Assignment 1

By: Nelson Lukman (10066099)

Personal email: lnelson001@mymail.sim.edu.sg

Class-code: L42
Submitted on: 15/10/2015

Alibabas Business Model

Jack Ma founded the website Alibaba.com in 1999, which is an e-commerce business-tobusiness portal to connect Chinese manufacturers with overseas buyers. The company
primarily operates in the Peoples Republic of China (PRC). Alibaba has today reached
market cap of $145 billion, while Jack Ma is currently the richest person in China, with net
worth of an estimated $22.5 billion, which includes his 7.8% stake in Alibaba and a nearly
50% stake in payment processing service Alipay. Alibaba Group is accounted for over 60% of
the parcels delivered in China by March 2013, and 80% of the nation's online sales by
September 2014. Alipay, an online payment escrow service, accounts for roughly half of all
online payment transactions within China.

1. Business Value Proposition

Alibaba.com, let exporters post product listings that buyers could browse, and it started to
attract members from all around the world. An open space platform invites small businesses
and bigger manufacturers to reach out to prospective customers. Make it Easy to do
Business Anywhere Alibaba hosts 6.6 million business partners, turning itself as a monopoly
of e market platform for both B2B and B2C providers. It features nearly a billion products, 7
billion sellers and is one of the most-visited websites globally.

2. Revenue, Pricing & Cost Policy

Alibaba monetize through commissions on transactions and fees for membership. Alibaba's
revenues are a fraction of its top competitors, especially Amazon, because it doesn't actually
sell the products on its site.

3. Market Opportunity.
Alibaba is now planning to expand their market in India, a country which ranked 7th in
worldwide GDP with primary manufacturing exports of textiles, steel, machinery, leather and
many more. Alibaba just recently invested $200 million in a photo-messaging app Snapchat.
With Snapchat being blocked in China, it is unclear what motivates this bold investment by
the group.
Alibaba will benefit from promoting and inviting additional products and services, allowing
buying firms to enjoy wider range of choices. As an intermediary 3rd party Company, Alibaba
need to continue enhancing their innovation, marketing strategy and technologies to remain at
the top and opens up future opportunities.

4. Competitive Environment
External factor has been affecting Alibaba greatly especially this year. 2015 has been quite devastating
for Oil & Gas industries as well as for steel industry. As the world stepped into 2015 steel market
outlook slides down as the production reached to overcapacity. Additionally, the world is facing a
downfall of a manufacturing giant this year as China dropped 7% on a 3rd quarter of this year. On 19
September 2014, Alibaba's market value was measured as US$231 billion which then fell $145 billion
by the end of September 2015.
In terms of its global competitors, Alibaba still has the lead over its competitors back home not

only in term of market share, but also publicity. Amazon and eBay do qualify as Alibabas
competitors, given the unique advantages each has in its domain, it seems difficult for
Amazon or eBay to enter the Chinese markets. In 2012, the combined transaction volume of
Taobao and Tmall topped one trillion yuan ($162 billion), larger than the 2012 totals for
Amazon and eBay combined. In China some Companies such as Tencent, JD.com and Baidu
remain as Alibabas top e-business competitors.

5. Competitive Advantage
I was never afraid of opponents who were bigger than I. said Jack Ma
during the start of Alibaba. Alibaba is able to receive a lot of financial
backing to support itself to grow and set aside competitors, especially
during the crucial early years. Back in 1999 Jack Ma gathered 18 people in
his apartment and he spoke about his vision. In 2 hours everyone puts
money on the table and Jack Ma received $60,000 to start Alibaba. Since
then Alibaba is able to raise money up to $5 million from Goldman Sachs,
$20 million from Softbank Corporation and $1 billion from Yahoo.
Alibaba allows exporters to post product listings that customers could buy
directly. Given poor internet search availability and usage in China during
the time, what Alibaba created was a huge innovation that changed
businesses. Its simplicity, affordability and convenience attracts buying
and selling firms at the fastest rate possible. Being the first to innovate
intermediary platform, Alibaba creates a monopoly in its home country,
surpassing 1 million registered users by as soon as 2001.

6. Market Strategy
Alibabas platform is reaching consumers in the most efficient way.
Availability of English language since its starting year opened up
opportunity for global growth. A retail website by the name of AliExpress
widens Alibabas target audience, allowing customers to purchase in
smaller quantity. Having a virtual marketplace with close to no overhead
cost allows Alibaba to enjoy a long tail economics.
Knowing that Chinas middle class is growing in number, which is now the
size of of the entire population in US, Alibaba predicted that China will
need to import products to serve that middle class, particularly since
domestic manufacturing has already strained the countrys resources and
created problems with pollution. This is the primary reason why Alibaba
expanded to US, hoping to tie Jack Mas global vision for the next 10 to 20
years. You buy it anywhere, you sell it anywhere.

7. Organization Development
Alibaba organization development is based on drive synergy between its
different divisions, while simultaneously creating reasonable safeguards.
Jack Ma admitted on 2012 that Alibaba Group doesnt know how to
organize. This is tackled by restructuring its organization. Four of the
groups manage its online shopping business: Taobao.com, eTao,
Tmall.com and Juhuasuan, while the other three units cover international
business operations, small business operations and cloud computing while
Alipay remains as an affiliate group. Leaders of each division are reporting
directly to CEO.

8. Key Management Team

Most of Alibabas board has been members since 1999 to early 2000.
Having leaders with great vision and wide range of skillset is one of the
main key of Alibabas success. Jack Ma and other board members try to
keep working environment fully driven and fun. When Alibaba first became
profitable, Ma provided every employee with a can of Silly String to go
wild with. Alibaba hosts an annual talent show in a large stadium for its
employees. They used to do handstands together during break time to
keep their energy levels up. These activities translated positively as
Alibabas employees admitted that the organization feels like a close-knit
family in a documentary called Crocodile in the Yangtzhe.