Analysis of Alibaba.com deal with Indian company about Paytm. Includes a brief strategy analysis based in frameworks who present insights about Alibaba value added proposition resulting from this movement.

1. Robin Raj
Jongho Chae
Preetha Majumdar
Hugo Rodrigues
Bharat Kapoor
Megumi Isobe
Analysts
Team 10

2. NEWS SUMMARY
• Alibaba agreed to invest $575M in Paytm India with a 30% stake
• Value of the company would be $2 billion
• Will expand Paytm operations and payment technologies
• Paytm has 15,000 merchants and 25 million registered users
• Alibaba looking to expand services beyond its home country

3. OVERVIEW
• Relevance of the news
• Context and market levels
• SWOT analysis
• Framework analysis - Porter’s 5 forces
• Strategic and analytical conclusion - STEEPLE
• Recommendations

4. RELEVANCE OF THE NEWS
• More than 80% transactions are ‘cash on delivery’
• Retail market expected to grow to $675 billion by 2016 and $850
billion by 2020, estimated Compound Annual Growth Rate (CAGR) of
7%
• E-commerce market set to grow the fastest within the Asia-Pacific
region, estimated CAGR of over 57% between 2012–16
• Other e-commerce investors: Amazon.com Inc. and Japan’s SoftBank
Corp

5. CONTEXT AND MARKET LEVELS
• Critical uncertainties and scenarios
i Security issues - hackers, viruses and interception of credit card numbers
ii High competition - Amazon, Flipkart, eBay etc.
iii Insufficient bandwidth and/or technology
• Delivering the value
i Supply chain – access to raw materials and how to obtain materials
ii Market access – difficulty in getting regulatory approval
iii Sales and distribution – direct sales and direct sales force

6. CONTEXT AND MARKET LEVELS (CONTD.)
• Two sided market
- Scale out the customer base
- Price sensitivity
- Single or centralized platform
- Innovation by leveraging higher margins
• Network effects
- Ability to capture cross-wide network effect
- Proprietary control over the usage of network
Networked
Market
Side 1 Side 2 Platform
Providers
E-commerce
Market
Shoppers Retailers Alibaba

7. Strength Weakness
Opportunity Threat
Alibaba
SWOT ANALYSIS
• Brand name
• Huge customer base
• International presence
• Lack of proper
infrastructure for customer
• Cultural preferences
• Raw market
• Diverse portfolio
• High growth rate market
• Government regulations
• Economic challenges

8. FRAMEWORK ANALYSIS - PORTER'S 5 FORCES
Alibaba
competitors
/ rivals
Threat of
new
competitors
Bargaining
power of
customers
Threat of
substitute
markets
Bargaining
power of
suppliers
• Already established rival platforms
• Multiple players
• Cultural differences
• Low loyalty level to a platform
• Limitation of technological resources
• Market and technological uncertainties

9. STRATEGIC AND ANALYTICAL CONCLUSION
Social
Technological
Economic
Environment
Political
Legal
Ethical
… Alibaba investment is worthwhile!
Uneven income distribution, cheap labor & liberal society, living conditions
Rate of technological transfer, changes in IT and mobile technology
Economic growth, inflation rates, consumer confidence
Resources, infrastructure
Trade policies, international trade regulations
Employment laws, consumer protection, corporate governance
Reputation, business ethics

10. RECOMMENDATIONS
• Solid research is a must before investment to mitigate risks
• Benchmarking shouldn’t be only on prior experience of China
• Adopt a strategy of free e-marketplace services and evolve to
premium add-ons
• Build trust and values among customers using the CRM model
• Integrate Alipay and Paytm in future
• Target specific markets and beware of cultural sentiments

11. Thank You!