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Title: Organizational challenges in Alibaba Group and Strategies to curb these challenges Essay Example

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    Business
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  • Level:
    Undergraduate
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7ALIBABA GROUP

Title: Organizational challenges in Alibaba Group and Strategies to curb these challenges

  1. What organisational challenges did ALIBABA face when expanding globally?

Jack ma the founder of Alibaba was first quoted in a video shot rallying his friends in a cemented floor in china. In this footage, he said that their great completion did not lie in China but in Silicon Valley where technology development was at its best. This meant that Jack ma had an innovative spirit that led him far and beyond (So and Westland, 2010, pg. 83). This innovative spirit led him to many challenges in the establishing and the running of the company.

One challenge Alibaba met was when developing the e-commerce. Their western counterparts were not in support of this and this therefore posed a threat to its smooth continuation. Nevertheless, he did not give up and continued with developing Alipay. In the time, few Chinese used credit cards for paying for purchases made. The Alipay came not only as a relief and as security to their money but also provided a platform where the customers would get value for their money, as they would pay after the goods had been released to them. They also collaborated with shippers to help in the reliability of their trade. This was a step to encouraging people to shop online and these created a wide base for their market and win the trust of their western counterparts. Alibaba become the first person to create the e-commerce in China (So and Westland, 2010, pg. 83).

Another challenge was the internet bubble burst in 2000. This came as a threat to the internet company because many companies started to offer services that Alipay previously offered. This led to lose of many customers by Alipay. This meant that Alipay had to stop some innovative services they had started and stretch it to overcome the threat it was faced with. A huge blow came in 2002when EachNet, a company that had a bigger percentage of China’s small consumer in the e-commerce market was acquired by eBay. Ma had to use many resources in fighting back to create Taobao and Alipay. Taobao was made free for three years. This was a move to undercut eBay fee model and this will see most of its customers coming back to his company. He used many of his employees to post the advertisement of the free Taobao and this attracted many of his customers to him. This made eBay to give up as the number of customers in its platform had been absorbed by the free Taobao and left the company to make a lot of loses (Liu and Avery, 2009, pg. 47).

Ma over emphasis on the company also posed another threat to the company as it created a clash with its shareholders. These strained their relationship with Yahoo. Yahoo had previously contributed to a lot of the capital that Taobao needed. This relationship had profited Yahoo a lot and therefore issues of this nature could not have been avoided. Despite that, the move was towards the betterment of Taobao.

In 2011, Alibaba faced criticism when it did away with Alipay and did not tell yahoo immediately or the other shareholders. This Ma defended him by saying that only electronic payment services that were only owned by Chinese citizens would give operating licences and therefore Alibaba would not want to miss the golden chance of being registered in Beijing.

Alibaba faces another challenge of dominance. Many internet companies have been established in China. This has created a lot of competition to the company. Users of the internet market are shifting to using tablets and other Smartphone. This has created a challenge to the smooth development of the company and has led to the company trying to re-establish itself in the market again.

Jingdong.com is an ecommerce company that has established itself in China and has offered competition to Alibaba. The jingdong.com company has commanded a huge market share and has earned itself a big reputation in the ecommerce market. In March for example, Jingdong.com Company received an investment worth $215 million from games portal Tencent holdings ltd. This competition has challenged Alibaba in terms of market share and reclaiming their old position of being the only company in the market. This company has come up to challenge Alibaba greatly and this has strained their working greatly.

In its quest to expand its market in US, it has been faced with a number of challenges ranging from product selection and volume. Gaining traffic flow to their site in the US is a big challenge because they exist multimillion companies in the US that have gained command in the ecommerce industry. To thrive in this the company has to invest a lot in securing big brand companies that will help it in advertising and securing itself in the market share. The company in the US is targeting small merchants and this is a challenge to commanding a big market share (Liu and Avery, 2009, pg. 48).

  1. Examples of strategies (globally) that allowed Alibaba to overcome these challenges

Jack Ma the founder of Alibaba in the beginning was only a computer trainer, who had not enough capital to start a huge company for ecommerce, but he had to start somewhere and this was the first of the many strategies that he would use in order for him to gain a market share in the Chinese market and beyond. The first of this strategies was to focus on where he would want to be and this made him realise that for him to succeed he had to set his mind to the Silicon market. This made him select a team of 17 members from his friends that would help him in the establishment of the ecommerce centre. In addition, to enable Alibaba to be successful in the market, they established online payment services that would enable the buyers to pay for the goods upon receiving them (Schepp, 2010, pg. 98). They also established services with ships that would enable shipping of the goods from faraway lands to the customers. This was in its plan to reduce the trouble that the customers had in the purchase for their goods and this was meant to attract more customers in the market.

Having met many challenges on the way, Alibaba had to invest in many strategies that would see him dominate the market share. One such was the collaborating with Yahoo. One thing that was in Jack Ma mind when collaborating with Yahoo was that it could provide the right capital for its investment and reinvestment. This worked well for him as true to his statement, Yahoo invested a lot of money into the company and this enabled the company to command the Ecommerce market. However, the collaboration did not last for long because Alibaba needed to be registered as an electronic payment services company. The registration required the companies to be registered under this service to be fully owned by the Chinese people (Schepp, 2010, 98). This therefore led him to making a choice of distancing from Yahoo and did not inform Yahoo immediately of this decision

Another strategy used by Alibaba was the creation of Taobao. This ecommerce company was used to command a market share in China after the company lost a lot of its market to a newly established EBay company that had a huge capital base and therefore had a huge potential of commanding a large capital base. Alibaba made Taobao a very service company for three years. This was a move made to attract its customers back. This move true to its objective enabled the company to attract many people to it and made the EBay to be sold out. This helped Alibaba to remain the only established ecommerce system in the company. Alibaba used 80% of his employees in the advertisement of the free Taobao services that could be offered. This reduced the company’s cost of advertisement. This advertisement was done using the employees’ emails.

Another strategy was established when there was a great upheaval in the ecommerce market. This was a great blow to the company as better companies came up that would provide better services to the people and will reduce their market in China. The company came up with better strategies of introducing better services and restructuring the company to reduce the output of the company to avoid many losses that could be made if nothing was done. They planned up on opening other stations in Shanghais and in the US. This would add up to their customer base (Nonaka and Zhu, 2012, pg. 112).

Alibaba which was a privately owned company strategized a plan to make the company a public company by setting up 25 business used in its preparation for its first ever IPO, (initial public offer). This would see it to a public owned company and this will enable it in expanding its market share. This will also shelter it from stormy relationships that it can make when collaborating with other companies like its partnership with Yahoo. This IPO will increase the value of the company to around $120 Billion in the next years. This will enable it compete successfully with Tencent a company that offers competition to Alibaba.

In establishing, its market in the USA Alibaba faced many challenges from the already existing companies that had commanded a large market share. Alibaba had to strategise greatly in order to establish itself. One of the strategies put was to target middle-income companies. This is because these companies were many and could attract many people into them. This was a shock to many companies as they thought that Alibaba being a great company in China would use the same strategy in gaining the market Share in the USA. Alibaba by targeting middle-income companies made a lot of income as these companies had a thirst for an ecommerce company that would enable them to advertise their products without charging the same as the big companies were being charged for advertising (Nonaka and Zhu, 2012, pg. 112).

References

. New York: HarperBusiness,Alibaba: the inside story behind Jack Ma and the creation of the world’s biggest online marketplaceLiu, S., & Avery, M. (2009).  pg. 45-54.

. Cambridge: Cambridge University Press,Pragmatic Strategy Eastern Wisdom, Global Success.Nonaka, I., & Zhu, Z. (2012).  pg. 112.

. Hoboken, N.J.: John Wiley & Sons,The official Alibaba.com success guide: insider tips and strategies for sourcing products from the world’s largest B2B marketplaceSchepp, D., & Schepp, B. (2010).  pg. 98.

. London: Marshall Cavendish Business.Red wired China’s Internet revolutionSo, S., & Westland, J. C. (2010).  Pg. 83.