Pandemic
 What are some of the biggest weaknesses Alibaba has?
o Limited International Exposure
o Limited Revenue Streams
o Counterfeits
 What are some of the biggest opportunities Alibaba can explore?
o Internationalisation
o Acquisitions and Partnerships
o Alibaba Cloud Computing
 What are the biggest threats looming over Alibaba at the moment?
o Competition
o Trade Barriers and Political Tensions
o The Pandemic
 Alibaba SWOT Analysis: Final Thoughts
What are some of the strengths Alibaba currently
has?
There are innumerable positives that have made this company into a huge deal, but for
the sake of keeping the discussion convenient, we are only going to look at a few. Here
are the main strengths that have made it possible for Alibaba to dominate the market.

They are Huge

Alibaba is one of the world’s largest online retail companies. They hold the record of
having the world’s largest IPOs of all time; in 2014 they went public and had a valuation
of US$231 billion!

Other than this, they were also acknowledged as the fifth largest artificial
intelligence company in the world in 2020. They currently have the world’s B2B, B2C,
and C2C markets in the world.

These are only a few examples of the feats they have enjoyed. It is a very big strength
for the brand to have because it enables such monumental and perpetual success.

Huge Customer Base

Alibaba has a very strong market share in the most populous country of the world; its
hometown is China. Chinese people all rely on their services and are satisfied with the
business.

If that is not enough, they also are very popular in India which is yet one of the world’s
biggest populations. Having these two countries as target markets is more than
sufficient for a business to do well. They are a global company which means their
customer base is very vast.

Research and Development

Because of their increasing business, they have to invest a lot of money into R&D so as
to remain ahead of the competition. This is a very big strength that enables them to stay
ahead in the game.

At the moment, they have really big R&D centers in Hangzhou, Beijing, Hong Kong,
Singapore, Silicon Valley, and Dubai.
Growth During Pandemic

Most businesses of the world really suffered when Covid-19 hit us, however, online
businesses saw a boom. Alibaba grew an impressive 30% during the pandemic in 2020
because people all around the world relied on online platforms for their shopping needs.

Their business was able to adapt to an unprecedented event because of the way they
operate.

What are some of the biggest weaknesses Alibaba

has?
Despite their many strengths, Alibaba does have a few weaknesses which should be
eliminated before they damage the company in the long run. Here are the most
important ones.

Limited International Exposure

Don’t get me wrong, Alibaba is present in many countries of the world if not all of them,
but they aren’t exactly as popular of a choice in other nations as they are in China.

Their current market share has dominated all thanks to China. They just don’t have the
same influence in other countries.

Limited Revenue Streams

Alibaba earns most of its revenue through its e-commerce services despite having other
modes of business in its portfolio.

This kind of takes away the fruits of diversification because if for some reason their
biggest revenue stream gets damaged, they have no viable fallback options to sustain
the magnitude of their business.

Counterfeits

Although the goods available on the website are already very affordable to begin with,
people still make cheaper counterfeit products that look the same but obviously are very
low in quality.

This issue can easily be resolved by investing in more patents and trademarks.
Otherwise, it takes reliability away from the business because many people cannot
distinguish between an original and a fake.
What are some of the biggest opportunities Alibaba
can explore?
Weaknesses can always be eliminated and strengths can always be amplified by
recognizing more opportunities at the right time. Here are some avenues the company
should look into investing its resources into.

Internationalisation

Their weakness can actually be converted into a golden opportunity because Alibaba
has the resources and infrastructure to make internationalization possible.

They have many regions to infiltrate owing to the ease and variety offered by their
business. They could become the world’s biggest e-commerce platform, surpassing all
else if they are able to capitalize on this opportunity.
Acquisitions and Partnerships

Alibaba although already has a bunch of acquisitions all around the world, they always
can have more. Forming strategic alliances of this sort can help in international
expansion. It is harder to enter newer markets from scratch.

Alibaba should have strategic partners in every country who would bring their valuable
knowledge and insight to the table.

Alibaba Cloud Computing

One of their businesses is cloud computing. If exploited in the correct manner, this
space could be dominated by the brand because of the amount of data produced by
Chinese internet users.

China does not sell their data to the western world so Alibaba can become even bigger
than they presently are by providing a proper platform to store and integrate this
priceless data.

The things they could do with this information are boundless. It is an interesting avenue
for the company to look into.
What are the biggest threats looming over Alibaba at
the moment?
Alibaba also faces many threats in the industry. Threats should be taken care of in a
timely manner before they become too big to avoid. They can cause irreparable
damage. Here are some of the most important ones.

Competition

Naturally, they, like any other business, also have some very strong
competitors. Amazon, eBay, Baidu are some of the bigger names among these
competitors.

If they make one wrong move strategically, these competitors can come for their necks
in a matter of a few months. Amazon especially is gaining more and more popularity
around the world. They can easily dominate the market by increasing the barriers to
entering for Alibaba.
Trade Barriers and Political Tensions

China and the USA just don’t get along. China is on its way to becoming the world’s
second superpower which obviously goes against USA’s interests, so both countries
constantly engage in tariff and trade wars.

It is because of these barriers Alibaba hasn’t been able to dominate the market in the
USA and other western countries which would bring the company amazing profits.

The Pandemic

Though on one hand, the pandemic has done this company favors in terms of growth,
on the other it has also brought with itself a threat in terms of changing buying patterns.

Consumers now prefer to spend money on essential commodities such as food delivery
instead of things commonly found on Alibaba. 

Alibaba SWOT Analysis: Final Thoughts

If you have managed to stay tuned till this point, it is safe to assume you now
understand how successful Alibaba actually is.

It is always a good idea to understand a business and its activities beyond our
relationships as consumers for them. This knowledge can help you in your own
educational and professional pursuits.

To sum it all up, we have discussed what a SWOT is and then we applied it to Alibaba’s
business. It is perfectly justified to say based on the information compiled here; their
strengths far outweigh the threats and weaknesses.

They also have amazing opportunities to look out for in order to become even bigger.
Cloud computing is the one they should focus more on with respect to the times and
digitalization of the world.

Overall, with the current state of their business, they are not going anywhere anytime
soon. We have yet to see a lot from the company!
A SWOT analysis is one of the easiest to understand, use and implement frameworks
available for improving your organization. It can be applied to industries at large as well
to understand them in more depth.

It highlights the strengths and weaknesses which occur on the inside and the threats
and opportunities which linger outside. If you know these four components of the
SWOT, you very easily can be on the road to improvement and growth.

Knowing how to conduct a SWOT analysis is a very useful skill to have for working
professionals as well as students to have.

If you wish to work on a SWOT of your own to increase your knowledge, we

recommend the use of a good template. Moreover, you can understand how the
analysis works by taking a look at a few extra examples. The easiest way to understand
and explain a SWOT analysis visually is to draft it in a tabular form. It is more concise,
clean, and comprehendible like this.