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1 Critically analyze the factors that led to Alibaba sustaining its leadership position in the
Chinese e-commerce market.

There are many factors that contributed to the success of Alibaba in the Chinese e-commerce
industry:

Alibaba started its operations when e-commerce in china was in its infancy stage. Considering
the potential of the budding e-commerce market, Alibaba started with operations that
concentrated on providing B2B services to SMEs that were aspiring to go global.

Competitive and marketing strategies: From an early stage, Alibaba had been focusing on
differentiating itself by providing better services to its customer. Its put an innovative business
model in place where customers could try out its services without any cost. Overtime, it was able
to generate revenue from alternative streams and increase revenue as the willingness of that users
to pay for additional services increased.

Knowledge of the local markets: The knowledge of the local market also proved crucial for
Alibabas success. For instance, its decision to start a payment system in collaboration with a
reputed bank in china was due to its local knowledge. Though credit cards were in china, they
were not the preferred medium of transaction as the Chinese were not comfortable using
it.Alibabas payment system provided them with a sense of safety and contributed to their
willingness to transact online. It was also able to provide a simple yet efficient website that
helped SMEs which were not too tech savvy to navigate the site effectively.

Alibaba had emerged as the largest e-commerce company in China. The company tailored its
strategies to meet the needs of the customers and made a mark because of its understanding of
the Chinese language and culture. However, some experts have also raised doubts over the
sustainability of Alibaba's business model.

The case highlights how Ma successfully competed with foreign e-commerce companies like
eBay Inc. (eBay) by establishing a rival website, Taobao.com, in the online auctions market.
However, Alibaba lagged behind in the Chinese web search market despite acquiring Yahoo!
China's operations in 2005. Moreover, with Baidu.com (Baidu), China's leading search engine
announcing its plans to foray into the rapidly growing e-commerce market in 2008, the
competition was expected to intensify for Alibaba. After a successful IPO, the company was
preparing to strengthen its competitive position in China and also to provide tough competition
to other Internet and e-commerce companies in the global arena.

Q.2 Discuss the rationale behind Ma establishing Taobao.com. what are the factors that led
to Taobaos success as compared to eBay in the Chinese online auctions market?

Alibabas increasing popularity and the burgeoning e-commerce market in china attracted
several foreign e-commerce companies to china. In 2002, eBay entered china by acquiring a 33
percent stake in each net to from eBay Each Net. In the same year, eBay each net emerged as the
leading player in the Chinese online auctions market. By 2003, eBay each net had captured a
market share of 79 percent in the Chinese online auctions market.

Considering the growth outlook of the Chinese online auctions market, Alibaba launched a rival
website Taobao.com by teaming up with Masayoshi Son (Son), CEO, Softbank, in 2003. Alibaba
launched Taobao to tap the opportunities in the fast growing C2C e-commerce market in
China.The company already held a dominant position in the B2B arena and felt that its local
knowledgewould help it topple eBay and dominate the C2C market as well.Taobao soon
captured the C2C e-commerce market and the market shares of eBay EachNet andTaobao were
reversed. This was despite the fact that the CEO of eBay was very bullish about theChinese
markets.
Taobaos understanding of the Chinese language, culture, and consumer preferences helped it
emerge as a successful player in the Chinese online auctions market. Taobao leveraged on
itsknowledge of the local market to wean customers away from eBay EachNet. Some factors that
contributed to Taobaos success were

Mama separated Taobao from eBay Every single Net by permitting free item postings on its site.
Moreover
eBay, Every single Net, next once more, charged for its administration. eBay, Every single Net
that at early censured the Taobao design of deed shouting it unsustainable, was coerced to accord
a comparable way later. And eBay, Every single nets progress was hindered by an nonexistence
of the belief constituent amid Chinese purchasers, more extra sellers as exchanging on the web.
The association obliged its clients to wage across trust cards as the Chinese shoppers liked to
wage alongside money. Alibaba, was favorable locale as it dispatched Ali wage, an installment
construction work that grasped the cash in an escrow report a little period presently the
purchasers and venders assaulted and arrangement.

This was main misstep on eBays portion, pondering that the earth substances in china were
totally disparate from those in supplementary extra crafted countries. eBays smugness and
choice not to depend a lot on the Every single Net cluster ( who had larger discovering of the
company sector) likewise made subjects for it.Taobaos choice to dispatch B2C benefit on
Taobao was one more hit to eBay Eachnet. So though, This permitted 10 million clients of
Alibabas B2B locale to sojourn Taobaos B2C site.

Other agents that helped Taobao prosper above eBay EachNet were its forceful for their distinct
techniques. Taobao posted raises on online destinations and set boards in main city area.
Taobao easy to use includes additionally helped it pull in clients, carrying concerning clients
making a movement from ebay Every single Net to Taobao. Analysts contacted that there were
disparate computes behind eBays subjects china. The biggest grievance opposing it was its
nonexistence of client administration. It didnt give a phone number that clients might hold if
there ought to arise an occurrence of each inquiries. Next once more, Taobao inspired its
purchasers and vendors to communicate across a moment transport person administration.
Taobao permitted its clients to cooperate alongside disparate clients beforehand buying an item.
Nonetheless, eBay retained the users link data secrecy till purchaser had own the offer. This
was eBays method for promising that the clients did not come into manage link alongside every
single supplementary till an transactions had been finished.

The eBay Every single Net locale was not custom-made to Chinese purchasers.Taobaos
closeout locale, on the supplementary hand, was perceived to be all the extra tuned in to the
Chinese consumerspurchasing conduct. It had a format that was like a Chinese retail shackle
alongside particular segments for womens and mans divisions. Taobao additionally exploited
eBays capitulated choice to devlop its globally fruitful design of deed in china. This was main
misstep on eBays portion, pondering that the earth substances in china were totally disparate
from those in supplementary extra crafted countries. eBays smugness and choice not to depend
a lot on the Every single Net cluster ( who had larger discovering of the company sector)
likewise made subjects for it.Taobaos choice to dispatch B2C benefit on Taobao was one more
hit to eBay Eachnet. So though, This permitted 10 million clients of Alibabas B2B locale to
sojourn Taobaos B2C site.

Baidus method into the Chinese C2C company was a possible danger for alibabab. Baidu had
as of nowadays crushed Alibaba in the Chinese web hunt marketplace and might use its data
of the acquaintance hood. Company sector to grasp away clients from Taobao. Baido
efficiently embodied 60 percent of the Chinese web pursuit company sector and it anticipated
to impact on it quality of internet find marketplace and its main intention is strength of searh
engine user center to foray into the C2C market.

Baidus popularity as a Chinese speech find engine was due to its forceful understanding of
the restraints of the Chinese speech and culture. Because of its intimate vision of the local
language,sophistication, and dealings alongside the power, Baidu should have an frontier in
the Chinese C2C market.Moreover,it was too coordinated to forlic the free game and alongside
the Chinese e-commerce market yet in its main periods of progress there was always a
potential of a shake up in the market. Taobao weaning away clients from eBay Eachnet was a
case in point. But there was a difference amid Taobaos accomplishment and what Baidu faced:
Taobao had to contend along eBay Each net that might not grasp on to its locale due to an
inadequate knowledge of the Chinese market place and unwillingness to reengineer its company
model. Baidu on the supplymentry hand had to contend alongside Taobao. Web find company
and e-commerce require different skills and the skills are not vitally transferable to every single
other. We have seen how Alibaba, that was so prosperous in e-commerce, struggled in the web
find market. The alike can transpire to Baidu after it enters the e-commerce bsiness. Though,
Taobao would do well not to be complacement. We saw what complacency did to eBay Each
net.

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Q.3 Though Alibaba was the market leader in the Chinese e-commerce market, it failed to
make a mark in the lucrative Chinese web search market. Do you think Alibabas strategy
of launching eTao, an online shopping search engine, would help it combat competition
with Baidu? Why(not)? Do you think Alibabas decision to acquire its 40 percent stake in
yahoo! China would help it gain some momentum in the Chinese web search market? Why
(not)?

With Alibabas business model and value chains, the future strategy of the company includes
strengthening and securing their supply chain to increase their substantial market share,increase
profits,and hold off competitors. Many of these planned strategies will happen through various
marketing and customer sevice initiatives, such as targeting marketing to increase the customer
base , continuously adding tools and features to the software, monetizing a user base that has
been receiving many free services for years, and expanding their service platform from trading to
customer relationship management. As Alibaba expands out of china, it must face fierce
competition from Global source and niche B2B service providers. If they can expand while the
competition threatens to move onto Alibabas home turf, their future looks very bright.

Adopting a free strategy industrialized the core of Alibabas company model. Most of the sellers
and buyers were enticed to its local because of Mas strategy of not charging each tabulating and
transaction fees from its clients and sellers in difference to supplementary e-commerce locations
that charged for their services. The company ideal at Alibaba entailed that Ma in conjuction
alongside his operatives industrialized the corporate strategy. The ideal was appeared at
afterward a methodical study of the companys performance alongside respect to competitiors.
This is how it recognized spans for enhancement and created a exceptional worth proposition. Its
decision to fous on the company segment was additionally a plus as it endowed it alongside the
scope of accomplish for organic development lacking being subjected to significant risks.
Alibabas free strategy was questioned on assorted fronts. Specialists were skeptical concering
its growth and the sustainability of its company ideal if it endured to furnish free listings and
charged no transaction fees for its services across the site. In a market place like china countless
people yet had not had an experience of the internet and of those who were experienced, the bulk
had yet not attained the alike level of refinement as their peers in industrialized nations. In such
circumstances, Alibaba.com comprehended that it had to craft a faithful client center before hand
it commenced charging for its services. In supplement to this, it concentrated on bestowing
enhanced ability to its clients and on innovation. As the users obtained refinement and as their
willingness to wage for worth added services increased, Alibaba anticipated that it should be able
to rise its revenues. Adopting such a long-term orientation is critical if one is to prosper in an
growing market place in china. Till one has to rely on alternative streams of revenue. Alibaba
had proved that its company ideal was a force to reckon with. For instance, a little of its
competitors who had primarily disapproved its business model, afterward selected to accept
precise aspects of it. Human capital too industrialized a large portion in Alibabas company
model. It concentrated on providing employees alongside larger working conditions were three
fold-incresed operative productivity, retention of top talent, and the skill to appeal top talent.
These three factors additionally helped Alibaba accomplish a sustainable. Business performance.
Global foray: with the company nature becoming increasingly competitive in china, Alibabas
decision to focus on the globe market place seemed to be a logical one. Later possessing
instituted its attendance in th e Chinese e-commerce marketplace alongside sales workplaces in
Beijing, Seoul, Silicon Valley, London and Latin America, Alibaba aimed to increase its
procedures generally to the rest of the Asia pacific, the U.S, Russia and Eastern Europe. With
money pending from its IPO, its had the opportunity to increase its globe footprint.it can spread
its company ideal in supplementary growing marketplaces too. For instance, in India for which
Alibaba had impressive strategies, the earth realities are comparable huge populace, forceful
GDP growth growing middle class, huge rise in Internet users, low trust card custom, etc. In
marketplaces such as these Alibabas company ideal should work well endowed the traditional
aspects are seized into account. Alibaba should consequently do well to forge a little crucial
alongside a little innate contestant in these markets. Even in extra industalized marketplaces, a
company ideal such as this might work. For instance, there is always a serving of the populace to
whom a free ideal seems attractive. Though, the key to developed marketplace should be to
furnish extra value-added services that a bulk of the users in developed marketplaces covet.
Alibaba was by now acting reasonably well in Europe and it is not hidden from the firm that it
might become extra revenues in the short word catering to users in these markets. Balancing
globe and innate priorities will be extremely vital for Alibaba. The internet market place in china
is yet in its main periods of maturity and losing focus might lead to Alibaba losing its dominant
position. The firm ought to additionally have a relook at its company portfolio. For instance,
questions such as Does something like Alimama indeed add each worth to its clients in china or
in the globe market? Ought to be critically considered.

Q.4 Critically examine Alibabas business model. Do you think it is sustainable? After
having captured the Chinese e-commerce market, what steps should Alibaba take to
expand globally?

To abide free strategy formed the core of Alibabas business model. Most the sellers and buyers
were attracted to its site because of Mass strategy of charging any listening and transaction fees
from its buyers and sellers in contrast to other e-commerce sites that Ma in conjunction with his
employees developed the corporate strategy. The model was arrived at after a thorough review of
the companys performance with respect to competitors. This is how it identified areas for
improvement and created a unique value proposition. Its decision to focus on the business
segment was also a plus as it provided it with the scope to achieve for organic growth without
being subjected to significant risks.

Alibabas free strategy was questioned on various fronts. Experts were skeptical about its growth
and the sustainability of its business model if it continued to provide free listings and charged no
transaction fees for its services through the site. In a market like china many people still had not
had an experienced, the majority had still not attained the same level of sophistication as their
peers in developed nations. In such circumstances, Alibaba.com realized that it had to build a
loyal customer base before it started charging for its services. In addition to this, it focused on
providing enhanced service to its customers and on innovation. As the users gained
sophistication, and as their willingness to pay for value added services increased, term
orientation is crucial if one is to increase its revenues. Adopting such a long-term orientation is
crucial if one is to succeed in an emerging market like china. Till then, one has to rely on
alternative streams of revenue. Alibaba had proved that its business model was a force to reckon
with. For instance, some of its competitors who had initially criticized its business model,later
decided to adopt certain aspects of it.