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Alibaba Business Strategy and Tremendous Success

Alibaba (阿里巴巴) is one of the largest multinational technology companies in the world, specializes in e-commerce, retail, internet, and technology. In this article, we’re going to discuss about Alibaba Business Strategy and Tremendous Success reasons. 

Alibaba Business Strategy Overview

Alibaba was initially founded by Jack Ma on 28 June 1999 in his apartment in Hangzhou, China. Alibaba provides  Business-to-Business (B2B), Business-to-Consumer (B2C), Consumer-to-Consumer (C2C) sales services all over the world. In 2014, Alibaba’s Initial public offering (IPO) raised US$25 billion on New York Stock Exchange, and by far, it was the world’s largest IPO in world history and Alibaba’s market value was raised US$231 billion.

Alibaba is one of the most influential and valuable corporations. In 2018, Alibaba became the Asian second-largest company, after its competitor Chinese giant technology Tencent company. In 2020, Alibaba became the sixth-highest global brand valuation. In 2021, Alibaba became the 23nd biggest public company on the Forbes Global 2000 list and Alibaba is the world’s 3rd largest retailer e-commerce company & fifth-largest artificial intelligence company.   

Alibaba expanded its business into the media industry, entertainment industry, and so on. Alibaba is the world’s fastest-growing e-commerce market and 80% of China’s online shopping market is dominated by Alibaba, Mainly It has 3 main sites — Taobao, Tmall, and Alibaba.com — which have hundreds of millions of users. They have more business services and affiliated companies like Alibaba Cloud, Alibaba Pictures, AliExpress, 1688.com, SCMP, Youku, DingTalk, Alimama, Cainiao, Freshippo, Alibaba Health, Lingshoutong, Lazada, Kaola, Ele.me, etc. 

Alibaba’s Initial History

Alibaba was established in 1999 by 18 people led by former English teacher Jack Ma in Hangzhou, China. Jack Ma collected $80,000 from 80 investors to start an online marketplace for Chinese companies but In October 1999, Alibaba received a $25 million investment from Goldman Sachs and SoftBank.

Alibaba started to improve its business for the domestic e-commerce market. They are working on developing SMEs business enterprises to help export Chinese products to the global market. 3 years later Alibaba became profitable and Jack Ma wanted to improve the global e-commerce system so Alibaba launched Taobao, Alipay, Alimama, and other services.

In 2003, eBay wanted to expand its business in China and buyout Alibaba’s subsidiary Taobao but Jack Ma rejected their proposal. In 2005, Yahoo! invested in Alibaba through a variable interest entity (VIE) structure, buying a 40% stake in the company for $1 billion. Alibaba was planning in 2013 to open traditional brick and mortar retail outlets in partnership with Chinese real estate company, Wanda Group.

In 2014, Alibaba purchased a 25% stake in Hong Kong-listed Chinese department store chain Intime Retail. In 2017, Alibaba & Intime’s founder agreed to pay as much as to take the store chain private. After that deal, Alibaba’s 28% stake would rise 74%.

E-Commerce Technologies, Features, Advantage and Disadvantage

In April 2014, Alibaba, Coatue Management, and Andreessen Horowitz led a $250 million Series D financing round that was completed by Lyft, bringing its total amount raised to $332.5 million. On 5 June 2014, Alibaba bought a 50% stake of Guangzhou Evergrande F.C. In 2014, Alibaba raised the highest IPO in history, bigger than Google, Facebook, and Twitter combined. In 2017, Alibaba & the International Olympic Committee jointly announced an $800 million deal that would last until 2028 in which the company would sponsor the Olympic Games.

In 2018, Jack Ma announced his retirement as a Chairman of Alibaba so he could focus on philanthropy. After his announcement, The Economist stated that Jack Ma had a significant impact in China and all over the world. In 2019, Jack Ma officially stepped down as the chairman of Alibaba. After Jack Ma’s retirement Daniel Zhang Yong became CEO of Alibaba Group. 

Alibaba’s Business Model & Framework

Everyone Knows Alibaba is one of the biggest e-commerce companies in the world and It breaks world IPO history. But how do Alibaba’s business models work? In short, A business model is a company’s core strategy for profitably doing business or some core rules or terms that practice makes any company profitable & create commercial value in the global market. Alibaba’s Business Model is pretty straightforward. Investopedia quote’s that “Alibaba acts as a middleman between buyers and sellers online and facilitates the sale of goods between the two parties through its extensive network of websites.”

According to Alexa, globally Alibaba takes up slots on the list of top 10 most popular websites for its core business strategy. According to Business insider, Alibaba’s record-breaking Singles Day generated $74 billion in 2020 and $38 billion in sales was the previous Singles Day in 2019. In June 2020, Alibaba had 757 million active users and that’s more than twice the entire population of the USA. Mainly Alibaba Business Model is divided into two parts: Local & Global. Here is the Chart of Alibaba’s Business Model and frameworks-

Alibaba Business Model

Alibaba’s Global E-commerce

Alibaba.com: Alibaba is a Business-to-Business (B2B) global wholesale services e-commerce website. Business-to-Business refers to a business style that is conducted between companies to companies or a manufacturer to wholesaler rather than any individual consumers. B2B trade can be viewed as wholesale transactions. B2B model connecting with manufacturers and wholesalers from around the world. Alibaba requires large orders with minimum product quantity & buyers can get customized products with their own branded labels. 

AliExpress.com: AliExpress is a Business-to-Consumer (B2C) global online retail service based in China owned by Alibaba. AliExpress is very user-friendly and affordable for buying products for consumers and easy to ship and payment processes around the world. Alibaba and AliExpress fundamental differences between Alibaba is for wholesale transactions and AliExpress is for retail transactions. AliExpress has no minimum requirement for orders and has no customized products service.

Alibaba’s Local E-commerce

Taobao (淘宝): Taobao is China’s largest shopping website owned by Alibaba. Taobao is a Business-to-Consumer (B2C) and Consumer-to-Consumer (C2C) platform where individuals and small business owners sell their products through Taobao. Taobao doesn’t charge transaction fees and it’s totally free for joining merchants. Taobao’s main revenue source is advertising products on its platform and collecting revenue from merchants. 

TMall (天猫): TMall or Taobao Mall is the largest Business-to-Consumer (B2C) retail platform in Asia operated by Alibaba. TMall mainly offers branded products for middle-class society and it has over 500+ million monthly active users. In China, Tmall became a reliable marketplace where people can purchase authentic products. TMall charges merchants an annual fee and a commission fee on transactions. TMall provided analytical tools to the sellers for showing the page views, impressions, ratings, visitors, which help sellers in making decisions. 

1688.com: 1688 is one of the biggest and most popular B2B trading wholesale e-commerce platforms for the Chinese domestic market. Alibaba.com is the international version of 1688.com, which means Alibaba dedicatedly works for the international market, and 1688 works for the domestic market. In 1688 platforms, All suppliers need to pay an annual membership fee to 1688. 1688 is a cheaper source for all kinds of products such as technology, electronics, digital products, home appliances, clothes, accessories, sports, beauty items, and so on. 

Alibaba’s Cloud and Infrastructure

Alibaba is expanding a range of high-performance cloud products and infrastructure including large-scale computing, storage resources, enterprise applications, artificial intelligence, media services, container & middleware, developer services, security & analytics, IOT, big data processing, and so on for users around the world. 

Alibaba’s Entertainment & Media

Alibaba has long dominated China’s entertainment and media sectors. It includes newspapers, digital and broadcast media, social-networking platforms, video-streaming sites, film production companies, advertising agencies, and so on. Alibaba’s core digital media and entertainment unit such as video streaming platform Youku Tudou, music platform Alibaba Music, Alibaba Pictures movie division, Ali Sports, KTPlay, AliTrip, and the most popular Hong-Kong based newspaper The South China Morning Post (SCMP) is also owned by Alibaba Group.

Alibaba’s Others Platform

Alibaba has been working in China and abroad for a long time with tremendous success and efficiency. Alibaba has numerous services or subsidiaries such as Alipay, Alimama, AliOS, AliGenie, AliHealth, Lazada, Ali Telecom, Trendyol, Daraz, Cainiao, Ele.me, Hema Xiansheng, cnzz, AdChina, UCWeb, DingTalk, Fliggy, Freshippo, KanBox, Kaola, Koubei, and so on.

Alibaba’s Revenue Model

Alibaba has several revenue-generating sources, including domestic commerce retail and wholesale business, global commerce retail and wholesale business, logistics services, consumer services, cloud computing, digital media and entertainment, and other initiatives. 

Alibaba generates revenue through online marketing, advertisement, commissions, storefront fees, membership fees, payment services like Alipay, etc. According to Statista, In the third quarter of 2021, Alibaba Group generated 63 percent of revenues through their domestic commerce retail business and global e-commerce retail sales accounted for five percent of total revenues.

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