Alibaba is an online platform that consists of several businesses, but primarily:
- Taobao – China’s largest mobile commerce destination and largest third party platform for brands and retailors
- Tmall, – China’s largest third party platform for brands and retailors. Alibaba’s higher-end site for established consumer companies.
- List of other Alibaba businesses: http://www.alibabagroup.com/en/about/businesses
Headquarters: Hangzhou, China
Annual active buyers in China: 443 million
Countries with buyers using Alibaba: 200+
Annual revenue*: $21.7 billion
Annual profits*: $5.8 billion
Market value: $264 billion
*12 months ended Dec. 31, 2016
Alibaba was founded by Jack Ma in 1999. Their mission statement is “to make it easy to do business anywhere.” It is often referred to as the Amazon of China and the comparisons between the two companies and their CEOs are the subject of many. By the numbers, Amazon outperforms Alibaba in revenues, $136 billion in comparison to $22 billion, respectively. However, Alibaba is far more profitable, with operating profits of $6.7 billion in comparison to Amazon’s $4.2 billion. Although Alibaba is highly profitable and the market share leader in China (world’s second largest consumer economy), “Ma knows that eventually he will need to conquer new territories for Alibaba to continue on its current trajectory.” Thus far many companies have had trouble entering the Chinese market; however, if that were to change, Alibaba would be in a tough spot.
To date, Alibaba’s “forays into the U.S. market have been furtive.” Their U.S. strategy is the following:
- Work with established brands to sell on Tmall;
- Help small businesses—the ones that would create new jobs—sell in China on Taobao
- Match U.S. manufacturers with Chinese component makers on Alibaba.com, the company’s original business
In order to help achieve their goals, Jack Ma has been working diligently to recast himself as global leader by taking a role as a global ambassador for Chinese business, touting “800 hours aloft last year—visiting princes, Presidents, and Prime Ministers and lots of mere businesspeople too.” However, the article highlights a key challenge that all business have when trying to enter a foreign market – government relationships and regulation.
Ma has been working closely with the U.S. government and has developed a “felicitous” relationship with government, which “rests heavily on his job-creating pledge to President Trump. And that bold promise is built on a bit of nuance. Specifically, Ma predicted that Alibaba will sign up 1 million U.S. small businesses to its various e-commerce platforms, primarily Taobao, its mass-selling site for individuals, and Tmall, its higher-end site for established consumer companies.”
Although, “many assumed Ma’s bonding with Trump presaged an Alibaba move into selling to U.S. consumers. For now, Alibaba professes to be more interested in helping U.S. businesses sell to Chinese consumers rather than the other way around.”
Additionally, Alibaba has another significant hurdle in dealing with lack of IP protection in China. Taobao has been “plagued with counterfeits,” leaving many business reluctant to use the platform. Adam Lashinsky notes that “problem is so bad that in December the U.S. Trade Representative reinstated Taobao on its “notorious markets” list, a “name and shame” tool intended to pressure non-U.S. marketplaces to clean up their acts.” Although the company has made strides in policing the issue, Ma acknowledges that the situation calls for extreme measures.
What does the future hold for Alibaba’s play to go global? Jack Ma leaves us with this:
“Maybe the business community has to drive this instead of government,” he says. “I feel sorry for government. When you put 200 country leaders in the same room trying to realize something, it’s impossible. But when you put 200 businesspeople in one room, we might work something out.”