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From its establishment in 1999¼ŒAlibaba has become well-known domestic and global e-commerce business company after a merger with Yahoo in China. Defined as small and medium enterprises in global trade platform, the company has been committed to service them, as well as combining with Yahoo China; Alibaba begins to enter a new stage of search for E-commerce aggressively. By a series of methods, including searching for locking users, Alipay and integrity message, Alibaba occupy the main battlefield of e-commerce with a key link in business market. So that, Alibaba is complete the overall layout of industrial chain from e-commerce to search, and turn out to be an image of an integrated strategy. In this report, it will firstly introduce the main E-commerce stage of Alibaba, and then, SWOT analysis methods will be used to understand the internal and external situation of Alibaba. Following this, PEST analysis methods will demonstrate Macro-environment of the company. Finally, this article also will present some strategies for Alibaba to operate smoothly in the global market.
Leading B2B E-business platform in the online trading market, Alibaba is the greatest global electronic marketplace in the world business as well as china’s domestic trade. The members of Alibaba come from more than 220 countries and regions. The network has become the preferred one on which the global merchants sell products, expand and promote their market. Headquarters of Alibaba is located in Hangzhou, which is a commercial city in eastern of China. There are 16 Sales Service Centers in China, Hong Kong, the United States and Europe. The company has composed an E-commerce development legend in the history of China.
3.0 SWOT analysis
SWOT analysis is a widely used tool in marketing management. This theory, proposed by a professor of management in University of San Francisco during 1980s, is used for corporate strategy development and competitive intelligence frequently. Each letter of SWOT represents strength, weakness, opportunity and threat respectively. S (strength) and W (weaknesses) are internal factors, and O (opportunity) and T (threat) are external factors (George, P. 2003,).
Using this method, it should be helpful for the organization to understand the scene in which Alibaba operates, and then conduct a comprehensive, systematic and accurate study, Moreover, the company can formulate appropriate development strategies, plans and countermeasures, based on the findings from the study.
3.1 Internal Strengths and Weaknesses
3.1.1 Internal Strengths
Intangible assets: There are a large number of members in Alibaba, divided into ordinary members and integrity members. At the end of 2003, the number of Alibaba’s members was 2.7 million, and there were 2 million members in China. More than 120 companies of the world’s top 500 enterprises had become professional procurement partner of Alibaba. Moreover, increasing visibility and excellent brand image enable the enterprise establish a growing coverage of information, attracting businesses to enter E-business market. A good business credit and aggressive corporate culture also bring Alibaba a high reputation effectively.
High-quality management system: The website owns three sets of language market systems, including British, Chinese and Japanese. Therefore, because of the extensive customers, it is easily to facilitate information exchange, improve information management system and creating a momentum efficiently. Gradually, Alibaba has a loyal and stable customer base, strong financing capability. At the first time, the final result of the financing is receiving the amount of 5 million dollars from five institutional investors of the joint venture, which are GoldmanSachs, Transpac, Singapore TDF, Investor AB and Fidelity. The most remarkable goal is getting 15 million dollars invested by MR. Sun, who is the founder of Softbank after the first meeting with CEO of Alibaba.
Skilled manpower resources: In fact, when the industry refers to Alibaba, the team will be highly valued. In core areas, there are staffs with expertise. The company possesses a sales model as “271” pattern, in which there are twenty percent of star sales, seventy percent of mid-stream salesmen, and ten percent of “wild dog” salesman. The organization also establishes a set of “KPI” performance appraisal system. The actively motivated staff with a strong organizational learning capability can bring of enormous benefit. Only a team of strong cohesion can be invincible at a critical moment.
Ability to compete effectively: There are three aspects to the powerful competition ability of Alibaba. They are the short cycle of product development, a strong dealer network and a good partnership with suppliers. In terms of them, the enterprise can reflect responsiveness to changes in market environment, so as to obtain market share leadership.
The correct market positioning: As a saver of the small and medium enterprises, Alibaba has become the largest global positioning site in China. At the beginning, the CEO of Alibaba considers the poor access for many small exporters. However, Asia is the world’s largest export supply base. Suppliers of small and medium enterprise crowd in the area intensively. As the CEO saying, the purpose of Alibaba is catching shrimps not whales, which are not always healthy. Alibaba operates the world’s import and export trade of the online trading market for small and medium enterprises.
3.1.2 Internal Weaknesses
Network of intermediary: Alibaba’s Web site model is an intermediary form, and this pattern can replace easily, which provide a sample for the other competitors to enter the industry, also increase the competition. Behind Alibaba’s B2B market model, there are a lot of catch-up figures. In August 2009, Alibaba launched a small wholesale and retail trade platform for the global sell-speed pass, which provided services similar as eBay and Dunhuang net. However, there are subtle differences in transaction process only in the seller access and charging method. Although, in a short period of time, Alibaba should be worry-free, it must not ignore the other competitors encroach.
Charges to members of web: At the beginning, Alibaba started a free mode, so that a large number of members can enter the system effectively. Then the company increased fees and charges from the membership system. At present, collecting membership fees is the major profit model of Alibaba. In the transition process, it would lead to the loss of existing members, and create the circumstance for competitors. So the situation can bring difficulty to the development of the site.
Low-quality of information: On the website, mass Alibaba transaction information, with low-quality, floods into eyes. The information will become the biggest obstacle to restrict their development. Alibaba provides a lot of messages every day, but these messages are copied from someone else’s website or newspapers, and the messages are not always timely for businesses. Therefore, Alibaba should set up its own press corps to gain collection and editing of the first primary commercial messages and apply the feedbacks to the enterprises in time. And then, it allows businesses to can be aware of these messages not through other unnecessary Web sites and newspapers. Supplying a better service to the enterprise should be the terminal goal of Alibaba, so that the information just can win vitality.
Imperfect business platform: The business platform of Alibaba turns out to be large and messy. Originally, there are 27 industry categories, and 800 – 900 subordinate categories, and that pose the biggest obstacle to optimize the business platform.
3.2 External Opportunities and Threats
Chance of market expansion: In recent years, BRICs (Brazil, Russia, India, and China) and VISTA (Vietnam, Indonesia, South Africa, Turkey, and Argentina) develop their economic with a rapid rate, and create a lot of business opportunities at the same time. Because of the large-scale promotion of these emerging areas, Alibaba promote quick and easy accesses to these emerging markets for the small and medium enterprises. Consequently, these enterprises could expand to other geographical areas, and share the flesh market opportunities.
Global marketing business: Thanks to Alibaba, E-commerce platform provides a virtual global trading environment to enterprises, and has greatly enhanced the level of business activities and quality of service, breaks the regional and national boundaries, opens up a huge online market. As a result, more and more development space for business will be explored. In the global market, by the strong growth in market demand, enterprises can optimize the allocation of resources to sell their products around the world efficiently.
Financial crisis: Under the depression, the downward economy of U.S. has appeared clearly, then the import demand turns to a significant reduction, while Britain, Germany and other European country is already facing negative growth trend in economy. In such a situation, Alibaba has uncharacteristically explored invests 3-5 times than past in large-scale marketing of the United States, Europe and other countries. The reason for the unusual action is not hard to understand, no matter how badly is the recession in developed economies, the basic living of the residents will not decrease, these is the only reduction is the luxury consumption. At the same time, for basic cost of living, the residents will be more inclined to seek low prices. Alibaba will greatly reduce the transaction costs of both imports and exports through E-commerce platform, in order to achieve the resident times, and that can meet consumer demand in economic crisis.
Competition from rivals: B2B business website model, in recent years, is developing rapidly in worldwide scope. It gradually becomes a trend of E-commerce Alliance, which is a business model in mergers and co-operation. That will lead to become more competitive. In the international market, there will be powerful new competitors to enter the market. Alibaba’s most powerful competitor is Commerce One j in United States, who is a leader in B2B e-marketplace and has established a global trading platform.
Financial crisis: Vulnerable to the impact of economic recession and the business cycle, the global economic slowdown and lead to the situation that a global enterprise survival space is compressed. Further intensified competition between each other will lead a more apparent survival for the fittest (Andrew, D.M. 2001,)
4.0 PEST analysis
Alibaba is a well-known brand of the E-commerce market in global area, also is the largest and most active online trading market and business community in the world’s international trade. The company has processed the successful integration of the B2B, C2C and search engines, so as to lead global customers and partners to success.
PEST is the analysis method of the macroeconomic environment, also known as the general environment which refers to various macro-forces of impacts to industries and enterprises. In analysis of macro-environmental factors, Analysis of the specific contents vary from different industries and enterprises operate, according to its own characteristics and needs. Generally dealing with P (political), E (economic), T (technological) and S (social), which are four major categories affect the main external environmental factors, the analysis is used for making strategies (RAPIDBI. 2009,).
4.1 Political factors
4.1.1 E-commerce regulation and security
The legal protection of E-commerce transaction security involves two basic aspects.
First of all, e-commerce transaction is a commodity trading, the security issue should be protected by the Civil and Business Law. Second, E-commerce transaction is a network economy with Internet as a platform. Its security depends on the safety degree of both computer and network (Lorna, E.G., 2003,).
From an international point of view, Promoting e-commerce have been considered as strategy tactics by many countries and regions to improve competitiveness of the State and optimize the allocation of resources, so in succession ,a number of laws and regulations have been formulated to ensure and promote the development of e-commerce. The United Nations Commission on International Trade Law passed the Electronic Signature Law in 2001 and the Convention on Electronic Contracts in 2005. For legislation of digital business in countries all over the world, these factors justify a set of international current e-commerce rules (Lorna, E.G. 2003,).
4.1.2 Green economic and trade
According to Obama’s program of stimulating the economy, 10% of funding will be invested in environmental projects. In his inaugural speech, he assured that the United States will provide energy for cars and factories by using solar, wind and soil. This argument determines the Western countries’ attitude of environmental programs. On the other hand, China also promises that the percentage of renewable resources use will increase to 16% of the required energy by 2020.
In the past two years, the searches of alternative energy on the website grew steadily, those energy including solar energy, wind power, electric cars, bio-diesel, organic products and so on. The raising mainstream awareness of environmental protection in developing country, and the fulfilling Government’s commitment of large-scale clean energy projects will continue to drive the demand of green products.
4.2 Economic factors
4.2.1 International electronic commerce
With the gradual improvement of international e-commerce environment, the condition of “tradable” gets mature day by day. At present, by the means of its substantial economic power and its Resource Advantage of e-commerce services, Developed Country and regions strive to maintain their world’s leading position in e-commerce competitions. At the same time, developing countries are actively exploring how to narrow the gap of electronic Business services with the developed countries.
4.2.2 Global financial crisis
This is a very uncertain time for the global economy. However, in the midst of a crisis there is historical opportunity.E-commerce is becoming one of the key elements which is the engine of driving big economic reforms. The global economic crisis has not only brought impact to the traditional way of international trade, but provided opportunity for developing and reforming International Electronic Business. In the environment under economic crisis, three major advantages of e-commerce are highlighted: less trading links, low transaction cost, increasing business life cycle.
At the same time, it also brings many challenges, such as optimization of business management model, network transaction security, credit of business market and so on. In short, the economic crisis has brought opportunities for the development of electronic commerce, but we should not ignore the existence of challenges
4.3 Social factors
Nowadays, network consumption habit is gradually formed, and consumers have become more and more rational, cost-effective commodity-oriented to online shopping. As the representative of the consumer economy, shopping online has gradually become more reasonable choice for consumer.
In addition to be able to meet the actual shopping needs, online shopping supplies a lot of information for consumers who buy goods on website at the same time, but also, it is available in fun which can not be provided in a variety of traditional shops. Today, there are two kinds of pursuit trend in the course of people’s consumption, because of pressure and nervous from work, consumers take a high degree of convenience on the shopping process as the goal, what they seek for is the time and labor cost savings as far as possible. While the other part of the consumer who is due to increased labor productivity and discretionary time available, they hope to find life through the fun form consumption. In the future, the consumption of these two psychological opposite will co-exist in a long period of time.
4.4 Technological factors
In information age, popularity of the Internet has spread widely. From a long-term perspective, information technology has changed business and society pattern, and business culture in information age gradually becomes practiced and mature (Kevin, S, 2008,). This historical context changes expedite to process by the catalytic action of the present international financial crisis. In other words, if the international financial crisis has exposed a number of disadvantages in industrial civilization densely, it is difficult to avoid the coming of business civilization in the information age. Internet-based E-commerce services may be the infrastructure of business civilization in the information age.
Products and services of Internet marketing should be information products and services and standardization of products, which do not try to purchase the product before the making decision. That just can be conducive to online sales. On position of consumers, Alibaba take aim to be consistent with the Internet users, and the consumers of products and services should be foremost Internet users.
By the reflection on the symmetry of information on the Internet, enterprises and customers can exchange information anytime and anywhere. Via the Internet, companies can quickly build and change the product items, and conduct virtual promotion on product project, thanks to the high-speed and low costs, Alibaba can achieve improvement on projects and marketing programs for product on researching.
The price of internet marketing products and services form Alibaba should refers to the following factors:
Internationalization: Thanks to a global market environment created by Internet, when Alibaba processes in the development of price products and services, they should consider international factors. Judged by demand and price situation of the international market, it just can be wisely to determine the price measures of the enterprise.
A lower price: As cost reduction of product development and promotions in the network marketing, Alibaba can reduce the price correctly. At the same time, as the Internet’s openness and interaction, the market is open and transparent, and consumers can be fully do the price comparison and selection on product. Therefore, enterprises are required to show lowest prices to provide consumers with products and services
Flexibility: As interactive marketing in the network, enterprise and customers can consult on product prices, and that is so called bargain. In addition, enterprises can also provides different requirements to develop the appropriate price, based on customer for each products and services
Price Explain system: Through the Internet, enterprises provide the customers pricing information of product, such as the production cost and cost of sales. And, establishing the price interpretation system for product pricing will explain reasons for customers. That can respond to consumer queries, and enable consumers to recognize product prices
In the network marketing, member of the network is one of the most important distribution channels. Member network is a network of groups established in an enterprise on the basis of a virtual organization. Through membership, it promotes customer contacts and exchanges among themselves, as well as customers and business, and fosters customer loyalty to the enterprise. As a result, it will bring the customers into the businesses throughout the marketing process, so that every member of the network can be beneficial and develops mutually. Alibaba should sign an agreement with a variety of authoritative logistics companies, those who can optimize the system for identification, distribution, search and tracking.
Alibaba should provide satisfactory support services to customers. With the development of the market and competition intensifying, more and more consumers have a delicate palate, and the competition among enterprises extends from product to service. Whether pre-sales or after-sales service, they become significant increasingly. The ability to provide satisfactory services to customer is often the key to business success. Internet marketing has advantages in providing support. Through the Internet, the world’s consumers can also contact and exchange with businesses, and the customers can be directly related to the business consulting products and services, on the other side, enterprises can apply text, pictures and graphics to show the contents of the products and services to customers, also they can interpret and response the customers’ consultations, so that the whole pre-sales and after-sales service can be timely refresh.
Alibaba should set up the respective partnerships with the customers and the subordinate and superior companies. Actually the cooperation is mutual, Alibaba obtains information from the customer; and also provide assistance for customers, not only to provide customers with products and services. Additionally, Alibaba help customers realize the value of these products and services. The purpose of establishing the partnerships with all kinds of companies is promoting cooperation between them, and carrying out more large-scale marketing activities. Then it provides customers with better and more convenient services, and also gives competitive advantage for the cooperation enterprises.
In conclusion¼Œthe traditional marketing mix has hardly can meet the needs of enterprises development, with the advent and development of the Internet, it is changing the methods of our marketing products and providing various services. As an emerging marketing model, although trend of E-commerce is very clear, but in the whole immaturely e-commerce market, many aspects of it are still at the exploratory stage. From the view of many investigations, results in the unhealthy operation of small and medium enterprises in network marketing is information scarcity, manage bottlenecks, low levels of e-commerce and marketing channels, etc. Without exception, innovation and development of enterprises, established on the basis of fully understanding on the market and other companies in the same industry, then through this information, the enterprise carries out strategies with scientific decision-making tools (Morrson. 2002,). Overall, there are two kinds of strategies, one is open style, and the other is conservative style. An open strategy largest reflects in the company’s daring to innovate and to be different, and this innovation is not influenced by the outside situation. Becoming a leader in the field of e-commerce, there is no doubt that Alibaba should take the network with characteristic, implement the combination between fine products and personalized service.
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