ALI BABA

Presented By:
Tayyaba Latif
INTRODUCTION
 Alibaba was founded in 1998 by Ma with a
group of friends -18 in member
 Based in Hangzhou, it offers a host of services
promoting online trade in China
CONT.

 The group provided online marketplaces

through
 Alibaba.com:
 aninternational B2B marketplace that help
match China’s small business with foreign trade
partners

 Alibaba.com.cn,
 the group’s domestic B2B marketplace
CONT.
 Taobao,
 China’s largest online shopping website providing
platform for both retailers and individuals to sell virtually
anything to Chinese consumers.
CONT.

 The Alibaba Group also offered online payment services through

 Alipay ,

 internet based business Management solutions through

 Alisoft,

 an online advertisement exchange in

 Alimama,

 and an entertainment portal in

 China Yahoo
ALIBABA GROUP HAD SIX SUBSTANTIAL BUSINESS
UNITS THERE WERE ORGANIZED AS INDEPENDENT
SUBSIDIARY .
CONT.
 During the rapid evolution of China’s E-
commerce business, Ma lunched a variety of
highly autonomous business

 to help Alibaba Group establish a leadership

position and grew revenues to $636 million for
the twelve-month period ended June 30, 2009.
OPENING OF CHINA AND EMERGENCE
OF SMALL BUSINESS
 Alibaba came into being in the wake of a two
decade of reform both political and economical
led by the Paramount leader, Deng Xiaoping
who passed away in 1997.

 The reform made it possible for China’s Gross

Domestic Product to grow at 9.5% annual rate
and its economy became the world’s third
largest when adjusted for purchasing power.
CONT.
 Per capita income more than quadrupled,

 Foreign direct investment boomed and

 Trade increased from 10% to 45% of GDP,

making China the world’s seven largest
exporter.
CONT.

 China’s growth since late 1970s lifted

100,000,0000s of people out of poverty

 In fact china alone accounted 75% of world’s poverty

reduction.

 Ideological barriers fell and business flourished

following the reform and a series of Party’s congress
were held;
 one in 1992 and the other 1997.
CONT.
 At the 1992 Party congress, the idea of
socialist market economy was raised and
agreed, thus recognising the crucial role that
private companies can play in national
economic development.

 In 1997, it was openly acknowledge that the

private sector was an important component of
the economy
CONT.
 In 2000, Jiang called for an expansion of
party’s membership to incorporate “new
elements of the society” including private
entrepreneur

 By the mid-2000, two third of Chinese

economy was said to be in the private hands as
claimed by the Economist Magazine.
PORTFOLIO OF COMPANIES
 By 2009, Alibaba employed about 17,000
people, approximately
 70% of whom worked in Alibaba’s B2B business

 Ma was an English teacher and had first seen the

power of internet in mid-1990s

 when he travelled to US as an interpreter for a

Chinese delegation.
CONT.

 His attempt to search China in an internet

which proved futile inspired him to leave the
delegation and create a china page,
 an online directory of Chinese companies looking to
expand business in abroad.
 Ma’s passion increased, he moved to a
company established under China’s ministry of
foreign trade and economic cooperation
 its mandate is to help Chinese companies take up
“electronic commerce”
CONT.
 However, Ma continued to get excited about
Chinese online business opportunities for the
following reasons;
 there were more than 40, 000,000 small business
in China,
 many of them operate in fragmented markets,

 with limited access to communication channels and

information sources that would help them market
and promote their products
CONT.
 Small business have the difficulty in evaluating the
trustworthiness of their trading partners.

 Consequently Ma left his government work to

develop Alibaba in 1999

 A simple online platform designed to help connect

small Chinese manufacturers with buyers, such as
 retailers, trading companies and downstream
manufacturers
CONT.
 Alibaba Group was formalised by its 18
founders led by Ma. By providing free basic
services to registered users

 By 2008, the company had migrated about 1%

of its users to the value added international
Group supplier and China trust pass
membership program
CONT.
 In 2008, Alibaba increased its operating profit by
48% to 1.2 billion (about $172 million), booked a
revenue of 3 billion ($432 million), 10.5 million
registered and 1.7 million storefront
 At the end of 2008, Alibaba’s international
marketplace had 7.9 million registered users and
970,000 storefronts while its larger domestic
marketplace had 30.2 million users and 3.6
million storefronts
TAOBAO
 In 2003, Alibaba Group launched Taobao, an
online shopping platform for retailers and
individuals to sell goods to Chinese consumers
i.e. consumer to consumer (C2C).

 The motivation according to Ma were:

 At the time there were only two companies in
China that understood online marketplaces.
They are eBay and Alibaba.
CONT.
 Ma was concern that eBay's power seller might
grow their business to compete in the B2B
space.
 He said he needed to stop eBay in order to
protect Alibaba.
CONT.
 At the time of the Taobao’s founding, eBay held
approximately 85% of the Chinese market, thanks
to its acquisition of the market leader each Net.
 However, by 2007, Taobao had taken 82% of the
Chinese market, leaving eBay with 7%,
 Bao Shao, the founder of eBay , believed that eBay
stumbled partly because it migrated its technology
platform from China to USA.More time was needed
to process information as fast reaction is crucial .
CONT.
 In 2008, Taobao introduced a new service called
Zhi Tong Che .This service let sellers bid for
keywords in exchange for preferential ad ranking .

 In 2008, Taobao achieved gross merchandise

volume of over $14 billion through its online
marketplace and became China’s second largest
website, based on number of page view. It
represents 2% of all china’s retail volume.
ALI PAY.
 Alipay is a third-party mobile and online
payment platform, established in Hangzhou,
China.

 Alipay was launched in 2004 for supporting

Taobao.

 Alipay was critical to Taobao’s development.

• Alipay quickly became an integral part of Alibaba’s

different business
ALIPAY-ENGENDERING TRUST

 Creating Trust between vendors and customers was a challenge in

China.
 Affect (from the heart), and

 Cognition-based trust (trust from the head)

Were intertwined, even in the business.

 Through, its escrow services, Alipay held payments on behalf of

consumers until purchased goods were delivered
 Done to reduce risk

 Encourage online commerce.

CONT.

 It gained critical mass and found an increasing number

of opportunities beyond Taobao.

 IN 2005, Ma decided to separated Alipay from Taobao

and made an independent business unit.
 Reporting directly to him

 In 2008, Alipay announced that the payment it handled

reached a peak of $66 million per day
 (annualized $24 billion)
CONT.
 It’s users accounts had exceeded 100 million
 By the end of the year, Alipay had approximately
50% of all online payments in China
 It also executed over 4 million transaction per
day
 It became leading China’s online payment
business
 WithPayPal being a global online payment market
leader
SELECTED OTHER BUSINESS

 In 2005, Alibaba bought China Yahoo, from Yahoo!

Inc
 This is one of the leading Chinese-language portal
offering search
 Email & entertainment content
• China Yahoo’s competitors were
 Baidu- share of the search market of 62%
 Google- share of the search market of 29%
• While yahoo had only 6%where as earlier it was 21%
largely because of 3721 function in which you have to
search in URL address box .The trend was shifted to
search in a search box of the website e.g. www.Baidu
.com.
ALISOFT

 2006, began incubating a new business

called Alisoft
 The intention is to provide small business
with internet-based enterprise
management software in areas such as;
 Customer relationship management
 Inventory management
 Financial management
CONT.

 The justification for Alisoft was that;

 China had over 40 million small business but
 Only 5% use enterprise management software
 While 60% of penetration rate in western world
 By January, 2007, Alisoft team sales team started
recruiting over 500,000 active users through beta
trials
CONT.
 Because of it market viability, Ma decided to
get Alisoft from incubation and established it
as a business unit, reporting directly to him
 By 2009, held 40% of Chinese enterprise
management software market and employed
approximately 500 professionals
ALIMAMA
 In 2007, Alibaba lunched Alimama
 An online advertising exchange connecting
websites and advertisers
 The rationale for coming up with this portfolio was
the desire to pioneer a “light “ model for the online
advertising market
 By 2008 employed 400 professionals and its
network had served over 3 billion advertisement
 On daily basis, Alimama connected with over 80
consumers
OWNERSHIP-IPO OF PARTIAL STAKE IN
ALIBABA’S B2B BUSINESS

 In 2006, Alibaba decided to IPO the B2B

business because it reached a threshold
of maturity
 It listed 19.25% of its B2B business on
Hong Kong stock exchange in 2007
 The IPO raised 1.7 billion
CONT.
 Alibaba public listing provided a lot of benefits
 The recognition and publicity was valuable to
Alibaba’s B2B customers looking to attract
their own customers
 It also attracted management talent and allow
Ma to use equity based incentives to pay
managers in Alibaba.com
ORGANISATION

 Alibaba's mission statement was broad

and visionary
 To make it easy to do business anywhere
COMPETITION OR COOPERATION
 By his own admission, Ma was a fan of Jack Welch
 No wonder that his organisation resemble that of
GE
 Ma, like Jack Welch also believes in
decentralisation
 That is each subsidiary sets its own strategy
 His governance inspired its subsidiaries to be leaders
of their industries
 Business unit presidents must have the freedom to do
what is right for their business.
CONT.
 To encourage competition, Ma assigned each
of the Alibaba’s subsidiaries its own board of
directors and executive team
 Includinga president
 A CFO and

 Operating Manager
ORGANISATIONAL EVOLUTION
OF C-SUITE
 According to Ma, our biggest challenge is was
growing from 18 to 10,000 employees
 He intimated that there is no model to imitate
 One way that he coordinated Alibaba’s growth
was;
 by adjusting the span of control
 Or the number of executive reporting directly to him
 The head of a new subsidiary would also report to
him directly
CONT.
 As per Welch’s belief that people were GE’s key
assets, ma elevated the importance of the
human resource functions in the group early in
the group’s history
 By creating the Chief People Officer (CPO) and
having it
 Report directly to him
CULTURE AND INCENTIVES
 Despite the internal competition, Ma fostered a
certain degree of cooperation
 Ex.The C-suite and the senior managements of its
subsidiaries engaged in community building
exercises;
 Such as annual retreats with their families
 Thegroup organisation also participated in
management training sessions
 Such
as the two day session titled “what leadership
mean”
CONT.
 Ma and his senior team also came together at
Alibaba’s annual strategy review sessions
 They used these sessions to discuss and set
Alibaba’s long term strategy
 They consider complimentary organisational
changes through a bottom-up process which had
three broad steps;
 Mid term strategy review in spring
 In Fall, subsidiary presidents submitted detailed
strategic plans to Alibaba’s corporate centre
CONT.
 Alibaba’s senior management team debated
and revised these strategic plans, thus finally
agreeing to group operating plan and budget by
year end
 Alibaba’s group provided employees with
powerful incentives in form of stock option
 This helped link compensation to the
performance of the business unit.
SOME FUTURE OPPORTUNITIES
 Ma was always searching for business
opportunities
 Opportunities are generated through;
 Top-down effort- led by senior Management team
 Informal bottom-up initiatives
CONT.
 As alibaba learned more about its small
business clients,
 Ma became increasingly aware of the unmet
demand from small Chinese businesses for
loans in sizes well below the traditional banks
are interested in lending
 Ma gets market feedback from Alibaba’s sale
and technology teams
CONT.

 If Alibaba wanted to enter potentially

lucrative businesses, it faced some
significant operating hurdles like;
 Obtaining bank licence
 Establishing a specialized banking operation
group
 Raising money to meet regulatory capital
requirements
 MOBILE PLATFORM

 The growth of Smartphone in in 2008, provided millions

of Chinese with affordable mobile access to internet.
 Ma believed that these popular Smartphone would drive
online trade to new levels
 Create opportunities both for Alibaba’s members and
business units
 Ex. He envisioned Alibaba. Com’s buyers using their smart
phones
 to search for products
 Contact sellers
 Close deals anytime, from virtually anywhere in the world.
CONT.
 Similarly, sellers could post new products
online
 Search for buyers

 Communicate with buyers

 Execute transactions from their mobile devices

INCOME STATEMENT AND BALANCE
SHEET
CONCLUSION

 There is a strong and growing consumer base in

China, and Ma hopes to tap into a part of that
growth opportunity as well Alibaba.com as the
B2B component.
 Jack Ma's success is based on hard work, a
strong consumer focus, and a sophisticated
knowledge of market needs.
 Alibaba need to adopt to the different business
and cultural constraints found in the rest of the
world.