Alibaba Strategy Analysis

Question 1

Perform an internal analysis of Alibaba. Your analysis should be in-depth and should include all relevant techniques and models. (25marks)

The vision of Jack Ma, lead founder and chairman of Alibaba Group, is to "connect Chinese companies to the world" and Alibaba's mission is to "make it easy to do business anywhere". With Jack Ma's vision, Alibaba Online was launched in December 1998 and served as a bulletin board for businesses to trade online. After forming a parent company, Alibaba Group, Alibaba began to venture into different sites with different languages and start to develop wide and deep B2B marketplaces, something which was difficult to imitate. To make it easy for its customers to do business, Alibaba uses multi-dimensional strategy to attract more users and customers to its effective marketplaces. It also provides interactive community platform and online features to differentiate itself from its competitors.

To perform an internal analysis of Alibaba, we shall look at the business fundamentals - financial strength, business cycle, business risk, organization design, R&D, operations and logistics, capability and core competencies evaluation and value chain analysis.

Business Fundamentals

1. Financial Strength

Based on the financial data given for 2004 – 2007, we shall look at its growth in revenue, expenses and overall profits.

From Table 1, we can see an increase in its total revenue with the revenue from international marketplace being the main contributor and not the domestic marketplace. However, when we compare year-on-year performance, the percentage of increase decreases.

Table 1 – Growth in Revenue

End of 2004 End of 2005 Year-on-Year End of 2006 Year-on-Year

359,435,000 738,297,000 +105% 1,363,862,000 +84%

From Table 2, we can see an increase in the expenses. However, when we compare year-on-year performance, the percentage of increase decreases.

Table 2 – Growth in Expenses

End of 2004 End of 2005 Year-on-Year End of 2006 Year-on-Year

334,558,000 657,219,000 +96% 1,113,278,000 +69%

From Table 3, we can see an increase in the profit. However, when we compare year-on-year performance, the percentage of increase first decreases then increases.

Table 3 – Growth in Profit

End of 2004 End of 2005 Year-on-Year End of 2006 Year-on-Year

73,861,000 70,454,000 -4% 219,938,000 +212%

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