Sanket Gandhi

About Alibaba
Alibaba.com, the primary company of Alibaba Group, founded by Jack Ma, is as of
2014, the world's largest online business-to-business trading platform for small
businesses. Founded in Hangzhou in eastern China, Alibaba.com has three main
services. The company's English language portal Alibaba.com handles sales between
importers and exporters from more than 240 countries and regions. The Chinese portal
1688.com was developed for domestic business-to-business trade in China. In addition,
Alibaba.com offers a transaction-based retail website, AliExpress.com, which allows
smaller buyers to buy small quantities of goods at wholesale prices.
Alibaba.com went public at the Hong Kong Stock Exchange in 2007, and was delisted
again in 2012.
In 2013, 1688.com launched a direct channel that was responsible for $30 million in
daily transaction value.
Business Model
Just as Amazon is known to most American consumers as an e-commerce titan, China's e-commerce
market is dominated by Alibaba. Though the company operates through a unique combination of business
models, Alibaba's core business resembles that of eBay. Alibaba acts as a middleman between buyers and
sellers online and facilitates the sale of goods between the two parties through its extensive network of
websites. The largest site, Taobao, operates as a fee-free marketplace where neither sellers nor buyers are
assessed a fee for completing transactions. Rather, the nearly 7 million active sellers on Taobao pay to rank
higher on the site's internal search engine, generating advertising revenue for Alibaba that resembles
Google's core business model.
While the majority of sellers utilizing the Taobao website are smaller merchants, Alibaba also has a
dedicated space for larger retailers. Tmall is the e-commerce site owned and operated by Alibaba that
caters to well-known brands, including Gap, Nike and Apple Even though Tmall has a fraction of the
number of active sellers listed on Taobao, Alibaba is able to generate revenue from deposits, annual user
fees and sales commissions charged to retailers utilizing the site.
Marketing Strategy
Jack Ma claims very often the name of the company as easy to write and speak in many languages but it also referred to
the character’s name AliBaba’s famous tale “One Thousand and One Nights.”
Alibaba at the center of the topics of the moment in becoming one of the largest companies of B2B in China and
worldwide. It has facilitated the purchase of any product in any place of the world. Yun Ma Alibaba Group founding in
1999, had as idea of making internet accessible, reliable and useful to all. Alibaba then had only 18 employees and their
office was in the apartment of Jack Ma. Last year it rose to 20,000 employees including several offices worldwide.
Alibaba Group now has seven companies, including Alibaba Small Business Operations, Taobao, Tmall, Alibaba
International Business Operations, Juhuasuan, Etao and Alibaba Cloud Computing. The Alibaba Group brings together
both corporate functions, mobile, e-commerce leader, the retail and wholesale market. It also provides services such as a
platform for consumers, merchants to trade. Overall, the market is composed of more than 30 million active users in
over 240 countries worldwide.
Jack Ma was once a teacher but the success of Alibaba makes him the richest man in China. According to Forbes, Jack
Ma would be the first Chinese entrepreneur who manages to be on the cover of Forbes.
Alibaba’s success is based on market segmentation which consists of factors that could be used such as product, price,
location, and promotions.
Alibaba therefore carries a marketing analysis and planning in order to find the best marketing mix. A long-term, stable
relationship is formed between the suppliers and buyers to facilitate the success of the company.
Journey of Alibaba
The Alibaba enhancement can be seen under 5 steps in the past 13 years.
In a first stage from 1998 to 2001 : Alibaba brought free information to suppliers entering the
market. At that time, the Chinese trade market made little progress and the information was
circulating on the Internet.
Jack Ma was addressing the needs of SMEs in China who want to enter the electronic market by
allowing them to access online services for free and information according to industry
characteristics.
In 2000, Jack Ma hires Porter Erisman a foreign expert to guide the company towards
globalization, which is now the vice president of Alibaba. Indeed, it was necessary to recruit
foreigners in China because people still had very little experience in management.
The second step comes in the years 2002 when Alibaba invented a reliable credit certification
called TrustPass. This invention guarantee consumers to make purchases without fraud and
deceit. This was a recurring problem throughout the e-commerce development process in
China.
Alipay has generated more profits since using it, SMEs therefore have a secure business
environment.
Contd.
With the strong growth in Internet penetration in China, the number of export has also increased
significantly. Worldwide, the buyers were on the lookout for cheap products.
The third step happen around 2004 when Alibaba seeking to develop foreign markets to develop the e-
commerce market. Alibaba created Tabao which has become the largest market of online purchases,
exceeding US eBay but Alimama the largest online advertising platform for Commercial purposes.
Between 2005 and 2007, Yahoo China was taken over by Alibaba. This marks the 4th stage in the
development of the company. Indeed, the possession enables it to monitor all transactions operations.
Then it creates a new e-commerce search engine for Alibaba after establishing his own www.yahoo.com.cn
system. From there, the company started to gain ground and was then able to secure a wider
communication space for e-commerce companies in the world.
Alibaba has established itself as a revolutionary business that decade. It has established itself as one of the
largest IPO in US history (the company is valued at $ 167.6 billion). Alibaba has two main shareholders
including Softbank Corp., a Japanese mobile company that owns 36.7% of shares and Yahoo Inc. holds a
24% stake.
In 2008, Alibaba opens Taiwan office and in Switzerland this is where the 5th stage begins. For a moment,
the B2C market (“business to customer”) and C2C ( “customer to customer”) were long overdue so
Alibaba review its business strategy whose aim was easier to insert the B2C market e-commerce. Now the
total number of registered users has increased significantly.
Strategy of Growth
It is obvious that the main function of Alibaba was meant to be a simple
platform to do business worldwide. In China, sales channels were very
inadequate for local SMEs before the arrival of Alibaba.
With an exploding economic growth and economic reforms experienced by the
country, many SMEs are looking for opportunities to enrich themselves and this
is what brought the technology Alibaba. According to the BBC, the total value
of goods sold on Alibaba in 2014 was higher than Amazon and eBay combined.
Alibaba provides communications services for users such as forums, blogs and
groups. But it also provides access to communication tools like alitalk,
Wangwang Taobao and Yahoo Messenger to facilitate communication between
clients at any time.
Contd.
First, Alibaba offers free membership in order to attract more potential clients.
Then he started to charge membership fees. Alibaba has two sources of profits:
the first comes from Alibaba advertising costs. The second source comes from
customers with value-added services.
Alibaba uses a competitive price for its product than its competitors. It does not
use an extreme difference in price but offer lower prices with good quality to
attract customers in its market.
Alibaba has two markets: the global market in English which targets
international exporters and importers and the Chinese market with the aim of
focusing on suppliers and buyers. With 560 million internet users, China can
therefore be considered as the largest internet market in the world.
To attract more customers, Alibaba is using its strategy by offering gifts and
therefore encourages consumers to use more often its platform.
Conclusion
Alibaba may be considered a “collective entrepreneurship”: it provides a
platform to merchants while they provide products. It is a model based
on profit sharing. The larger the network is more great benefits for the
company and traders increase. In addition, Alibaba has a good
relationship with the Chinese Governement which is very important
because the government is a major player in the Chinese economy.
In the coming years, Alibaba would like to expand into developing
countries like India. He wants to get rid of the counterfeit products, the
company wants to reduce the counterfeit products sold on the site or
even delete them.