The problem of counterfeit products on Alibaba platforms is twofold: its first part is concerned with the managers’ awareness (or the neglect of the necessity for a change), and the second one is the issue proper: the presence of counterfeit products (Buchwald & Neckes, 2014). As a result, our recommendations include a two-step system of actions.
First Step: Management Awareness
The first step towards changing the situation consists of encouraging the management to realize the necessity of attending the issue. A thorough analysis of the situation with the help of strategic tools and the presentation of the results to the leaders of the company is suggested (Rao, Rao, & Sivaramakrishna, 2008). As shown in this paper, the results of such an analysis demonstrate the fact that counterfeit products are a weakness and tend to cause other weaknesses; therefore, these tools should improve the awareness of the managers.
Another form of analysis, the development of multiple scenarios can be recommended as well. The main scenarios would include “doing nothing” and “changing the situation” with the latter developed according to the recommendations of the second step that is discussed below. Scenarios, as stated by Lindgren and Bandhold (2009), are both a “learning tool and planning instrument,” which means that they are suitable for the demonstration and analysis of the situation and the creation of a detailed plan for the implementation of the second-step recommendation (p. 24). Still, the primary role of scenarios consists of improving the awareness of the company’s leaders by demonstrating to them what the results of their actions and lack of actions can be.
Second Step: Counterfeit Products
After the first part of the issue is dealt with, the problem of counterfeit products can be attended. Here, the second recommendation from the previous chapter is chosen: it is suggested that the firm’s operations are revisited and restructured. The main reason for this choice is the fact that counterfeit products play a vital role in the company’s operations (Schuman, 2015; Alibaba Group, 2016). Since the problem is so deeply rooted, the attempt to deal with it is a major change that is likely to involve several aspects of the company’s activities: in other words, it will result in a reorganization that should be managed. Restructuring is a transformational tool for substantial and consistent change that is suitable for such management (Zilka & Bischoff, 2010).
Several remarks can be made about the implementation of restructuring. As stated above, restructuring beings with an analysis as well, and the key tools include IFE, EFE, and PESTEL. The primary aim of restructuring deals with the improvement of the control over suppliers and distributors as well as the related policies. However, the targeted area is bound to cause changes in the company as a whole, which includes its competitive strategy. On the other hand, the restructuring must integrate conservatism elements so that the company’s current assets and competitive advantages are used, and its image remains whole and improved rather than replaced. It is noteworthy that the specific features of this restructuring can be figured out as a part of the scenarios presented to the company’s leaders during the first step of the action for change.
Conclusion: Recommendations Effectiveness
Given the significance of the issue, Alibaba is very unlikely to benefit from the lack of actions, which explains the need for the first step of the recommendations. This first step needs to include all the means of improving the managers’ awareness; the tools that are mentioned here were chosen for their demonstrative and illustrative capabilities. The choice of the second-step recommendation is explained by the fact that the problem is very deeply rooted in the organization. The two-step plan addresses both aspects of the problem; therefore, it can be suggested that the presented proposition is a viable option, and the company is likely to benefit from it.
References
Alibaba Group. (2016). Company Overview. Web.
Buchwald, B., & Neckes, J. (2014). Alibaba’s Catch-22. The Business of Fashion. Web.
Lindgren, M., & Bandhold, H. (2009). Scenario Planning. New York: Palgrave Macmillan. Web.
Rao, C., Rao, B., & Sivaramakrishna, K. (2008). Strategic Management and Business Policy. New Delhi, India: Excel. Web.
Schuman, M. (2015). Why Alibaba’s Massive Counterfeit Problem Will Never Be Solved. Forbes. Web.
Zilka, C., & Bischoff, W. (2010). Business Restructuring. Hoboken, NJ: Wiley. Web.
The contemporary world is known for the fast progress in digital technologies facilitated by the internet that provides total and ubiquitous connectedness on the global level. As a result, the businesses involved in online retail have a massive advantage to expand their customer base and increase their income. The focus company of this paper is the Chinese e-commerce giant called Alibaba Group – the largest retail and wholesale company specialized in the online trades. Alibaba Group is known for its rapid expansion and the development of a broad ecosystem that secured a variety of competitive advantages for it.
Company Profile
Alibaba Group Holding Limited is based in the People’s Republic of China; however, its business operates globally, and the company has customers in every continent. The leader and the major founder of the company is a businessman and a former teacher of English, Jack Ma. Today, he is known as one of the wealthiest people on the planet and his business success and strategy are admired and studied in the business schools as exemplary. Initially, Alibaba Group was organized with one main objective – to create marketplaces for the small domestic businesses of China (Alibaba Group Holding Ltd (BABA.N), n.d.).
Company History
Jack Ma and 17 of his associated founded Alibaba Group in 1999 (The History & Timeline of the Alibaba Group, 2014). Focused on their role of the providers of the growth opportunities for the small domestic manufacturing companies, Alibaba Group took the Chinese trades to the new level. As a result, today, the Chinese business tend to produce more goods than the local consumers need as they rely on the customers from abroad. As the e-commerce business of Alibaba grew, the company became to penetrate many other spheres of life of their customers. These days, they B2C and B2B online platforms specialized in retail and wholesale such as TaoBao, Aliexpress, and T-mall, mobile payment (Alipay) and Cloud computing services; the company also is involved in the entertainment sphere owning a TV channel and producing motion pictures, mobile games and supporting a mobile browser (Alibaba Group Holding Ltd (BABA.N), n. d.)
Mission and Vision
According to the website of Alibaba Group, its mission is “to make it easy to do business anywhere” (Company overview, 2016, para. 1). The focus on the expansion of the business and growing its ecosystem is the main idea of the company’s vision and its primary goal. Small businesses remain the main target of Alibaba Group (Culture and Values, 2016).
Competitive Advantage
The competitive advantage of Alibaba Group is its size – the e-commerce giant is larger than several platform that operate in Europe combined which reflects in its level of income (Here’s Why Changing Market Dynamics Should Worry Alibaba’s Investors, 2014). Besides, the strong and all-consuming ecosystem provides a larger client base and secures the company’s dominant position in more than one market.
Problem Statement
One of the biggest problems Alibaba Group has to deal with is the heavy presence of counterfeit goods in its e-commerce platforms. In fact, most of the company’s current income originates from the activities of the counterfeiters selling know off items via the Chinese platforms. The leaders of the company are known to overlook this issue offering their marketplaces on mild conditions to all kinds of businesses (Buchwald & Neckes, 2014). Some of the world’s most renowned brands such as Gucci and Yves Saint Laurent noted that they were willing to press charges against Alibaba for the support of knockoffs that harmed the original manufacturers (Raymond, 2015).
The statement that Alibaba has potentially higher prospects for success in developing countries than in developed ones is considered to be logical and reasonable from the point of view of modern market trends. Large corporations like Amazon and eBay are aimed primarily at Western audiences. Alibaba, on the contrary, was originally created as a Chinese sales platform taking into account local market trends.
Despite the growth of the corporation and its significant expansion around the world, the principles of sales maintained by its management more closely match the models of developing countries. Such programs as discounts and promotional offers, wholesale propositions, and other strategies for attracting as many consumers as possible prove that Alibaba is more concentrated on the quantity of buyers than on their financial value. Consequently, this principle of customer-seller interaction is suitable for work in developing countries.
Sticking to this separation strategy has both benefits and some risks. For instance, when Alibaba concentrates on specific target markets, it develops proposals for its target customers based on their interests and offers relevant products. It also simplifies logistics since no complicated delivery schemes are required. At the same time, there is a threat of supply chain disruptions because small businesses operating through this platform may not have reliable partners.
Amazon’s and eBay’s strategies that focus on Western audiences have a good advantage in terms of consumer confidence and a well-formed technical base. Moreover, in these corporations, a supply chain problem may also arise. Demand for licensed and certified products dictates the need for cooperation with trusted suppliers, and delivery delays may occur. Therefore, there are certain difficulties and potential benefits in both operational mechanisms.
Alibaba Group is the largest and most famous e-commercial platform in China. Suppliers are mainly from China, but there are also exporters from Taiwan, India, Korea, Japan, and some other countries. Apart from the largest marketplace, Aliexpress, the company also includes the websites Taobao.com, Tmall.com, and Juhuasuan.com, which account for about 82 percent of the company’s revenue (Wu & Gereffi, 2018). Having the largest turnover in the world, Alibaba is a global leader in sales. This paper aims to identify the existence of internal and external strengths, weaknesses, threats, and opportunities for the Alibaba Group.
A well-known brand is the main strength of the Alibaba Group. Fast growth, huge investments, and asset acquisitions stimulate the interest of the outside world in the company and its brand. Another advantage is that the company has a wide network of sellers and buyers, the growth of which is promoted by active promotion and advertising (Clark, 2018). Alibaba has a rather big customer base and a well-developed procedure of the information exchange. The largest Chinese forum Yishanghuiyou creates a great opportunity for global business exchanges, which improves the popularity of the website (Wu & Gereffi, 2018). Information on the website is becoming more differentiated, comprehensive, targeted, and effective.
Aside from its obvious advantages, Alibaba Group has several weaknesses such as the abundance of sellers. When Alibaba first appeared, there were more than 8 million vendors, and this number is growing rapidly (Qin, 2017). Alibaba does not have a limit of vendors who register to sell their products on the Chinese e-commerce market. This has led to a huge number of dealers competing in the online commercial platform. This is a big challenge for many sellers which makes them withdraw the agreement. Moreover, the majority of vendors are deprived of the opportunity to sell at beneficial prices.
Alibaba Group has several threats that include the strengthening of state regulation and the growth of competitors. Increasing competition is the main risk. Although Alibaba is a market leader, the company is under pressure from a growing number of competitors, especially in the B2C segment. For example, JD.com shows rapid growth by offering lower prices and faster delivery (Wu & Gereffi, 2018). As for state regulation, most platform sellers are often non-residents of China, which allows them to avoid local taxation. There are currently no regulatory standards for small enterprises, but this omission may be eliminated in the future.
Despite some threats, Alibaba has huge opportunities for further growth because of its well-developed base in the Chinese market and a good knowledge of e-commerce. The fast-growing cloud business is one of the main expectations for the future. Recently, there was significant growth in its income from cloud services. The total revenue of Alibaba Group increased almost twice in just one year (Qin, 2017). Taking into account this enormous rise and the increasing investments in research and design, Alibaba can successfully develop its cloud business in the future.
It can be concluded that Alibaba has an almost exclusive monopoly in Chinese e-commerce. Alibaba creates products in fast-growing markets trying to take a leading position. The choice of the right strategy helps the company to continue its rapid growth, which will entail an increase in stock prices, profits, and trading turnover in the future. Despite the weaknesses and threats in the form of competition and state regulation, the growth potential of the company has not yet been exhausted.
References
Clark, D. (2018). Alibaba: The house that Jack Ma built. Harper Collins.
Qin, P. (2017). Integration in Chinese e-commerce and public policy concerns: An analysis of Alibaba Group. Thammasat Review of Economic and Social Policy, 3(1), 68.
Wu, X., & Gereffi, G. (2018). Amazon and Alibaba: Internet governance, business models, and internationalization strategies. International Business in the Information and Digital Age, 327-356.
Offering bonds in the United States will provide Alibaba with numerous advantages and disadvantages. The first advantage is that bonds are Alibaba will not give away ownership interest because they will not affect the company’s structure. Secondly, bonds will provide flexibility for Alibaba since the company can issue bonds of varying payments terms, value, convertibility, and duration. Thirdly, bonds will expand the number of available investors for Alibaba. In most cases, investors consider bonds to be a less risky investment. The ratings given to Alibaba’s bonds indicate lower-risk returns, attracting more investors. Finally, investors will be attracted to the bond issued by Alibaba due to its high liquidity levels than other investments.
On the other hand, bonds will be disadvantageous to Alibaba because they are debt. The company must make its bond interest payments to repay the debts. In cases where Alibaba cannot make interest payments, bondholders have the power to force it into bankruptcy. In bankruptcy, bondholders have a liquidation preference over the shareholders. Therefore, issuing bonds means that Alibaba will prioritize bondholders over the investors. Another disadvantage is that bonds can make Alibaba load itself with too much debt, leading to face value payments.
In 2012 and 2013, Alibaba raised its funds through syndicated loans. These loans vary in duration and their maturity from on-year to five years after being issued to the company. In addition, the loans were syndicated by underwriters ranging from number five to nine. Further on, the floating rate of these loans was according to the London Interbank Offered Rate (LIBOR). The money raised from these syndicated loans was put to various uses, including stock buybacks. However, bonding financing was different from syndicated loans because Alibaba had raised it from private equity investors.
When Alibaba became a publicly-traded company, it exposed itself to numerous risks. One of the main risks is that it is exposed to uncertain revenue growth recorded in its financials. For instance, from 2010 to 2013, its revenue grew by 400% because it was booking sales in billions. Due to this, the company is at risk of investors expecting a certain amount of upside when they put their money in the company, and sometimes these upside amounts can be unreasonable. In addition, uncertainty is likely to happen due to a lack of agreement between the company and customers to lock its growth. Therefore, maintaining revenue growth at the current levels is not guaranteed for the company.
The company’s filing has revealed that the cash reserves of $7billion and has a lot of debt. Before issuing bonds, the company had exhausted all the funding it had acquired from syndicated loans. In addition, the company has continued to increase its non-current bank debt, which is at $4.86billion. If the company continues with this debt trend without making payments, it is at risk of having a debt load that is relatively high in the future.
Due to the debt that Alibaba has, it is the best time to issue bonds because it will raise more funds that will help repay its creditors. In addition, offering bonds will increase investors in the company since it does not affect the company’s ownership structure. Further, bonds increase credit score of Alibaba since the bonds will not be offered under the parent company name, but finances channeled to the bonds will be brought to the company.
Alibaba group has been growing by leaps and bounds because of its unique business strategy. It has managed to spread its activities in more than 100 countries. There are a few strategic tools that can help save the company from counterfeit products.
PEST Analysis
PEST is an acronym for Political, Economic, Social, and Technological (Rao, Rao & Sivaramakrishna, 2008). It is a framework for macro-environmental factors that Alibaba can use for environmental scanning. It is useful in conducting an external analysis for businesses.
Economic
Alibaba Group is a Chinese e-commerce giant that has specialized in online trade (Buchwald & Neckes, 2014). The manufacturing companies are losing sales in the process. Gucci and Yves Saint Laurent are also about to complicate the matter if they decide to sue Alibaba group.
The legal tussle may cost the company a lot of money. When customers start complaining about the services, Alibaba may end up losing their trust. When they start buying from the competitors, the company would be greatly at a loss (Evans, 2013). The company has to take responsibility and stop the counterfeit products since customers get them through its supply chain.
Political
The company would not have perfect reception in the places it has been operating (Gould, 2012). Some countries would also consider increasing penalties or entirely disallowing their operations. The company should develop a marketing campaign in all the countries discrediting counterfeit goods. It should come up with authenticity stickers and digital confirmation numbers for proof of its products.
Social
It would hamper the workers’ future career advancement. Some could consider leaving the company. It would also have a poor relationship with its customers and suppliers. The leadership should start promotional activities for customer awareness. It should also have staff motivational programs.
Technological
Alibaba’s pride in technological advancement would just seem baseless for the moment. The government agencies would start applying stringent regulatory measures (Evans, 2013). The well established online trade would not be sufficient for the business if the company does not make sales. Alibaba should use the same technology to pass definite information about its products.
EFE and IFE Model
The External Factors Evaluation and the Internal Factors Evaluation models would be very helpful in establishing a solution. EFE would examine the external weights and ratings and come up with the correctly weighted score (Rao, Rao & Sivaramakrishna, 2008). Some of the challenges the company would have to deal with include competition, lawsuit, counterfeits, and distribution channels. The IFE would indicate Alibaba’s resources that would be available for the response. It would also evaluate the significance of counterfeit products (David, 2005).
Alibaba’s EFE and IFE Strategy Analysis Sample Tables
EFE
Weight
Rating
Weighted Score
Opportunities
Market Strength
11%
4
0.44
Diversified Portfolio
12%
3
0.36
Company’s Image
10%
2
0.2
Customer Preference
8%
4
0.32
Competitive Advantage
16%
3
0.48
Threats
Gucci
10%
1
0.1
Yves Saint Laurent
5%
3
0.15
Counterfeit
8%
2
0.16
Economic
5%
2
0.1
Legal process
15%
1
0.15
Sum of Weights
100%
Total Weighted Score
2.46
The above EFE results show that the total weighted score is 2.46. It indicates that the business has slightly less than average ability to respond to external factors.
IFE
Weight
Rating
Weighted Score
Internal Strengths
Diversified Portfolio
11%
2
0.22
Successful Innovation
8%
3
0.24
Good Reputation and Image
15%
5
0.75
Access to International Market
11%
4
0.44
Experienced Workforce
6%
0
0
Strong Network
12%
2
0.24
Internal Weaknesses
Leadership Response
10%
4
0.4
Staff Response
11%
3
0.33
Uncertainty
8%
3
0.24
Legal Framework
8%
1
0.08
Total Weighted Score
100%
3
The above IFE results show that the total weighted score is 3. It indicates that the business has strength in its response to the problem.
EFE and IFE results are necessary for the strategic analysis action. Alibaba needs to take steps that would enhance its internal progress. The leadership and staff need to cooperate more for the growth of the company. The company also needs to monitor its distribution channels keenly.
Competitive Profile Matrix
The Competitive Profile Matrix compares a business with its competitors to find opportunities and threats available (Gould, 2012). The method uses the critical success factors to compare company brands against those of the rivals.
Alibaba’s critical success factors are brand recognition and customer loyalty. It has qualified customer service and the best advertising channels (Buchwald & Neckes, 2014). The primary concern is about counterfeit goods. It has to overcome this challenge. Competitors should not use this as a competitive advantage against Alibaba (David, 2005).
Competitive Benchmarking
It is the continuous practice of comparing a company’s best practices with that of its most successful competitors (Raa, 2009). Benchmarking would help Alibaba to achieve its goal. It would help the leaders to improve customer service. Alibaba would have to benchmark its service offering to find out if it needs a significant shift. It would also benchmark its response time to customer complaints. It seems that these two components are the ones that the company needs to benchmark and make notable changes.
The leaders would have to accept that the problem would significantly affect the business. Strategic tools would help the leaders to make a decision that would quickly lead to adequate solutions. Alibaba group would be capable of finding the best option to become the preferred destination for all customers.
References
Buchwald, B., & Neckes, J. (2014). Op-Ed | Alibaba’s Catch-22. The Business of Fashion. Web.
David, F. (2005). Strategic management. Upper Saddle River, N.J.: Pearson Prentice Hall. Web.
Evans, V. (2013). Key strategy tools. Harlow, UK: Pearson. Web.
Gould, R. (2012). Creating a strategy. London, UK: Kogan Page. Web.
Raa, T. (2009). The economics of benchmarking. Hampshire, UK: Palgrave Macmillan. Web.
Rao, C., Rao, B., & Sivaramakrishna, K. (2008). Strategic management and business policy. New Delhi, India: Excel. Web.
Porter’s model emphasizes the mutual influence of a company’s performance and the market (Ormanidhi & Stringa, 2008). To define an appropriate strategy, a short description of the market’s structure needs to be presented.
Alibaba Group is a relatively young e-commerce company (founded in 1999) that used to be operating primarily in the Chinese and Japanese markets, where it has become the leader in the industry (Hoover’s, 2016). Nowadays it is successfully entering the world market. Given its current performance the company is in the stage of growth (By the Numbers: 60 Amazing Alibaba Statistics, 2015). Its NYSE debut provides evidence to this fact (Mac, 2014).
The products of Alibaba Group that include modern e-commerce platforms, mobile payments, a TV channel, mobile games, and cloud computing are definitely in the stage of rapid growth: nowadays, the demand for all these products and services is very high, and the level of innovation in them is corresponding (Alibaba Group Holding Ltd (BABA.N), 2016).
To sum up, this company is technically an entrant to the worldwide industry of e-commerce, but back in China and Japan, it is already a very reputable and distinguished firm. It can be said that the strategy of the company in China deals with differentiation: it is a prominent organization with unique (branded) products and services. The question of whether a similar strategy would work for the world market remains open for the time being. Given the competition of Amazon.com and E-bay (that, according to Hoover’s (2016), are the key competitors of Alibaba Group) it may be recommended to attempt the price leadership strategy in the world market.
At the same time, the products of Alibaba Group are quite distinct from what Amazon.com and E-bay are offering (in the terms of e-commerce, it is just a platform without warehousing, for example). Whether this distinction is going to be appreciated worldwide as much as it was in China and Japan is an open question for the time being. In any case, given the differences that these two markets have in relation to Alibaba Group, it appears logical to apply the focus strategy for these different environments.
Alibaba Group has been known as one of the pioneers in e-commerce, online retail, and other areas of the digital market for holding companies. Having entered the market when it was only starting to gain traction among general audiences and practically having built it from scratch, Alibaba Group has grown into a juggernaut of online retail (Tan, Tan, & Pan, 2016). As a result, the firm has been enjoying quite substantial flexibility in its decision-making as far as the business strategy of its choice is concerned.
The current business strategy of Alibaba can be described as a business-to-business (B2B) platform based on which the organization has been developing its marketing strategy and gaining the attention of its target audiences. Namely, the company seeks to digitalize every possible process across its value chain in order to transfer to the realm of the e-market completely. To achieve this goal, Alibaba Group will need to consider the entirety of its supply chain infrastructure, which includes its inbound and outbound logistics processes, its strategy toward managing communication across the SC, and the approach used for public relations.
Appropriateness
The focus on digitalization as one of the main phenomena observed n the global market is noteworthy. The inclusion of the tool that helps the organization to reach the standards set by an organization working in the global community is an essential tool in managing the instances of intolerance and the lack of compliance with the set standards for gender interactions. The importance of using the matrix model as opposed to the other two options that the model provides lies in the outcomes that each of the other two strategies provides. It is quite unusual that the case mentioned by Rick does not represent an immediate threat in the form of his uncle.
Overall, the appropriateness of the communication model at hand has to be recognized especially high due to the effects of the matrix framework, The opportunity to organize processes within the company simultaneously encouraging organizational development was a worthy goal to pursue. In turn, Alibaba could have made efficient use of the first method of application setting the process of establishing Adidas san actual physical company in the Lego world is quite touching.
The rationale for Developing International Competitive Capabilities
The basic reasoning behind the current approach used at Alibaba to help the company remain afloat in the environment of the global market is that the firm needs to expand and grow by encompassing a larger number of customers. Thus, the rationale for creating the international competitive capability described above is quite simple.
However, although the active attempts at embracing the digital market and using it to retain Alibaba’s influence in the global market are understandable, they seem to ignore the factors that make Alibaba so popular among its target audiences. To keep its services fresh and new to its clients and at the same time retain its brand name recognition levels, Alibaba will need to focus on the improvement in the quality of its services, especially as far as the probability of online fraud between customers is concerned.
Alternative Methods of International Market Entry
In addition to the increase in the customer base through the further expansion into the digital environment, Alibaba could consider partnering with the organizations that will offer the firm an opportunity to become a part of a certain foreign market. Although the described technique will only help Alibaba to focus on one market at a time instead of encompassing the entire global setting, it will allow developing especially strong relationships with the target population. As a result, the company will create a brand that will be recognized instantly by its buyers and, therefore, will gain the status of the most frequently used service in the identified environment.
Organizational Structures Used
When entering the digital segment of the market, Alibaba made it possible to use several organizational structures as the support system. Namely, both functional and divisional structures coexist in the company’s context to create a single matrix structure that allows the organization to thrive in the global market (Gang-lan, Xiang-hua, & Huang, 2009). Indeed, considering the tools that Alibaba uses in its selected economic environment, one will realize that the structural model of managing its key goals is deployed (Anwar, 2017).
However, at the same time, the company is capable of operating across the globe, embracing every possible state on the list with only a few rare exceptions (Wu & Gereffi, 2018). Therefore, the company is currently using the matrix organizational structure, which offers the most advantages to keep the corporate processes running and increase the competitive advantage (Anwar, 2017).
Alibaba’s Choice of Structure
The decision to utilize the matrix structure has affected Alibaba in several ways, the main one being its scope and goals. Since the matrix approach immediately implies that the two primary tools for structuring organizational processes are incorporated in the corporate framework, premises for the expansion of the business are designed immediately. The use of the matrix technique has helped the firm to choose the model of expansion into the global market, which was critical for its initial growth and the development of positive influence in the global economic setting.
In addition, the opportunity for aligning the key processes within its framework with the ones related to the company’s SCM was an important step in getting the firm’s processes in order and developing the system of managing its resources that would help Alibaba to maximize the utility of its current approach and maintain its performance processes uninterrupted.
Important Take-Always
The analysis of the changes that Alibaba has experienced after considering the idea f expanding its services shows that the company has been focusing on the expansion into the global digital market quite successfully. In addition, the positivity of the overall experience that Alibaba has had too far with the integration of the business strategy aimed at communication to other entities rather than the approach that involves the minimum communication across the supply chain.
The increase in the number of interactions before across the SCM context helps to keep the corporate processes orderly and organized, which is crucial for a company of the size of Alibaba. Moreover, the use of the matrix approach allows the company to establish a rapport with its employees by designing differentiated communication tools and implementing an employee-based approach.
Overall, Alibaba seems to have benefitted from the identified choice, gaining opportunities for additional training in the vaping contest (Wu & Gereffi, 2018). The approach adopted by Alibaba has helped the firm to introduce a homogenous framework into the management of its resources and the communication process across its departments. As a result, the efficacy of the SCM processes is believed to rise slowly, the chosen framework for managing organizational processes seems to be quite appropriate and efficient.
References
Anwar, S. T. (2017). Alibaba: Entrepreneurial growth and global expansion in B2B/B2C markets. Journal of International Entrepreneurship, 15(4), 366-389.
Gang-lan, H. U., Xiang-hua, L. U., & Huang, L. H. (2009). Research on e-business ecosystem and its coordination mechanism – A case study of Alibaba Group [J]. Soft Science, 9(3), 1-10.
Tan, T. C. F., Tan, B., & Pan, S. L. (2016). Developing a Leading Digital Multi-sided Platform: Examining IT Affordances and Competitive Actions in Alibaba.com. CAIS, 38, 36.
Wu, X., & Gereffi, G. (2018). Amazon and Alibaba: Internet governance, business models, and internationalization strategies. In International business in the information and digital age (pp. 327-356). Emerald Publishing Limiteds.
was founded in 1999 (The History & Timeline of the Alibaba Group, 2014).
is aimed at creating and offering marketplaces for retailers as well as wholesalers from all over the world (Alibaba Group Holding Ltd (BABA.N), n.d.).
Why Alibaba Group:
E-commerce market;
Company’s development;
Strong corporate culture.
Goals:
To evaluate the company’s corporate culture and employees’ adherence to it;
To identify issues that the company faces as regards:
human resources management;
corporate policies;
public relations;
ethical conduct.
Alibaba Group was founded in 1999 by Jack Ma and 17 more people. Initially, it aimed at the creation of the marketplaces for Chinese entrepreneurs, but soon it became international.
As for the basis of my choice, I chose the company as it is operating in one of the most promising markets. It is a competitive market, but the company manages to be successful and develop at a significant pace. Finally, the company is characterized by a strong corporate culture that accounts for the organization’s success.
The organization’s mission is “to make it easy to do business anywhere” (Company overview, 2016, para. 1).
Vision:
Alibaba Group aims at creating “an infrastructure of commerce” and be “a company that lasts at least 102 years” (Company overview, 2016, para. 2).
Values:
The company’s six values are:
customer first;
teamwork;
embrace change;
integrity;
passion;
commitment.
The company’s leadership (Alibaba Group Holding Ltd (BABA.N), n.d.):
Yun Ma – Executive Chairman,
Michael Evans – President,
Yong Zhang – Chief Executive Officer,
Maggie Wu – Chief Financial Officer,
Zhaoxi Lu – The Board Vice Chairman,
Peng Jiang – Deputy Chief Technology Officer,
Jian Wang – Chief Technology Officer,
Timothy Steinert – Corporate Secretary,
Lei Peng – Chief People Officer,
Shan Dai – Chief Customer Officer,
Xiaofeng Shao – Chief Risk Officer,
Masayoshi Son – Director,
Hwa Tung – Independent Director Appointee,
Wan Ling Martello – Independent Director,
Teh Ming Kwauk – Independent Director Appointee,
Jerry Yang – Independent Director Appointee.
The company is located in China but operate worldwide. The organization operates in the e-commerce market. The services are as follows:
Taobao Marketplace (the Chinese online shopping platform), Tmall (the Chinese brands and retail), Juhuasuan (online sales platform where consumers’ demand is aggravated with the help of short discounted sales, AliExpress (“the global consumer marketplace targeting consumers around the world”), 1688.com online wholesale marketplace operating in China, Alibaba.com (online B2B platform) (Alibaba Group Holding Ltd (BABA.N), n.d.).
The company’s organizational structure changed three times. The last shift resulted in the creation of 25 small groups that concentrate on a particular sphere. For instance, Alibaba Group provides the retailers and wholesalers platform for B2B and C2C business. The group also provides loans, insurance. It also has a TV channel and its own film and television production company (Friedman, 2016a).
The company’s leadership covers such spheres as corporate governance, financial management, HR management, public relations, and technological development. It is also clear that the company has divisions operating in different markets as the top managers concentrate on the overall group’s operations as well as particular divisions (Alibaba Group Holding Ltd (BABA.N), n.d.).
Alibaba Group Changing Organization Structure.
Organizational Overview: Structure & Diversity
Operations:
Different Markets;
Different Services;
Maintaining the focus.
Human Resources:
Gender;
Age;
Ethnicity;
Experience/Educational background.
The organizational structure contributes to the diversity as regards operations. The group operates in different markets and provides various services that minimize risks and maximizes the profitability of the group. Importantly, Alibaba Group is divided into smaller groups that focus on a particular segment. This focus is a significant competitive advantage as the group can develop popular services.
As for the human resources management, the structure reveals the diversity in this sphere as well. Even the company’s leadership reflects the diversity. People of different genders, ages, ethnicities and educational background, as well as working experience, can contribute to the generation of creative ideas that help the group remain competitive.
The decentralized structure relates to the values stipulated (Kirkhaug, 2009).
The evolution of the structure also mirrors the company’s values (Livas, 2009).
The decentralized structure is a manifestation of the company’s values especially when it comes to such values as the customer first, change and teamwork (Kirkhaug, 2009). Each division focuses on particular markets, customers and services, which enables them to identify and satisfy customers’ needs. The change of the structure from simple to complex can be seen as the adherence to such values as change, teamwork, integrity (Livas, 2009).
Operations Strategy and Quality Management
Operations management is a set of measures aimed at addressing organizational strategic goals and managing current operations.
Operations management is associated with the implementation of a quality management system that focuses on the production and marketing of new services and products (Nickels, McHugh, & McHugh, 2013).
Human Resources:
Adherence to high standards.
Awarding high achievers.
Provision of ongoing training.
Commitment to “conscious capitalism” (as cited in Brennan, 2016, para. 7).
Contributing to the development of the impoverished communities (An introduction to Taobao villages, 2016).
Product Development:
Innovation.
High quality.
Cross-functional teams.
Finances:
Transparency.
Integrity (Corporate governance, 2016).
As regards operations strategy associated with human resources, these include adherence to the highest standards, awarding high-performing employees, providing extensive training and commitment to “conscious capitalism” (as cited in Brennan, 2016, para. 7). In other words, the company is ready to invest in its employees to boost their commitment to the organization’s development.
As for public relations, the company is committed to the development of better communities, and it provides detailed information on its operations in this sphere. This contributes to the development of the favorable image.
When it comes to product development, the operations can be characterized by such features as innovation, high quality and the use of cross-functional teams. Thus, Product Manager, Moa Yao, develops teams consisting of IT specialists, marketers, designers.
The financial operations are characterized by transparency and integrity as high-achievers (both employees and partners receive awards and bonuses) (Corporate governance, 2016).
The use of cross-functional teams, as well as adherence to such features as high quality and innovation, reveals (and contributes) to the diversity. The teams include people of different ages, cultures, genders, ethnicities and backgrounds, which helps them generate ideas and bring them to life.
The company’s operations are characterized by such features as innovation, collaboration, transparency, integrity, quality, diversity, commitment, and responsibility, which are consistent with the organizational values. This enables the company to remain one of the leaders in the e-commerce market.
Diversity and Product Development Through Cross-Functional Teams.Operations activities reflect Alibaba Group’s strategy, which is vital as leaders need to “develop each operations activity as a deployment of strategy rather than simply daily operations” (Prajogo & McDermott, 2008, p. 515).
Human Resource Management
Strengths:
A significant degree of diversity
Effective communication
The use of cross-functional teams
Diversity and Code of Ethics:
The concept of diversity is absent (Code of ethics, 2014).
No particular behaviors are described.
The concept of diversity is not linked to the concepts of respect, integrity, and accountability.
Limitations of Alibaba’s Code of Ethics:
The lack of focus on the interaction within the diverse workforce
Vague descriptions of equal opportunities (Code of ethics, 2014)
Vague descriptions of the concept of discrimination
Violations and the Code of Ethics:
Detailed instructions on reporting violations
No particular descriptions and definitions of violations
The lack of descriptions of various behaviors that are regarded ethical
Such code of ethics is unlikely to help address various issues related to diversity (Buller & McEvoy, 2012).
Group Statements & Corporate Policies:
Addressing customers’ needs globally
The focus on teamwork
Integrity is one of the priorities
No descriptions of conduct in terms of diversity
No clear understanding of the concept of integrity
Inability to make strategic decisions (Kleasen, 2007; Pomeranz, 2009)
Alibaba Group’s HR management is quite efficient. It is characterized by a considerable diversity, effective internal communication, the utilization of cross-functional teams., which makes it a high-performing organization. However, there are still various weaknesses especially when it comes to diversity.
Although the company has representatives of many age groups, ethnicities, and females occupy high posts, it is impossible to note that the concept is integrated into the organizational culture. Thus, the concept of diversity is not explicitly present in the code of ethics. This document does not describe desirable and inappropriate behaviors as regards diversity. Finally, the code of ethics also includes such concepts as integrity and accountability, but they are only partially linked to the concept of diversity. This poses certain threats to the development of a truly diverse workforce in the future.
Other weaknesses of the code of ethics include the lack of attention to the interaction of diverse groups within the organization. The code of ethics also includes only vague descriptions of such concepts as discrimination and equal opportunities. This negatively affects the development of the organizational culture, and it may pose threats to the development of the company.
The code of ethics is characterized by such features as detailed descriptions of the way to report some violations. At the same time, there are no specific definitions or descriptions of these violations. More so, there are no specific descriptions of ethical behaviors. According to Buller and McEvoy (2012), the code that does not provide detailed guidelines concerning desired or appropriate behavior cannot contribute to the development of the organizational culture. The ethical conduct will be required, but employees will have different views on what such behaviors imply.
It is possible to note that the group statements are not properly aligned with the organization’s corporate policies. The company’s mission is to meet the needs of customers worldwide, but there is no focus on diversity in the company’s corporate policies. Managers simply do not know how to address needs of customers who are diverse in terms of culture, ethnicity and so on. The teamwork and integrity are the company’s priorities, but there is no clear understanding of the concepts and managers are likely to fail to make strategic decisions.
Marketing, PR & Corporate Citizenship
Alibaba Group has various channels to promote its services:
Websites;
Its own TV channel (Friedman, 2016a);
Social networks;
National TV channels;
Sponsorships;
Participation in various projects and partnerships (Friedman, 2016b);
Another important tool to promote products and services is the promotion of the company through the development of the corporate citizenship (Pomeranz, 2009).
Corporate citizenship is a complex concept that involves the organization’s social and environmental responsibility.
Multinationals and large companies have more responsibilities to the society (Aguinis & Glavas, 2012).
Alibaba Group’s Environmental Responsibility:
The company donates to major environmental charities including National Geographic Society (Sustainability, 2016).
The company earmarks 0,3% of their annual revenue to “fund efforts designed to encourage environmental awareness and conservation” (Sustainability, 2016).
The company bans from its platforms products associated with products made from endangered species.
Alibaba Group’s social responsibility activities involve:
Contributing to the development of impoverished communities (An introduction to Taobao villages, 2016).
Funding projects aimed at the development of communities through the created Alibaba Foundation (Sustainability, 2016).
Provision of disaster relief including several programs aimed at addressing the aftermaths of the earthquake Sinchuan Province in 2008 and the Honshu earthquake in 2011 (Sustainability, 2016).
The company uses a variety of channels to promote its services: its websites, its own TV channel, social networks, national TV channels, sponsorships, and partnerships. One of these partnerships is the agreement to broadcast NFL matches through Alibaba Group’s channel (Friedman, 2016b).
However, it has been acknowledged that promotion of the company is as important as the promotion of its products and services. Pomeranz (2009) argues that global reputation is essential for the development of the company in the contemporary business world. The commitment to corporate citizenship is vital for such organizations as Alibaba. Modern customers’ needs are not confined to products and services as they expect companies to contribute to the community.
Legal Landscape & Other Ethical Issues
Chinese Legal Landscape Opportunities:
Governmental support through taxation (China to promote cross-border e-commerce as incomes rise, 2015).
Collaboration of the National Development and Reform Commission and Alibaba Group (Alibaba expands e-commerce in rural China, 2016).
The Chinese government introduces policies that will allow complete foreign ownership of e-commerce companies that will be able to operate in the Chinese market (China to promote cross-border e-commerce as incomes rise, 2015). This policy is aimed at boosting the competitiveness of the e-commerce sphere.
Counterfeit Products:
Domestic regulatory bodies
Foreign regulatory bodies (Choudhury, 2015)
Internal policies and company’s officials’ statements
Unethical Conduct:
Alibaba Group was accused of using inappropriate marketing methods and forcing customers to buy from them instead of playing nice (Chouldhury, 2015). JD.com, the company’s major competitor, noted that the retail extravaganza taking place on November 11 annually is one of such methods. The State Administration of Industry and Commerce reminded all e-commerce companies to play nice without imposing any fines to Alibaba Group.
The Chinese government focuses on the development of the e-commerce market and introduces specific tax policies (reduced taxes) for companies operating in the industry (China to promote cross-border e-commerce as incomes rise, 2015). The National Development and Reform Commission will allocate $1.53 billion to develop online sales in 300 rural areas. This policy is aimed at the development of rural areas.
Clearly, for Alibaba Group, this policy poses certain threats as global key players will be able to enter the Chinese market, and the company will have to work hard to retain its position.
One of the most significant issues the company faces is associated with counterfeit products. The U.S. Government’s Notorious Markets List developed by the US Trade Representative included Taobao until 2012 (Choudhury, 2015). However, the company implemented certain steps to diminish the cases of the use of its platforms for selling counterfeit products. Certain verification procedures were introduced and the situation improved. However, there are still many cases associated with counterfeit products.
However, it is clear that the company should reconsider some of the strategies used to adhere to the concept of the corporate citizenship.
Summary, Recommendations & Conclusions
Key Points:
Alibaba Group is one of the leading operators in the e-commerce market.
Alibaba Group is committed to the adherence to corporate citizenship.
Alibaba Group has a strong culture, but it still lacks fro the focus on diversity.
Key Issues to Work on:
Diversity as regards customers and partners;
Diversity as regards employees;
Ethical conduct and strategic decision-making.
Recommendations:
The company should:
Implement comprehensive research concerning the needs of customers in different markets with the focus on gender, age, and cultural differences.
Incorporate the data concerning the customers’ diversity into the code of ethics.
Develop detailed guidelines concerning ethical behavior as regards diversity and adherence to the concept of corporate citizenship.
Benefits:
Clear understanding of the benefits of the corporate responsibility.
Clear understanding of the concept of corporate citizenship.
Future Considerations:
Adherence to the code of conduct in different countries.
Strategies to develop an effective code of conduct.
The company’s mission is to meet the needs of customers across the globe, but this concept is absent from the organizational code of ethics. Employees fail to take into account peculiarities of customers in different markets, which makes it impossible for them to make correct decisions.
The code of ethics does not include particular guidelines as to diversity, and employees cannot collaborate effectively due to various issues that may arise.
Finally, ethical conduct is not specifically defined, which contributes to the development of quite unethical policies. For example, the extravaganza can be regarded as an unethical strategy. However, until the company develops a detailed code of conduct, such marketing strategies are likely to be used.
Reference List
Aguinis, H., & Glavas, A. (2012). What we know and don’t know about corporate social responsibility: A review and research agenda. Journal of Management, 38(4), 932-968.
Alibaba expands e-commerce in rural China under gov’t support. (2016). Xinhua Finance. Web.
Buller, P. F., & McEvoy, G. M. (2012). Strategy, human resource management and performance: Sharpening line of sight. Human Resource Management Review, 22(1), 43-56.
China to promote cross-border e-commerce as incomes rise. (2015). Reuters. Web.
Kirkhaug, R. (2009). The management of meaning: Conditions for perception of values in a hierarchical organization. Journal of Business Ethics, 87(3), 317-324.
Kleasen, K. (2007). Building human resources strategic planning, process and measurement capability: Using Six Sigma as a foundation. Organization Development Journal, Chesterland, 25(2), P37-P41.
Nickels, W. G., McHugh, J. M., & McHugh, S. M. (2013). Understanding business. New York, NY: McGraw-Hill/Irwin.
Pomeranz, R. (2009). The evolution of human resources directors’ responsibilities. The CPA Journal, 79(7), 12-13.
Prajogo, D. I., & McDermott, C. M. (2008). The relationships between operations strategies and operations activities in service context. International Journal of Service Industry Management, 19(4), 506-520.
Sustainability. (2016). Web.
The History & Timeline of the Alibaba Group. (2014). Web.
Zhu, J. Q. (2013). Alibaba Group’s Changing Organizational Structure. Web.
Alibaba’s strategy involves global expansion and the provision of cheap Chinese products to customers worldwide. This type of strategy provides direct connection between the buyer and the seller.
The main environmental opportunities and threats for Alibaba are the situation in the global labor market, the relationship with the Chinese government, and the activities of global competitors.
One of the greatest weaknesses of Alibaba is its waiting times, which could exceed 20-30 days. In addition, Alibaba is more prone to fraud. Cheapness and relative quality of goods remain the platform’s strongest points. “Customers first, employees second, investors third.” – is the motto of Alibaba.
The main cultural factors involve the widespread corruption in the Chinese society, the Chinese labor force, and the national loyalty of the Chinese customers. The company can retain its domestic market.
Strategic Choices
Business units within the same company should compete without affecting the company’s output in a negative way. They should force one another to evolve, in order to achieve the best result possible.
Alibaba’s structure allows for almost any company to compete using the site’s platform. Nevertheless, the businesses to be included in a portfolio should have a good reputation.
In order to compete successfully, Alibaba should reach out for large foreign markets. The EU and the US present an opportunity for international competition.
Alibaba has not been innovating appropriately. Despite existing in the domestic market for a long while, the company did not invest in a private delivery system, unlike JD.
Establishing one’s own brand in a foreign market from scratch is a lengthy and risky process. Alibaba should seek to purchase domestic brands in foreign countries.
Strategy in Action
As it stands, the strategies used by Alibaba have led to subsequent losses, caused by the rising competition, the decrease in the Chinese domestic market growth, and the rise of other competitors, both domestically and abroad. Strategies need to be changed.
The process of strategy-making is a complex issue. Alibaba should utilize the available tools, such as SWOT, Porter’s Five Forces, PESTLE, and other systems to determine the direction of their strategy.
The main organizational structures and systems to facilitate change in the company strategy are the directorial board, the analytics team, the HR department, and all other departments likely to undergo changes to make them more competitive.
The management of changes should be prepared and performed by the HR department, which could use transformational and transitional leadership to do so.
According to the caustic HR strategy model, the company should determine the overall strategy, the HR department is supposed to facilitate changes, and the managers in places should help reform their respective departments to fit the new model.
Strategy’s Three Main Branches
Context
The industry of internet retail is geographically divided, as the deliveries are large affected by distances. Alibaba, based in China, as an effective grasp over the markets in Asia, India, and Russia. Amazon and EBay, two large e-commerce platforms, are dominating over Europe and the USA respectively. Culturally, the areas of influence are different, as Europe and the US enjoy high-quality goods and free markets, whereas government regulation and cheap products dominate the Chinese market. Based on resources, Alibaba is in a good position, as China is a production giant.
Content
Some of the strategic options presented to Alibaba include focusing on the domestic market versus expanding abroad. The first approach includes defeating JD as its primary competitor in China, whereas the internationalization involves reaching out to the US and Europe in force. The newly-appointed manager of the company favors the second approach.
Process
Realizing the expansion plan requires serious strategic planning on the part of business analytics, logistics, and the HR department. The company would need to choose and change, in order to deliver the results required at a faster rate than it currently can. As a part of strategy-as-practice approach, the company should establish its own supply channels to deliver the goods as fast as Amazon.
