Chinese E-commerce Company: Alibaba’s Road of Success

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Founded in 1999, Alibaba has been created by Jack Ma and other eighteen co-founders in an apartment in Hangzhou. In 2016, it is declared that Alibaba has become the largest retail transaction platform in the world. What has it done? What is the secret behind Jack Ma’s success?

Chinese E-commerce: Alibaba’s Merger and Acquisition

Daxue Consulting - Chinese e-commerce - Alibaba (2)Since 2005, Alibaba has made a lot of acquisition and investment on other firms, intending to improve its digital presence and in the meantime the internet system. The number of the companies being bought and invested is considerable. At least 26 large-scale companies have been acquired by Alibaba. The blasting fuse is the acquisition of Yahoo company, the searching company from the United States, which had cost Alibaba $7.1 billion in cash and stock to buy half of the American online firm’s holding. Since then, Alibaba kept the pace of purchasing one company every year. And the two explosive years were on 2013 and 2014. Alibaba focused on making an investment in domestic companies in these two years, including Weibo, AutoNavi, and Yintai. One of the most interesting’s investment is the one made upon Youku and Tudou in 2014, which are leading video websites in China, owning a one-fifth stake at around 3.6 billion USD, getting a better access to Youku-Tudou’s user base.

Alibaba Group Holding Limited (BABA) has a already a huge number of businesses that operates in the firm’s ecosystem. The different companies owned by the group concerned nearly every digital field, including searching companies, navigational apps, fund companies and social networking sites. Yahoo Company was bought by Alibaba as the representative of a searching company. There are navigational apps such as AutoNavi and Kuaidi (The Chinese version of Uber, offering ride hailing services).  The firms are generally unique, technology-based that cover every online retail segments. There is also some fund company such as Tianhong Fund and Social networking sites including Weibo, Momo, and UC. Moreover, Alibaba has extended to the companies that are barely associated with its own business, including post office branch, sports, music, food, travelling, entertainment and so on. The scale of the companies can be as small as an unknown app, but it can also be as large as a nation-level company such as the Singapore Post.

What Are the Motives?

APP industry ChinaBy the need to be a worldwide group, Alibaba is enhancing its core competitiveness . On one hand, through purchasing or investing other companies, Alibaba can eliminate some competitors and increase its market standing. In 2005, Taobao, a C2C platform that belonged to Alibaba, was under the threat of other e-commerce platforms, such as Yipai, which occupied about 7.29% of the whole market, until Alibaba purchased Taobao, in 2005 and ceased Yipai’s service and operation. On the other hand, companies that are purchased or invested are providing Alibaba with their variety and service to help achieving Alibaba’s success. For instance, Alibaba bought Baozun company, a famous marketing agency and has used its marketing, logistices and CRM services. This acquisition has benefited Alibaba’s C2C and B2C platforms.

Alibaba wants to perfect the e-commerce and even the whole market system, 2011  has been a watershed for the group. Before 2011, Alibaba were focusing on increasing its own core competitiveness by expanding its own business. After 2011, Alibaba aimed to form a market system featuring multi-context and multi-mode to improve the information circulation. At first, Alibaba paid attention to social networking sites, aiming to append information about e-commerce from those social networking sites and to develop it. For instance, the investment on navigational apps has been made to create the real connection between physical shop and the Internet.

Consequences of the Chinese e-commerce 

What is surprising is that Alibaba’s stock price is continually decreasing since 2014, the exact time when it began its investment and acquisition. Both Alibaba’s stock price and market value had gained a decline for 10 months in a row by the end of 2015. The market value plummeted by 140.7 billion dollars.

The major reason is due to the skeptical attitude from American investors. American investors are usually reserved in terms of a transaction. However, in the whole Chinese market, the growth rate of GDP has declined and an exchange rate of RMB is fluctuating. Moreover, Alibaba owns too many different and diverse companies that are not even related to its major business.

Alibaba has a wide range of businesses, and within those businesses, the company offers many different products and services that cater to every aspect of retailing, from sourcing of goods to selling to individual consumers to helping with the exchange of payment and logistics. This ecosystem is truly self-sustaining and keeps getting more comprehensive with each new business launched. Alibaba’s acquisition and investment got a real hit in 2013 and 2014, Alibaba is gradually building its edifice in the world of internet.

Daxue Consulting and its Client

Daxue Consulting has helped its clients to understand the Chinese online consumer’s behavior in order to implement actionable insights. It helps us to identify the most promising target groups, with the online research panels. The research probes buying behavior, usage and satisfaction at every stage of the consumer lifecycle.

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