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Case Study: Alibaba, the World’s Largest E-commerce Corporation, Holds 70% of China’s Online Market, Defeating eBay and Amazon

2018-03-09 · Seoul

E-commerce conglomerate Alibaba surprised the world again by joining a group of companies with a market capitalization of USD 500 billion in January this year – which is the first time for a Chinese company listed on the New York Stock Exchange. Nearly 100 million users access Alibaba each day and make purchase. Not only do nearly 70% of all packages across China belong to Alibaba’s affiliate online shopping malls, but the deals made through Alibaba records close to 2% of China’s total GDP.

 

South Korea’s one of the most influential business magazines, Maekyung Economy, searches the factors behind success and growth of Alibaba, of which the CEO is one of the school’s alumni. Alibaba’s strategies on success and Jack Ma’s leadership are elaborated with the interview with Professor Teng Bingsheng, Associate Dean for Asia and Europe and Professor of Strategic Management of Cheung Kong Graduate School of Business (CKGSB). Associate Dean Teng was introduced as a renowned expert in the field of Strategic Alliance.

 

It cannot be denied that Alibaba’s founder Jack Ma has shown a charismatic leadership in his management, which is one of the reasons why Alibaba has grown substantially. In addition to his charisma, accurate analysis of customer needs has been another pivotal influence as well.

 

“Taobao’s customers spend considerable amount of time in the website because Taobao has the vast selections of merchandise – and it takes quite bit of time to browse through, make selection, and complete deal.” Associate Dean Teng noted.

 

Alibaba’s unique shopping spree, “Singles’ Day”, has become widely recognized by the global world as well. In 2017, the day showed a record-breaking sales revenue and reached over RMB 168.2 billion – on just one day.   

 

“The significance of Singles’ Day on Alibaba can be explained in three ways,” Associate Dean Teng explained, “firstly, the day creates a new “shopping holiday” online to consolidate the Alibaba platform and becomes an excellent reminder of the existence of Taobao and Tmall. Secondly, the concept of “New Retailing” that combines online and offline market, has been advocated by Jack Ma. This event is a perfect example of a new scenario. Finally, since November usually is a slow shopping season in China, retailers end up with large inventory that they need to get rid of. Therefore it is a perfect time to have a shopping spree.”

 

Associate Dean Teng also added explanation on Jack Ma’s leadership: “Without doubt, Jack Ma has been the most unique business leader in China, to whom probably only Ren Zhengfei of Huawei could rival. His style is a mix of vision-drive, grass-root based, and culture oriented. Alibaba culture includes extreme customer orientation, “take no prisoner” attitude, team work, and result-driven.”

 

However, some question that the unique culture of Chinese market somehow contributed to Alibaba’s success. The question leads to how global companies could survive in the market and what aspects of Alibaba they could benchmark.

 

“The characteristics of the Chinese market, including certain policy issues, certainly contributed towards Alibaba’s success,” Associate Dean shared his insights regarding the issue, “Amazon, for instance, was initially doing well in China – but it did not seize the opportunity but it was rather defeated by Taobao due to its lack of flexibility. So the biggest lesson for multinationals is that they need to “think global, act Chinese”. Empowering the Chinese team to establish its own strategy will be a good example.”

 

To read the original Korean article in Maekyung Economy, please click here.