Alibaba is a multinational technology corporation with the headquarter location in China. It focuses on the retail side of e-commerce. Jack Ma and his partners launched the company in 1999, and since then it has been growing exponentially into a prosperous enterprise. Alibaba manages its operations through a number of divisions and business units. For the corporation, these subsidiaries produce a sizable amount of money.
Alibaba Group Holding has a calculated net worth of $ 211.48 Billion and has sixth position in global brand valuation. Daniel Zhang is the CEO of the company.
Introduction to the Alibaba
Alibaba began as an online marketplace for business-to-business (B2B) transactions. Jack Ma, Joseph C Tsai, Zhang Ying and others founded this business in Hangzhou residence. Three to four months after its operation,in October 1999, Goldman Sachs and Softbank made the company’s first sizable investment. These businesses contributed $25 million as the initial investment.
The business started slow and was in loss during the early operations. At first, the business was making a loss. The company marked its first successful year in 2002. The business increased its offerings to include a global e-commerce system a year later. As a result, the business introduced Lynx, Alipay, Alimama.com, and Taobao Marketplace. The same year, as part of its entry into China, eBay made an offer to buy out its subsidiary Taobao. The buyout was, however, rejected by Alibaba’s founder.
Taobao ultimately caused eBay to leave China a few years later. Similar to that, Yahoo! continued to invest in the business in 2005. The corporation persisted in operating enterprises and gradually expanded its platform. Around that period, the company also began to amass a number of subsidiaries.
Alibaba launched its first public offering on September 19, 2014. (IPO). The IPO, which was also the biggest IPO at the time, netted the corporation $25 billion. The business also acquired a $231 billion market valuation through the IPO. In a similar manner, the business was the second in Asia to surpass the $500 billion valuation market in 2018. The brand valuation of Alibaba is sixth highest globally.
There are only a few names which are bigger than Alibaba in terms of online business. Alibaba is the second-largest online company in terms of total revenues. Alibaba is ranked among the top internet corporations along with other similar enterprises. In terms of market capitalization, the company is ranked seventh on the same list.
Even people who don’t shop online are familiar with Alibaba, one of the most well-known names in the industry. Everyone in the world uses their business to purchase a wide variety of goods at some of the lowest costs available. People may also compare products to discover the greatest deals for their needs by allowing customers to sell directly to other consumers.
SWOT Analysis of Alibaba
It is no longer a mystery that Alibaba is thriving. But performing this SWOT analysis will enable us to fully grasp the position of the company in relation to four key factors.
There are countless advantages that have contributed to this company’s success, but we will focus on just a handful in order to make the conversation more convenient. These are Alibaba’s primary advantages, which have allowed it to rule the market.
They are a big corporation
Alibaba is one of the largest internet retailers in the world. When they went public in 2014, they held the record for the largest IPOs in history, with a valuation of US$231 billion. Furthermore, they were recognized in 2020 as the fifth-largest artificial intelligence business globally. They currently control the global B2B, B2C, and C2C marketplaces. These are only a few of the accomplishments they have attained. Because it permits such immense and ongoing success, it has a very significant brand strength. In figures, there are more than 755 millions active users across the world and a seller base of 8.5 million businesses.
Large customer base
Alibaba has a sizable market share in the world’s most populated country; its birthplace is China. All of the Chinese population relies upon their services and is happy with the company. They are also incredibly well-liked in India, which has one of the largest populations in the world. For a business to succeed, having these two nations as key markets is more than sufficient. They have a very large customer base because they are a global organization. In figures, there are more than 755 millions active users across the world.
Research and Development
Due to their expanding business, they must make significant investments in R&D in order to stay one step ahead of the game. They can continue to lead the game thanks to this extremely important strength. They currently have very large R&D facilities in Silicon Valley, Dubai, Hangzhou, Beijing, Hong Kong, and Singapore. In 2017, Alibaba planned to invest $ 15 billion on R&D over the years with a goal to serve two billion customers and 100 million jobs by 2036. R&D at this level is definitely a strength factor.
Gained momentum during the pandemic
When Covid-19 arrived, the majority of businesses around the world truly struggled, but online enterprises experienced a surge. Due to the fact that consumers all over the world relied on online marketplaces for their shopping needs. Alibaba had an outstanding 30% growth during the pandemic in 2020. Due to the way they conduct business, they were able to adjust to a rare occurrence.
At the time when all other businesses were struggling, Alibaba made a fortune out of it. This is possible only when a business has something strong in its corporate culture and operational procedures.
Alibaba has a number of advantages, but they also have a few flaws that need to be fixed before they cause long-term harm to the business. These are listed in order of importance.
Limited exposure internationally
Alibaba is present in most, if not all, of the countries in the world, but they aren’t quite as widely used there as they are in China. China has dominated their existing market share entirely. Simply put, they don’t exert the same effect elsewhere. Only around 9% of total business revenue of Alibaba e-commerce comes from international transactions.
Revenue streams are limited
Despite having various business models in its portfolio, Alibaba derives the majority of its income from its online shopping services. This kind of negates the benefits of diversity because, if their main source of income were to be disrupted, they would have no real backup plans to maintain the size of their enterprise.
Alibaba has a huge number of sellers which creates unnecessary competition among the sellers associated with Alibaba, lowering the margins for sellers. This is affecting the revenues of its sellers which eventually affect the revenue of Alibaba.
Over dependence on e-commerce and diversification of business in similar related fields also make the business and revenue fragile. Limited and similar revenue pools may affect the business.
Despite the fact that the products on the website are already quite reasonable, people continue to produce cheaper, identical-looking counterfeit goods that are obviously of very low quality.
Alibaba is not famous for branded products, rather, it is famous for its reasonable price. Hence, such availability of counterfeit products make the content less credible and create segregation in the business and customers.
A simple solution to this problem is to spend more money on patents and trademarks. Else, it will damage the company’s reputation for dependability because many consumers cannot tell the difference between a genuine and a fake product.
China Dependent Ecosystem
The major business of Alibaba is the Chinese market. Around 90 percent of Alibaba’s revenue comes from Chinese consumers. From sellers to buyers, Alibaba is all about Chinese dependency. This dependency has been a weakening factor for Alibaba.
The growing tension in China, the negative sentiment towards China, import tariffs on Chinese products etc. will impact the business of Alibaba as the majority of its business ecosystem revolves around China.
By seizing more opportunities as they arise, weaknesses can always be overcome and strengths can always be enhanced. These are some potential areas where the business should consider allocating resources.
Expanding operations globally
Because Alibaba has the means and infrastructure to enable globalization, their deficit can actually be turned into a huge advantage. Due to the simplicity and variety of what they have to offer, they have a wide range of areas to penetrate. If they are able to take advantage of this chance, they could overtake all others and become the largest e-commerce platform in the world.
In 2019, Alibaba opened its platform for US sellers. The retail industry in the U.S. is worth USD 6.6 trillion in 2021. This global market is the biggest opportunity for alibaba.
Mergers and acquisitions
Alibaba has a number of acquisitions around the world, but they can always make more. Such alliances can be formed to aid in worldwide expansion. Newer markets are more difficult to break into from scratch. Every nation might as well have strategic partners for Alibaba who can contribute their invaluable expertise.
Alibaba is expanding its business portfolio through merger and acquisition. Such expansions open the opportunities for the business. Alibaba has its investment in different businesses. Alibaba entered the Indian market from its investment in BigBasket. Similarly, Alibaba has made its strong presence in the Indonesian market from its various investments.
Alibaba Cloud Computing
Cloud computing is one of their ventures. Because of the volume of data generated by Chinese internet users, if properly utilized, the brand may control this market. Because China doesn’t sell its data to the west, Alibaba may grow even more by offering a suitable platform to combine and keep this priceless data. With this knowledge at their disposal, the possibilities are endless. It’s a worthwhile direction for the business to go.
Alibaba has recently planned to invest $ 1 billion into cloud computing business to have the information leverage. Alibaba Cloud has experienced the fastest growth in Alibaba business, comprising 9% of total revenue.
In the industry, Alibaba also confronts numerous threats. Before they grow too large to be avoided, threats should be dealt with quickly. They might harm you forever. Here are a few of the most significant.
Naturally, they face some formidable rivals, just like any other company. Among these rivals, some of the more well-known names are Amazon, eBay, and Baidu. These rivals could come for their necks in a couple of months if they strategically make one mistake. Particularly, Amazon is becoming more and more well-known worldwide. By raising the entry hurdles for Alibaba, they may easily dominate the market.
Trade barriers and political uncertainties
America and China simply do not get along. The United States certainly doesn’t want China to become the second powerhouse in the globe. Both the nations are continually engaged in trade and tariff conflicts. Due to these obstacles, Alibaba has been unable to completely dominate the industry in the USA and other western nations, which would have resulted in incredible revenues for the business.
The US-China tariff restrictions impacted the business of Alibaba. Similarly, the geo-political preferences led China and China based business at the back hand.
Changing buying patterns due to the pandemic
Although the epidemic has helped this company grow on the one hand, it has also introduced a challenge in the form of shifting consumer behavior. Nowadays, consumers would rather spend their money on necessities like food delivery than on items frequently seen on Alibaba.
In conclusion, we can say that despite being a household name in the domestic market as well as a handful of international markets, Alibaba still faces the threat of growing competition and changing industry landscapes. If the company is able to capitalize on its opportunities and tackle its threats and weaknesses accordingly, it has the potential to become the leading online marketplace in the world.