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Analysis on the Business Model

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Analysis on the Business Model of Alibaba.com

Analysis on the Business Model of Alibaba.com

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    Could you please send me your presentation for my research paper.

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    Analysis on the Business Model Analysis on the Business Model Document Transcript

    • SHENYANG AEROSPACE UNIVERSITY E-Commerce “AnAlysis on the Business Model of AlibAbA.com” rOni BHOWMIK Master’s ProgramDepartment of Economics & Management SHENYANG AEROSPACE UNIVERSITY 1
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce TABLE OF CONTENTS Title Page No. Introduction 05 Alibaba Group Companies and Affiliated Entities 06 Development History 08 Vision 09 Mission 09 Values 09 Alibaba Stock Performance 09 SWOT Analysis 11 Macro environment 12 Competitors Analysis 13 Five Forces Analysis 15 Business Model 17 Business to Business Models (B2B) 20 Revenue Model 21 Market Opportunity 25 Market Strategy 29 B2B Electronic Exchanges: 31Value Propositions, Chains, and Supply Chains of Alibaba 41 Transaction Process of Alibaba 50 Impacts of Electronic Business 51 Conclusion 55 2
    • SHENYANG AEROSPACE UNIVERSITY E-CommerceIntroduction:Alibaba Group (simplified Chinese: 阿里巴巴集团; traditional Chinese: 阿里巴巴集團;pinyin:Ālǐbābā Jítuán) is a privately owned Hangzhou-based family of Internet-basedbusinesses that includes online marketplaces that facilitate business-to-business internationaland domestic China trade, retail and payment platforms, shopping search engine and data-centric cloud computing services.Alibaba Group and its affiliated entities now have more than 22,000 employees across some70 cities and regions, including China, Hong Kong, India, Japan, Korea, Taiwan, the UnitedKingdom, and the United States.Jack Ma, the founder of Alibaba, is reportedly the first to have launched a commercialwebsite in China.Founded in Hangzhou in eastern China, Alibaba.com has four marketplaces.The company‘s English language international marketplace (www.alibaba.com) serves tobring together importers and exporters from more than 240 countries and regions. The Chinamarketplace (www.1688.com) is developed for domestic business-to-business trade in China.It also has a Japanese marketplace (www.alibaba.co.jp), which is focused on facilitating tradeto and from Japan through an associated company. In addition, Alibaba.com offers atransaction-based wholesale platform, AliExpress (www.aliexpress.com), which allowssmaller buyers to buy small quantities of goods at wholesale prices.The company claims that together these marketplaces have more than 65 million registeredusers. Alibaba.com was listed in the Hong Kong Stock Exchange at the IPO price ofHK$13.5 on 6 November 2007, raising HK$13.1 billion (US$1.7 billion) in the second-largest initial public offering sale of an Internet company after Google Inc.In September 1995 Chinapages.com, a directory of companies, goes online and within tenyears Ma grows it in one of the most successful Internet companies of China.The initial business model of Alibaba was simple; facilitate a 24/7 meeting platform forsuppliers and buyers around the world. From the start Alibaba did not just connect Chinesesuppliers with international buyers, but it had the goal of connecting all importers andexporters around the world to each other. Although other B2B websites have always said 3
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce―You cannot have a global company out of China, it makes no sense.‖ From the verybeginning Alibaba was ―the first global Internet Company emerging from China.‖Unlike most other Internet companies, language was no barrier for Alibaba. Its membershipbase has always been communicating in English even before Alibaba arrived on the scene, soits non-English members were already used to communicating in a different language. Porterpoints out: ―We are lucky that our market is country independent, it is inherently global.‖Alibaba basically functions as a matchmaker and provides a cheap and efficient platformwhere sellers from all over the world in practise mostly China can find appropriate foreignbuyers and visa versa. In a 2007 interview for Radio86, Porter comments on the growth ofAlibaba: ―Alibaba really just getting started‖ and ―given that the internet is growing andinternational trade increasing and more and more people are coming online, there’s plenty ofroom to grow for the next fifteen to twenty years.‖Alibaba Group Companies and Affiliated Entities:Alibaba.comFounded in Hangzhou in eastern China, Alibaba.com has four marketplaces. The company‘sEnglish language international marketplace (www.alibaba.com) serves to bring togetherimporters and exporters from more than 240 countries and regions. The China marketplace(www.1688.com) is developed for domestic business-to-business trade in China. It also has aJapanese marketplace (www.alibaba.co.jp), which is focused on facilitating trade to and fromJapan through an associated company. In addition, Alibaba.com offers a transaction-based 4
    • SHENYANG AEROSPACE UNIVERSITY E-Commercewholesale platform, AliExpress (www.aliexpress.com), which allows smaller buyers to buysmall quantities of goods at wholesale prices.Taobao MarketplaceTaobao Marketplace (www.taobao.com), previously known as Taobao, is the biggest C2Conline shopping platform in China. Founded in 2003, it provides a wide variety of productofferings. The company claims that it served more than 370 million registered users as of theend of 2010.Taobao MallTaobao Mall (www.tmall.com) was introduced in April 2008 as a dedicated B2C platform tocomplement Taobao‘s C2C marketplace and became an independent business in June 2011. Itis now a major online shopping destination for quality, brand name goods in China.eTaoeTao was beta-launched by Taobao in October 2010 as an independent search engine andbecame an independent business in June 2011. It is the most comprehensive shopping searchengine in China, covering product results from all major Chinese online shopping platforms.AlipayLaunched in 2004, Alipay (www.alipay.com) is a third-party online payment platform.According to analyst research report, Alipay has the biggest market share in China. Thecompany claims it had more than 550 million registered users as of the end of 2010.In China,Alipay partners with more than 65 financial institutions including Visa and MasterCard toprovide payment solutions for Taobao as well as more than 500,000 Chinese businesses.Internationally, Alipay helps more than 300 merchants and sellers worldwide sell directly toconsumers in China.Alibaba Cloud ComputingAlibaba Cloud Computing aims to build an advanced data-centric cloud computing serviceplatform, including e-commerce data mining, high-speed massive e-commerce data 5
    • SHENYANG AEROSPACE UNIVERSITY E-Commerceprocessing, and as well as data customization. It was established in September 2009 inconjunction with the 10th anniversary of Alibaba Group.China Yahoo!In October 2005, Alibaba Group formed a strategic partnership with Yahoo! Inc and acquiredChina Yahoo! (www.yahoo.com.cn), which is a Chinese portal with a focus on essentialInternet services including news, email and search.Development History:  In December 1998, Jack Ma and other 17 founders released their first online marketplace named "Alibaba Online".  From 1999 to 2000, Alibaba Group raised a total of US$25 million from SoftBank, Goldman Sachs, Fidelity and some other institutions.  In December 2001, Alibaba.com achieved profitability.  In May 2003, Taobao was founded as a consumer e-commerce platform.  In December 2004, Alipay became an independent business.  In October 2005, Alibaba Group took over the operation of China Yahoo! as part of its strategic partnership with Yahoo! Inc.  In November, 2007, Alibaba.com successfully listed on the Hong Kong Stock Exchange.  In April 2008, Taobao established Taobao Mall, a dedicated B2C platform, to complement its C2C marketplace.  In September 2008, Alibaba Group R&D Institute was established.  In September 2009, Alibaba Group established Alibaba Cloud Computing in conjunction with its 10-year anniversary.  In May 2010, Alibaba Group announced a plan to earmark 0.3% of its annual revenues to fund environmental protection initiatives.  In October 2010, Taobao beta-launched eTao as an independent shopping search engine.  In June 2011, Alibaba Group reorganized Taobao into three separate companies: Taobao Marketplace, Taobao Mall and eTao. 6
    • SHENYANG AEROSPACE UNIVERSITY E-CommerceVision: To last 102 years To be one of the world‘s top 10 internet sites To be an essential partner for all business peopleMission: To make doing business easyValues:Customer comes first Customers are everythingTeamwork and Cooperation Team interests are always ahead of individual interestsEmbrace changes Go beyond yourself and welcome changesIntegrity Honest and upright, honoring commitmentsPassion Never give up and stay optimisticHonoring your job Perform the extraordinary with a professional attitude and an ordinary mindAlibaba Stock Performance:Alibaba.com Limited operates as a business-to-business e-commerce company in thePeople‘s Republic of China and internationally. It provides software, technology, and otherservices connecting small and medium-sized buyers and suppliers, as well as offers Internetcontent, advertising services, business management software, and Internet infrastructureservices. The company offers platforms for international, domestic, and retail trade. Itsproducts and services also include online payment platform, instant messenger developmentand maintenance services, and keywords on Web sites for the promotion of its marketplaces. 7
    • SHENYANG AEROSPACE UNIVERSITY E-CommerceThe company‘s listings displayed on its online marketplaces cover a range of products andservices in various industries, including agriculture, apparel, automobile, business services,chemicals, computer hardware and software, construction and real estate, electroniccomponents and supplies, energy, excess inventory, fashion accessories, food and beverage,furniture, and gifts and crafts. Its listings also cover products in industries, such as hardware,health and medical, home and garden, home appliances, lights and lighting, luggage, bags andcases, minerals and metallurgy, mechanical parts and fabrication services, office and schoolsupplies, packaging and printing, rubber and plastics, security and protection, shoes andaccessories, sports and entertainment, telecommunications, textiles and leather products,timepieces, jewelry and eyewear, toys, and transportation. Open $11.36 Previous Close $11.38 Day High $11.44 Day Low $11.26 52 Week High (02/17/11) - $17.70 52 Week Low (06/20/11) - $11.02 Market Cap 57.2B Average Volume 10 8.2M D EPS TTM $0.29 Shares Out Standing 5.1B Ex-Date 12/23/10 P/E TTM 32.2x Dividend -- Dividend Yield 1.95% LAST$11.30 HKDCHANGE TODAY-0.08-0.70%VOLUME5.5M 1688: HK Historical Stock Quote 8
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce 1688: HK Advanced Stock ChartSWOT Analysis:Strength(S) The site has a team of three (Britain, China, Japan), to include broader customer base, and conducive to information exchange, an increase of the amount of information, but conducive to building momentum to expand its influence. Alibaba increases segmentation of information and comprehensive, so that more targeted and effective. The worlds largest Chinese Forum –―以商会友‖, has created a great convenience for traders around the globe to exchange, and also closer to the distance between the various traders, but also to enhance the visibility of the website. A large number of members, to enhance the visibility of the brand so that the set of information Alibaba increasing coverage, the advent of attracting business. To open the "Golden supplier", a web-based transactions to ensure security.Weaknesses (W) Alibabas Web site model is an intermediary form, and replicability of this model, which other competitors from entering the industry to provide a sample; it increased by competitors for itself. 2.Alibaba membership system to increase the fees in the process of transformation, will lead to the loss of existing members, will create the opportunities for competitors, the development of the site will be difficult. Alibabas business platform large and cluttered that it had 27 industries, 800 - 900 categories of industries as a business platform to optimize the greatest obstacles. 9
    • SHENYANG AEROSPACE UNIVERSITY E-CommerceOpportunities (O) In China, several large banks and credit companies to participate fully in the field of e-commerce, which the depth of the development of e-commerce has created opportunities. China is now speeding up the development of e-commerce legal provisions, and actively creates a safe and regulated business environment. Chinas existing small and medium enterprises cannot afford to start their own b2b business website, so that online intermediaries such as the popular Alibaba their welcome. The Internet continuous development and improvement, the popularization of computers, there will be more companies have joined the online business.Threats (T) Alibaba profits mainly in China, but China b2b business environment has constrained the further development of Alibaba, such as a sound law, loopholes in online payment security, not so good infrastructure in some cities, which will hold back the development of Alibaba. B2B business site model, not only in the last few years with the rapid development of the world, and gradually formed a trend - e-business alliance - that is, the trend of mergers and cooperation, which will lead to more competitive.Macro environment:According to the latest iResearch released "in 2007 Chinas small and medium-sized B2B e-commerce study," data show that in 2006 the total number of Chinese small and medium-sized 31518000, in the state system conditions gradually improved, well-developed macro-economic environment, China has become the worlds such as a manufacturing center, drivenby favorable factors, Ereli next 5 years will be for the expansion of Chinas small andmedium-sized, small and medium enterprises will remain 7% -8% annual growth rate, thetotal number of SMEs in 2012 will reach 50 million. 10
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce The number of SMEs (ten thousand) the growth rateCompetitors Analysis:Global SourcesGlobal Sources is a Hong-Kong based business-to-business (B2B) Media Company thatfacilitates trade between Greater China and the world. It provides sourcing information tovolume buyers and integrated marketing services to suppliers. A wide range of media is usedto connect suppliers and buyers worldwide – online portals, magazines, research reports, andtrade fairs.Global Sources advantage- The promotion of more channels and market research reports and organize their own event. Promote experienced Global Sources has been done for 38 years, is the old platform to promote and experience. Has its own fixed base of buyers, manufacturersGlobal Sources disadvantage- Less well-known domestic brands than Alibaba. Less number of suppliers than Alibaba groups. Publicity and advertising no better than Alibaba channels. If the three channels at the same time promoting the relatively high cost. Alibaba positioned to service small and medium-sized, Global Sources in the large enterprises (SMEs are more). 11
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce Apart from the "world managers" journal, other magazine subscription needs to reduce the number of the issue. With the rise of e-commerce, CD-ROM and paid magazines will be gradually out the stage of history.Made-in-China.comChina manufacturer directory and China products catalog, providing trade leads among Chinafactory, manufacturers, suppliers, and global buyersMade-in-China.com advantage- It is under the Focus Technology Co. ltd, has financial strength. English name is made-in-china, a good Web site optimization, to some extent the search engine to facilitate search. The prices are cheaper. The use of agent systems. Rapid accumulation of short-term source of funds to expand the business scale.Made-in-China.com disadvantage- Less well-known domestic brands than Alibaba. Less number of suppliers than Alibaba groups. Publicity and advertising no better than Alibaba channels. Agents management uneven, and sometimes have a negative impact on Made-in China.com‘s services. 12
    • SHENYANG AEROSPACE UNIVERSITY E-CommerceFive Forces Analysis:Barriers to EntryHigh returns will draw firms. This results in many new entrants, which will effectivelydecrease profitability. With the development of B2B market and long time high profit ofAlibaba.com. There are more and more new websites try to copy the business mode ofAlibaba.com. The most common way to entry B2B e-market is try to position its targetmarket to a single industry. For example, in the recently 2 years, finechemical.com for thechemical products and Textilehome.com for the textiles and so on. Although these firmsdon‘t have the broad market as Alibaba.com, in another word, they share the special marketof Alibaba.com because they are more professional and targeted.Buyer Bargaining PowerThe buyer bargaining power is the ability of customers to put the firm under pressure and italso affects the customers sensitivity to price changes. For Alibaba.com, the customers aregenerally the medium and small-size firms which don‘t have the ability or don‘t need to buildup their own websites. To negotiate with the biggest B2B e-platform, these firms don‘t havetoo many advantages to fight for lower cost and nearly all the standards are decided by theAlibaba.com. But with the development of B2B websites, the customers may have theopportunity to choose the other platform and that will also be the opportunity to negotiatewith Alibaba.com for more rights.Supplier Bargaining PowerSuppliers of raw materials, components, labor, and services (such as expertise) to the firmcan be a source of power over the firm. Suppliers may refuse to work with the firm, or e.g.charge excessively high prices for unique resources. But for Alibaba.com, there are seldomsuppliers of raw materials, components and labor because it is not a manufacture firm but ane-service one. The largest cost for this firm is cost for selling, so the most important suppliersare the firms supply the advertise for Alibaba.com, such as the famous magazines,newspapers and websites. 13
    • SHENYANG AEROSPACE UNIVERSITY E-CommerceAvailability of SubstitutesThe existence of close substitute products increases the propensity of customers to switch toalternatives in response to price increases. The most important substitute service is the self-websites of large companies. For the customers which prefer to make business with largecompanies, they will not turn to Alibaba.com but directly contact with the companiesthemselves.CompetitionFor most industries, this is the major determinant of the competitiveness of theindustry.Sometimes rivals compete aggressively and sometimes rivals compete in non-pricedimensions such as innovation, marketing, etc. The most competitive firms of Alibaba.comare the search-websites such as Baidu.com and Google.com. The potential customers maysearch the results just through these free and simpler websites but not through the B2B e-platform, which will lead Alibaba.com to lose lots of profit. 14
    • SHENYANG AEROSPACE UNIVERSITY E-CommerceBusiness Model: 15
    • SHENYANG AEROSPACE UNIVERSITY E-CommerceBusiness Model:Business Model describes details of planned activities in business that involve with purpose,offerings, strategies, infrastructure, organization structures, trading practices, operationalprocesses, and policies designed to result in profits in a marketplace.Business model is very important because business model is a main component of businessplan and every good business must have a business model. More than that, for independentstudy and most of case study, student has to be able to identify the components of businessmodel.Business Plan:Business plan is a formal statement that describes objectives of a company and how thecompany will achieve those objectives. And business plan also describes the company‘sbusiness model.E-commerce business model:E-commerce business model aims to use and leverage unique qualities of Internet and Web.Key elements of business model:Business model composes of different parts of activities that organizations use to earnrevenues and there are 8 key elements of business model as following: (for most of the casestudy, students need to identify the following key elements)Before you start any business you should take in consideration to a few pointers to kick startyour business properly and make it a successful one. 16
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce8 Key elements of a business model that you need to pay:1) Value Proposition Define how a company‘s product or service fulfils the need of customers. Examples of successful value propositions Personalization/ Customization Reduction of product search, price discovery costs Facilitation of transactions by managing product delivery2) Revenue Model Define how the firm will earn revenue generates profits and produce a superior return oninvested capital Major types:  Advertising revenue models: CNN.com  Subscription revenue models: MATCH.com  Transaction fee revenue model: eBay, E-Trade, Hotwire  Sales revenue model: Amazon, LLbean, Gap.com  Affiliate revenue model: E-pinions, Banner Exchange, Edmunds à sends traffic to another website3) Market Opportunity Refers to a company‘s intended market space and the overall potential financial opportunities available to the firm in that market space4) Competitive Environment Refers to the other competition selling similar products and operating in the samemarket space -Influenced by  How many competitors are active  How large operations are 17
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce  The market share for each competitor5) Competitive Advantage Achieved when a firm can produce a superior product and/or bring a product to market,at a lower price than most, or all, of their competitors. -Types of competitive advantage:  First mover advantage  Unfair competitive advantage6) Market Strategy Plan that details how a company intends to enter a new market and attract strategy7) Organizational Development Describes how the company will organize the work that needs to be accomplished8) Management Team  Employees of the company responsible for making the business model work  Strong management team gives instant credibility to outside investors  There are many types of e-commerce business models let‘s take a look at all of them and what are the difference.Business to Business Models (B2B): E-distributor  Supplies products and services directly to individual businesses  Owned by one company seeking to serve many customers E-procurement  Creates and sells access to digital electronic markets  B2B services providers is one type  Application service providers: a subset of B2B service providers Exchanges  Electronic digital marketplace where suppliers and commercial purchases can conduct transactions  Usually owned by independent firms whose business is making a market Industry Consortia  Industry-owned vertical market place that serve specific industries 18
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce  Horizontal market place, in contrast, sell specific products and services to a whole range of industries Private industrial networks  Digital networks designed to co-ordinate the flow of communications among firms engaged in business together  Lobbying: influence the government as a group à Public policy access Business models in emerging E-Commerce Areas  Consumer to consumer: Provides a way for consumers to sell to each other, with the help of online market maker (EBay)  Peer to peer (P2P): Link users, enabling them to share files and common resources without a common server (Kazaa, Cloudmark)  M-Commerce: E-commerce business models that use wireless technologies (EBay Mobile)—To date, m-commerce is a disappointment in the united states however, technology platform continues to evolveRevenue Model:Revenue model is the most important element of business model in professor‘s opinionbecause revenue model describes how the firm will earn revenue, generate profits, andproduce a superior return on invested capital.There are 5 major types of e- business revenue model as follows:  Advertising revenue model  Subscription revenue model  Transaction fee revenue model  Sales revenue model  Affiliate revenue modelExample:  What would be the revenue model for Google? AdWords and AdSense  What would be the revenue model for HP? 19
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce Sales of products (PC) and service  What would be the revenue model for Microsoft? Software and serviceThe 8 Internet Revenue Model Options:For a publisher or other media site owner, identify eight types of revenue model which arepossible online. Let me know of any I‘m missing Of course, transactional sites have theoption of these also in addition to sales – online, everyone is a media owner.1. Revenue from subscription access to contentA range of documents can be accessed for a period of a month or typically a year. Forexample, I subscribed to FT.com for access to the digital technology section for around €80per year.2. Revenue from Pay per View access to documentHere payment occurs for single access to a document, video or music clip which can bedownloaded. It may or may not be protected with a password or Digital Rights Management.3. Revenue from CPM display advertising on site(e.g. banners ads and skyscrapers).CPM stands for ‗cost per thousand‘ where M denotes ‗Mille‘. The site owner such as FT.comcharges advertisers a rate card price (for example €50 CPM) according to the number of itsads shown to site visitors. Ads may be served by the site owners own ad server or morecommonly through a third-party ad network service such as Google AdSense as is the casewith my site.4. Revenue from CPC advertising on site (pay per click text ads)CPC stands for ‗Cost per Click‘. Advertisers are charged not simply for the number of timestheir ads are displayed, but according to the number of times they are clicked. These aretypically text ads similar to sponsored links within a search engine but delivered over anetwork of third-party sites by on a search engine such as the Google Ad Network. 20
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce5. Revenue from Sponsorship of site sections or content types (typically fixed fee for a period)A company can pay to advertise a site channel or section. For example, bank HSBC sponsorsthe Money section on the Wanadoo/Orange portal (www.wanadoo.com) orwww.orange.co.uk. This type of deal is often struck for a fixed amount per year. It may alsobe part of a reciprocal arrangement, sometimes known as a ‗contra-deal‘ where neither partypays.6. Affiliate revenue (CPA, but could be CPC)Affiliate revenue is commission based, for example I display Amazon books on my siteDaveChaffey.com and receive around 5% of the cover price as a fee from Amazon. Such anarrangement is sometimes known as Cost per Acquisition (CPA).7. Subscriber data access for e-mail marketingThe data a site owner has about its customers is also potentially valuable since it can saiddifferent forms of e-mail to its customers if they have given their permission that they arehappy to receive e-mail either from the publisher or third parties. The site owner can chargefor adverts placed in its newsletter or can deliver a separate message on behalf of theadvertiser (sometimes known as list rental).8. Access to customers for online researchAn example of a company that uses this approach to attract revenue from surveys is the teensite Dubit.Considering all of these approaches to revenue generation together, the site ownerwill seek to use the best combination of these techniques to maximize the revenue. To assesshow effective different pages or sites in their portfolio are at generating revenue, they will usetwo approaches. The first is eCPM, or effective Cost per Thousand. 21
    • SHENYANG AEROSPACE UNIVERSITY E-CommerceAd Server Market Structure:Given below is a list of top ad server vendors in 2008 with figures in millions of viewerspublished in an Attributor survey. Since 2008 Google controls estimated 69% of the onlineadvertising market. Vendor Ad Viewers (Millions) Alibaba 1,118 Double Click (Alibaba) 1,079 Yahoo! 362 MSN (Microsoft) 309 AOL 156 Adbrite 73 Total 3,087 22
    • SHENYANG AEROSPACE UNIVERSITY E-CommerceBusiness Model and Revenue Model of AlibabaAlibaba Group is a privately owned Hangzhou-based family of Internet-based businesses thatincludes business-to-business international trade, online retail and payment platforms anddata-centric cloud computing services.Jack Ma, the founder of Alibaba, is reportedly thefirst to have launched a commercial website in China. In September 1995 Chinapages.com, adirectory of companies, goes online and from then on there was no looking back.Traditionally, they had to pass through a long chain of intermediaries:Factories -> trading companies -> importers -> distributors -> retailers -> consumers. Intermediaries Trading Factories Importers Distributors Retailers Consumers CompaniesBuyers always want to go up the food chain and find cheaper suppliers. Factories alwayswant to go down the food chain and find buyers who pay better. But the opaque process oftraditional trade made it difficult for both parties to achieve their ends.Low margins have long been a problem for small factories in China. Without a way ofmarketing themselves globally, they are often at the mercy of a few large trading houses.Market Opportunity:Market Opportunity consists of 2 things which are market value and market share comparingto your competitors.5 Forces Model is one of the tools that can use to analyze marketopportunity. And market opportunity describes needs, wants, or demand trends that acompany can take advantage of because they are not being addressed by the competitorsMarket spaceMarket space is area of actual or potential commercial value in which company intends tooperate. 23
    • SHENYANG AEROSPACE UNIVERSITY E-CommerceRealistic market opportunityRealistic market opportunity is defined by revenue potential in each of market niches inwhich a company hopes to.Example of Market OpportunityInsider Tips and Strategies for Sourcing Products from the World’sLargest B2B Market place:Keep your Edge on Alibaba.com:As you gather input about your products and business through your interactions withcustomers, suppliers, and all the other people who will support your business, don‘t forget tocome back to the Alibaba.com web site to research your next good product sourcing move.This time, scroll down near the bottom of the page, and look for the ―Trade Trends‖ headingalong the left-hand side. Find link for ―Rising Demand Top 20‖, ―Hot Products Top 20‖, and―Popular Categories Top 20‖. 24
    • SHENYANG AEROSPACE UNIVERSITY E-CommerceFigure: Alibaba.com‘s Trade Trends page gives you a glimpse of in-demand products andpopular categories.Amazon and eBay can help:Let‘s put aside for the moment the question of whether you‘ll ultimately sell your productsthrough sites such as Amazon and eBay. 25
    • SHENYANG AEROSPACE UNIVERSITY E-CommerceFigure: The search results page on Amazon.com can help you research best-selling productsfor your business.For example, you can search for your product idea on both of these sites. On Amazon searchfor your product and then sort the result by ―Bestselling‖. Now you can see what the mostpopular items are and then work to determine what exactly it is that makes them best sellers.Figure: Completed listings on eBay can show you which items are actually selling on the site 26
    • SHENYANG AEROSPACE UNIVERSITY E-CommerceOn eBay, you‘ll do an ―Advanced Search‖, by clicking on that link from the home page,entering your keywords, and limiting your results to completed listings. When you scan yourresults, pinpoint items with prices that are in green because the only measure of success oneBay is whether the item in question has actually been sold.Market Strategy:Market strategy is a detailed plan that describes a process of how a company intendsto enter a new market and attract customers, and concentrate on how its limited resources canincrease sales and achieve a sustainable competitive advantage by fulfilling the customers‘satisfactions. Best business concepts will fail if not properly marketed to potential customers. STRATEGY BUSIN ESS ORGANIZATION MODE TECHNOLOGY L the business model’s place in the companyMarket Strategy is related to: 27
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce How do you plan to promote your products? How do you target your customers?Organizational DevelopmentOrganizational Development can be described as a plan from top-down that relates to how acompany organizes beliefs, attitudes, values, and structure of people and the company itselffor the positive changing or to accomplish the work. In order to have a good organizationaldevelopment, the company has to understand the nature of its structure and culture of thecompany first, and then the company will know what aspects of the organization need to beimproved to get the work done and to achieve the success. Figure: Corporate Structure of Alibaba.com Work is typically divided into functional departments. Hiring moves from generalists to specialists as company grows.Management TeamManagement team refers to employees in the company who have control in making thebusiness model work. Before the company assigns the management team to work on the 28
    • SHENYANG AEROSPACE UNIVERSITY E-Commercebusiness model, it has to know the management team‘s background, strong points and weakpoints in order to get the right management team to control the business model. Strong management team gives instant credibility to outside investors. Strong management team may not be able to salvage a weak business model, but should be able to change the model and redefine the business as it becomes necessary.B2B Electronic Exchanges: Public e-marketplaces (public exchanges):Trading venues open to all interested parties (sellers and buyers) and usually run by third parties Exchange: A many-to-many e-marketplace. Also known as e-marketplaces, e-markets, and trading exchanges Market maker:The third-party that operates an exchange (and in many cases, also owns the exchange) Systematic sourcing:Purchasing done in long-term supplier–buyer relationships Spot sourcing:Unplanned purchases made as the need arises Vertical exchange:An exchange whose members are in one industry or industry segment Horizontal exchanges:Exchanges that handle materials used by companies in different industries 29
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce Dynamic pricing:A rapid movement of prices over time, and possibly across customers, as a result of supply and demand Process that results in dynamic pricing in most exchanges includes A company posts a bid to buy a product or an offer to sell one Anonymity is often a key ingredient of dynamic pricing Buyers and sellers interact with bids and offers in real time A deal is struck when there is an exact match between a buyer and a seller on price, volume, and other variables such as location or quality The deal is consummated, and payment and delivery are arranged Functions of exchanges Matching buyers and sellers Facilitating transactions Maintaining exchange policies and infrastructure Ownership of exchanges An industry giant A neutral entrepreneur The consortia (or ―third-party‖ co-op) Revenue models Transaction fees Fee for service Membership fees Advertising fees 30
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce Other revenue sources Governance and organization Membership The community in the exchange Site access and security Information should be carefully protected Services provided by exchanges Provide many services to buyers and sellers B2B portals:Information portals for businesses Pure information portals include: 31
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce directories of products offered by each seller lists of buyers and what they want other industry or general information Vortals:B2B portals that focus on a single industry or industry segment; ―vertical portals‖ Thomas Register—information portal Sellers distribute information on what they have to sell Buyers can find what they need and purchase over a comprehensive and secure procurement channel reduce costs shrink cycle times improve productivity Alibaba.com—started as a pure information portal and is moving toward becoming a trading exchange Huge database is a horizontal information portal with offerings in a wide variety of product categories Reverse auctions Features–free email, email alerts, etc Revenue model—advertisement and fees for special Figure: B2B concept Third-party exchanges are characterized by two contradicting properties they are neutral, not favoring either sellers or buyers they do not have a built-in constituency of sellers or buyers and sometimes have a problem attracting enough buyers and sellers to attain financial viability A major problem is: Market liquidity:The degree to which something can be bought or sold in amarketplace without affecting its price 32
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce Buyer aggregation model Buyers‘ RFQs are aggregated and then linked to a pool of suppliers that areautomatically notified of the RFQs Suitability aggregation models work best with MROs and services that are well defined, that have stable prices, and where the supplier or buyer base is fragmented Consortium trading exchange (CTE):An exchange formed and operated by a group of major companies to provide industrywide transaction services Three basic types of environments: 1. Fragmented markets 2. Seller-concentrated markets 3. Buyer-concentrated markets CTEs, defined by two main criteria: whether they focus on buying or selling whether they are vertical or horizontal 33
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce 4 types of CTEs 1. Purchasing oriented, vertical 2. Purchasing oriented, horizontal 3. Selling oriented, vertical 4. Selling oriented, horizontal Purchasing-oriented consortia Vertical Purchasing-Oriented CTEs All the players are in the same industry Horizontal Purchasing-Oriented CTEs Owner-operators are large companies from different industries that unite for thepurpose of improving the supply chain of MROs used by most industries Selling-oriented consortia Most selling-oriented consortia are vertical Participating sellers have thousands of potential buyers within a particular industry Other issues for consortia Legal challenges for B2B consortia level of collaboration among both competitors and business partners antitrust and other competition laws must be considered Critical success factors for consortia Appropriate business and revenue models Size of the industry Ability to drive user adoption Elasticity Elasticity: The measure of the incremental spending by buyers as a result of thesavings generated Management of intensive information flow Smoothing of supply chain inefficiencies Harmonized shared objectives 34
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce Combining consortia and third-party exchanges dot-consortia—large consortia + third-party owner combination may bring about the advantage of both ownership and minimizing third-party limitations such as low liquidity Dynamic trading:Exchange trading that occurs in situations when prices are being determined by supply and demand (e.g., in auctions) Matching supply and demand quantity, delivery times, and locations Auctions Exchanges offer members the ability to conduct auctions or reverse auctions in private trading rooms auction services as one of its many activities fully dedicated to auctions Many-to-many public auctions—vertical, horizontal, run on the Internet or over private lines Building e-marketplaces is a complex process usually performed by a major B2B software company Commerce One Ariba Oracle IBM Integration issue Seamless integration is needed between the third-party exchange and the participants‘ front and back-office systems In private exchanges the seller‘s computing system must be integrated with the customers systems External communications Web/client access Data exchange Direct application integration Shared procedures 35
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce Process and information coordination in integration How to coordinate external communications with internal information systems Use of Web services in integration Web Services enable different Web-based systems to communicate with each otherusing Internet-based protocols such as XML System and information management in integration Management of software, hardware, and several information components, includingpartner-profile information, data and process definitions, communications and securitysettings, and users‘ information Directory services and search engines Directory services help buyers and sellers manage the task of finding potential partners Partner relationship management (PRM):Business strategy that focuses on providing comprehensive quality service to business partners E-communities and PRM B2B application needs to provide community services such as chat rooms, bulletinboards, and possibly personalized Web pages Integration (as per Keenan Report) Business-to-exchange (B2X) hubs connect all of the Internet business services e-merchant services exchange infrastructure buying and selling member enterprises other B2X exchanges 36
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce Figure: The conceptual framework of a matchmaker for B2B e-marketplaces Private vs. public exchanges Private exchanges:E-marketplaces that are owned and operated by one company.Also known as company-centric marketplaces Problems with private exchanges Transaction fees—required to pay transaction fees with existing customers Sharing information—do not want to share business data with competitors Cost savings—not great enough to attract buyers Recruiting suppliers—lose direct contact with customers Too many exchanges Supply chain improvers Companies want to streamline their internal supply chains, which requires integration with internal operations instead of ―plugging in‖ to an exchange‘s infrastructure Major problem is trust in the large corporation running the exchange Software agents in B2B enable customized syndication of content and services from multiple sources on the Internet to any device connected to the Internet provide real-time, tighter integration between buyers and sellers facilitate management of multiple trading partners and their transactions across multiple virtual industry exchanges 37
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce Open standards mean that the technology can be incorporated easily with participating firms‘ back-end technologies, allowing full visibility of the supply and demand chains Networks of exchanges (E2E) Large corporations may work with several exchanges, and they would like these exchanges to be connected in a seamless fashion Commerce One and Ariba developed a strategy that allows them to plug a broad rangeof horizontal exchanges into their main networks Centralized management Managing exchanges and providing services to participants on an individual basis is expensive Build ―families‖ of exchanges managed jointly in order to operate several exchanges from a unified, centralized place Manages all of the exchanges‘: Catalogs Auction places Discussion forums Managing and centralizing: Accounting Finance Human resources IT services New directions in B2B marketplaces 38
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce Early failures of exchanges were due mainly to the failure of these marketplaces to foster a broad-based sharing of information Recognize the fundamental asset provided by their member base is the unique knowledge of the industry e-distributors Take title to the goods they sell Aggregate those goods for the convenience of buyers Advise buyers which to choose Reach hard-to-find buyers Result in extra value for buyers and decent profits for sellersValue Propositions, Value Chains, and Supply Chains of Alibaba:Alibaba‘s main e-commerce activities in the framework of the conceptualmodel. It providesan insight on the execution of the successful strategy utilizing the existingresources in thecurrent business climate of China. The main activities of this e-market in eachphase oftransaction are outlined, and the complexity of controlling these activities to guaranteeasecure and trustable transaction is evaluated. Personalized and Customized Services in Alibaba Figure: Rayleigh-CurveIn the information and the negotiation phases of the Model, Alibaba offers personalizedandcustomized services. Hundreds of product categories from 42 industries are presented inthismarket. Members are offered a utility called ―Ali-assistant‖ (or My Alibaba) to managetheirproduct listing and internal web sites. A wide array of trading functions are available forbuyersand sellers to choose from, such as online auctions, online categories hosted in eachmember‘s site,and real time negotiation conducted through ―Trade Manager‖. The staffs in 39
    • SHENYANG AEROSPACE UNIVERSITY E-CommerceAlibaba are not as muchinvolved in matching buyers and sellers. However, the less humaninvolvement of Alibaba iscompensated by its three services: Ali-college, Ali-forum andTrustPass. Sothrough these three services, Alibaba users can be better serviced with reducedhelp from humanagents.Transaction Information Negotiation Payment DeliveryProcessControllingComplexityLow Personalized and Customized Services Alibaba: Products from 42 industries; Ali-assistant; Ali-college; Ali-forum;Medium Personalized and Customized Services Alibaba: Online catalogs Online auctions TrustPass TradeManagerHigh Risk Control of Strategic the partners fulfillment network Process Alibaba: Alibaba: The bank Supporting partner multiple alliances 40
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce payment Ali-pay partially methods controls the Ali-pay, a third risks in the party delivery payment service, TradeManager effectively control the risk in the payment phases with lower operating cost Figure: Alibaba‘s e-commerce activities Risk Control of the fulfilment Process in AlibabaAlibaba‘s payment process is intertwined with the delivery phase. It involves multiple playersfrom transportation and storage providers to customs agents and banks. Alibaba also focuseson controlling of transactional risks presented in the payment and delivery phase. Alibabadoes not supervise the entire process and does not help arrange deliveries. However, byoffering Ali-pay (or called as Payment Bao), a third party payment service, Alibabaeffectively control the risk in the payment and delivery phases with lower operating cost. InAli-pay, money is held by Ali-pay before buyers confirm receipt and quality of goods. Strategic partners network in AlibabaAlibaba provide support in all four phases of transaction, increasing value eitherbycontrolling transactional risks, or by reducing transactional cost and enhancingtransactionalefficiency. Even though Alibaba has weaker support in the delivery phase, itcleverly allowsparticipant involvement from both sides in meeting the contract. Alibaba hasmatched beyond the needs of users, so itis actually considered best successful e-market inChina. It is also noticeable that Alibaba‘stransactional process design requires less humaninvolvement; it also increases the scalability ofAlibaba‘s network and reduces its operationalcost. The controlling complexity 41
    • SHENYANG AEROSPACE UNIVERSITY E-CommerceThe degree of controlling complexity varies along the four phases, from ―low‖, ―medium‖to―high‖. In the information phase, the degree of controlling complexity in facilitatinginformationpublishing and searching is low. Inexhaustible data about all sorts of buying andselling businessis aggregated and disseminated. It is simple and straightforward to fulfil thisfunction withInternet technology. Most e-markets in China have this basic capability.Alibaba‘s model is a modified one reflective of their entirelyvirtual service nature.Traditionally, the primary activities of a company included inboundlogistics or receivingsupplies, manufacturing the product, and shipping it out. Once theproduct is ready, themarketing and sales team sells the product to customers and customerservice works to ensurethe satisfaction of the customer. Each one of these steps increases thevalue of the finalproduct, from simply being a mix of supplies to a happy customer whoseneeds had been met.The very first step tocreating value for these companies is to have customers from with togenerate value with andfor. It is true that value is relative to the user regardless of whether theproposition includes aphysical product, only an intangible service, or a combination of both.The value propositionof virtual service companies, such as Alibaba, however, is that theycould never make anoffering without an initial customer to serve and give value to. In dealingwith models thatinvolve the production of physical products, such as a car, a car can still bemanufacturedwithout a customer, and at least have value to the manufacturer. Without firsthaving acustomer, Alibaba has no platform for which to add value and offer value to othercustomers.In light of this, the following model is proposed to incorporate the virtual value andsupplychain. For Alibaba, technology has incorporated operations on an expanded scale.Technologyfor Alibaba is more than a way to work more effectively and add a few newvalue-added 42
    • SHENYANG AEROSPACE UNIVERSITY E-Commerceservices; it is fundamental for their business model to generate their value andrevenues.Because the entire value proposition is built upon the customers, marketing & salesandcustomer service span the whole time of the value generating operations.Thethree operational steps are then the inputs, operation of information, and outputs.Theinputs are the customers who join the service looking for a matching company for theirsupplychain needs. The operations of the website manipulate the information and generatebusinessconnections the customers are using Alibaba for. These operations steps, donethrough theirtechnology, include gathering, organizing, selecting, synthesizing, and distributinginformation. Outbound for Aliaba is when a supplier and a buyer have formed arelationshipand leave Alibaba to finalize their transaction. Of important note, the inputs andoutputs arethe same: the customers. This is different than the operations of a manufacturingsupply chainbecause supplies are the inputs and a finished product is the output. As stated by Alibaba, theworkflow includes: Suppliers and buyers post their listings, matching the inputs from the company‘sstrategic perspective. Listings are searched, contacts are made, and information is exchanged between thesuppliers and buyers. This will often include product specifications and capabilities. This corresponds to the information manipulation the company‘s servers and softwareuse to generate the value for the customers. Customers then negotiate with each other, which is the ―outbound‖ part of theworkflow. 43
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce All of the communications for suppliers and buyers is enabled through tools withinAlibaba‘s software.Alibaba’s Role in a Customer’s Supply ChainThe result of this supply chain is the value generated by each of its steps. To betterunderstandthe value generated, Alibaba‘s role in the supply chains of their customers mustalso be brieflyanalyzed.The traditional value chain is again displayed, as the vast majority of Alibaba‘scustomers areon either the inbound or outbound side of the manufacturing process. Forbuyers, Alibaba‘srole in their supply chain is connecting with suppliers who deliver aproduct. The buyer‘scompany then processes their purchase according to their needs,markets it, and services thecustomer. For Sellers, Alibaba shifts to the outbound andmarketing aspects of a supply /value chain. For sellers, marketing & sales is includedbecause for many companies, their topmethod of marketing is their presence on Alibaba. 44
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce The Big Picture Partner Network • Buyer GPS, Ali loan Customer Relationship • Keyword Purchase • Premium Placement • Third-party exchanges • Virtual Showroom • Ali loan program • Ali-ADvance /Japan Link • Buyer to Buyer • AliExpress /Ali-Institute • Personalized web profile • Business Management Software • Newsletter • Business Network Service • Team blog (RSS) • China Wholesale Platform • VIP events with team • Mobile China TrustPass • SMEs • Online Translation • Free email, email alerts Core Capability Activity Configuration Value Proposition Distribution Channel Target Customer • Team management • Attractive soccer • Buyer to Buyer • Agriculture • Event management • 360º event (match, • Online networks • Supplier • Apparel • Venue management dining, shopping) • Alibaba website • Companies • Automotive • VIP relationship • Exclusive VIP lounges • Alibaba Shops • Event/concert organizers • Chemicals management • Merchandising • Ali-college • Advertisers • Security and Protection • Renting out stadium • Ali-forum • Retailers • Service Equipment • Trust Pass • Buyer • Textiles and Leather Products Cost Structure Revenue Model • Web cost • Pay per view access to document • Team & maintenance • Advertisement and fees for special • Infrastructure management • CPM display advertising on site • Marketing • Sponsorship of site sections or content types • Employee • Subscriber data access for e-mail marketing • Advertising revenues • Sales • B2B revenues • Transaction Fee 45
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce Value Creates Revenues Partner Network • Buye r GPS, Ali loan Customer Relationship • Ke yword Purchas e • Pre mium Place me nt • Third-party exchanges • Virtual Showroom • Ali loan program • Ali- ADvance /Japan Link • Buyer to Buyer • AliExpre s s /Ali- Ins titute • Personalized web profile • Bus ine s s Manage me nt Software • Newsletter • Bus ine s s Ne twork Se rvice • Team blog (RSS) • China Whole s ale Platform • VIP events with team • Mobile China T rus tPas s • SMEs • Online T rans lation • Free email, email alerts Activity Configuration Value Proposition Distribution Channel Target Customer Core Capability • Team management • Attractive soccer • Buyer to Buyer • Agriculture • Event management • 360º event (match, • Online networks • Supplier • Apparel • Venue management dining, shopping) • Alibaba website • Companies • Automotive • VIP relationship • Exclusive VIP lounges • Alibaba Shops • Event/concert organizers • Chemicals management • Merchandising • Ali-college • Advertisers • Security and Protection • Renting out stadium • Ali-forum • Retailers • Service Equipment • Trust Pass • Buyer • Textiles and Leather Products Cost Structure Revenue Model • Web cost • Pay per view access to document • Team & maintenance • Advertisement and fees for special • Infrastructure management • CPM display advertising on site • Marketing • Sponsorship of site sections or content types • Employee • Subscriber data access for e-mail marketing • Advertising revenues • Sales • B2B revenues • Transaction Fee Creating Value Requires Infrastructure Partner Network • Buyer GPS, Ali loan Customer Relationship • Keyword Purchase • Premium Placement • Third-party exchanges • Virtual Showroom • Ali loan program • Ali-ADvance /Japan Link • Buyer to Buyer • AliExpress /Ali-Institute • Personalized web profile • Business Management Software • Newsletter • Business Network Service • Team blog (RSS) • China Wholesale Platform • VIP events with team • Mobile China TrustPass • SMEs • Online Translation • Free email, email alerts Core Capability Activity Configuration Value Proposition Distribution Channel Target Customer • Team management • Attractive soccer • Online networks • Buyer to Buyer • Agriculture • Event management • 360º event (match, • Alibaba website • Supplier • Apparel • Venue management dining, shopping) • Alibaba Shops • Companies • Automotive • VIP relationship • Exclusive VIP lounges • Ali-college • Event/concert organizers • Chemicals management • Merchandising • Ali-forum • Advertisers • Security and Protection • Renting out stadium • Trust Pass • Retailers • Service Equipment • Buyer • Textiles and Leather Products Cost Structure Revenue Model • Web cost • Pay per view access to document • Team & maintenance • Advertisement and fees for special • Infrastructure management • CPM display advertising on site • Marketing • Sponsorship of site sections or content types • Employee • Subscriber data access for e-mail marketing • Advertising revenues • Sales • B2B revenues • Transaction Fee 46
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce Infrastructure Generates Costs Partner Network • Buyer GPS, Ali loan Customer Relationship • Keyword Purchase • Premium Placement • Third-party exchanges • Virtual Showroom • Ali loan program • Ali-ADvance /Japan Link • Buyer to Buyer • AliExpress /Ali-Institute • Personalized web profile • Business Management Software • Newsletter • Business Network Service • Team blog (RSS) • China Wholesale Platform • VIP events with team • Mobile China TrustPass • SMEs • Online Translation • Free email, email alerts Core Capability Activity Configuration Value Proposition Distribution Channel Target Customer • Team management • Attractive soccer • Online networks • Buyer to Buyer • Agriculture • Event management • 360º event (match, • Alibaba website • Supplier • Apparel • Venue management dining, shopping) • Alibaba Shops • Companies • Automotive • VIP relationship • Exclusive VIP lounges • Ali-college • Event/concert organizers • Chemicals management • Merchandising • Ali-forum • Advertisers • Security and Protection • Renting out stadium • Trust Pass • Retailers • Service Equipment • Buyer • Textiles and Leather Products Cost Structure Revenue Model • Web cost • Pay per view access to document • Team & maintenance • Advertisement and fees for special • Infrastructure management • CPM display advertising on site • Marketing • Sponsorship of site sections or content types • Employee • Subscriber data access for e-mail marketing • Advertising revenues • Sales • B2B revenues • Transaction Fee 47
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce The Profit Zone Partner Network • Buyer GPS, Ali loan • Keyword Purchase Customer Relationship • Premium Placement • Virtual Showroom • Third-party exchanges • Ali-ADvance /Japan Link • Ali loan program • AliExpress /Ali-Institute • Buyer to Buyer • Business Management Software • Personalized web profile • Business Network Service • Newsletter • China Wholesale Platform • Team blog (RSS) • Mobile China TrustPass • VIP events with team • Online Translation • SMEs • Free email, email alerts Core Capability Activity Configuration Value Proposition Distribution Channel Target Customer • Team management • Attractive soccer • Online networks • Buyer to Buyer • Agriculture • Event management • 360º event (match, • Alibaba website • Supplier • Apparel • Venue management dining, shopping) • Alibaba Shops • Companies • Automotive • VIP relationship • Exclusive VIP lounges • Ali-college • Event/concert organizers • Chemicals management • Merchandising • Ali-forum • Advertisers • Security and Protection • Renting out stadium • Trust Pass • Retailers • Service Equipment • Buyer • Textiles and Leather Products Cost Structure Revenue Model • Web cost • Pay per view access to document • Team & maintenance • Advertisement and fees for special • • Infrastructure management Marketing < • • CPM display advertising on site Sponsorship of site sections or content types • Employee • Subscriber data access for e-mail marketing • Advertising revenues • Sales • B2B revenues • Transaction FeeTransaction Process of AlibabaAlibaba is the dominant e-market in China, with a market share of more than 60%. It has twomainsites, Alibaba International (www.alibaba.com) and Alibaba China(www.China.Alibaba.com).Alibaba International is an English site with international tradeorientation. It now has300,000 visits daily. Alibaba China is a Chinese site for domestic trade.It has more than 7 millionregistered users. Its featured functions are product listing,requesting for quote/information, realtime negotiation (TradeManager), buyer/seller creditreporting (CreditDirect), news and businessintelligence, online payment, online community,online auction, search engine advertising, hostingtrade shows, etc. Users are charged with anannual subscription fee for the above services.Alibaba.com offers an open environment for SMEs, who can join with minimumrequirements. Itensures reliable online payment process through a third-party paymentwebsite- PayDirect Bao. Its premium TrustPass Membership is another notable creditenhancing mechanism. Only memberswho have completed an authentication and verification 48
    • SHENYANG AEROSPACE UNIVERSITY E-Commerceprocedure conducted by a third-party credit agency are granted TrustPass qualification.TrustPass serves to provide transparency regardingthe identity and legitimacy of sellers andseller‘s potential trading partners with Alibaba.com.Information quality for TrustPass membership is also guaranteed, and thus it increasesbuyerconfidence. More than 85% of buyers on Alibaba.com prefer to do business withmembers who have the TrustPass qualification.In the transactionalprocesses Alibaba provides the credit mechanism through (1) TrustPassmember identityverification and (2) the third-party payment websites for the buyers andsuppliers to make theirtransaction directly with one another. Figure: The transaction process of Alibaba.comImpacts of Electronic BusinessThe Internet has changed the way we conduct business and the way we see the world andourselves in it. It has rewritten the rules of business and transformed many industries (i.e.,book, travel, music, accommodation, internet phone, real estate, among many others). It hasbrought profound changes (including both negative and positive impacts) to individuals,organizations, industries, governments and societies. Impacts Positive Impacts Negative ImpactsTo Convenience; Personalised Privacy issues; Security issues(i.e.,Individuals &customised products & online fraud, viruses, spam,etc); services;Ubiquity & mobility; Better Individuality issues (i.e.,passwords 49
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce andmore affordable and user names areused to represent communicationand interaction (i.e., in human beingson the internet); The real-timeand multimedia way); lost balancebetween work and Greaterflexibility and better leisurearising from the use of lap freedomof publishing ideas and tops,mobiles and other views;Better connection with mobiledevices; The loss of writing othermembers of communities;Access andother language skills resulting to products, services andinformation from overly using computer andthe from all over theworld (normally with internet; The lost humaninteraction cheaperprices); Making fulfilling with others byexcessively relying thedream of being your own bossand on e-mail,VoIP, instant messaging, of managing an internationalbusiness onlinechatting and other electronic much moreeasier; among many others. communication tools; etc.To An additional distribution Channel conflict when doingbothOrganizations channel;New opportunities in online and offline operations;More existingand new markets; Better/new intense competitionfrom existing products and services;Enhanced competitors andnew entrants; efficiency & effectiveness;Time & Losses due tonetwork failures and cost reductions; securitybreaches; The wide and Better relationships withcustomers, quickerdistribution of negative news with suppliers andbusiness partners, onthe organization; The with governmentagencies, with difficultiesin maintaining 24/7 competitorsand with employees; reliabilityand accessibility of online Enlargedmarket share, Increased operations; etc. revenue;Improved profit, Better image,among many others.To Industries More effective and efficientindustries Increased competition in and industry supplychains more manyindustries (especially in efficient & effective;Enhanced serviceorientedindustries); cooperation andcollaboration within Changedstructure of many and acrossindustries; Creation of industries(i.e., many traditional newindustries and addition of intermediarieswill either disappear newelements to existing or change their roles (e.g.,providing 50
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce industries;among many others. more value-addedservices and focusing more on knowledge) while some newonline players (i.e., onlineaggregators and distributors) will enter the market; etc.To Better services to citizens,Reduced Security issues (both insideGovernments time and costs ofoperations; Better andoutside threats); The wide relationshipswith citizens, businesses, andquicker distribution of othergovernment agencies, and negativenews on the government; employees;Quicker and Better Thedifficulties in maintaining responsivenessto national 24/7reliability and accessibility of securityissues and unfortunate e-governmentoperations; events;Enhanced transparency of Unclearand inconsistent, and theiroperations; Improved inexperiencedgovernance of engagementsfrom citizen, andpolicies for the Internet; etc. businesses,other government agencies, and employees; Improved cooperationand collaboration with relevantparties; Diversified campaigns and propaganda activities; among any others.To Societies Better availability and accessibilityof Digital divide (i.e., between products, services,information & developing and developed knowledge fromall over the world; countries);Health issues arising Better living(i.e., convenience of fromusing the computer and onlineshopping): Better accessthe Internet; Job losses understandingof the world and its arisingfrom automation; Public history;Exposure of ideas to the welfareissues (i.e., Online gaming/- globalaudience; Faster distribution of gambling addiction); Publicsafety information and knowledge;Easier, issues (i.e., Online less expensive and moreflexible pornography,especially child education (i.e., via etraining/learning, pornography);The loss of face-to- online universities);Improved health facesocial networking to social 51
    • SHENYANG AEROSPACE UNIVERSITY E-Commerce servicesand medical advances; networkingsites and other Reducedrisks associated with onlineapplications; The e-waste performingdangerous tasks; Better (disposingcomputing and crimeprevention and control; Better internetequipments). environment protection andsustainability; among manyothers. Table: Some positive and negative impacts of electronic business 52
    • SHENYANG AEROSPACE UNIVERSITY E-CommerceConclusion:With Alibaba‘s business model and value chains, the future strategy of the companyincludesstrengthening and securing their supply chain to increase their substantial marketshare,increase profits, and hold off competitors. Many of these planned strategies willhappenthrough various marketing and customer service initiatives, such as targetingmarketing toincrease the customer base, continuously adding tools and features to thesoftware, monetizinga user base that has been receiving many free services for years, andexpanding their serviceplatform from trading to customer relationship management. AsAlibaba expands out of China,it must face fierce competition from Global Source and nicheB2B service providers. If theycan expand while the competition threatens to move ontoAlibab‘s home turf, their futurelooks very bright.References:  Typical Trading Process on the Alibaba.com marketplace‖. Asia Case Research Centre. The University of Hong Kong. ―Alibaba.com‖. 2008.  Virtual Value Chain‖. http://en.wikipedia.org/wiki/Virtual_Value_Chain. Retrieved Oct 29, 2009.  www.alibaba.com  E-commerce Development in China, State Economic and Trade Committee, 19 December.  Alibaba, (2010a). Company Overview [Online]. Alibaba Group http://news.alibaba.com/specials/aboutalibaba/aligroup/index.html  "Critical success factors for B2B e-commerce use within the UK NHS pharmaceutical supply chain". International Journal of Operations & Production Management  Hsia, cliff (2005). About AliBlog. Retrieved October 9, 2009, from About AliBlog Web site: http://aliblog.alibaba.com/aliblog/about.html  The Largest B2B marketplace. Retrieved on September 21, 2009 from http://aliblog.alibaba.com/aliblog/2008/12/sourcing-for-online-sales-think- globally.html. 53