Global Trade Starts Here TM

Presented By:
Anil Kumar Sahu – 20104004
Abhik Tushar Das - 20104001
Sitanshu Pathak - 20104007
 Itihaaas: Alibaba.com

• Lead founder: Jack Ma (native of Hangzhou , near Shanghai , PRC).

• Founded in Dec’1998 as online marketplace: Alibaba Online in English language.
• Started as a online bulletin board to post,buy,sell trade leads.
• June 1999: Alibaba Group formed by Jack Ma and 17 founding partners.
• Simplified Chinese website Alibaba.co.cn inaugurated to serve mainland China.
• Sept’1999: Alibaba.cn launched in simplified Chinese serving Mainland China.
• In few months 3 websites of “Alibaba” launched in English(for International users)
Korean(for Korean users) & Trad Chinese (for Chinese users outside China).
• Oct’2000: Gold supplier membership scheme launched to support Chinese Exptrs.
• Aug’2001: website International TrustPass a membership service launched for
exporters outside China.
• Mar’2002: China TrustPass launched to cater to serve SME’S in China engaged in
domestic trade within China.
• Sept’2006: after restructuring; “Alibaba B2B” went Public thru IPO (17% of shares
went to public, remaining retained by parent company, employees, consultants.
 Retrospective: Alibaba.com

• 6th Nov’2007: Alibaba.com went public through a IPO on HKSE .

• Raised US$1.5 billion , became world’s biggest internet offering since Google’s IPO.
• Stock price overshoots by 193% making it 4th largest such event in HKSE history.
• Share price closed at US$5.09/share enabling market cap value at US$25.6 billion.
• After IPO it’s stock became among the most expensive in Hong Kong.
• Stock traded at 306 times of projected 2007 earnings of US$83.6million.
• Stake holders Yahoo!(39% PRE-IPO)& Softbank(29.3% post-IPO) traded at around 60
times of projected earnings showing “great confidence among investors” on it.
• With in a week after IPO it was reported to be prospecting a JV with Softbank in 2008
to expand its business in Japan which was impenetrable till now.
• Proved its mettle by dominating EachNet (backed by eBay) its old rival.
• Founder Chairman Jack Ma aimed to propel the Alibaba Group among the world’s
3 largest internet companies and also a "Fortune 500 company”.
• Optimism shadowed Ma’s mission after the IPO in coming times.
 Internet & e-commerce growth in PRC

• By 2007 PRC had 162 million internet users, Globally 2nd only to US as net-surfers.
• Internet use penetration rate in PRC at 12.3% only compared to above 65% in US.
• Penetration rate grew annually at @ 3% / annum and still rising.
• Online-shopping done by only 25.5% internet users in PRC compared to 71% in US.
• Online sales, marketing utilization rate in PRC at 4.3% compared to 15% in US.
• Only online stock transactions rate higher in PRC at 14.1% compared to 13% in US.
• As pe iResearch consulting group, online shopping market of PRC at US$1.5 billion.
• onlineC2C biz segment accounted at US$1.3 billion oi.e 89.7% of market in PRC.
• Online shopping market recorded a 14.8% rise in Q1 of 2007 over Q4 2006 and a rise
of 64.1% on previous Y-O-Y rate.
• Online B2B market segment valued at US$65.7billion in Q2 2007 ;implicating a rising
by 10.4% on Q-O-Q and grew at a Y-O-Y growth rate of 69.8%.
 Sparking of a business idea in Jack Ma

• Jack Ma grew up during Chinese Cultural Revolution in Hangzhou, PRC.

• Keenly interested in learning English Language since age of 12.
• To improve English ascent gave free guided tours to foreigners.
• Was poor in studies; failed university exams twice; joined low paying teaching
job.
• Later employed by Chinese Govt for interpreting in a dispute between a Chinese
firm an its US partner.
• Due to knowledge of English, pressurized by US firm to partner in internet
startup.
• Had first encounter with a computer and Internet in Seattle in US.
• Returned to China started a website “China pages” with borrowed US$2000.
• Primary purpose of website was to link Chinese companies to foreign traders.
• China Telecom forcefully bought out his entire stake and made him a civil servant.
• 1998: Still holding to his vision to establish his dream venture, Ma stepped out of
Civil service and restarted his venture as Alibaba Online.
 Growth driver for Alibaba: extensive usage
of e-commerce by SME’S in China

• 2004: SME’s contributed to 68.8% of gross industrial output(at present prices).

• Estimates forecasted SMEs to grow from 31.5million(2006) to 50 million(2012).
• Only 28% (8.8million) out of 31.5 million SME’s used B2B e-commerce platform.
• Encouragement of The 11th five year plan of Chinese Govt. for promoting usage
of e-commerce by SME’s and increase business and boost exports.
• Revised estimates projected SME’ to grow to 41 million and 82% (2012).
• E-commerce usage expected to quadruplet between 2007 and 2012.
Driving factor for growth of e-commerce among SME’s:
• geographic trade limitations enabled the need of SME’s to venture globally.
• Scattered suppliers, Overseas buyers lacked a proper communication channel.
• Small scale of operations limited SME’s resources for sales & marketing.
• Absence of mechanisms to evaluate trustworthiness of trading partners.
 Business Model

• Connects the buyer (outsourcers/ whole-sellers) with the

seller (suppliers/ manufacturers) on a common platform called
“Storefronts” where products were listed.
• No transactions between buyer and seller on platform
• Wide coverage; 30 industries and 5000 product categories; 2.4
million storefronts and 2.9 million listings
• Basic account (free): Premium account (paid) high; exposure
and visibility
• Revenue generation; premium accounts; growth rate of 50-
80% (Y-o-Y)
• Subscriber base; basic account; growth rate 80% (Y-o-Y)
 Results

All Users Paid Users

18 100%
16 90%
14 80%
70%
12
Total 60% Total
10 China China
50%
8 Market Market
40%
6 International International
Market 30% Market
4 20%
2 10%
0 0%
2004- 2005- 2004- 2005-
2005 2006 2005 2006
 Profits

Profit After Tax (PAT) as % Revenue generated

2007

2006
Profit After Tax (PAT) as %
Revenue generated
2005

2004

0 5 10 15 20 25 30 35
 Expenses

Expenses as % revenue
Expenses as % revenue

2006 10.1

2005 9.1

2004 2.7
 Market Share

Market-share (by revenue)

Alibaba.com
Global Sources
Made-in-China.com
HC360.com
ChinaChemNet
Others
 Strengths

•Built a premium brand in e-commerce domain; highest traffic in

B2B segment
•Attracted suppliers with the wide coverage which cascaded into
more and more buyers
•Exclusive focus on the high potential, cost sensitive SME sector
awarding credibility through “Trust Ratings”.
•Strong and dedicated sales team; 1900 salesmen in 30cities in
China; 800 tele-callers; 400 customer service personnel.
 Strategy

•Strong mission statement – “To make it easy to do business

anywhere”
•Strategic plan to expand user-base by encouraging growth in Basic
Accounts to encourage more sellers.
•Improved GUI’s on its website; improving community bonding
through meetings, trainings and offline activities.
•Convert Basic users to Premium users by offering VAS.
•Tap international markets through Gold Supplier memberships
(Hong Kong) and joint ventures in Japan.
•Expanding its scope into Business Processes like CRM and
Operations (Alisoft Export Edition)
•By business strategies like acquisitions, cross-selling, cross-
marketing, licensing etc.
 Competition
• Please remember our learning from Marketing Myopia..

• Competition may be or may not be from same industry..

• Alibaba was strong in B2B marketing, based on internet, for SMEs.

Essentially it fulfils the need of contact between sellers and
buyers.. Anyone doing that is a threat to Alibaba.
 Competition From Global Sources

Market Share of China's E Commerce Market by Revenue

1%
4%
10%
Alibaba
Global Sources
Made-in-China.com
14%
HC-360
50% ChinaChemNet
Others

21%

November 2007 data. China’s B2B E commerce Market reached Rmb 489.1 billion in Q2 of 2007
 Major Competitors

• Global Sources (HK Based)

o Buyer network in over 230 countries – something which Alibaba
lacked
o Published 13 monthly magazines and over 100 sourcing research
reports per year
o Trade Specific Exhibitions – 22 times a year in 7 cities
o That means, apart from strong virtual presence, there was physical
presence too.
o Started as monthly trade magazine in 1971 but by 2006 its 40%
revenue was coming from online business
 Major Competitors (cont..)

• Global Sources (HK Based)

Market Penetration:
o Increased revenue by exhibitions – more booths and more revenue
per booth
New Product Development:
o 11 new online market places in 2007
o 8 new exhibitions planning in 208 / 09
Expansion in China’s Domestic B2B Market:
o Global sources already had presence in China’s import export market.
o Launched Global Sources Online to enable international suppliers to
sell to China’s domestic B2B market. Increased Exhibitions
Acquisitions and Alliances:
o Acquired assets of Beijing-based Blue Bamboo China Ventures
 Major Competitors (cont..)

• Global Sources (HK Based)

Market Penetration:
o Increased revenue by exhibitions – more booths and more revenue
per booth
New Product Development:
o 11 new online market places in 2007
o 8 new exhibitions planning in 208 / 09
Expansion in China’s Domestic B2B Market:
o Global sources already had presence in China’s import export market.
o Launched Global Sources Online to enable international suppliers to
sell to China’s domestic B2B market. Increased Exhibitions
Acquisitions and Alliances:
o Acquired assets of Beijing-based Blue Bamboo China Ventures
 Major Competitors (cont..)

HC360.COM - Domestic B2B e-commerce platform in China

ChinaChemNet – catering to domestic chemical industry of china

and having more vertical depth

Other competitors like Search Engines, Traditional trading

channels, Trade Magazines, Classifieds, Outdoor Advertising.

These other competitors are not exactly same industry that is

internet based B2B marketing yet they threat Alibaba just as
Teleconferencing facility threats Aviation Industry or Aviation
Industry threats Hotel industry.
 Founder’s Vision

Not keen on holding on to the company for ever but eventually

exit to make room for next generation

Executives Education in foreign Universities.. – A move to make

company ready to take on global business challenge.

(It may be a move to create strong leadership so that Jack Ma can

retire peacefully?? )
Have a look at the Web Interface
Product Category, Sub Category, Pricing Everything arranged Beautifully…
The interface showing the global
presence of the company…
Online Instant Messaging software
developed based on client feedback…!
 Presence in India ??

Yes Of Course…!!
They call it: Passage to India

Entry Year: 2008

Mumbai, Delhi, Chennai, Ahmedabad

CEO Speak
Although there is a bureaucratic red
tape, barriers are diminishing..
Hope to do it again..

India’s E commerce looks like that of

China’s 7 years back.
Thank You