Alibaba Group: birth of an Internet empire with a real-world business model

Ten years later, the company with a strange-sounding name would become the world's largest business-to-business (B2B) e-commerce company, serving as the B2B lifeline for 45 million small- to medium-sized enterprises (SMEs) in 240 countries and territories around the world.

At the same time, Alibaba subsidiary Taobao.com has become China's biggest consumer-to-consumer (C2C) and business-to-consumer (B2C) online auction website in just three years, building an 80 percent market share and a customer base of more than 170 million users. The value of transactions handled on the site surpassed 200 billion yuan last year and will likely shatter the 400 billion yuan barrier in 2010. The company's revenues are expected to grow five hundred-fold within the next eight years.

Alibaba's Alipay.com, founded in 2004, has also risen to become China's biggest third-party online payment platform, controlling roughly half of China's online payment market through its 270 million users. On Dec. 8, Alipay celebrated processing more than 1.2 billion yuan in one day for the first time, and with Chinese consumers set to make an estimated NT$2 trillion in payments online through its platform in 2010, Alipay is being recognized as a giant financial institution.

Spreading Disruptive Innovation Globally

Though Alibaba is a relatively small company, it has ambitions of emerging as a globally influential B2B online player.

Within a decade, Ma has led the Alibaba Group in vanquishing eBay's China unit eachnet.com and acquiring Yahoo! China on its way to becoming the world's biggest e-commerce group.

Many Taiwanese Internet operators harshly disparage Alibaba's success, denouncing it as being partly the product of Chinese government protectionism. The government requires, for example, that domestic investors control at least 51 percent of Chinese Internet companies, severely restricting foreign online players' room for development.

But few people really understand how Ma took local troops with little overseas experience and eventually defeated powerful world-class Internet operators after a fierce struggle.

“Alibaba unleashed disruptive innovation, in which an e-commerce company became not simply a distribution channel, but a partner that helps SMEs build their businesses by providing marketing, financial and information solutions,” observes Yi-Chia Chiu, a professor in National Chung Hsing University's Department of Business Administration who specializes in technology management. Ma has redefined the rules of the game in e-commerce, Chiu says.

Alibaba developed three major initiatives — building an integrated “bricks and clicks” sales model, establishing market order, and helping companies with value innovation. These stand as high thresholds difficult for competitors in China to scale.

These are also the three management capabilities Taiwanese companies most lack in gaining a presence in China's markets. Alibaba's development model can be seen as the business management benchmark for SMEs that want to cultivate China's market and internationalize their operations.

1|2|3|Next Page>>

SharePrintEmail

Write a Comment

Terms

Enter your comments - 3000 characters max

Type in image code

Submit

 Receive China Post promos
 Respond to this email