Company Description
The Alibaba Group Holding Limited is an online shopping company which offers e-commerce trading in China. Founded in 1999, the company has been active in offering electronic payment, cloud computing, and online shopping platform services to customers within the China market.
The company is currently valued at $231 billion. The group has affiliate companies such as Toaboa, Alibaba.com, Juhuansuan, Tmall.com, Alipay, and eTao among others. Alibaba Group Holding Limited has employed the laggard activism strategy to not only capture the Chinese market, but also leapfrog the dominant e-commerce companies.
The Alibaba Group Holding Limited has good knowledge of the Chinese market. The company operates on the Customer-to-Customer (C2C) platform and Business-to-Business (B2B) platform. In order to penetrate the expanding Chinese market, Alibaba Group Holding Limited’s business platform was modified through introduction of services such as premium customer experience, compact support from the community, and low charges for small businesses.
Mission Statement
The mission of the company is to proactively create a reliable and sustainable future e-commerce infrastructure across the globe to meet the expectations of the customers. The mission has internalized the aspects of quality services, affordable products, and long culture of reliability.
The business strategy of the Alibaba Group Holding Limited in achieving its mission functions on the parameters of brand momentum, market innovation, and product excellence. Under the brand momentum, the company has created an effective system for maintaining purity and product strength to position the Alibaba Group Holding Limited brand as a market leader.
As a result, the elements of digitalization, brand recognition, and direct market interaction have become part of the company’s business culture. The attitude of the organization towards localization is an indication of clear vision within the Chinese market.
The goal is to concentrate on the local market through the use of an open-system business model. The strategy was meant to take advantage of the challenge of ‘smallness’ to defeat the giant companies, which depended on the closed-system approach in the execution of their business strategies.
Internal Analysis
The Balanced Scorecard (BSC) system offers the opportunity for an organization to fill the vacuum that often exists between actions and strategies adopted. The system engages a multi-user board in planning for the immediate and long term strategies.
The system has application for tracking feedback against the progress of each strategy and records any changes in the business environment. Thus, the BSC system can be described as a necessary tool for systematic evaluation of the strategies in place against future focus in order to successfully translate the strategies into deliverable variables that can be quantified. This part of the paper carries out internal analysis of the Alibaba Group Holding Limited through use of the balanced scorecard.
The balanced scorecard for the Alibaba Group Holding Limited
Since the Alibaba Group Holding Limited operates in a dynamic and highly competitive e-commerce industry in China and across the globe, it is important to develop an explicit Balanced Scorecard that captures the company’s key success factors such as enhancing learning and innovation, internal business process, financial, and customer management. The Balanced Scorecard in summarized in the tables below for each success factor.
Perspective: Learning and Innovation
Perspective: Internal Business Process
Perspective: Customer
Perspective: Financial
The financial ratio performance of the company as compared to its major competitor is summarized in the tables below.
The Alibaba Group Holding Limited
eBay China Company
The profit margin for the The Alibaba Group Holding Limited declined from 33.63% in 2012 to 18.42% in 2013. The value increased to 18.78% in 2014. On the other hand, it can be observed that the profit margin for its main competitor, eBay China Company, declined from 10.93% in 2012 to 9.69% in 2013.
The ratio further declined to 9.43% in 2014.Thus, it can be noted that the profit margin of the Alibaba Group Holding Limited is higher than that of eBay China Company. This implies that the Alibaba Group Holding Limited performs better in terms of profitability than its main competitor.
Besides, it may also indicate that the Alibaba Group Holding Limited is more efficient in managing cost of sales and operating cost than the eBay China Company.
Applying the Balanced Scorecard
The Alibaba Group Holding Limited’s retail model targets user consumers who form the majority of its market catchments. Since this target group frequent The Alibaba Group Holding Limited online platforms, the company has been in a position to conveniently direct the customers to their designated delivery points and stores without having to directly deliver since the customer perspective is properly implemented.
The Alibaba Group Holding Limited has merged the strategy with advertisements since this group of consumers has access to social media. Due to exposure to information sources such as new papers, television, radio, and magazines, product announcement through these avenues has come in handy.
The decision on the best product relies on information feedback after multiple exposures to different competing products. This approach has been successful towards dominance as it offers a variety of options to consumers, while at the same time, maximizing benefits of economies of scale to the company.
Alibaba Group Holding Limited is the leading company in the e-commerce industry in terms of design and innovation in China. The company is associated with new innovations and attractive designs that appeal to their customers across the world.
Thus, through integration of the training and innovation elements within the Balanced Scorecard, the Alibaba Group Holding Limited has benefited from this strategy in terms of market expansion. Specifically, through product development, the company has been in a position to optimally exploit opportunities available in the innovation market segment and gain a significant share in the e-commerce market in China.
Company’s Major Strengths and Weaknesses
Strengths
The Alibaba Group Holding Limited Company depends on the local means of production in running the business. The company’s business model was to create a decentralized system in terms of a management line of the expansion within the Chinese market. The Alibaba Group Holding Limited rolled out an interesting entry into the Chinese market by concentrating in the affordable traditional methods of advertising.
This strategy ensured that the company is sustainable even when it is offering free services as was the case within the first three years of operation. The affordable and visible traditional methods of advertisement ensured that the targeted market was in a position to distinguish the business from its rival. Besides, the company introduced very low charges for its services, which could not be matched by its rivals.
The payment system of the Alibaba Group Holding Limited is internalized within the flexible platform known as the Alipay. This platform is easy to use among the Chinese customers and businesses. The current financial performance of the company is a clear indication of sustainable business since the company has never made loses since its inception in the year 1999.
Generally, when all other factors are held constant, the Alibaba Group Holding Limited is in a better positioned to sustain its business within the Chinese market due to its unique services, wide appeal to customers, and relatively flexible management model.
Weakness
The Alibaba Group Holding Limited faces stiff competition from companies such as the eBay China, which has mature formula for doing business in the expanding Chinese market. High levels of bureaucracy and inter-functional rivalry are the main reasons that impede the Alibaba Group Holding Limited’s strategy from fully penetrating the Chinese market.
The Alibaba Group Holding Limited has more presence in China than other parts of the global e-commerce market. Specifically, unlike its main competitors, the company has only three physical branches outside China, unlike its competitors. Thus, the Alibaba Group Holding Limited does not enjoy the substantive demand in the global market as its customer catchment area is restricted to the boundaries of the Chinese market.
Besides, the focus of the Alibaba Group Holding Limited is more about the small business platform. This is counterproductive in terms of revenue generation since the majority of its customers are small businesses and private individuals who cannot operate in the global e-commerce platform.