Alibaba Group Holding Limited Evaluation Essay

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Table of Contents

Company Description
Mission Statement
Internal Analysis
Applying the Balanced Scorecard
Company’s Major Strengths and Weaknesses

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

Key success factor (objectives)	Key performance indicator	Target	Summary action plan
Business environment improvement and sustainability.	The performance of the decision science since the management approach is proactive.	Emerging the supply chain and the marketing strategies that are customized to serve the dynamic and sensitive Chinese market.	The company has been successful in streamlining the supply chain and marketing departments on the basis efficiency.
Effective and organized workforce drawn from the local market.	Performance of the employee review system through use of the effective 360 degree feedback and talent promotion.	Micromanaging the employee performance through a series of constructive trainings that are designed to create an open workenvironment.	The company has been successful in developing a series of employee training modules within the business scope within the expansive Chinese market.
Improving the digital business platform.	The number of recorded visits on the company’s online portal has risen from three million in 1999 to 1.2 billion by the end of the 2014.	30% of the private and corporate online visits in a month within China are recorded in the company’s online customer activity tracker.	The company has been proactive and focused on recruiting a digital marketing support team as part of the workforce to serve its extensive customer base through the state of art customer care center in Beijing.
Creating a flexible learning environment.	Proactive business model and workforce that has the relevant talents and skills to support the complex online business platform.	There is efficiency in business reporting at the company through the company’s executive directors and regional representative.	The company has successfully outsourced training consultants or experts from the Silicon Valley to ensure that its current business platform is the most advanced but user friendly.

Perspective: Internal Business Process

Key success factor (objectives)	Key performance indicator	Target	Summary action plan
Efficiency in the internal audit channel.	Improvement in the business development process and reporting.	There are series of proactive internal audit reports to ensure that internal control is within the mission and vision of the company.	The Alibaba Group Holding Limited offers training on the required business process auditing and creating a secondary team to audit the reports generated each year to minimize cases of fraud.
Micromanaging the audit and management units as dependent functions.	Optimal management reports that are generated on a yearly basis.	The Alibaba Group Holding Limited has been successful in creating a rationale internal control system.	The Alibaba Group Holding Limited has been successful in offering mandatory training and performance review for the managers and auditors.
Effective services with regards to actual and reported business activities.	The actual performance report against preset targets.	The Alibaba Group Holding Limited has been successful in continuously managingits decision making organ through the highly skilled board of governors.	The Alibaba Group Holding Limited has been successful in reinventing its approach towards customer’s expectation management.
Micromanagement of the supply chain and online portal.	Effectiveness of the supply chain.	Smooth flow across the supply chain since all the activities are centralized and paperless.	The Alibaba Group Holding Limited has successfully automated its supply chain and logistics support centers across the China.

Perspective: Customer

Key success factor (objectives)	Key performance indicator	Target	Summary action plan
Stratification of different market segments.	Positive records of new and old customers in comparison to preset targets.	Micromanaging the different branding strategies to meet the demands of the customers.	The Alibaba Group Holding Limited has been successful in implementing the current strategic customer retention strategies such as offering attractive discounts and other after sales services.
Management of customer demands.	The increase in number of positive compliments from customers.	Creating a sustainable customer base.	The Alibaba Group Holding Limited has been successful in offering persuasive and attractive services to customers through the current promotional channels.
Customer satisfaction	Frequency of same customers	Creating a sustainable customer base	The Alibaba Group Holding Limited has been successful in creating a system for management of the customer loyalty programs.
Feedback reporting	Frequency of messages from customers	Creating a feedback system for online and offline customers	The Alibaba Group Holding Limited has successfully outsourced an IT company to carry out customer relationship management on its behalf.

Perspective: Financial

Key success factor (objectives)	Key performance indicator	Target	Summary action plan
A sustainable financial management	The business ethics and professionalism in reporting financial reporting	Improving the performance ratios	The Alibaba Group Holding Limited has been successful in creating a tight financial reporting channel.
Improving the daily returns tracker	The financial performance per day	Constant growth in returns by a positive value	The Alibaba Group Holding Limited has been successful in implementing the returns management system.
Expanding the profitability	Improvement in the annual profitability within the set target	Growth in the profit margin after every three months of active business	The Alibaba Group Holding Limited has been successful in ensuring that there is stability in the performance ratios.
Rationalized financial investment	Rational financial plans	Success of long term investments	The Alibaba Group Holding Limited hassuccessfully created a tight financial planning system.

The financial ratio performance of the company as compared to its major competitor is summarized in the tables below.

The Alibaba Group Holding Limited

Profitability	2012	2013	2014
Profit Margin %	33.63	18.42	18.78
Asset Turnover	0.58	0.61	0.58
Return on Assets %	19.42	11.21	10.86

eBay China Company

Profitability	2012	2013	2014
Profit Margin %	10.93	9.69	9.43
Asset Turnover	1.07	0.94	0.89
Return on Assets %	11.7	9.14	8.38

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.

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