Alibaba Group Holding Limited 1

Alibaba Group Holding Limited

Hazem Albassam

Northwestern University

Professor. Claudia Gamboa

ORG_BEH_391
Alibaba Group Holding Limited 2

Introduction

Founded on 4 April 1999 in Hangzhou, Zhejiang, China. Alibaba Group Holding Limited is

a multinational technology company specializing in e-commerce, retail, Internet, and technology.

Alibaba owns and operates a diverse range of businesses around the world in various sectors, the

company provides business (B2B) sales services via web portals, business-to-consumer (B2C),

consumer-to-consumer (C2C), in addition to cloud computing services, electronic payment

services, entertainment services and shopping search engines among other business.

Business Model

Alibaba is one of the three largest retailers in the world, exchanging top spot with Walmart

and Amazon according to 2020 Investopedia article[ CITATION REB20 \l 1033 ].However, its core

business model is extremely similar to that of eBay’s. Alibaba acts as a middleman, it facilitates

the sale of goods between buyers and sellers through its large network of e-commerce websites.

Although Ali baba's main business model is e-commerce through its multiple web sites such as

Aliexpress, Alibaba, Tmall and Taobao [ CITATION Ali20 \l 1033 ], it is also in many other

sectors such as the financial sector with its online payment platform similar to PayPal called

Alipay.

Other companies owned by Alibaba are Lazada, South China Morning Post, Hema supermarkets,

AutoNavi, Alibaba Pictures Groups, Aliwangwang and Laiwang and Ali Health Information

Technology, just to name a few. In addition to 15 international subsidiaries in United States,

Japan, Netherlands, Italy, France, Germany, Hong Kong, Taiwan, Australia, United Kingdom in

addition to their headquarters in China according to Uniworld database search.

In short, Alibaba makes their money through multiple avenues such as E-commerce and retail,

Cloud computing and artificial intelligence technology, Entertainment services, Internet services

and others.

History

According to Alibaba’s website “Alibaba Group was established in 1999 by 18 people led

by Jack Ma, a former English teacher from Hangzhou, China. From the outset, the company’s

founders shared a belief that the Internet would level the playing field by enabling small

enterprises to leverage innovation and technology to grow and compete more effectively in the

domestic and global economies. Since launching its first website helping small Chinese

exporters, manufacturers and entrepreneurs to sell internationally, Alibaba Group has grown into

a global leader in online and mobile commerce. Today the company and its related companies

operate leading wholesale and retail online marketplaces as well as businesses in cloud

computing, digital media and entertainment, innovation initiatives and others.”[ CITATION

Ali201 \l 1033 ].

On an funny note on the naming of Alibaba, the Group’s name came from Middle Eastern

folk tale of “Ali Baba and the 40 thieves” from the collection of “One Thousand and One

Nights” also known in the Western World as “Arabian Nights” because of its universal appeal.

As Jack Ma, the main founder said in a CNN Talk Asia interview “LH - Now Alibaba... Fancy

name, catchy too! But it conjures up, at least to me, something to do with thieves, not legitimate

business. Why Alibaba?

JM - One day I was in San Francisco in a coffee shop, and I was thinking Alibaba is a good

name. And then a waitress came, and I said do you know about Alibaba? And she said yes. I said

what do you know about Alibaba, and she said 'Open Sesame.' And I said yes, this is the name!
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Then I went onto the street and found 30 people and asked them, 'Do you know Alilbaba'?

People from India, people from Germany, people from Tokyo and China... They all knew about

Alibaba. Alibaba -- open sesame. Alibaba -- 40 thieves. Alibaba is not a thief. Alibaba is a kind,

smart business person, and he helped the village. So...easy to spell, and global know [sic].

Alibaba opens sesame for small- to medium-sized companies. We also registered the name

AliMama [sic], in case someone wants to marry us!”[ CITATION Lor06 \l 1033 ].

Current state of Alibaba

Growth or Contraction. Although the numbers on Wall Street expects Alibaba to earn 87 cents

per share on revenue of $15.2 billion on Monday May 13th, 2020. This compares to the year-ago

quarter when earnings came to $1.25 per share on revenue of $13.59 billion. Showing that

Alibaba is contracting its growth, and that is extremely understandable due the coronavirus

outbreak.
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Nevertheless, according to analysis that I did using my online stock trading account with e-trade,

I found that Alibaba Group (BABA) Alibaba's EPS Growth Rate is greater than 97% of its peers

in the Online Services industry. Furthermore, Alibaba's Gross Margin is more than 71% of other

companies in the Online Services industry, which means it has more cash to spend on business

operations as compared to its peers. As indicated by the Operating Margin, BABA controls its

costs and expenses better than 97% of its peers. It is also worthy to note that Alibaba group has

outperformed The Dow Jones industrial index and eBay Figure 1, despite the coronavirus

triggered recession.

Figure 1[ CITATION etr20 \l 1033 ]

Moreover, Alibaba’s stock price predictions in one year is at $257.44 or %28 growth from its

current price of $201.19 (5/8/2020) Figure 2

Figure 2[ CITATION etr20 \l 1033 ]

Top Competitors or Alternatives to Alibaba group (BABA Market Cap 539.7 B + BABAF

Market Cap 517.7 B = 1.06 T) could be eBay (Market Cap 29.5 B), Amazon (Market Cap 1.2 T)

and Walmart (Market Cap 348.4 B).

If we are going to be talking about market size or market capital we will find that Alibaba and

Amazon are extremely head to head when it comes to that, we might also notice that all of the

businesses that Amazon is currently involved in including grocery stores are being done by

Alibaba as will, we will find that Amazon is doing the same but in a completely different market,

We might even consider that Alibaba is The Amazon of China.

If we look at stock price comparison [ CITATION etr20 \l 1033 ]Figure 3[ CITATION etr20 \l 1033 ]

between Alibaba and Amazon for the last three months during the Corona virus outbreak we will

notice that both stocks performed equally until the high demand in new US markets for door to

door delivery through Amazon prime.

Figure 3[ CITATION etr20 \l 1033 ]

Innovation and competition, Alibaba group has been a leader in innovation according to a lot

of news articles and scientific journals, One article in the Brazilian Journal of technology states

that Alibaba has transitioned into big data [ CITATION DeS20 \l 1033 ]. Another article by Asia

Policy, states that Alibaba is a pioneer in smart city building implementing artificial intelligence

and that it is expanding beyond The Chinese border to Kuala Lumpur Malaysia among other

cities to build smart cities.[ CITATION Nau20 \l 1033 ].

Alibaba has changed its original business strategy from e-commerce to big data and cloud-

computing application, and adjusted its strategy in alignment with a global business strategy.

Regarding Alibaba's competition in innovations, we will find that Alibaba is very much at the

same level of innovation as Amazon. For example, we will notice that the one main thing that

they compete over is cloud services [ CITATION Can20 \l 1033 ]Figure 4 [ CITATION Can20 \l

1033 ], thus far Amazon is winning that competition by holding more than 32% of global cloud

services, whereby Ali Baba holds only 6%.[ CITATION Can20 \l 1033 ].
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On the financial front of competition, PayPal a US based company has invaded the home of

Alibaba’s Alipay by Acquiring 70% for local Chinese financial company called GoPay as of last

year.[ CITATION Mat19 \l 1033 ]

Figure 4 [ CITATION Can20 \l 1033 ]

As for competition, US based Amazon’s and Walmart’s supply chains are mainly Chinese.

Meanwhile, Alibaba is based in China itself, Despite Globalization, Alibaba still has the home

field advantage. In other words, they could react quicker and swifter than their competition.

Culture and values

“Customers first, employees second, shareholders third. Trust makes everything simple. Change

is the only constant. Today’s best performance is tomorrow’s baseline. If not now, when? If not

me, who? Live seriously, work happily.”[ CITATION Ali202 \l 1033 ]. These are Alibaba’s values

according to their website, I am extremely impressed with their first directive where they put the
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customers first employees 2nd and then shareholders third, I’m not sure if this is a communist

philosophy or is it a company philosophy, regardless it is extremely impressive.

However when i did and external research on the subject via glassdoor.com, I found the

company to hold a 3.9/5 star according to the employees rating , with one main complain of a

bad life work balance, And on the other hand a lot of compliments on a great work environment [

CITATION Gla20 \l 1033 ].

Leadership

Jack Ma, also known as the Steve jobs of China. He founded China's first Internet-based

company in 1995. The main founder of Alibaba Group, known for his leadership style .

Jack ma is about 55 years old, with a net worth of about 42 billion, making him one of the

wealthiest men in China and the world. In May 2013 Jack ma surprisingly resigned as CEO of

Alibaba. Nevertheless, his leadership style is worth studying, despite that he is no longer with

Alibaba group.

At the first glimpse, we find that Jack Ma is an inspirational leader, just by the number of quotes

he has on the Internet, he also has showmanship skills.

Jack Ma, knows how to unify people with a common goal and not by unifying their

thoughts” Don’t even trust that you are able to unify what everyone is thinking; it is impossible.

30% of all people will never believe you. Do not allow your colleagues and employees to work

for you. Instead, let them work for a common goal. It is a lot easier to unite the company under a

common goal rather than uniting the company around a particular person.”[ CITATION Jac14 \l

1033 ].
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He also believes that a leader should never compare his technical skills to an employee, Ma adds

that the employee should have superior technical skills in comparison to the leader, and if he

doesn’t than they have employed the wrong person.

According to Ma, a true leader should have three distinct qualities:” Visionary with more

foresight than the employees. Higher grit and tenacity and be able to endure what employees

cannot. Higher endurance and ability to accept and embrace failure” [ CITATION Jac14 \l 1033 ]

For all of his success, Ma has continued to be incredibly humble. He is very willing to talk about

his own mistakes and failures. When asked about his accomplishment he most commonly prefers

to talk about the others who built his company or his customers.” (He) admits that he doesn't

know the very best way to run his company. He's still experimenting. However, if Ma is sure of

one thing, it's that he hates empire thinking, he said. "Empire thinking means join me, or I'll kill

you. And I don't like that model," Ma said in an earlier talk. "I believe that everybody should be

connected to each other, help each other. It's an ecosystem."[ CITATION LAU \l 1033 ].

When we compare Ma’s leadership style to our western leadership style, we find it to be entirely

contradictory and even ambiguous to a western mindset. Nevertheless, Ma's leadership style has

been flawless, whether that leadership style could be contributed to communism or to orientalism

but it definitely worked for Alibaba group. You will be able to sense that from reading his

following quote “If you complain or whine once in a while, it is not a big deal. However, if it

becomes habitual, it will be similar to drinking: the more you drink, the stronger the thirst. On

the path to success, you will notice that the successful ones are not whiners, nor do they

complain often. The world will not remember what you say, but it will certainly not forget what

you have done.” You can feel the South eastern mentality of honor in those words, and that will
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give you a little bit more sense of the background that he grew up in and the values that he

cherishes.

When we read sources from outside the US, we notice the differences in how business and

leadership are described. One main difference for example, is the idolization of leadership and

leaders in Eastern viewpoint. From a US and the western viewpoint, Jack Ma maybe consider it

to be a lenient leader.

Conclusion

I will end with line from a poem by Rudyard Kipling "East is East, and West is West, and never

the twain shall meet” It continues, a few lines later “But there is neither East nor West ... When

two strong men stand face to face.” And in this case Alibaba and Amazon stand face to face.

Alibaba was Grown by a simple English teacher to be that huge international global entity, and it

is still growing branching to multiple sectors beyond its original E-Commerce platform.

References
Alibaba. (2020). CULTURE AND VALUES. Retrieved from Alibaba:

https://www.alibabagroup.com/en/about/culture

Alibaba. (2020). HISTORY AND MILESTONES. Retrieved from Alibaba:

https://www.alibabagroup.com/en/about/history

Alibaba. (2020). OUR BUSINESSES. Retrieved from Alibaba:

https://www.alibabagroup.com/en/about/businesses
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Canalys. (2020, April 30). Global cloud services market Q1 2020. Retrieved from Canalys:

https://www.canalys.com/newsroom/worldwide-cloud-infrastructure-services-Q1-2020

De Souza, M. F. (2020). A Brief Contextualization of Big Data in the International Business

environment: evidence from the Alibaba Group's transition. Brazilian Journal of

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Glassdoor. (2020). Alibaba Group Reviews. Retrieved from Glassdoor:

https://www.glassdoor.com/Reviews/Alibaba-Group-Reviews-E225974.htm

Hahn, L. (2006, April 25). Jack Ma Talkasia Transcript. Retrieved from CNN International edition:

http://edition.cnn.com/2006/WORLD/asiapcf/04/24/talkasia.ma.script/

Heller, M. (2019, Oct 1). PayPal Investment Positions It for China Entry. Retrieved from CFO:

https://www.cfo.com/payments/2019/10/paypal-investment-positions-it-for-china-

entry/

Ma, J. (2014, Feb 2). How To Be Successful In Life And Business, According To Jack Ma. Retrieved

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MCCLAY, R. (2020, Feb 21). 10 Companies Owned by Alibaba. Retrieved from Investopedia:

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MONTINI, L. (n.d.). Alibaba's Jack Ma: We're Ready to Make Mistakes. Retrieved from Inc:

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