Case 5 Alibaba in 2011: Competing in China & Beyond

1. Introducti
on
Startup
portfoli
o
Competiti
on
Summar
y

2. Introducti
Startup
portfoli
o
Competiti
on
Summar
y
 Alibaba Group.
• Is an e-commerce company that had several Internet businesses
focused on various e-commerce business models such B2B, C2C,
and B2C.
• Is the first companies to enter the Chinese Internet industry,
Alibaba played a major role in bringing about an Internet
revolution in the country.

3. Introducti
Startup
portfoli
o
Competiti
on
Summar
y
 Alibaba Group.
• Alibaba was launched with the vision of serving SMEs in China
and across the world.
• Alibaba had been the clear market leader in the Chinese e-
commerce market with a market share of 63.5 percent for the FY
2010, & by 2011 it had 69 million registered users spread across
more than 240 countries.

4. JackMa
Startup
portfoli
o
Competiti
on
Summar
y
 Jack Ma :
• In 1964, Jack Ma the Chinese business magnate, investor was
born.
• At the age of twelve, Ma began learning English by listening to the
Voice of America24 and acting as a free guide to foreigners who
visited Hangzhou.
• In 1988, Ma earned a degree in English from the Hangzhou
Teacher’s Institute and began teaching English and international
trade at the Hangzhou Electronic and Engineering Institute.

5. JackMa
Startup
portfoli
o
Competiti
on
Summar
y
 Jack Ma :
• In 1995 Ma resigned from his teaching job, borrowed US$ 2,000
from his relatives, and launched China Pages (China’s first
commercial website).
• In 1998, Ma moved to Beijing to work as the Head of the
Information Department of the China International Electronic
Commerce Center for the Chinese Ministry of Foreign Trade and
Economic Cooperation.
• In 1999 Ma resigned to fulfill his dream of establishing his own e-
commerce company.

6. Introducti
Startup
portfoli
o
Competiti
on
Summar
y • In March 1999, Ma and his 18 colleagues came up to US$ 60,000
to start Alibaba from Ma’s apartment in Hangzhou.
• In August 1999, the Chinese Bureau of Industrial and Commercial
Administration registered Alibaba as a computer company since
the company’s business could not be classified under any other
category & Because of the strict IPO regulations in Beijing,
Alibaba was registered in Hong Kong at the same.

7. Introducti
Startup
portfoli
o
Competiti
on
Summar
y • In October 1999, Ma accepted an offer from a group of
investors including the Goldman Sachs Inc. and was able to raise
US$ 5 million from them.
• In January 2000, Ma successfully persuaded Softbank to invest
US$ 20 million in his venture.
• In 2000, Ma moved the company’s headquarters from Hangzhou
to a new building in Shanghai.

8. Introducti
Startup
portfoli
o
Competiti
on
Summar
y

9. Introducti
Startup
portfoli
o
Competiti
on
Summar
y Threat of new entrants
• Alibaba’s position as market leader
faced a challenge when Baidu
announced its plans to enter the
Chinese e-commerce market.
• The political environment in China is a
barriers to entry into the Internet
industry were low as far as start-up
costs for foreign players.
5 Forces
COMPETITORS
SUBSTITUTES
SUPPLIERS
NEW
ENTRANTSBUYERS

10. Introducti
Startup
portfoli
o
Competiti
on
Summar
y Threat from substitutes
• A few players existing in the Chinese
e-commerce market, because of the
prices they fixed to increase their
profitability.
• Alibaba’s position is a dominance in
the B2B market.
5 Forces
COMPETITORS
SUBSTITUTES
SUPPLIERS
NEW
ENTRANTSBUYERS

11. Introducti
Startup
portfoli
o
Competiti
on
Summar
y Opportunity of buyers power
• Because of Alibaba providing free
services , the bargaining power was
significantly high in the Chinese market.
• Buyers in the industry compete by
bargaining for services and quality and
the cutting down of prices, keeping
profitability of the industry in check
5 Forces
COMPETITORS
SUBSTITUTES
SUPPLIERS
NEW
ENTRANTSBUYERS

12. Introducti
Startup
portfoli
o
Competiti
on
Summar
y Strength power of suppliers
• Alibaba’s strengths was its strategic
location where thousands of suppliers
were available.
• The understood of Chinese language
and culture was also considered as an
asset for it in maintaining its supplier
directory included the manufacturers,
agents, wholesalers, distributors,
agents, etc.
5 Forces
COMPETITORS
SUBSTITUTES
SUPPLIERS
NEW
ENTRANTSBUYERS

13. Introducti
Startup
portfoli
o
Competiti
on
Summar
yOrganizational Strategy
Acquisition Strategy
Increasing user acquisition
and engagement.
Improve customer experiences.
Expanding products & services.
Marketing Strategy
Pricing.
Discount.
Free Membership.
Value - added service.
B2BB2CC2C
Alibaba
Alibaba
Amazion
AliExpress
ebay
International
1688TmallTaobaoDomestic

14. Introducti
Startup
portfoli
o
Competiti
on
Summar
y(B2B) Market
• 1999 Alibaba lunched after other players lunched & market
leader was global sources in B2B market.
• BY free charge transaction & build
customer loyalty strategy Alibaba
Became the market leader with
53.8% at end of 2011 in B2B market.
Global Source Competitors
Alibaba
54%
Global sources
12%
Made-in-
china.com
4%
HC360
4%
Dhgate
3%
Mysteel
2%
Global Market
1%Toocle.com
1%
Others
19%
Market Share %

15. Introducti
Startup
portfoli
o
Competiti
on
Summar
y
2002
2011
2008
2007
2006
2005
2004
2003
In 2002, eBay Inc. entered China by acquiring a 33 % of
EachNet.
79% Market Share.
May,
Taobaolaunching as B2C & C2C
platform
US$ 56 m from Softbank
team up with Son
July, full acquisitionfor EachNet by $150m
investing$ 12 m
LaunchingAliPay
Q1: 90% M.S.
Q1: 9% M.S.
↑Q4: 41% M.S.
↓ Q4: 54% M.S.
↓ 29.1% M.S. ↑ 67.3% M.S.No. of page viewsuser7.4
GMV $90m
No. of page viewsuser 10.7
GMV $120m
May, LaunchingB2C services
on Taobao
Removing the
middlemanconcept
Motorola, Haier,
Nokia, Adidas
Dec, JV with TOM
FreeListing
FreeListing
↓ Q1: 16% M.S.
↑ Q1: 74% M.S.
↑Q2: 82.95% M.S.↓ Q2: 7% M.S.
98 m registered users,86.3 m registered users,
C2C↑Q3: 90.5% M.S.
B2C↑Q3: 50.9% M.S.
↓ Q2: 0.6% C2C & B2C Market

16. Introducti
Startup
portfoli
o
Competiti
on
Summar
y
2002
2011
2008
2007
2006
2005
2004
2003
C2C & B2C Market
Strengths: Easy-to-use, additional
features, contact between sellers & buyers,
Understanding the Chinese consumers ,
aggressive promotional strategies.
Weakness: Limiting to local market,
Insufficient control counterfeit products
Strengths: 1st to enter the online auction
business, Strong brand,
Weakness: Inability to understand local
market, language and culture and failing to
adapt, The difficulty of using, The lack of a
secure online payment system, Concealing the
seller’s identity

17. Introducti
Startup
portfoli
o
Competiti
on
Summar
y Web Search Market
46.5%15.6%2006
76%0.3%2009
77.7%0.2%2011
• Alibaba acquired the operations of Yahoo! in China in 2005
• Baidu is local competitor and
dominant web search market in
China.
• Confusion in strategy & brand
ambiguity, no one know it is
search engine or portal and then
turning to be a business-oriented search engine
• The inability to add value to the customers to
differentiate from the competitor.
• Launching eTao as online shopping search engine
Chinese web search market had reached RMB 811.7 million in 2007

18. Introducti
Startup
portfoli
o
Competiti
on
Summar
y
 The Key Success factors
• Leadership and vision: the leadership and vision of Jack Ma cannot
be underestimated. He was able to build up an Internet business in
China from scratch and this led to the flourishing of the Internet
market in China. His entrepreneurial skills and vision contributed
hugely to the success.
• First mover advantage: Alibaba started its operations when
e-commerce in China was in its infancy stage, Alibaba started with
operations that concentrated on providing B2B services to SMEs
that were aspiring to go global.

19. Introducti
Startup
portfoli
o
Competiti
on
Summar
y
 The Key Success factors
• Smart competitive and marketing strategies: From an early stage,
Alibaba had been focusing on differentiating itself by providing better
services to its customer. It put an innovative business model in place
where customers could try out its services without any cost.
• Local knowledge: The knowledge of the local market also proved crucial for
Alibaba's success. For instance, its decision to start a payment system in
collaboration with a reputed bank in China was due to its local knowledge.

20. Introducti
Startup
portfoli
o
Competiti
on
Summar
y
• Taboo's understanding of the Chinese language, culture, and consumer
preferences helped it emerge as a successful player in the Chinese online
auctions market. Taboo leveraged on its knowledge of the local market to
wean customers away from eBay Each Net.
• Adopting a free strategy formed the core of Alibaba's business
model. Most of the sellers and buyers were attracted to its site
because of Ma’s strategy of not charging any listing and transaction
fees from its buyers and sellers in contrast to other e-commerce
sites that charged for their services.
 The Key Success factors

21. Introducti
Startup
portfoli
o
Competiti
on
Summar
y
• The business model at Alibaba entailed that Ma in conjunction
with his employees developed the corporate strategy. The model
was arrived at after a thorough review of the company's
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.
 The Key Success factors

22. References
• www.resources.alibaba.com.
• www.forbes.com
• International Management Managing Across Borders and Cultures , EIGHTH EDITION ,Helen
Deresky. Website: www.icmrindia.org .
• https://www.inc.com/alex-moazed/why-alibaba-shut-out-the-google-of-china-and-all-that-
referral-traffic.html
• http://www3.hkexnews.hk/listedco/listconews/sehk/2011/0407/ltn20110407456.pdf
• https://www.ukessays.com/essays/marketing/analysis-of-taobaos-business-strategies-marketing-
essay.php

23. THANK YOU
Abdullah Shadad – Ahmed Fouad
Ahmed Goda - Ibrahim Ateya – Islam Magdy
Omar Diwan - Shady Rabea