STRATEGIC MANAGEMENT FINAL REPORT ALIBABA GROUP HOLDING LIMITED
By: Nabila Sekar Hapsari
1506679483
Rahmatania Ekoputri Apriliana
1506679281
Pratama Adipradana
1606884602
Ananda Nandika
1506727204
Mohamad Raihan Ghifari
1506679294
Rheinhard Rheinha rd Yonatan
1506749634
Menno Janssen van Doorn
1806265583
Tobias Heinicke
1806265564
FAKULTAS EKONOMI DAN BISNIS UNIVERSITAS UNIVERSITAS INDONESIA DEPOK
STATEMENT OF AUTHORSHIP
We, the undersigned, hereby declare that the attached paper is purely the result of our own work. No work of others that we use without citing sources. This material is not / has not been served / is used as a material for papers / assignments on subjects other than we stated stat ed clearly that we have used. We understand that this task can be reproduced and or communicated for the purpose of detecting the presence of plagiarism.
Course
: Strategic Management
Paper / Assignment Title
: The Analysis of Strategic Management Model Case Study: Alibaba
Date
: December 19th, 2018
Lecturer
: Anna Amalyah Agus S.E., M.B.A / Avanti Fontana Ph.D
Name
Student ID Number
Nabila Sekar Hapsari
1506679483
Rahmatania Ekoputri A.
1506679281
Pratama Adipradana
1606884602
Ananda Nandika
1506727204
Mohamad Raihan Ghifari
1506679294
Rheinhard Yonathan
1506749634
Menno Janssen van Doorn
1806265583
Tobias Heinicke
1806265564
"
Signature Signatu re
GROUP MEMBERS
Ananda Nandika Finance 1506727204
Menno Janssen van Doorn Marketing 1806265583
Nabila Sekar Hapsari Finance 1506679483
Rahmatania Ekoputri A. Finance 1506679281
Pratama Adipradana HR 1606884602
Mohamad Raihan Ghifari Marketing 1506679294
Rheinhard Yonatan Finance 1506749634
Tobias Heinicke Operations 1806265564
#
TABLE OF CONTENTS
STATEMENT OF AUTHORSHIP
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GROUP MEMBERS
"
TABLE OF CONTENTS
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COMPANY OVERVIEW
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BUSINESS PORTFOLIO
%
VALUES, GOVERNANCE AND SOCIAL RESPONSIBILITY
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Alibaba’s Corporate Value
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Board of Directors
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Corporate Social Responsibility
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VISION AND MISSION
Alibaba’s Vision Statement
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Alibaba’s Mission Statement
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Alibaba’s Proposed Vision and Mission Statements
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EXTERNAL AUDIT
Market Share
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Core Commerce
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Cloud Computing
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The Alibaba Ecosystem
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Alibaba versus the Others
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Investments
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Captive Market of China
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EFE Matrix
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INTERNAL AUDIT
IFE Matrix
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CPM Matrix
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STRATEGY GENERATION
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SWOT Matrix
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SPACE Matrix
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BCG Matrix
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IE Matrix
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Grand Strategy Matrix
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STRATEGY SELECTION
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Market Development
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Product Development
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QSPM Matrix
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STRATEGY IMPLEMENTATION
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Marketing
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Finance
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Research and Development
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Management Information System
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STRATEGY MONITORING
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Balanced Scorecard
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CONCLUSION
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APPENDICES
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REFERENCES
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COMPANY OVERVIEW
Alibaba Group is a Chinese multinational conglomerate which businesses are comprised of core commerce, cloud computing, digital media entertainment, innovation initiatives, and major investee companies. The headquarter is located in Hangzhou, China. Founded in 1998, Alibaba Group provides C2C, B2C, and B2B sales services via web portals. The company was established by 18 founders led by Jack Ma. Its first web portal is Alibaba.com, a global wholesale marketplace. Jack Ma and 17 other founders also tried to develop the trade market condition in its home country by creating a domestic wholesale marketplace named 1688.com. Halfway through a decade, Alibaba Group launched its online shopping website called Taobao. Since then, Alibaba has been gaining lots of attention from investors, domestically and globally. As a technology-based company, Alibaba Group developed its own communication platform for the sellers and buyers named Aliwangwang and a third-party online payment called Alipay. In 2007, Alibaba completed its initial public offering on Hong Kong Stock Exchange and launched Alimama, an online marketing technology platform. The company expanded its business line by establishing AliExpress which enabled exporters in China to reach and directly transact with consumers around the world. Through its journey of business expansion, Alibaba also focused on promoting social issues and helping the society. The Alibaba Foundation was established with an aim to promote human development. d evelopment. In 2014, Alibaba was listed in New York Stock Exchange and became the biggest Asian IPO of all time opened in NYSE. The company also announced that it will invest RMB10 billion over the next three to five years to build 1,000 county-level "Taobao rural operations centers" and 100,000 village-level "Taobao rural service centers" throughout China. Alibaba has been named as one of the fastest growing company for the last two decades and it has more room to grow. On Fortune Magazine’s annual list of World’s Most Admired Companies, Alibaba Group notched 4th place in the Internet Services and Retailing category with estimated brand value of about $54.92 million. The company also became the top 5 e-commerce in Asia, Australia, and southern part of America. Until now, Alibaba has been developing a business ecosystem through throug h its technology platform. plat form. BUSINESS PORTFOLIO
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Alibaba is a major empire consisting of many different businesses and segments. Ranging from commerce to logistics, they surely have it all. One of the way Alibaba operates that is quite important in their revenue generating process is how they categorize every single platform into different compartments, and that each platform would have different uses, or similar uses but for different kinds of markets.
Figure 1. Alibaba’s Core Businesses
The first segment to describe is the core commerce segment. As Alibaba’s powerhouse, this t his segment contributes the most to Alibaba’s total revenue rev enue at about 80% every time. What’s different about Alibaba’s commerce segment is that they don’t try to force and cramp every single thing and features into one platform; instead, they created different platforms targeting niche markets for each platform. plat form. Firstly, they differentiate the region r egion that th at is China and International. The reason behind this is that they want to keep using Chinese language and Mandarin letters within their domestic platforms, keeping these marketplaces appealing to and being close to heart for the Chinese market, which has always been their main market. However, upon targeting the international market, they use a more global approach which was to use English on their international & cross-border commerce platforms. And then, further compartmentalization happens on the level of transaction happening in the platform, as they categorize their commerce segment into retail commerce and wholesale commerce. They have many local retail commerce platforms such as Taobao (retail commerce in China), Tmall (where brands act as sellers and sell directly to individual customers), and juhuasuan (for group buying). Local wholesale commerce happens in
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1688.com, the largest B2B marketplace in China. Meanwhile, the global market is served through AliExpress, Tmall Global, Alibaba.com and Lazada. Moving on to the cloud computing segment, Alibaba Cloud or Aliyun. This segment was initially founded in 2009, however the usage was still internal as it also supported the first ever Single’s Day (11.11). As time went on, Alibaba witnessed a digital movement happening everywhere and eventually decided to make the Alibaba Cloud services available for public. Right now, it is the largest cloud computing company in China, and operates in 18 data center regions and 42 availability zones around the world. Aside from its main operations, Alibaba also branched out to entertainment, mobile media, and other sets of innovations. The platforms within this segment is namely UC Browser, Tmall TV, Alibaba Music, AliHealth, and so on. They aspire to be in every aspects of everyone’s lives. 1)2#" 3*4-5+-- 6#(7)*/-5 8 6##7-")+/4- 9)"+*-"5
Figure 2. Alibaba’s Investee & Cooperative Partners
As they want to create a whole ecosystem, Alibaba decided upon a strategic move which was acquire firms who were operating in the field that Alibaba didn’t master, and make them partners that would align their businesses with Alibaba. A notable example would be Cainiao who had been acquired by Alibaba in 2017 by 51%, because Alibaba intends to invest more in its logistical capabilities. Another example is Alipay, which started out as a victim of China’s central bank regulations on third-party payment providers, to become restructured as a domestic company controlled by Jack Ma. Although they had some issues on their transfer of ownership, but Alipay went on to becoming Alibaba’s ultimate payment platform. In 2015, its parent company was rebranded as Ant Financial Services Group.
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VALUES, GOVERNANCE AND SOCIAL RESPONSIBILITY
Alibaba’s Corporate Value
Alibaba has six core values that are fundamental to the way the firm operates and how the firm recruits, evaluates, and compensates its people. The six corporate values of Alibaba are customer first, teamwork, embrace change, integrity, passion, and commitment. The meaning of “customer first” value is that Alibaba puts the satisfaction of consumers, merchants, and enterprises as its first priority by providing a supportive ecosystem to help them prosper. Alibaba also emphasizes on teamwork as the firm believes that teamwork enables people to achieve extraordinary things. As the business environment moves dynamically, Alibaba is running its business flexibly and innovatively in order to maintain sustainability and vitality of the business. Alibaba also promotes integrity as the firm expects that Alibaba’s people uphold the highest standards of honesty and deliver on their commitments. Those values can be achieved by internalizing and implementing passion and commitment in every activities that is done within the company. The success and rapid growth of Alibaba is built on the spirit of entrepreneurship, innovation, and an unwavering focus on meeting the needs of our customers. The firm believes that a strong sense of shared values v alues enables enabl es to maintain a common company culture and community. Alibaba’s corporate values has its own characteristic which include transparency, flattened hierarchy, and family unity. A truly unique element of the corporate culture at Alibaba is the impact of the myths and legends of Chinese martial arts novels, which have become an everyday reality for employees. This is not just a fun exercise in the culture of Alibaba but also a method for flattened hierarchy.
Board of Directors
Jack Ma and Simon Xie (Alibaba Group’s Co-Founder) have effectively transferred ownership to select members of the Alibaba Partnership who are Chinese citizens. The Alibaba Partnership was set up by the company a decade ago to ensure that Alibaba does not rely on one or two executives in power and divides decision making among the 36 Alibaba partners. The Alibaba Partnership comprises 36 individuals who have the exclusive right to nominate a simple majority of Alibaba’s board of directors, subject to shareholders’ approval during the annual general meeting. This means they are also generally the ones with the most
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decision-making power since directors are hand-picked by the partners, despite not all of the partners serving on the board of directors. directo rs. Of the 36 partners, six were part of Alibaba’s 18 co-founders, including Ma (a lifetime partner) and executive vice-chairman Joe Tsai. The remaining partners are executives who have worked for at least five years at Alibaba, or its affiliates like Ant Financial, each with a proven track record of contributing to the group’s business. They are elected into the partnership by their peers, with years of vetting. They must also be nominated by three existing partners, and receive at least 75% of the votes of all existing partners.
Name
Position
Member Since
Jack Ma
Executive Chairman
1999
Joe Tsai
Executive Vice Chairman
1999
Daniel Zhang
Director and CEO
2007
Michael Evans
Director and President
2014
Eric Jing
Director
2007
Masayoshi Son
Director
2000
Chee Hwa Tung
Independent Director
2014
Walter Kwauk
Independent Director
2014
Jerry Yang
Independent Director
2005
Börje E. Ekholm
Independent Director
2015
Wang Ling Martello
Independent Director
2015
Table 1. Alibaba Board of Director
As stated in Alibaba Group’s website, “The Alibaba Partnership has the right to nominate such number of persons who shall stand for election as directors as may be required to ensure that directors nominated or appointed by the Alibaba Partnership shall constitute a simple majority of the total number of directors on our board of directors, with as equal a number of such nominated directors assigned to each group of directors as possible.” Besides the Alibaba Partnership, SoftBank and Nominating and Corporate Governance Committee also have the rights to nominate a person who shall stand for election as directors. As it is also stated in Alibaba Group’s website, “SoftBank has the right to nominate one person to stand for election for so long as SoftBank owns at least 15% of our outstanding shares. The director nominated by SoftBank will be entitled to receive notices and materials for all meetings of our committees and upon notice to the relevant committee, &&
to join as an observer in meetings of the audit committee, the compensation committee, the nominating and corporate governance committee and other board committees we may establish.” However, for the Nominating and Corporate Governance Committee of the board of directors has the right to determine the persons who shall stand for election as directors for the remainder of the places available for election to our board of directors. Alibaba Group also has its own board of committee. It consists of three subsection of committee which includes audit committee, compensation committee, and nominating and corporate governance committee.
Corporate Social Responsibility Responsibility
Alibaba had a numbers of
corporate social responsibility programs that was
implemented in China. One of Alibaba corporate social responsibility programs is to support rural development in China, and Alibaba has launched a service center named “Rural Taobao” in October 2014. Rural Taobao is one of Alibaba’s strategic projects that aim to enhance the trade between China’s rural and urban areas. Since 2010, Alibaba has earmarked 0.3% of their annual revenue to fund initiatives with the objective of encouraging environmental awareness and conservation as well as other CSR efforts. Alibaba has also helped to reduce the number of unemployment in China. It could happen because many types of service providers needed and it create employment opportunities. Alibaba provides direct and indirect business opportunities for merchants, Alibaba creates new opportunities for service providers in logistics, marketing, consulting, operation outsourcing, training, and online commerce professional. Also provides direct and indirect job opportunities in China, makes people working directly online storefront and service to merchants. Alibaba is committed to running their social responsibility program through a unique charitable environment that focuses on innovation and scalability. Alibaba also supports and promote another charitable and social responsibility initiatives as long as that programs in ways that Alibaba believes and alignment with Alibaba core values and mission. Proof that Alibaba focused on to take care about social responsibility are got named on one of the top 10 charitable enterprises in China and the top charitable private enterprise in China.
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VISION AND MISSION
Alibaba’s Vision Statement Statement
A vision should provide clear information about the foundation for developing a comprehensive mission statement. Aligning with the company goal to become the biggest ecommerce, Alibaba should make a clear way about their vision and mission. Alibaba’s vision is “We aim to build the future infrastructure of commerce. We envision that our customers will meet, work and live at Alibaba and that we will be a company that lasts at least 102 years”. The meaning of its vision statement is that Alibaba wants to enable commercial and social interactions among hundreds of millions of users, between consumers and merchants, and among businesses every day. The company also wants to empower customers with the fundamental infrastructure for commerce and new technology, so that Alibaba can build businesses and create value that can be shared among the company ecosystem participants. Alibaba Group also strives to expand its products and services to become central to the everyday lives of the customers. Finally, for a company that was founded in 1998, lasting at least a hundred years means Alibaba will have spanned three centuries. Alibaba beliefs that the company culture, business models, and systems are built to last, so that it can achieve sustainability in the long run.
Alibaba’s Mission Statement
Alibaba Group’s mission is “to make it easy to do business anywhere”. The company wishes to enable businesses to transform the way they market, sell, operate and improve their efficiencies. Alibaba also tries to provide the technology infrastructure and marketing reach to help merchants, brands and other businesses to leverage the power of new technology to engage with their users and customers and operate in a more efficient way. The company businesses are comprised of core commerce, cloud computing, digital media and entertainment, and innovation initiatives. An ecosystem has been developed around the company’s platforms and businesses that consists of consumers, merchants, brands, retailers, other businesses, third-party service providers and strategic alliance partners.
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Alibaba’s Proposed Vision and Mission Statements
There is a way to evaluate vision and mission statement by doing vision and mission analysis. Although there is no one best vision and mission statement for a particular organization, when it comes to evaluating vision and mission statements, good judgment is required. Ideally, each of the statements will provide more than simply inclusion of a single word of the component. Alibaba’s statement about their vision already reveals the type of business that the firm engages because Alibaba has an ocular proof of developed infrastructure of commerce. They built an ecosystem that provides e-commerce and created many platforms that transform the way of business to make business more efficient to their stakeholders that are consisting of consumers, merchants, brands, and retailers. There are nine components of an effective mission statement. It includes customers, products or services, markets, technology, survival, growth, and profitability, philosophy, self-concept, public image, and employee. Alibaba has created such a clear mission statement that is going to create an ecosystem that makes it easy to do business anywhere. From this perspective, Alibaba is paying attention to its customer which consists of business firm and also individual consumer. Thus, customers component are fulfilled. Product or services component can be found in “We provide the technology infrastructure and marketing reach to help merchants, brands and other businesses to leverage the power of new technology to engage with their users and customers and operate in a more efficient way” statement.
The statement “to make it easy to do business anywhere” itself consists of markets, self-concept, and philosophy components. Self-concept component has further explanation in “an ecosystem has developed around our platforms and businesses that consists of consumers, merchants, brands, retailers, other businesses, third-party service providers and strategic alliance partners” statement. As for the technology and concern for survival, growth, and profitability components, it can be found in “we provide the technology infrastructure and marketing reach to help merchants, brands and other businesses to leverage the power of new technology to engage with their users and customers and operate in a more efficient way” statement.
Since there is no statement that empower or explain about the company’s concern for public image and employees, we can say that there is something missing from Alibaba’s &$
mission statement. Thus, we proposed a new Alibaba’s mission statement that includes the missing components. The new lines added for the mission statement would be as follows: “...We believe there is no prosperity when our people and planet are not sustainable. Our concern about sustainability bring us to care about social equity, economic development, and environment.”
Components Component s
Existing Mission
Customers Product or Services Markets Technology Concern for Survival, Growth, and Profitability Philosophy Self-Concept Concern for Public Image Concern for Employee Table 2. Mission Statement S tatement Checklist
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Proposed Mission
EXTERNAL AUDIT
Market Share
Alibaba is well known for its widely diversified portfolio of services. However in this report, we would like to focus on our market share analysis on two of Alibaba’s strongest segments that are Core Commerce (which comprises of both Retail and B2B Commerce) and its new and growing segment, Cloud Computing.
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Core Commerce Market Share (%)
Rank
Company 2016
2017
1
Amazon.com Inc
21.8
23.3
2
Alibaba Alibab a Group Holding Ltd
13.4
13.4
3
JD.com Inc
6.5
7.9
4
eBay Inc
5.9
5.2
5
Apple Inc
2.6
2.4
Table 3. Global G lobal Non-store Internet Retailing Industry Market Share (Euromonitor, 2018)
The market share data shows the movement of worldwide non-store internet retailing market share. This data shows that Alibaba is a force to be reckoned with, overtaking the world with its commerce business unit. Despite coming second trailing after the giant Amazon.com Inc., to be reminded again is that this data shows global market share in which takes into account all population in the world, and that Alibaba has successfully claimed almost 15% of global population. Another thing to note is Alibaba’s growth rate in this core commerce business unit. When faced head-to-head with major competitor Amazon.com, the data shows this movement:
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Figure 3. Core Commerce Growth Rate FY 2013-2017 Comparison (Company Data, Team Analysis)
Despite the downward movement from 2013 and finally taking a huge hit on its revenue growth on 2016, but afterwards it has been moving upwards going into the year 2017 and onwards. When compared to Amazon, while it’s true that they’re having constant upward growth rate, but in general their growth rate is still below Alibaba’s growth over the years. Looking at the upward growth rate for Alibaba, it’s natural to forecast another increasing growth rate looking at 2018 and furthermore.
!
Cloud Computing
This segment of Alibaba is relatively a newcomer among its cloud computing competitors (taking an example of the leading service AWS by Amazon which was founded way back in 2002, while Alibaba Cloud was initially founded in 2009 and offered for public usage in around 2014). However, being new to the public cloud services market doesn’t stop Alibaba from soaring as shown in table 4. Market Share (%) Rank
Company 2016
2017
1
AWS (Amazon)
53.7
51.8
2
Microsoft Azure
8.7
13.3
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3
Alibaba Cloud
3.7
4.6
4
Google Cloud
2.7
3.3
5
IBM
1.6
1.9
Table 4. Global IaaS Public Cloud Services Market Share (Gartner, 2018)
Alibaba is already in third place with increasing market share from 2016 to 2017, with 3.7% and 4.6% market share respectively. Moreover, just recently the new appointed CEO of Alibaba, Daniel Zhang stated that Alibaba cloud will be Alibaba’s main business in the future with all the digital enhancement that is happening all over the world. The rate that Alibaba Cloud is growing is shown in figure 4.
Figure 4. Cloud Computing Growth Rate FY 2013-2017 Comparison (Company Data, Team Analysis)
The overall IaaS cloud computing market is increasing, and Alibaba is jumping in on the growing bandwagon. For a relatively new business unit, Alibaba Cloud is showing tremendous growth rate at 62.7% per year from 2016 to 2017. While it is true that the market is dominated by rivals Amazon and Microsoft, but Alibaba Cloud’s growth rate is showing how the business is still small, yet growing and expected to see upward growth movement.
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The Alibaba Ecosystem Ecosystem
Ever since its inception back in 1999, Alibaba founders had already agreed upon a vision, that Alibaba would “foster the development of an open, coordinated, prosperous ecommerce ecosystem.” They wanted to make a platform providing all kinds of resources, or access to resources, that an online business would need to succeed. This ecosystem was simple at first, which became a place where buyers and sellers of goods are linked. Over the years, one by one business functions started to be technologically infused, like marketing, logistics, and finance. The ecosystem expanded accordingly to accommodate these innovations, and is now an interrelated ecosystem.
Figure 5. The Alibaba E-commerce Ecosystem (Company Data)
The ecosystem comprises of several categories, which are marketplaces, and enablers or accelerators. The marketplace category beholds all kinds of Alibaba’s marketplaces that each serves niche markets; Alibaba for global trade, 1688.com for Chinese wholesale transactions, AliExpress for connecting global buyers with Chinese wholesalers and manufacturers, Taobao for Chinese retail customers, Tmall for branded sellers, and Juhuasuan for group buying. Meanwhile, these trades’ transactions and workflow are facilitated by the enablers, such as Alipay for payment services, Cainiao for logistic services, UC Browser as a browsing application, and many more. These platforms have created on integrated ecosystem in which all of their business units complement one another on serving their customers, a nod to one of their utmost important values that is ‘customer first’.
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Alibaba versus the Others
Alibaba is operating in the wholesale business against some very big competitors like Amazon and eBay, who have entered the industry prior to Alibaba. Now, the race on becoming the best and largest lar gest e-commerce platforms is on for f or these players, and even more. With that being said, Alibaba through the lens of Jack Ma has operated in a way that would set them apart from its US counterparts. One of the ways they differentiated themselves from the others are: !
Investments
Alibaba has grown from the plucky startup taking on eBay to China’s most dominant ecommerce player, and one of the most valuable companies in the world. For the last two decades, the company has made plenty of investment decisions. The following chart offers a breakdown of Alibaba’s startup investments to date, both by industry category and by country of origin. Most of Alibaba’s startup investments are made in tandem with other investors and the specific amount Alibaba put into the deal typically isn’t disclosed. Clearly, Alibaba’s biggest priority is holding its home turf: online shopping in China. The vast majority of its investments to date have gone to China-based startups and its favorite industries to invest in, ecommerce and logistics, have direct relevance to its existing ecommerce business. Aside from US VR firm Magic Leap, Lazada and Tokopedia were the only foreign companies to make the list. Breaking the deals down by the total amount funded, Chinese firms were the clear winners, with US$12.8 billion raised and Indonesian firms were next, with US$3.1 billion. Looking at the money distribution down by industry, ecommerce-relevant investments came out on top, with over US$10.8 billion of the US$16.5 billion total. Like its other Chinese tech rivals, Alibaba is big enough to have at least some investment interest in most tech-related industries, and it has spent money supporting startups in all the global tech hotspots.
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Figure 6. Alibaba’s investments segments
Figure 7. Alibaba’s investments by country
!
Captive Market of China
Alibaba’s understanding of the local Chinese market has always been its valuable asset. Alibaba continues to lead retail e-commerce sales in China with the market share of 58,2%. The company is playing a dominant part in China’s economy with its international scope of business line. Its customer base is gigantic, considering the 1.4
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billion people that inhabit China. Alibaba acts as a middleman, allowing businesses and people to offer their products in auctions. Over the past few years, the dynamic marketplace in China has welcomed some new players that are offering branded products, which are popular among consumers, but forecast ranking of top 10 e-commerce predicts that Alibaba will continue to dominate China e-commerce market, followed by JD.com with 16.3% share. And this is an important edge to have because as seen on figure x, the global retail sales is a zero sum game where it shows that while the US has decreasing global retail share, it shows an increase in Asian market, as the current comparison is already 16% US and 84% Asia and the rest of the world, with the expected rate to be decreasing even more in the future. Alibaba has already conquered the gigantic Chinese ecommerce market, but soon US and European marketplaces may be targeted.
Figure 8. 10 Largest E-commerce Markets (Nielsen, 2017)
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Figure 9. The shift of US and Asian Retail Ecommerce Sales (Euromonitor, 2017)
Figure 10. China Retail E-commerce Sales (Statista, 2018)
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EFE Matrix
Upon identifying Alibaba’s opportunities and threats, we have concluded with sets of facts and data included in our External Factor Evaluation Matrix. After the identification is done, we created this EFE Matrix and score accordingly.
No.
Key Internal Factors
Weight
Rating
Weighted Score
OPPORTUNITIES
1.
China fully support Alibaba's operations that causes abroad companies (Google, FB, Twitter) to exit the country thus Alibaba can earn high revenues ($129 million in only half part of 2017) and growth (58% average growth from 2010-2018)
0.10
4
0.40
2.
Data anticipates 246,15% increase in global e-commerce sales which presents massive opportunities in this industry, and Alibaba welcomes this with investing more than 100 billion yuan to build the technical backbone for a smart logistics network
0.15
4
0.60
3.
Ability to attract international skilled workforce due to attractiveness of China company’s career path and better job prospects
0.20
3
0.60
4.
Growth of Internet Users, the number of Internet Users growth steadily each year, and in January 2018, it was recorded that there was 7 % increase in the number of internet user from the previous year, recorded 4.021 billion internet users in January 2018
0.06
3
0.18
5.
Increasing product categories, there's a wide variety of product in Alibaba Group, from various various product made by small to medium businesses that provided by Alibaba.com to various branded product provided by Tmall.com.
0.09
4
0.36
0.06
2
0.12
THREATS
1.
Increasing competitiveness of alternative cost-effective source locations (e.g. India)
"$
2.
Increasing regulation from the Chinese government over its market activities due to Alibaba monopoly market power
0.04
4
0.16
3.
Currency fluctuations due to global economy and superpower countries influence towards foreign exchange market
0.20
3
0.60
4.
Shortage of experienced labour in China
0.08
4
0.32
5.
China’s five-year environmental policy plan to reduce pollution will limit Alibaba operational activities
0.02
3
0.06
TOTAL
1.00
3.40
Table 5. EFE Matrix for Alibaba (Team Analysis)
The results shows a mighty 3.40 as Alibaba’s EFE results. This is showing how Alibaba is really strong on using its opportunities to counter its threats. This is a way above average results and therefore, Alibaba appeared really great on the External Audit and they’re really good at handling their external features.
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INTERNAL AUDIT
IFE Matrix
Internal factor evaluation matrix is one of the best strategic tool to perform internal audit of any firm. IFE is use for internal analysis of different functional areas of business such as finance, marketing, information technology, operations, human resources, and other depend upon the nature of business. Based on our analysis of Alibaba’s internal factor evaluation matrix we have gathered regarding relevant informations needed to realize the evaluation techniques. Here are our findings:
No.
Key Internal Factors
Weight
Rating
Weighted Score
1.
Market Leader in China e-commerce business, Alibaba has 58,2% market share in China, larger that their other local competitors (Financial).
0.18
4
0.72
2.
Provide many platform outside e-commerce as Alibaba has 25 business units (Marketing).
0.13
4
0.52
3.
Strong R&D performance performance through its own DAMO Academy and Alibaba Cloud Computing (R&D).
0.07
3
0.21
4.
Automated warehouse system runs by 80 robot that covers 705 of warehouse work (MIS/Value Chain).
0.10
3
0.30
5.
Global Market. Alibaba is expanding their operation into global market, one of their way is by acquiring other e-commerce such as Lazada and Daraz, which already have presence in the respective market (Lazada is Southeast Asia and Daraz in Pakistan).
0.12
4
0.48
STRENGTHS
WEAKNESSES
1.
High number of employees causes a hindrance in doing internal audit that are clear, correct, and competent (Management Function)
0.11
2
0.22
2.
Marketing effectiveness depends heavily on the product made available by Alibaba’s partners (Marketing)
0.08
2
0.16
3.
Alibaba’s foreign investment are still limited to companies and industries which relate strongly to Alibaba’s business unit (Financial)
0.07
1
0.07
"%
4.
The lack of self-automated machine in their operating sector holds back potential improvement on logistics and customer support (Operation)
0.09
1
0.09
5.
The uneven distribution of the benefits across members as the network grows in size
0.05
2
0.10
TOTAL
1.00
2.87
Table 6. IFE Matrix for Alibaba (Team Analysis)
Internal factor evaluation matrix of alibaba shows a result of 2.87, which means that Alibaba’s internal strengths and weakness are showing great evaluation score. Nevertheless, Alibaba still needs to improve their performance in some aspect to makes Alibaba better and also makes innovation about their business to maintain their position a market leader in ecommerce.
CPM Matrix Alibaba Critical Success Factor
Amazon
Weight Rating
Weighted Score
Rating
Weighted Score
0.2
3
0.6
2
0.4
0.1
2
0.2
4
0.4
Price Competitiveness
0.1
4
0.4
2
0.2
Management
0.1
3
0.3
4
0.4
Financial Position
0.15
3
0.45
4
0.6
Customer Loyalty
0.1
4
0.4
2
0.2
Global Expansion
0.2
3
0.6
4
0.8
Market Share
0.05
3
0.15
4
0.2
Advertising Product
Total
Quality
1
3.1
"(
3.2
Table 7. CPM Matrix for Alibaba (Team Analysis)
According to Alibaba’s CPM Matrix, when we compare Alibaba with Amazon, Alibaba still located in the second place with a total weight of score of 3,1 while Amazon, lead in the first position with a total weight of score of 3,2. The result of the CPM Matrix, while we can say that Amazon still lead the race between the two giant tech companies, it doesn’t necessary means that Amazon is better than Alibaba, but instead, it means that Amazon had better performance in some areas than Alibaba. In fact, in some areas such as advertising, price competitiveness, and customers loyalty, Alibaba had better performance than what Amazon had done in that area.
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STRATEGY GENERATION
SWOT Matrix
SWOT
Helpful
Harmful
Internal
Strengths
Weaknesses
1. Scale of operations
1.
2.
~2015)
Market share (58%,
Too many sellers (~8.5 mill.
2015)
2. High discounts
3. Visionary leader
3.
4. Partnerships
adds on the site
Biggest profit is generated by
4. Cheap reputation External
Opportunities
Threats
1. Aggregator model
1.
2.
(Amazon, eBay, JD)
Government support
Overall rising competition
(high lobbyism)
2. Internet security
3. Growing E-commerce
3. Stability of the economy (Alibaba
4.
Strongly established in
relies on the cheap products)
China, possibilities for enter
4. Rising demand in service
new markets
SO Strategies !
Emphasize the aggregator model by the scale of operations and the market share. (S1,S2,O1)
!
Emphasize on the visionary leader and seek new markets (S3,O4)
!
Keep strong partnerships and use the strong market position in China as leverage (S4,O4)
WO Strategies !
Use the aggregator model to keep track of sellers (W1,O1)
!
Use more precise E-commerce, and personalize discounts (W2,O3) ")
!
Apply for governmental support (W3,O2)
ST Strategies !
Seek opportunity of Partnerships with competitors (S4,T1)
!
Sell more premium products (S1,T3)
!
Improve service and increase staff (S3,T4)
WT Strategies !
Improve website safety and control (W1,T2)
!
Hence economy is getting stable, make less discounts (W2,T3)
!
Increase product quality, make requirements for sellers (W4,T4)
These above strategies have been conducted from the SWOT. It both shows where to improve operations but also where to seize opportunities and avoid or mitigate threats.
SPACE Matrix Internal Strategic Position
Ratings
External Strategic Position
Financial Position
Ratings
Stability Position
Return on Investment
6
Rate of Inflation
-4
Leverage
6
Technological Changes
-2
Liquidity
5
Price Elasticity of Demand
-5
Working Capital
6
Competitive Pressure
-2
Price Earnings Ratio
5
Barriers to Entry into Market
-1
Y - Axis Competitive Position
2.8
Industry Position
Market Share
-2
Growth Potential
7
Product Quality
-3
Financial Stability
5
#'
Customer Loyalty
-2
Ease of Entry into Market
4
Technological Know-how
-1
Resource Utilization
6
Control over Suppliers and Distributors
-2
Profit Potential
4
X - Axis
3.2
Table 8. SPACE Matrix Dataset
From the analysis on all four spectrums yielded the results of both axises, being 3.2 for the x-axis and 2.8 for the y-axis. These results placed Alibaba on the Aggressive quadrant on the SPACE Matrix as shown on figure 6.
Figure 11. Alibaba’s position in SPACE Matrix
First, we must also identify what kind of profile Alibaba is in this aggressive quadrant. Given the coordinates of (3.2 ; 2.8), it’s showing that Alibaba is operating in a good, growing industry but haven’t seen much financially gaining results. This gives Alibaba several recommended strategies, such as integration strategies, market penetration, market development, and both related and unrelated diversification.
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BCG Matrix
In the analysis of BCG Matrix, we identified three main segments of Alibaba’s business portfolios which are retail commerce, wholesale commerce, and cloud computing. The sales percentage, relative market share and industry growth of the three segments are as stated as table x. However, the profit percentage aren’t able to be shown because there are no data in regards to segmental profit that each segment makes.
No.
Divisions
Percent Sales
Relative Market Share
Industry Growth
1
Retail commerce
77%
82%
, 24.8%
2
Wholesale commerce
8%
100%
, 25.4%
3
Cloud computing
4%
7%
,23.3%
Others
11%
-
-
Total
100% Table 9. BCG Matrix Dataset
Upon doing analysis on the dataset from table x, we got the BCG Matrix for Alibaba as shown in figure x.
Figure 12. Alibaba BCG Matrix
From the results, both retail commerce and wholesale commerce are located in the Star quadrant, while the growing cloud computing is located in the Question Marks quadrant. These two different locations signify two different kinds of set of strategy recommendation.
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For the more established core commerce segment, the strategy recommendations are the integration strategies and the intensive strategies that consist of market penetration, market development and product development. This is shown by the segment’s high relative market share position and the high-growth within their industry as well. Meanwhile, for the cloud computing segment the strategies varies from intensive strategies to divestiture. This is caused by the fact that cloud computing currently has quite a low relative market share position, yet is being in a high-growth hig h-growth industry, indu stry, and it’s also stated that t hat they have yet to gain any profit so far. However, with the possibility of high growth upon this segment it is more advisable for Alibaba to go with the intensive strategy.
IE Matrix
Figure 13. Alibaba IE Matrix
Alibaba analysis about Internal Factors Evaluation (IFE) and External Factors Evaluation (EFE), Alibaba can conclude their Internal External Matrix. Alibaba IE Matrix be in column II based on score on IFE and EFE. IFE scores of Alibaba show on 2.87 and EFE scores of Alibaba show on 3.40. Alibaba has positioned on grow and build strategy. Strategy that Alibaba should do as intensive and integration. Intensive strategies could be doing with market penetration, market development, and product development and then for integration strategies Alibaba either forward, backward, or horizontal integration.
##
Grand Strategy Matrix
This Grand Strategy Matrix has become a popular tool of for formulating strategy, All organizations can be positioned in one of the Grand Strategy Matrix four strategy quadrants. The Grand Strategy Matrix based on two evaluation dimensions : competitive position and market (Industry) growth. Firms located in Quadrant I are in an excellent strategic position.
Figure 14. Alibaba Grand Strategy Matrix
Based on analysis and result that we already have from 2 factors : competitive position and market growth. Alibaba Grand Strategy be on quadrant I. Alibaba have strong position on the market based on Alibaba is the biggest e-commerce and also the market leader. Alibaba have their own commerce ecosystem that provide Logistic, Travel, Entertainment, Communications, and many more. Alibaba on quarter ending June 2018 posted revenue growth by 61%. Therefore, suitable strategy that should adopt by Alibaba could be related diversification, product development, and integration strategy.
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STRATEGY SELECTION
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Table 10. Strategy Recommendation Recap
Based on the strategy generated from each matrix use in the strategy generation, we found that most of the matrix recommends Alibaba to choose either market development or product development. Our team found that Alibaba has already defined what their market development and product development strategies would look like. Alibaba’s market development strategy is to expand their market globally, deeply into other countries, especially in South Asia countries and for their product development, Alibaba planned to open a smart physical store in China.
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4
Market Development
Alibaba planned to expand their market globally, and at the present day they aimed to increase their market in South Asia country. One of the move used by Alibaba in this strategy was to acquiring foreign e-commerce services that already have presence in the respective market, for example, when Alibaba started to expand their market to Southeast Asia Countries, Alibaba acquire Lazada, which at that time in 2016, already become one of the largest e-commerce services in Asia. Currently, Alibaba aimed to expand their market shares in South Asia country, and like what they had done when expanding their market into Southeast Asia market, they acquire company that already have presence in the South Asia market. In May 2018, Alibaba acquire Daraz, which is an e-commerce services that serves market in South Asia countries. In India, Alibaba invest in some of the India’s e-commerce services, such as Paytm, which is India’s largest mobile payments company with more than 200 million users, snapdeals, the third most popular e-commerce retailer in India by app downloads, and in 2018, Alibaba invest their money to Xpressbees, an e-commerce logistics firm, and into BigBasket’s Series E, an online grocery store. Despite this, Alibaba expansion into India was wasn’t without challenges and until now, they still battled with Amazon for a domination in India’s market shares.
Product Development
Alibaba planned to expand their product into brick and mortar shopping in China, but it’s not a conventional retail store, but instead Alibaba want to create a physical store that combine its physical store operation with their online operation. In fact, Alibaba has already open this smart physical store which is known as Hema. Hema incorporate some of the feature that the customer usually found on Alibaba e-commerce services, such as payment using their Alipay account by scanning their faces at the kiosk, the ability for customer to order the groceries online, and see product information in their phone by scanning the respective product barcode. Beside use as retail store, Hema also had a restaurant, which is serves by robot and used as warehouses for online orders. Alibaba itself intended to reach their 100 stores in December 2018, and until now, it’s already operate in 16 cities, and according to Alibaba in their 2018 Investor Day, Hema had already served 10 million customers. As Alibaba focused to open this smart physical store in tier 1 and tier 2 cities in China, we found that at this moment Alibaba won’t face major challenges from other domestic competitor in China, as #%
currently they’re still the market leader in China e-commerce businesses and with the tight regulation imposed by the Chinese government which cause many abroad companies to exit the country, means that Alibaba also won’t face major challenges from foreign companies that try to open the same smart retail store in China.
QSPM Matrix
Key Internal Factors
Weight
STRENGTHS
Open Physical Store (PD)
Expand Globally (MD)
AS
TAS
AS
TAS
Market Leader in China e-commerce business
0.18
4.00
0.72
1.00
0.18
Provide many platforms outside ecommerce as Alibaba has 25 business units
0.13
3.00
0.39
2.00
0.26
Strong R&D Performance through its own DAMO Academy and Alibaba Cloud Computing
0.07
4.00
0.28
2.00
0.14
Automated warehouse system runs by 60 robots that covers 70% of warehouses work
0.10
4.00
0.40
2.00
0.20
Alibaba is expanding their operations into global market by acquiring e-commerce services that already have presence in the respective market
0.12
1.00
0.09
4.00
0.28
High number of employees causes a hindrance in doing internal audit that are clear, correct, and competent
0.11
0.00
0.00
0.00
0.00
Marketing effectiveness depends heavily on the product made available by Alibaba’s partners
0.08
0.00
0.00
0.00
0.00
Alibaba’s foreign investment are still limited to companies and industries which relate strongly to Alibaba’s business unit
0.07
3.00
0.21
1.00
0.07
The lack of self-automated machine in their
0.09
1.00
0.09
3.00
0.27
WEAKNESSES
#(
operating sector holds back potential improvement on logistics and customer support The uneven distribution of the benefits across members as the network grows in size
0.05
0.00
0.00
0.00
0.00
Tight regulation from Chinese government causing abroad companies to exit the country, making Alibaba able to gain high revenues
0.10
4.00
0.40
1.00
0.10
Increase in global e-commerce sales which Alibaba welcomes by highly investing to accommodate a one-stop shopping ecosystem
0.15
2.00
0.30
4.00
0.60
Ability to attract international skilled workforce due to attractiveness of China company’s career path and better job prospects
0.18
3.00
0.54
4.00
0.72
Growth of internet users
0.06
1.00
0.06
4.00
0.24
Wide variety of product categories in Alibaba Group
0.09
0.00
0.00
0.00
0.00
Increasing competitiveness of alternative cost-effective source locations (e.g. India)
0.06
0.00
0.00
0.00
0.00
Increasing regulation from the Chinese government over its market activities due to Alibaba monopoly market power
0.04
1.00
0.04
4.00
0.16
Currency fluctuations due to global economy and superpower countries influence towards foreign exchange market
0.20
3.00
0.60
1.00
0.20
Shortage of experienced labour in China
0.08
2.00
0.16
3.00
0.24
China’s five-year environmental policy plan to reduce pollution will limit Alibaba
0.02
1.00
0.02
3.00
0.06
OPPORTUNITIES
THREAT
#+
operational activities STAS
4,30
3,72
Table 11. Alibaba QSPM Matrix
According to our QSPM analysis, we found that it’s more attractive for Alibaba to implement their product development strategy which is to open their smart physical store instead of implement their market development strategy. The reason of this strategy selection, according to our analysis, as the physical store were built in China, Alibaba could maximize their current strength and opportunity, mainly their high market share and government support. In addition, Alibaba R&D in the present day which is focused on the development of Artificial Intelligence are aligned with the development of the physical store which require the use of Artificial Intelligence on its operation . Alibaba would also found less threat when they’re opening their physical stores in China, as some of the threat face by Alibaba was imposed because their international operation, such as currency fluctuation and challenge presented by other e-commerce businesses when they are operating overseas, such as Amazon, which is considered as Alibaba main competitor, especially when it comes to their market share in India.
#)
STRATEGY IMPLEMENTATION IMPLEMENTATION
Marketing
There are seven aspects to Marketing which are product, promotion, price, place, Physical Evidence, Process, and People.
-
Product
Alibaba is operating in online space as the one of the largest online ecommerce in the world. Alibaba is where businesses go to source manufactured products, both cheaply and in bulk, that they can resell or private label for their own businesses. One of the best qualities qualiti es of using the Alibaba website is that anyone, with or without their own business, can browse through their database of suppliers, manufacturers and products. Alibaba product is simply put to provide medium for manufacturer and consumer in one place so Alibaba can makes them to make deals easier which benefits both the t he seller and the consumer. consumer . Alibaba should implement and execute the new retail concept. which combines the online shopping convenience and traditional shopping experience. Alibaba will help traditional retailers to restructure and enhance the way they operate, which can touch everything from customer experience, to inventory management, and retail spaces. By implementing New Retail, whether it be across a grocery store, a mall or even a car vending machine, requires experimenting, implementing and harnessing the power of three important concepts; Cloud Commerce, Digital Shopping Experience, and Location Data Analytics. Cloud Commerce mastery is important to help Alibaba’s analysed data needs to be processed quickly and securely at an unprecedented scale and in coordination with every other system a given retailer employs. Digital Shopping experience will enhance the user of Alibaba’s new retail experience and convenience so the customer will have higher satisfaction. Location data and analytic tracking used real-time data processing via the cloud and real-time application activity of users and employees combine to better understand the feasibility of location of the new retail and how Alibaba can implemented it successfully. -
Place
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Alibaba operates in over 200 countries and territories, Alibaba is the world's largest retailer, one of the largest Internet and AI companies, one of the biggest venture capital firms, and one of the biggest investment corporations in the world. The company hosts the largest B2B (Alibaba.com) and B2C (Taobao, Tmall) marketplaces in the world. Alibaba also has main offices in many countries and regions, including China, Hong Kong, Singapore, the United States and the United Kingdom. In addition, we maintain data centers in a number of countries including Indonesia, Malaysia, India, Australia, Singapore, Germany, Japan and the United States to help Alibaba coordinated their worldwide operation Alibaba’s new retail concept will first be implemented in China and then expand around the world, starting from India and other developing countries around Asia and then expand worldwide to developed countries with the experience from few years of implementation.
Figure 15. Alibaba Global Expansion up to 2015
-
Price
The pricing strategy that Alibaba uses is penetration pricing as it seeks to enter newer and newer markets. It therefore offers discount for both supplier and consumer. Some of the services that they offer do not involve any transaction cost. Some of the services like Aliexpress have no registration fee as well. The main revenue of Alibaba is through the advertisements that are done on their site by businesses. The secondary revenue is from customers who take $&
membership. It also sometimes employs competitive pricing to offer products at prices similar to the competitors co mpetitors to drive the sales.
-
Promotion
Alibaba promotes through a number of channels. Alibaba advertises through traditional channels like print media, radio and TV and Social Media. It advertises through catchy taglines. As most of the services offered are online Alibaba promotes through digital media as well. They have also been the sponsors for international events like Beijing Olympics. It has also sponsored Australia-China Business Week which was one of the high-profile events in the business world. The other ways in which it promotes itself is through offers, discounts, festive sales and cashbacks for purchases on its ecommerce ecommer ce platforms.
-
Physical Evidence
The physical evidence of Alibaba includes the intangible aspects of service like the delivery schedule which has to go as promised. The products delivered should be as per the order and quality desired. The transactions should be smooth and trustworthy and the ecommerce platforms should be user friendly and attractive. These aspects form the physical evidence of the company.
-
Process
Alibaba offers shopping platforms and the way the whole process takes place is simplified. The shopping can be done on a wholesale basis, group shopping, or customer to customer. The manufacturers make the products according to the order quantity and ship them. The customers who want to sell, sell the products directly to other customers. The transactions can be done through either Alipay or Western Union and similar platforms.
-
People
Alibaba is mainly divided operations, finance, marketing and customer service departments. The lowest level is the one having manufacturers and sellers. The organization has a major emphasis on the engineering department where they hire only from top institutes. The engineers are extremely skilled in their domain and
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adaptable to the changes in technology as it is the department which is at the core of the business. This completes the marketing mix of Alibaba.
-
Perceptual Map of Alibaba
Figure 16. Alibaba Perceptual Map
Finance
According to Forbes.com, over the past two years Alibaba has been buying physical stores, engineering a bold experiment to revamp China’s entire retail landscape. Alibaba is currently integrating their online-offline shopping experience for its consumers by developing their physical stores with the use of online technology. Alibaba has budgeted ¥1,799,148,000 in 2017 for this newly implemented program. This fund is used to open up their new brick and mortar stores and investing in its technology to run the new retail experiment. Alibaba predicts that from f rom this new retail retai l initiatives, it will grow gr ow Alibaba’s total addressable ad dressable market in e-commerce. We have several information about Alibaba and the general economy in which the firm operates its business. Alibaba’s operating margin in 2017 is reported to be 30.65% of their sales. Alibaba also has an interest rate in range of 15%-20% and its tax rate is 29.00%. By the end of 2017, the amount of share outstanding is 1,363,170,000 shares with their most
$#
recent closing price is ¥997.41 or 144.32 USD. We also have the information of their 2017 capital structure that consists of 56% equity and 44% debt. By using the information above, we can make an EPS/EBIT analysis to determine which financing alternatives that Alibaba can use to implement their new retail initiatives. These are the list of the data used for the analysis: !
Amount of Capital Needed
: ¥1,799,148,000
!
EBIT Range (calculated by using the revenue in 2017): Recession
: ¥170,934,840.00 (using revenue growth 8%)
!
Normal
: ¥174,100,300.00 ¥174,100,300.0 0 (using revenue growth 10%)
!
Boom
: ¥177,265,760.00 (using revenue growth 12%)
!
!
Interest Rate
: 17%
!
Tax Rate
: 29.00%
!
Stock Price
: ¥997.41
!
#Shares Outstanding
: 1,363,170,000 shares
The calculation for the EPS/EBIT analysis is presented below in the form of table and graph: Common Stock Financing
Debt Financing
Recession
Normal
Boom
Recession
Normal
Boom
¥170,934,840
¥174,100,300
¥177,265,760
¥170,934,840
¥174,100,300
¥177,265,760
¥0
¥0
¥0
¥309,093,626
¥309,093,626
¥309,093,626
EBT
¥170,934,840
¥174,100,300
¥177,265,760
-¥138,158,786
-¥134,993,326
-¥131,827,866
Taxes
¥41,520,073
¥42,288,963
¥43,057,853
-¥33,558,769
-¥32,789,879
-¥32,020,989
EAT
¥129,414,767
¥131,811,337
¥134,207,907
-¥104,600,017
-¥102,203,447
-¥99,806,878
EBIT Interest
# Shares ¥1,364,973,820 ¥1,364,973,820 ¥1,364,973,820 ¥1,363,170,000 EPS
0.0948
0.0966
0.0983
-0.0767
¥1,363,170,000 ¥1,363,170,000 -0.0750 -0.0732
Table 12. EPS/EBIT E PS/EBIT Analysis (Formulated by the writer)
Stock
56%
Debt
44%
Recession
Normal
Boom
EBIT
¥170,934,840
¥174,100,300
¥177,265,760
Interest
¥137,237,570
¥137,237,570
¥137,237,570
EBT
¥33,697,270
¥36,862,730
¥40,028,190
Taxes
¥8,185,067
¥8,953,957
¥9,722,847
EAT
¥25,512,203
¥27,908,773
¥30,305,343
¥1,364,172,924
¥1,364,172,924
¥1,364,172,924
0.0187
0.0205
0.0222
# Shares EPS
Table 13. Conditional Financing Analysis (Formulated by the writer)
$$
As we can see from the calculation and graph above, the most ideal financing alternative for Alibaba’s newest retail initiatives is by doing a 100% equity/stock financing. For each economic condition and EBIT range (low to high), the 100% equity financing option is still the best pick as it generates the highest EPS value for Alibaba. This result suggest that Alibaba should not put more strain in their debt as they have a quite high interest rate. Since Alibaba does not do dividend payment and the current stock price is rising, the equity financing can be the best option.
Research and Development
Alibaba in 2017, invest more than $15 Billion over the next three years ($5 Billion a year, about 14% Alibaba projected annual sales) for global research through a program called as Discovery, Discovery, Adventure, Momentum and Outlook — DAMO Academy, which will set up seven research labs in Beijing, Hangzhou, San Mateo and Bellevue in the U.S., Moscow, Tel Aviv and Singapore, and recruit 100 researchers to staff them. According to Jeff Zhang, Alibaba Chief Technology Officer), Alibaba are looking for talented and driven researchers to join them in the quest for new disruptive technologies that would advance everyday lives, benefit small businesses and narrow the technology gap to make our world a more inclusive place. According to DAMO in 2018, they plan to develop those disruptive technologies over the next five years and this Disruptive technologies are Artificial Intelligence, Internet of Things, financial technology, and quantum computing and and human-machine interaction.
Management Information System
Alibaba Group in 2009 has established a management information system that calls Alibaba cloud. Alibaba cloud is a subsidiary of the Alibaba group. It provides cloud computing service to online business and Alibaba group’s own e-commerce ecosystem. Alibaba cloud not just provide a cloud for Alibaba, it also provides a comprehensive suite of global cloud computing service to power both our international customers online business. that international operation is registered and headquartered in Singapore and has international teams stationed in many countries.
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Figure 17. Alibaba Cloud services
Alibaba cloud offers many aspects to help improve online business all around business such as high performance, elastic computing power in the cloud. Service that Alibaba cloud gives could be available on a pay as you go basis and include data storage, relational database, big data processing, anti-DDoS protection and content delivery network (CDN). Alibaba committed to help the research and development of a large database system and advance big data technologies. Their R&D has the effort to keep develop their MIS from the advancement of an Internet of things technology, virtual reality, smart homes, and cloud-based mobile device operating system. Alibaba cloud helps global infrastructure from an online business technology aspect, this cloud already operates in 49 availability zones in 18 regions around the world that makes data connected from one to other and keeps updated.
%$ STRATEGY MONITORING
Balanced Scorecard Area of Objectives
Measure of Target (KPI)
Primary Responsibility
Strategy
Finance
Doing lots of promotion to attract existing and new consumers
Marketing
Increase sales by raising transaction volume Create Create an efficient financial planning and execute it effectively
Financial Performance
1
Profitability of The Company
Increased in RoA and RoE
2
Revenue of The Company
Increased Income
3
Cost Efficiency
Increased in Profit Margin
Top Management
in
Net
Customer
1
Obtaining New Customer
Increased in # of New Customer
Marketing
Utilize the use promotion mix
of
2
Customer Loyalty
Increased in % of Customer Loyalty Index
Marketing
Create loyalty programs and membership
Operation
Doing regular supervision and implement reward & punishment system
HRM
Customer service training and customer satisfaction survey
Operations/Process
1
Quality of Service Delivery
Increased in % of On-time Delivery
2
Customer Service
Increased Customer Satisfaction
in
Community/CSR
1
Social Welfare for Local Community
Increased in % of Top Management CSR Expense
Helping community technology infrastructure
2
Promoting Emerging SMEs
Increased in # of Top Management New Sellers in Alibaba Platform
Create new opportunity for SMEs to develop their product and expand their market
$(
local through and
Table 14. Alibaba Balanced Scorecard
$+
CONCLUSION
The strategy that Alibaba should implement is the Product Development through the brand new concept that is New Retail. This strategy is great to re-capture r e-capture their home market and to maintain their position as number one in the country. This chosen strategy is also in line with the mission statement that Alibaba has, which is to make it easy to do business anywhere. By integrating both online and offline aspects of shoppings, they are literally making it easy for everyone to conduct business anywhere. This strategy will not be easy to market nor will it be easy to be funded, but Alibaba is known for taking calculated risks upon operating and this strategy is one of them, therefore we would recommend for Alibaba to further implement the Product Development strategy that takes form in the New Retail concept.
$)
APPENDICES
Projected Income Statement
12/31/2018
12/31/2019
12/31/2020
¥246,905,880 ¥91,355,176 ¥155,550,704 ¥71,602,705 ¥83,947,999 -¥5,342,000 ¥89,289,999 ¥21,429,600 ¥0 ¥67,860,399
¥385,173,173 ¥142,514,074 ¥242,659,099 ¥111,700,220 ¥130,958,879 -¥8,013,000 ¥138,971,879 ¥33,353,251 ¥0 ¥105,618,628
¥600,870,150 ¥222,321,955 ¥378,548,194 ¥174,252,343 ¥204,295,851 -¥10,684,000 ¥214,979,851 ¥51,595,164 ¥0 ¥163,384,687
12/31/2018
12/31/2019
12/31/2020
¥416,676,603 ¥8,776,000 ¥0 ¥8,370,000 ¥433,822,603 ¥40,412,000 ¥250,840,000 ¥28,216,000 ¥1,908,000 ¥755,198,603
¥642,424,333 ¥13,164,000 ¥0 ¥12,555,000 ¥668,143,333 ¥60,618,000 ¥376,260,000 ¥42,324,000 ¥2,862,000 ¥1,150,207,333
¥925,938,122 ¥17,552,000 ¥0 ¥16,740,000 ¥960,230,122 ¥80,824,000 ¥501,680,000 ¥56,432,000 ¥3,816,000 ¥1,602,982,122
¥93,958,000 ¥0 ¥93,958,000 ¥153,670,000 ¥2,580,000 ¥250,208,000
¥140,937,000 ¥0 ¥140,937,000 ¥230,505,000 ¥3,870,000 ¥375,312,000
¥187,916,000 ¥0 ¥187,916,000 ¥307,340,000 ¥5,160,000 ¥500,416,000
Common Stock Retained Earnings Treasury Stock Paid in Capital & Other Total Equity
¥5,048,204 ¥176,418,399 -¥5,646,000 ¥329,170,000 ¥504,990,603
¥7,572,306 ¥282,037,027 -¥8,469,000 ¥493,755,000 ¥774,895,333
¥10,096,408 ¥445,421,714 -¥11,292,000 ¥658,340,000 ¥1,102,566,122
Total Liabilities and Equity
¥755,198,603
¥1,150,207,333
¥1,602,982,122
Revenues Cost of Revenue Gross Profit Operating Expenses EBIT Interest Expense EBT Tax Non-Recurring Events Net Income Projected Balance Sheet Assets
Cash and Equivalents Accounts Receivable Inventory Other Current Assets Total Current Assets Property Plant & Equipment Goodwill Intangibles Other Long-Term Assets Total Assets Liabilities
Accounts Payable Other Current Liabilities Total Current Liabilities Long-Term Debt Other Long-Term Liabilities Total Liabilities Equity
REFERENCES
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