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Introduction: Alibaba group is a website where sellers get the opportunities to advertise and sell their product and vice versa. It has 61 million registered users in around 240 countries. It was founded by Jack Ma (chief executive officer) in 1998. He wanted to make the availability of internet for all persons and make it beneficial for everyone. He also wanted to make internet trustworthy for all internet users. So he maintained integrity. Alibaba is a group making it easier to buy and sell online. Primary business of Alibaba group is to serve the market of China. It connects all companies with manufacturers and suppliers all over the world. Today Alibaba has set up its whole business into seven groups.
1. How does the Alibaba Group create corporate advantage? (Why are t he business
under one roof?) Is this corporate advantage sustainable Corporate Advantage means the position which an organization occupies in the market against the competitors’. According to David J Collins, the way by which an organization can create value through all its multibusiness activities’ configuration. It can by occurred by developing such attributes which can help in higher performance than competitors in market. Alibaba has been very successful in Chinese mar ket. It has efficient and cheap platform for sellers and buyers where sellers can search for appropriate buyers from abroad countries a nd vice versa. Alibaba group of companies has been developed by one company after another. It was leaded by one man Jack Ma, who has maintained this group in a single business portfolio.
Jack Ma felt the need of online business as he wanted to bring all retailers, small business and traders together. That’s why he started as online trading company. Firstly, he launched Taobao which worked as platform for online shopping. Here everyone could have the opportunities of selling the products to Chinese market. So Alibaba group made revenue from both the consumers and retailers. This would add the value to Alibaba group. After that, Jack Ma felt the need that its entire client should be under one business. So in 2004, new business was launched which is known as Alipay. Alipay ensured that all the customers served by Taobao whether they are consumers, retailers or traders would get the opportunities to make payment within same system. Individual could make the payment for service before the confirmation of delivery of product. At that time, Alipay was responsible for payments on behalf of all its customers. The main purpose of Alipay was to promote e-commerce and to ensure integrity which encouraged Chinese to do online transaction without any risk. This created value to Alibaba group and hence corporate advantage. Further Alibaba went further and provided more services to its clients like emailing, entertainment and online search portal which ensured that all the information, which clients require, would reach to then as soon as possible by internet. For this, Alibaba purchased another group “Yahoo China” which was already serving in this sector.
Alibaba did the complete market survey of chine and saw that i n china; around 40 million small businesses were present. There was a possibility that to run their business properly, all these small organizations were using management software. So Alibaba launched new business Alisoft. Purpose of Alisoft was to deal with the creation of such type of management software which was being used by s ame businesses. All these software would be able to run the businesses inventory to B2B groups, CRM for B2C groups and finance. Alisoft grew its business and held 40% of Chinese market software. Alibaba gave the facility to enterprises to make payment via Alipay for the purchase of software. So when Alisoft grew, Alipay also grew while Alisoft grew because of its integrity. This added value to Alibaba group.
After that, in 2007, Alibaba launched new business of doing online advertisements named as Alimama. It ensured that the entire world and media would know and take the benefits of all the businesses which were operating under this Alibaba group. Now Alibaba majorly focussed on the advertisement of its corporate benefits. Alimama did the publishing very well. It linked up and brought all web based publishers together. Then Alimama was able to connect about 80 million people on daily basis. Like Alisoft, Alimama also ensured all consumers to make payments via Alipay. This created a great value to Alibaba.
All Alibaba groups were being operated under one roof which was headed by Ma. Following are the reasons for being all the businesses under one roof:
The sole owner of business like Ma can make decisions easily. There is no interference from third party in all decisions. Like in 2006, Ma was ready to issue initial stock of B2B business to raise money. This helped in growing and welcoming the investors in Alibaba group. Personal assets become protected The businesses under one roof have unlimited personal liability for all t ypes of business debts or all lawsuits against the group. Ownership: - If a business is incorporated under one roof like Alibaba, ownership of the organization can be transferred and sold easil y to a group of shareholders. Credibility:-It becomes easier to maintain and instil the trust of customers, individuals and retailers in the organization under one roof. Alibaba group won the trust of clients. It attracted and brought client to do business with this group
For being a sustainable advantage, there should be such products, services a nd processes which are value creating and cannot be matched by competitors. Ali baba group is a long lasting company. Its operation is also long time. If shareholders and owners want to disintegrate the company, it can still be run without owners been around. When the centralization of all business units will be completed, then corporate advantage can be sustainable.
2. Is the degree of competition among business units appropriate? Do you think Jack Ma should encourage cooperation? If so, how?
Degree of competition is of four types among business units:
Perfect competition – In this type of competition, many equal sellers are pr esent in market. Monopolistic competition - In this type of competition, many sellers ar e present in market which produce similar products but buyers perceive them as different. Oligopoly competition - In this type of competition, a few sellers are present in market Monopoly competition - In this type of competition, only one major seller in present in market
Competition should be healthy among business units. Healthy Competition is always appropriate because
High revenue can be produced by this.
It increases sales turnover.
It helps in building innovative ideas.
It promotes competition among the skills of all staff which ensured that all business units had competitive staff to do their best. It helps in developing more and more strategic ideas in running business. It grows a business unit to such level where it can do all its operations like a separate organization It makes the organization to work efficiently and effecti vely hence increases productivity.
Healthy competition always results in increased motivation and creativity.
It increases discipline among employees.
Good quality output will be produced
It promotes respect, care and consideration among all e mployees.
It increases the effect of concept of marketing mix. Therefore, it increases the competition in Product: - The product quality should be so good that competitors could not penetrate in the market. Pricing: - Pricing of the product should be economical which can secure the market and makes the organization within the competition. This can make the business to increase in revenue and grow financially. Promotion:- Advertisement and web publishing increases the competition Place: - Location also attracts clients. Goods and services should be delivered to locations which are convenient to client. With e -commerce clarifies how products’ delivery makes difference. This grows the ownership and credibilit y
of business. By doing so, Alibaba has secured its place in the market with a high degree. Jack Ma should encourage cooperation: - Jack Ma i s considering on the fact whether he should enhance the competition among business units on or he should consider for encouraging cooperation. Benefits of cooperation are:
Cooperation among all units helps in maintaining the competition with alternatives that are from outside the group. Cooperation means combination of task of individuals whose activities are coordinated. Successful Coordination can help in performing the better than individuals. It does the things in such way which an individual can’t do.
. Way to encourage cooperation:
Enhance teamwork: - When employees work together in team business, relationship among them grows. By this, all team members come close to each other, share their views and ideas to make business better. Participation in trainings: - Management should arrange training on leadership which can unify the individual employees and business units. This type of training can cr eate happy, strong, cheerful and united working environment among different departments and business unit. They work together in a group. Exercise of team building:-To grow relationship among employees of same group who are working in different business units, some team building exercises should be done like holiday camps and social activities should be organized for team members. Job rotation: - Same type of job always brings boredom and no further learning. So rotation of staff should be there which will increase their interest in work and help them in improving their skills. It will provide opportunities for broadening their knowledge and career enhancement. It will boost their abiliti es to work in other business units. Cross business: - Group of people who are having different expertise work towards a common goal and attain that goal. It includes collaboration of employees working on different levels in all group companies. They share their ideas and improve their performance and add value to the organization Goals and expectations should be communicated to employees clearly. Employees want to be part of organization. They want to know all the important task and result of those tasks. For motivating employees and increasing cooperation among them, Organizational mission should be explained to them and they should be tied with it. Transparency:-Information should be shared with employees. Employees should know what is going on in the organization. They should understand how they can contribute for good performance. If employees will have all information, they will feel their worth and encourage them for better per formance. Information given to them should be correct whether it is bad or good news as it will increase their feeling of ownership.
Open Communication should be encouraged: - Ever yone should understand what is important to them. This can be done by taking survey, using suggestion box and meetings with team. Respect the ideas of team instead of criticising them. Their concerns should be addressed in the best way. This will increase cooperation among employees. Latest Updates about company: If an employee hears an important update about company from outside sources like media, colleagues, friends or famil y, this will create a negative impact in their minds. So employees should be updated about important messages as soon as possible. Promotion of organization’s reputation, values and ethics: - Every employee wants to see his organization at the top. They will feel good for the performance of their leaders, their quality of work, quality of product and reputation of organization. So Active promotion should be there. Culture: - Employees should be encouraged to be fit with the culture of organization. Freedom to employees: - Employees should be free enough to explain their ways of supporting organizational strategies and value. This will increase f eeling of cooperation among them. Trust: - Trust should be built within employees. They should trust each other and top management. Employees understand the management decisions, behaviour and effect of that on organization. If they will not trust on them, they will never perform their best. Engagement of employees: - Opinions of all employees should be shared and respected as well. Such environment should be created that they will engage themselves in sharing their ideas. Innovation should be encouraged: - Innovative ideas should be respected and rewarded properly which will encourage other employees also. Participation of employees: - All Employees should be encouraged to participate in achieving the goals and objectives of the company. Belonging sense: - Every employee should feel themselves as the par t of organization. So such activities should be done which can foster the rel ationships among them. Constant feedback should be provided: - Proper feedback should be given to employees about their work. The one, who is performing a good job, should be recognised. Weakness should not be the only focus area of feedback. By crit icizing employees, they will start hiding their mistakes. A little recognition will boost their morale and encourage others also. Well performing people should know that they are performing very well and they should keep on performing this. This will encourage them to do better. Immediate feedback should be given to employees: - It means t he opportunity to share the opinions of each other and to find the solutions of the problems. Feedback should be a two way communication. Some managers think that it should be on done annual basis but in actual, it should be done on daily basis. Way of using feedback: - All employees should be clarified “in what ways their feedback is being used”.
Employees should be supported in their growth and work: - Subordinate’s ideas should be responded as brilliant or good ideas. Success provides success. Their growth should be supported by providing them education, proper tr aining, learning opportunities and coaching. Their personal development should al so be supported. Cooperation for solving problems:-If employees think that manager or leader only have to solve all the problems, then their engagement will decrease. So team members should be encouraged to take their responsibility and solve the issues and problems by their own understanding collaboratively. They should understand that manager will not solve everyone’s problem. By this, they will seek for co-operation with each other. Delegation: - Work should be delegated among team members. By this, employees will get growth opportunity. They can gain the manager’s trust. To do this, they will do their task correctly and this will increase ownership of their task. Delegation also expands managerial span of control. Incentives:-Incentives should be given to employees to motivate employees. Employees should be given proper recognition, which will encourage employees for being engaged. Different employees should be motivated by different things. Financial and non-financial achievements should be celebrated: - Emplo yees should be given proper value. They should feel that they are an important part of company and organization value them. A manager or leader should show the care for employees and should be given recognition for efforts.
3. As Alibaba develops new businesses, how should the firm incorporate them into the organizational structure? What are the benefits and costs of having new businesses report directly to Jack Ma? Alibaba should use the below points to incorporate all new businesses into organizational structure:
A team should be built to work on the change. Knowledge of transferring the ownership of business should be provided to team. It will prepare rest of employees for a change. Change is a factor which is transitional and employees take time to adapt it. Alibaba’s staff should be made aware and ready for any type of change which avoids understanding conflicts. To keep the new business in place, goals should be set li ke what is expected and what should be accomplished by all units. After this, to measure the business, milestones should be set. High goals require greater effort and vice versa. Then strategies should be made to help employees to perform their best. Then plan should be made to implement them. Jack Ma should always get feedback fr om the team members about this which was set to carry out change. After the transition, whole organization should be restructured to incorporate new business. It should be ensured that there should not be any conflict for
understanding in team members. Each business unit should work towards the same core values and goals which are expected fr om them. BENEFITS:
Interaction of team members directly with managers Participation of Managers in planning Experts or Specialists can be allowed to handle a nd control the business functions. Relationship becomes better among all levels. All can share innovative ideas and perform best. Jack Ma himself can control the expenses and costs incurred to run the business Jack Ma himself can evaluate the revenue and performance of company There will be consistency in work practices. Everything will be in front of Jack Ma’s eyes so that he can control it completely. Consistency can be maintained in work practices. Jack Ma will supervise everything himself and control them accordingly. There will be fewer conflicts among employees. Staff can be controlled easily. Good dispute resolution process
COSTS:
This will increase workload on managers. So they cannot be able to concentrate fully to the goals and core values of the group. There will be no control on the pricing of goods and services which will be provided to customers. There will be no standardization in the company because each unit and manager will want to do the best and perform towards a way which works best t o them Quick decisions are not possible which result in delay of work. Supervision becomes less because executives have high work pressure. Secrecy is not possible Employees will have less commitment.
4. What should Jack Ma and his C-Suite be concerned about? Should Jack Ma centralize more functions to the corporate level? If so, which ones? Should Jack Ma create a Chief Operating Officer position?
Jack Ma is a wonderful leader. He used his talent and made Alibaba a successful group. He focussed on 4 parts i.e. target, mission, teamwork and value system. Due to high growth of business, Jack Ma and his C-suite should be concerned about the complex structure of business. After growth, structure of business will be so complex that there will not be close control over the
assets of company. Some of the employees get confused about their direct supervisor. Dual authority and problem in communication can create distances among managers and employees which can create dissatisfaction of employees and their low morale. So need for re-structure the organization arises and they should look into process of centralization. A centralized structure is the way to handle all the decisions where power is at the top of hierarchy. Employees discuss the planned activities with higher management but cannot make decisions.
Reasons for centralising more functions to corporate vale are: Cost Saving: - Standardised methods and procedures help in reducing o the cost as it does not emphasize on departmental functions. Relationship management: - To being top management and employees o to work together who can share their innovative ideas and views to perform the best to run the unit. To consolidate the performance measurements. It guarantees a high o degree of reporting and evaluating of the company’s revenue and performance. Work Standardisation o Flexibility of work: - It considers the fact that if there is an emergency o or crisis in the organization or any need for other workers to assist in the units, and then flexibility should be there to change the sta ndards as per the approval by top management. Jack ma should consider centralizing business units as this would help o in financing them. Action Uniformity: - It becomes easier to maintain consistency in work o practices. Same executive supervises the job and same equipments are used which ensures uniform performance. Leadership: It encourages leadership which facilitates aggressive o marketing and achievement of required goals. Good quality of work o Proper Data analysis o Better supervision o Data storage: records can be stored together which are easily o retrievable. Business unit application development o Mobile platform: Customers can get single point of contact. o Rapid Execution of policies: Few people are involved in discussing o and deciding the strategy and plan of action. Once decisi ons are made, leaders will send the directives to lower levels who will implement the same.
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Less conflict: When one person or a small group of employees is decision maker, then there will be fewer conflicts among middle and lower level employees. When top management takes the responsibilit y of making polices and decisions and implementation of those, they lower the risk of unfavourable and wrong decisions which could be made by other leaders and managers. Good control over staff: Staff can be controlled more eas ily. Accountability of any policy and decision lies with top management. Budget Control: Centralized business is more organised which has a clear hierarchy. As decisions are made by top management people, they can control over budgets. They ensure that all the expenses will be under their supervision. Lower level employees have to take approval for expenses from top management. Guidance by expert: - Top management is the group of most expert and most experienced people who always guides lower management. Coordination becomes easy: - When decisions are made at top level, it becomes easy for lower levels to work together. Everyone has to work according to management policies.
Jack Ma should create a Chief Operating Officer position. Even though whole group has a number of presidents who directly report to J ack Ma but to carry our centralization successfully and to concentrate on strategizing and leadership, all business units should be under one person who alone can take care for the operations of the company. So there is need of COO position. By making this position, centralized reporting from all units will be done to Jack Ma. This will reduce pressure of Jack Ma. Key responsibilities of COO should be to plan the whole unit operation both for customers and internal staff and drive the performance of unit. Need for COO position is because : Today companies’ structure is becoming more large and complex day by day. o So it becomes very difficult for a single person to have total oversight on the whole group. So one COO will handle separate unit and will report to Jack Ma. There is a strong relationship between the progress of an organization and o COO presence in that organization. COO can help in lowering the retention of key executives who are at the risk o of moving to a competitor COO takes care of day to day responsibilities and strategic planning activities. o COO formalizes limited resources to most productive uses which creates o maximum value to the company COO develops the organization’s strategy for lower management and staff, o implements appropriate policies and corrective and training practices to make employees understand the company goals. COO makes proper planning which prioritizes customer, employee and o requirement of organization.
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COO drives performance measure to increase the efficiency and effectiveness of employees. COO maintains and monitors all levels in the unit and motivates them to fulfil organizational goals.
References Turban, E. (2012). A managerial and Social Networks Perspective, part 1 - 5. http://technode.com/2009/01/22/a-brief-history-and-future-of-alibabacom/ http://cdixon.org/2012/02/13/ebay-vs-amazon-decentralized-vs-centralizedecommerce/ http://news.alibaba.com/specials/aboutalibaba/aligroup/index.html http://supplychain-mechanic.com/?p=211
