1. E-Industry analysis
2. A. Nature of the Industry

E-commerce has increasingly become a common type of business since the 20th century.  It is a kind of business in which people transact businesses electronically especially through the Internet. The provision of goods and services takes place online and physical contact between the buyer and supplier is very minimal or none at all. Essentially, e-commerce is a technological processing of electronic information for business purposes. (Qin & Beijing, 2009).  Through the digital and electronic technology, players in e-commerce can transform, redefine relationships and create value among organizations and individuals. With the modern advances in technology, the concept of e-commerce is becoming increasingly popular especially in the modern dynamic and competitive business world. Alibaba.com, the giant e-commerce firm in China, is one of the largest online platforms internationally.

Types of E-commerce in Alibaba

From the definition, it is clear that e-commerce involves an online commercial transaction between a supplier and client. Alibaba.com through its different commercial groups exercises different types of e-commerce transactions.  The following are different categories of e-commerce transactions at Alibaba;

(i)    Business-to-business (B2B)

Alibaba.com is the largest online business-to-business trading platform for small business. This is a form of e-commerce in which organizations carry out business transactions electronically between themselves. The most notable aspect with B2B web shop is that requires log in details to gain access (Magazine, 2012).   The customers in B2B web shops are treated differently in terms of prices, assortments, and discounts. Alibaba has beaten other competitors in B2B especially from the Chinese portal 1688.com, which facilitates domestic B2B trade in China.

1. ii) Business-to-Customers (B2C)

This kind of e-commerce involves an electronic business relationship between businesses and final consumers. It operates as a common retail shop where consumers have access to products and services from web shops. It is associated with quick processing and delivery, and this makes it common in the modern economy. This type of e-commerce has open access, and all visitors have access to the web shops. In this business model, Alibaba introduced a transaction-based retail website AliExpress.com that allows customers to buy goods in small quantities. Alibaba’s Tmall also account more B2C transactions as it handles more than half of all parcel deliveries in china.

iii) Consumer-to-Business (C2B)

This another common type of e-business where consumers post their products and services expecting bids from interested companies. The consumer and company that have expected bids selected carry out a review of the bids.

1. iv) Consumer-to-Consumer (C2C)

This is a form of electronic business of goods and services involving two consumers.  People conduct these transactions through a platform that a third party offers. Alibaba’s Taobao branch is concerned with consumer-to-consumer business models. Alibaba offers free registration and commission free transactions using third party payment platforms; this has increased the website’s popularity. Taobao market place is one of the world’s top 10 most visited websites and has over 760 million product listings.

 

Nature of Alibaba’s Products and Services

The e-commerce industry is becoming a competitive industry each and every day. This competitiveness is a result of the dynamic nature of goods and services offered online. What is more, the technological advance in the modern days has increased internet accessibility. As a result, the percentage of the virtual items distributed by Alibaba is growing rapidly. Most of the commonly traded services in Alibaba web shops include an electronic version of newspapers, magazines, gaming, books, and electronics.  The organization also offers advertisement and e-payment services to customers through the Alipay. The market also involves physical properties such as houses and motor vehicles. Alibaba claims to be a one stop shop where a variety of products ranging from simple toys to automobiles.

User and Customer Characteristics in E-Commerce

As earlier stated, e-commerce involves the online transaction of goods and services. Customers in this trade may either be organizations or individuals. Customers in e-commerce are expected to check their requirements online and place their orders to the reliable suppliers (Magazine, 2012).  After making choices, the customer can make payments through the variety of e-payment options such as credit cards, PayPal, and MasterCard, just to mention a few.  Alipay has also been an important payment mode especially in Alibaba transactions. People can execute some of the e-commerce operations via e-mail, where people or companies mail the placement of orders and invoice notifications. What is more, there should be constant reviews on customer satisfaction to ensure maximum satisfaction of goods and services offered.

1. The structure of e-industry

Alibaba’s business model

Modern entrepreneurs have realized the magnitude of profits associated with e-commerce and are venturing into this business in large numbers.  The E-commerce business only requires a computer and Internet access. Alibaba has several websites where merchants and buyers sell and buy their goods and services 24/7. The organization has adopted a variety of e-commerce business models to online business as discussed below.

1. Storefront

This is a business model in which people sell goods via the website. The products sold on this model could be manufactured by the seller or sold through methods such as drop shipping; here, a third party is involved in selling goods on behalf of the manufacturer. Auction websites are also one of the most common types of storefront business models. This offers a storefront site where entrepreneurs sell their products through a bidding process. Alibaba does not conduct auction businesses as is the case with eBay and Amazon.

1. b) Vanity

This is a business model in which an individual promotes his/her interests through a website.  For instance, a writer who writes blogs as a form of self-expression can use this business opportunity. However, it is imperative to understand that vanity site is not for profit purposes, but people or businesses can generate minimal income. The blogger may take advantage of Advertisement Ads where one realizes earnings when visitors click on them.

1. c) Subscription

Another e-commerce business model from the Alibaba group is the subscription model.  In this model, there are subscription websites that allow subscribers to acquire information especially from newspapers, periodicals, and magazines.

1. d) Affiliate Marketing

This is a form of e-commerce in which one business sells the products of another in expectation of a commission. For instance, an individual may create a website and provide stock market information to help investors buy shares. The registration of such websites with affiliate programs of a business that sells a book on how to make money by investing in stocks and places a link to the book on the site, is paramount. When a visitor clicks and purchases the book, then the website owner receives a commission. Alibaba’s Taobao branch has made tremendous profits through earnings per click on their website. Alibaba offers free registration to this site thus attracting large number of customers.

1. Profiles of Key Competitors

Types of competitors and nature of competition

E-commerce has proved to be a very lucrative business opportunity and it has attracted several players. The increase in number of players in this sector has brought about very stiff competition in the industry. For instance, although Alibaba.com is unknown outside China, it has faced stiff competition both within and outside China. Most people compare its prominence in the Chinese market to the dominance of e-bay and Amazon. The operations carried out in the e-commerce of Alibaba are not like a typical e-commerce business. Alibaba does not embrace distribution channels and warehouses and neither does it indulge in direct selling. Its operations are based on an open marketplace where bigger and smaller customers can get to its customers. Amazon and e-bay offers global competition to Alibaba but the two operate in different set ups.

Alibaba’s Global Competition

E-bay

E-bay is one of the global e-commerce competitors of Alibaba.  The two are very close in set up and bringing trade merchants together on a platform. They also provide e-payment modes just like eBay’s PayPal called Alipay. EBay has been very competitive on e-market, PayPal and, eBay enterprises which involve commerce, retailing, and digital marketing. It is difficult for Alibaba to capture the brand recognition as one with eBay

Amazon.com Inc

Unlike Alibaba, Amazon is greatly involved in direct selling and owns distribution warehouses. It is a major competitor and has built strong brand recognition among its customers as a result of the provision of pleasing services to its customers. It has offered a great platform for manufacturers and self-branded products, and it is a platform for authors and publishers. However, it is imperative for one to understand that the two are prominent in their respective territories, and they only compete for markets outside their dominant regions.

Home Competition

JD.com

This is regarded as the largest direct online sales company in terms of transaction volumes. It supposedly enjoys 54.3% of the Chinas market share in the 2nd quarter of 2014 (iResearch). Its operations are similar to Amazon.com where its business model involves direct sales, holding inventories, managing logistics, and shipping. It also enjoys listings in the U.S stock markets.

Tencent

This is a moderate small Internet company founded in 1998. It indicates perpetual growth over the years and this makes it among the largest and widely used Internet service portals in China. Tencent company enjoys listings in the Hong Kong stock exchange and its common products are QQ, WeChat, QQ.com, and PaiPai just to mention a few. Though it started as an entertainment website, its latest operations seem to overlap Alibaba’s operations especially with its messaging app WeChat that is entering into e-commerce.

Baidu

Another domestic competitor to Alibaba comes from Baidu, which is China’s dominant search engine that is greatly concerned with online-to-offline services. Its presence has created demand for products in physical stores through the mobile and internet. The company, which is similar to Google, is listed on Nasdaq and deals in maps, videos, and software among other products. The deal between Dalian Wanda group, Tencent and Baidu has brought about stiff competition with Wanda being the world’s biggest online-to-offline e-commerce platform. Their unity is seen as a threat towards the success of Alibaba both in China and abroad.

However, it is imperative to understand that Alibaba has dominated over its domestic competitors in terms of revenues, market share, and also in publicity as a result of its listing in NYSE. The company has concentrated its efforts in the domestic market with only 10% of its revenues coming from international trade (Magazine, 2012). This has caused it to remain competitive and ward off the interest of eBay and amazon.com in the Chinese market since it would be difficult for them to take a lead there. Therefore, Alibaba’s competition is at home where everybody (Tencent, Baidu, JD, Wanda) is against it.

D Marketplace

The market is concerned with how the products and services get to consumers. The target customers and their location is another important consideration when defining a marketplace. Alibaba’s major markets are domestic and mainly from the Chinese population. The marketplace for the Alibaba’s products and services is the Internet. It is imperative to understand that the Internet has a diverse global market. This is great advantage to the company since the products will reach a large percentage of the audience. Alibaba groups own different online B2B marketplaces that offer an online platform for buyers and suppliers all over the world to get its products and services. The company has several websites from which potential buyers and suppliers acquire products.

The company has expanded its market beyond China; Alibaba is a leading global exporter and importer of goods and services. As a result of expanding its market place, the company has a Japanese website that has a Japanese language to enable trade in and out of Japan. The company has also embraced direct distribution in delivering its services and products to wider market places. Alibaba has several outlets outside China in countries like USA and UK. The company has strived to ensure that its services and products reach the required destination. It embraces every available channel including supermarkets, hypermarkets, and warehouses among others.  The company’s website has been instrumental in facilitating transaction between exporters and importers globally.

1. E. The General Dynamics of the eIndustry

The e-commerce industry is a very dynamic sector in which technology among other dynamisms are essential. Information technology has been a great driving force for the overall success that the company has realized.  The company has adopted a trade manager tool that is an important communication platform for trading partners to communicate in real time with their partners. The company understands the importance of communication in business, and has upgraded its e-trading communication system.  Alibaba has a team of experts who are always motivated to search for better innovative technology platforms to keep up with ever increasing generational change. Its urge to remain competitive in e-commerce has forced the company to develop new and highly competitive systems to improve customer transactions for the consumers by setting ample security actions. It is for this reason that the company has Trustpass; it gives online customers a strong trust and security of online transactions. The recent increase in cyber crime has forced the company to be wary of online fraud and must ensure that customer satisfaction and security are guaranteed. The company has the strongest anti-fraud and anti-spam technology that can detect fraudulent activities and filter unwanted messages. Alibaba understands that customers are the main source of their business. Therefore, its IT department is constantly involved in improving accuracy and protection of consumer interests.

1. Assessment of current Alibaba strategy and implementation
2. A. Nature of current Aibaba strategy

The modern e-commerce sector is very dynamic; therefore, it is imperative for businesses to have excellent strategies to attain a competitive advantage over other businesses. Alibaba has been at the forefront of ensuring that it has a workable strategy to achieve an upper hand as compared to its competitors (Scobey & Lingras, 2013). The company has maintained its initial model as a long-term model and built a foundation for Business-to-Business (B2B).  The company is aware that this model is pertinent to ensuring the network creation for partners. Such a business model is also responsible for maximum profits and sustainable revenue stream.

The B2B model is also a critical component of revenue and price strategy in the company. Over the years, the company has provided free membership to attract clients to e-commerce that has become quite competent. After the company attracted a good number, the members were registered at a fee. The overall company’s revenues have increased as a result of advertising, value addition, as well as, listing and registration fees.  The introduction of Alipay has also contributed immensely as it collects a service charge from business transactions that take place outside the company’s websites.

The company’s pricing strategy is also a competitive one.  Alibaba has ensured that its prices are competitive as compared to those of the competitors. It makes use of a strategy that ensures that the quality and prices of product and services offer a competitive edge and attract the target market.  Alibaba’s dominant position in e-commerce has made Alipay to emerge as the leading online payment processing avenue in China. Statistics also indicate that it clears over 80 million transactions daily. The current introduction of the Alipay Wallet mobile app has also resulted in an increase, in revenues as it completes 45 million transactions on a daily basis. Alibaba is also known to adopt the penetration pricing strategy that has been instrumental in increasing the sales and market share.

The company has also been actively involved in the issue of discounts to stimulate sales and maintain the company’s customers. The provision of discounts plays a significant role in influencing bulk buying especially during the festive period, and this has resulted in increased revenues. The company has also maintained high profits by ensuring the application of value addition to services (Doole & Lowe, 2008).  In such cases, it offers products at cheap prices, but services such as shipping, guarantees, warranties and instant deliveries ensure that total costs are higher than the production costs.

Alibaba also understands the importance of having a unique product in the market. It is imperative to note that Alibaba is the only Chinese company that failed to copy existing business models in US and Europe. The company understands the benefits associated with the value of proposition.  The company provides a platform for sellers and buyers and proposes news, timely price lists, and analysis (Schneider & Schneider, 2011).  It has a research and development team that researches on new functions and technologies to support their website. This enhances service and reduces the cost of operation, and also the amassing of significant profits. Alibaba’s business model and value proposition aim at structuring an efficient, flexible, and responsive structure in front of customer demands and information society opportunities.

Alibaba has also strived to ensure a strong brand image that is essential for the acquisition of a competitive advantage. The choice of the companies name has played a major role in establishing a strong image branding. The ability to be pronounced and spelled in different languages has given the company a competitive edge by raising brand awareness. The association of the company’s name with a character in the movie “One Thousand and One Nights” has also been instrumental in branding.  In a business perspective, Alibaba is a company that opens the gateway for wealth.  In essence, the success of this company barely lies on the choice of the name.

The company has also been involved in an intensive promotion strategy.  In the recent years, the company has penetrated many new markets through freebies. This has been a promotional tool to attract more customers to the company’s online marketing platform (Doole & Lowe, 2008).   Alibaba has also carried out internet promotions through direct marketing, public relations, and discounts for certain items especially during festivities. It is also imperative to note that the company has also used media advertising and event sponsoring as major promotional tools. All these factors have led to increased awareness of the Alibaba products.

Impact of Current Alibaba Strategy

It is imperative to understand that Alibaba marketing strategy will have great impacts both to the consumers and the organization itself.  For instance, the heavy promotional exercise will increase its global consumer base immensely. The increase will lead to the majority of consumers in having experience with the products that the company offers (Pour, 2013). The promotion exercise has enabled the company to penetrate in other markets such as Russia, North America, and Brazil.  This expansion is instrumental in creating a platform for interaction between people with different cultures and backgrounds. Consumers also have an opportunity to acquire a variety of products and services from the different marketplaces.

The current strategies that the company employs are also essential in ensuring that it stays ahead of its competitors. The organization has a strong online presence; over the years, it has been dominant in China. With increased strategic design, Alibaba will hold in its local market position and expand its global presence in other parts of the world. What is more, the increased brand name will result in an increase, in the number of organizations interested in working with this e-commerce giant and explore first-to-market opportunities.

The sole objective of the Alibaba Company is to ease the process of doing business everywhere.  Before the introduction of this company in China, the SMEs in the country faced an uphill task in selling their products. The promotional means available to the SMEs were very expensive, and they hindered growth and development of such entities. However, with the introduction of the well strategized Alibaba, the small enterprises have benefited immensely (Qin, 2014). The improved technology by the company has enabled the SMEs to enhance their business. For instance, geographical barriers have been fully eliminated, and this has expanded their markets. The presence of e-commerce has also slashed the transactional costs to reasonable amounts. Information technology has also enabled the suppliers and buyers to make informed choices since the availability of information has increased than before. It is imperative to understand that the strategies have also increased the competitiveness of the company both domestically and at the global level. According to BBC, the total sales from Alibaba in 2013 were more than those of Amazon and eBay combined. This is a clear indication of the increased competitiveness registered by the company as a result of an effective strategic marketing.

Long-Term and Short-Term Recommendations

From the above company analysis, it is necessary that the Alibaba Company practices the following recommendations now and in the future:

For instance, the company should find foreign markets-related information rather than spend a lot of time in the domestic markets. The Foreign market will bridge the information gap that existed earlier before and enhanced the understanding of new market characteristics (Magazine, 2012).   The organization should also move to foreign markets via various strategic alliances with effective and growing organizations. This strategy will be critical in value addition and improve the organization’s status in the global front. For the organization to deal with the competition threat of the union between Wanda and Baidu, it is recommended that it goes for mergers, partnerships or joint ventures. Such approaches will be vital in boosting competitiveness and increased global presence. It will be a kind of synergy for the organization to grow and develop in the new market, in an exponential way.

Another vital recommendation to Alibaba is to revise its promotional strategy. Although the organization’s promotion strategy is not the worst, a better promotional exercise will lead to increased profits (Palmer, 2010). For instance, the organization should concentrate on public relations and media advertising to create more awareness.  Though online communication is detailed, it is imperative to understand that its accessibility is limited.

It is also recommended that the research and development team are more aggressive in meeting the company’s obligations.  More innovative ideas are essential for increased performance of the organization. In the same way, critical innovations regarding the current market situation of the company are necessary for strategic reasons. Such ideas are important in enhancing promotion and branding of the company’s products.

It s also recommended that Alibaba grabs the untapped markets in developing countries. The management should understand that developing countries forms the best market for the development of e-commerce. The research and development team should have an analysis of the developing countries to make informed choices on how to tap this untapped potential. The necessary training on how the business proceeds is also essential in ensuring that the target market is conversant with such business dealings.

Alibaba.com should also ensure a more user-friendly e-commerce marketplace for the global consideration. It is imperative to understand that most of the world’s population, especially from developing countries, is not conversant with the e-commerce marketplace.  Therefore, the IT team should develop a user-friendly software and e-commerce marketplace that may encourage the new users to inculcate the e-commerce marketplace for their buying and selling purposes (Bak, 2011).  This will be a major step towards achieving a global presence. A user-friendly e-commerce marketplace will be instrumental in enhancing the profitability and revenue collection.

Another important recommendation that the organization should consider is deciding on the best segmentation strategy for market penetration. Alibaba.com should go for market segmentation in the new marketplace and take advantage of the most suitable segment of customers available in the market. It will also be critical for the organization to identify the customers’ needs and their long term relationships with the organization.  Proper segmentation will also be critical to customer satisfaction and overall improvement in the operations of the company. It may take some time, but the segmentation strategy will work and help the organization to gain competitive advantage and grow in the global market.

Conclusion/ Insights

Effective e-commerce marketing strategies have been instrumental in Alibaba’s success, in such a short period. It is crystal clear that it will be difficult for any e-commerce company to overtake Alibaba.com at the moment. The company’s success is attributed to the management’s ability to plan and execute effective strategies. It is evidence from the analysis that the founder of this company was greatly inspired by the success of Alibaba; the movie character. Jack Ma has admitted that the success of his business despite his ignorance is technology.  As a matter of fact, his great ambitions made him the pioneer of e-trade in China (Spiramus, 2009). This was an important step since it offered a platform for SMEs and other businesses to expand their sales through global penetration. His ideas opened China to overseas markets and made the company one of the best-recognized e-trade platforms in the world.

It is imperative to understand that the 4Ps in marketing have also been pertinent to the success of the company. Alibaba has ensured that the consumer has the right product at the right place, and for the right price. There has also been the practice of effective promotional activities to increase product awareness. Customer satisfaction has been a driving force in the daily operations of the organization.  Nevertheless, Alibaba.com should be cognizant of the fact that this successful empire faces a great risk from scammers, and this is detrimental to customer retention. Therefore, it is important for the company to have adequate buyers’ protection by identifying scammers. What is more, it should have secure payment modes such as Escrow to reduce the risk of financial losses. Lastly, a global presence is critical for business growth and sustainability; therefore, it is crucial for the company to embrace global penetration and face Amazon and eBay.

 

Reading list:

https://classes.soe.ucsc.edu/tim050/Fall12/Slides/CaseStudyAlibaba.pdf

http://www.slideshare.net/AKSHAYPRATAP0/case-study-of-alibabacom

http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy/BSTR288.htm

 

References

Bak, O. (2011). Impact of e-business technologies on public and private organizations industry comparisons and perspectives. Hershey, PA: Business Science Reference.

Doole, I., & Lowe, R. (2008). International marketing strategy: Analysis, development and implementation. (5th ed.). London: Cengage Learning.

E-business The Practical Guide to the Laws. (2009). Spiramus Pr.

Informatics and Management Science IV. (2013). Berlin, Heidelberg: Springer Berlin Heidelberg.

Laudon, K., & Traver, C. (n.d.). E-commerce: Business, technology, society (Tenth global ed.).

Palmer, D. (2010). Ethical issues in e-business: Models and frameworks. Hershey, PA: Business Science Reference.

Pour, M. (2013). E-commerce for organizational development and competitive advantage. Hershey, PA: Business Science Reference.

Qin, Z., & Beijing, C. (2009). Introduction to e-commerce. Berlin: Springer.

Qin, Z. (2014). E-Commerce Strategy. Berlin, Heidelberg: Springer Berlin Heidelberg.

Schneider, G., & Schneider, G. (2011). E-business (9th ed.). Boston, Mass.: Course Technology/Cengage Learning.

Scobey, P., & Lingras, P. (2013). Web programming and Internet technologies: An E-commerce approach. Burlington, MA: Jones & Bartlett Learning.

Magazine, E. (2012). E-Business Entrepreneur’s Step by Step Startup Guide. New York: Entrepreneur Press.

 

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