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Alibaba case study

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  1. 1. 1. Who is  Online market place for national and international trade(Est: 1999)  B2B market place for International and Domestic trade  Manufacturer, trading agents------------export (emarketplace) ------ Global buyers  Global Suppliers------------Import (emarketplace) ------ Manufacturer, trading agents, Retail Shops  Typical Sellers- SME’s  Buyers-Companies of all sizes, Very diverse  The business model of Alibaba is very simple. It is to help sellers meet buyers. More specifically, it provides an Internet based business‐to‐ business (B2B) platform where sellers (suppliers / manufactures) can meet buyers (outsourcers / wholesalers) on a global scale.  Customers are both the sellers and the buyers, who are able to post “storefronts” to advertise their products or needs. the workflow includes: 1. Suppliers and buyers post their listings, matching the inputs from the company’s strategic perspective. 2. Listings are searched, contacts are made, and information is exchanged between the suppliers and buyers. This will often include product specifications and capabilities. This corresponds to the information manipulation the company’s servers and software use to generate the value for the customers. 3. Customers then negotiate with each other, which is the “outbound” part of the workflow. 4. All of the communications for suppliers and buyers is enabled through tools within Alibaba’s software.
  2. 2. Moved beyond its original remit of connecting businesses to each other to ventures that let companies sell directly to the public (Tmall) and enable members of the public to sell to each other (Taobao). In America 76% of online retailing involves people buying from individual merchants, according to a new report by the McKinsey Global Institute (MGI), a think-tank. In China, in 2011, that figure was 10%. The other 90% was sold through marketplaces that simply allow buyers and sellers to find each other. The first was that many Chinese are tight-fisted. So Alibaba made all the basic services it offers free to both buyers and sellers. It earns money through online advertisements and extra services it offers clients, such as website design. With 6m vendors Taobao is a cluttered-up cyberspace. Many sellers think it worthwhile to pay for fancy storefronts and online advertisements to help them stand out. The second is that many Chinese are reluctant to trust strangers. So Alibaba has provided tools to build trust. One is an independent verification service through which third parties vet the claims made by sellers; the sellers pay for the process.
  3. 3. Another is the Alipay payments system. Unlike PayPal, used by many Western internet companies, Alipay takes money up front and puts it in an escrow account. For three years Alibaba has been making small loans (average size $8,000) to merchants trading on its platforms, using the data it holds on them to guide its decisions. Taobao-C2C-Larger then ebay Tmall-B2C eTao-Comprehensive shopping search engine in china Alipay Alibaba Cloud Computing-data centric cloud computing service Alibaba’s biggest shopping site with more than 7 million sellers and 800 million product listings, doesn’t charge any commission fees on transactions. Taobao makes money because many merchants pay to advertise on the site as they try to stand out among several million merchants and attract consumers. Alibaba’s model is a modified one reflective of their entirely virtual service nature.
  4. 4. Competitor 1. Global Source Advantage:  Has its own fixed base of buyers and customers  Very Experienced in promoting global sources  Provide market research reports and organize their own events Disadvantage:  Less well known domestic brands than alibaba  Less number of suppliers than alibaba group  Alibaba is positioned to service small and medium enterprises. Global source targets large enterprises. 2. Made in Advantage:  Part of focus technology group has financial strength
  5. 5.  Prices are cheaper  The use of agent system Disadvantage:  Less well known domestic brands than alibaba  Less number of suppliers than alibaba group  Publicity and adv. Less as compared to alibaba Revenue models:  Transaction fees  Fee for Service  Membership fees  advertising fees