Alibaba.

Com (A)
 Introduction

 Alibaba.com founded in 1999 in Hangzhou, China by

Jack Ma.
 A fee-free online b2b marketplace to conduct business
for SME around the world.
 It provides:
◦ Location to find the trade opportunities
◦ Promote the business
◦ Conduct online transactions
 Itcovers 27 separate vertical market segments.
 Funded by top venture capitalists:
◦ Goldman Sachs and Fidelity
◦ Venture TDF and Transpac
◦ Investor AB and Softbank
 Introduction

 By 2000, Alibaba.com
◦ Operated 4 websites
◦ English for international customers
◦ Korean for Korea’s SME,
◦ Greater China and other markets,
◦ Chinese domestic market
◦ Registered members: 4,25,000 from 200 countries.
◦ Growth: 1200 new members registered every day.
◦ Traffic on website: 1 million page view daily.
◦ Had strong presence in China market (2/3 of the members)
◦ Majority of revenue derived from China
 Introduction

 Despite tremendous growth, Aliababa’s sales were

negligible because:
1. Focused on brand building and increasing user base.
2. Poised to capitalize on China’s e-commerce
potential.
 China E-Commerce Market
 Estimated to increase from $42 million in 2000 to $4
billion in 2003.
 500 dot.com companies were up and running (2000)
 Internet users were approaching towards 20 million.
 Fastest growing internet market in the world.
 Introduction

 Aliababa’s expected plan:

 To focus on SMEs buyers and sellers
 Provide full support for transacting online including
third parties services.
 To collaborate with major payment platforms and
banking service companies.
 Generate revenue from credit, insurance and logistic
services through partnerships.
 Provide marketing services to members and generate
revenue.
 Introduction

 How Alibaba.com was organized?

Business USA London Hangzhou Hong Shanghai Shenzhen
Functions Kong
Sales
website
Operations
eCommerce
Solutions
Marketing/P
R
Finance
Technology

 It was decided to outsource several activities to

partnering organization for facilitating customers
business. E.g. credit rating and insurance services.
 Introduction
 Marketing
 Used multiple means for marketing and brand building
 Creation of marketing research department in China
 Print and newspaper advertisement in regional and
national business news papers and on websites.
 Television advertisement on CNN and CNBC for Asia.
 Participated in Shanghai trade show.
 Personnel and retention
 Hired most of the employees from the local market.
 Focused on young employees (average age 26).
 Created the culture of trust,, teamwork, dedication and
professionalism.
 Employee turnover was around 2%.
 Introduction
 Customer experience
 SME importer and exporters had less opportunities to
market their products on the web.
 Alibaiab leverage this opportunity and offered various
services to lower transaction cost for SMEs.
 Trade deals and company contacts for each product
category.
 Facilities to view product sample and to communicate
directly with partners. E.g. email
 Offered free registration for data-base.
 Had 2/3 sellers and 1/3 buyers of registered members.
 Users oriented website features – trade leads, sample
house, business club, chat room, and informational pages
on world trade.

 Introduction
 Aliababa launched a new feature – My Trade Activity
◦ Allows members to aggregate documents
◦ To generate quotes and purchase orders via online
template.
◦ Capture negotiation between buyers and sellers
 Launched BizSite product
◦ Website builder for members and showcase their products.
◦ Template to build online storefront (Hosted by Alibaba).
◦ Planning to charge for this service.
 Sources of Revenue
 Expected revenue: less than 1 million for 2000.
 Advertising
 BizSite service
 Third party services e.g. logistic, credit and insurance.
 Alliances e.g. Motorola and Double Click
 Online marketing services – preferential placement and
presentation of bid and advertisement on website.
 Design and sales of banner ads.
 Design of websites for members (b/s)
 Need critical volume transaction for generating revenue
from third party services.
 Expected to increase volume in another 18-24 months.
 Competition
 HorizontalExchanges
 Global Sources
◦ Linked chinses exporters to importers abroad.
◦ Had 80, 000 export companies and 1,95, 000 buyers.
◦ Hosted online catalogue for suppliers and major retailers.
◦ One of the few companies showing profit (mostly from
offline business)
 MeetChina
◦ Early mover in the industry and provided online ‘auction’
service.
◦ Facilitated over $50 million worth transaction.
◦ Offered online links for global credit agencies, trade
financers, insurers and shippers.
 Competition
 Sparkice
◦ Shifted from B2C to B2B exchange business model
◦ Partnership with Metro AG, Bank of China, China shipping
conglomerate, and service tie-up with other firms.
 Li & Fung
◦ Designed studio.com for sourcing of western firms in Aisa
◦ Mainly focused on SMEs and acquired clients from Li &
Fung.
◦ Provided better services at lower price.
◦ Focused on entire supply chain and tended to work for
global players. (Alibaba focused on intra-China trade)
 Competition
 Specialized B2B Players – focused on specific markets
based on the prior expertise.
 Pacific Netmarkets
◦ Addressed 3 specific online markets: food, hospital
supplies, and printing.
◦ Operate business in both domestic and global markets.
 iTextile.com
◦ Provide expert textile advice and focused on enabling
access to SME textile mfgs in China.
 Asiane2e.com
◦ Fully integrated marketplace for the Asian electronics
market.
◦ Offered industry news and data.
 Competition
 B2B Enablers – focused on enabling the mechanisms in
B2B e-commerce.
 Enablers’ market development strategies are critical for
Alibaba as it was depended on the similar services for
revenue.
 Portsnportals:
◦ Online trade, shipping and logistics services.
 Freightquote.com
◦ Provides online shipping services and quote from various
shippers.
◦ Charge 5 to 10 % of the quoted price.
 CommerceOne
◦ Develops transaction mechanism for e commerce.
◦ Increase revenue generating capabilities of B2B e-
commerce.
 Competition
 Buyer driven Substitutes
 Private companies started their own e-commerce hub
rather than transacting via third party marketplaces.
 SinuE.com:
◦ Procurement hub established by the largest chineses
appliance mfg.
 Covisint:
◦ Established by GM, Ford, and DaimlerChrysler for
procurement of automobile components.
 Transora:
◦ Developed by large number of MNCs in the consumer
product industry.
 Challenges
 Absence of transactions support services (From deal to
delivery):
◦ Payment and Banking services
◦ Reliable distribution network
◦ Financing, shipping and tracking services
 The Right Mix:
 To provide global breadth of offering while retaining existing
members (e.g. Chinese supplier base).
 To become first in each offering (e.g. vertical/industry) to
reach at a critical scale.
 Economies of scope v/s Economies of scale or both
 Which services to offer in which markets e.g. auction is
popular in US but do not work in China.
 Challenges
 Management and Organization:
◦ How to maintain current culture of org. while growing.
◦ How to ensure intensive output and a committed staff.
 Profitability
 Current focus on brand building, membership
acquisition, repeated businesses.
 How to reduce cost and reach at break-even or generate
profit.
 Strategies
 Dealing with competition
 Partnering with B2B Enablers for
◦ Logistics and shipping services
◦ Payment and Banking services
 Offering right mix of products
◦ Comprehensive services (one stop solution for supply
chain)
◦ Right mix of services in each market (combination of
standardize and customized services)
 Profitability
◦ Focus on critical volume in each vertical
◦ Charging fees for transaction
◦ More emphasized on online value added services
 Strategies
 Managing organization
 Maintain flexibility through restructuring
 Manage complexity (economies of scope)
 Balance of informal and formal control
Thank You

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