The challenges the largest Chinese electronic commerce company faces many challenges at the end of 2001. This case describes how it has completely reoriented its strategy in the past 12 months to become a B-to-B company. The key question is: Will it work and what should be done now?
Swot Analysis of "Alibaba.com (B)" written by F. Warren McFarlan, Fred Young includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Reoriented Alibaba.com facing as an external strategic factors. Some of the topics covered in Alibaba.com (B) case study are - Strategic Management Strategies, and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Alibaba.com (B) casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing,
cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Alibaba.com (B) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Reoriented Alibaba.com, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Reoriented Alibaba.com operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Alibaba.com (B) can be done for the following purposes –
1. Strategic planning using facts provided in Alibaba.com (B) case study
2. Improving business portfolio management of Reoriented Alibaba.com
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Reoriented Alibaba.com
Strengths Alibaba.com (B) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Reoriented Alibaba.com in Alibaba.com (B) Harvard Business Review case study are -
Effective Research and Development (R&D)
– Reoriented Alibaba.com has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Alibaba.com (B) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Reoriented Alibaba.com is present in almost all the verticals within the industry. This has provided firm in Alibaba.com (B) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Sustainable margins compare to other players in Strategy & Execution industry
– Alibaba.com (B) firm has clearly differentiated products in the market place. This has enabled Reoriented Alibaba.com to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Reoriented Alibaba.com to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Reoriented Alibaba.com are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Superior customer experience
– The customer experience strategy of Reoriented Alibaba.com in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Reoriented Alibaba.com is one of the leading recruiters in the industry. Managers in the Alibaba.com (B) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High brand equity
– Reoriented Alibaba.com has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Reoriented Alibaba.com to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Reoriented Alibaba.com has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Alibaba.com (B) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Reoriented Alibaba.com has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Alibaba.com (B) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Strong track record of project management
– Reoriented Alibaba.com is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the Alibaba.com (B) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Learning organization
- Reoriented Alibaba.com is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Reoriented Alibaba.com is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Alibaba.com (B) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses Alibaba.com (B) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Alibaba.com (B) are -
Low market penetration in new markets
– Outside its home market of Reoriented Alibaba.com, firm in the HBR case study Alibaba.com (B) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Reoriented Alibaba.com has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Alibaba.com (B) HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Reoriented Alibaba.com has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Reoriented Alibaba.com has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Lack of clear differentiation of Reoriented Alibaba.com products
– To increase the profitability and margins on the products, Reoriented Alibaba.com needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Reoriented Alibaba.com has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow decision making process
– As mentioned earlier in the report, Reoriented Alibaba.com has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Reoriented Alibaba.com even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Aligning sales with marketing
– It come across in the case study Alibaba.com (B) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Alibaba.com (B) can leverage the sales team experience to cultivate customer relationships as Reoriented Alibaba.com is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Alibaba.com (B) HBR case study mentions - Reoriented Alibaba.com takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Reoriented Alibaba.com supply chain. Even after few cautionary changes mentioned in the HBR case study - Alibaba.com (B), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Reoriented Alibaba.com vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Reoriented Alibaba.com is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Reoriented Alibaba.com needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Reoriented Alibaba.com to focus more on services rather than just following the product oriented approach.
Opportunities Alibaba.com (B) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Alibaba.com (B) are -
Loyalty marketing
– Reoriented Alibaba.com has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Using analytics as competitive advantage
– Reoriented Alibaba.com has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Alibaba.com (B) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Reoriented Alibaba.com to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Reoriented Alibaba.com can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Alibaba.com (B) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Learning at scale
– Online learning technologies has now opened space for Reoriented Alibaba.com to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Reoriented Alibaba.com can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Reoriented Alibaba.com can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Leveraging digital technologies
– Reoriented Alibaba.com can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Reoriented Alibaba.com is facing challenges because of the dominance of functional experts in the organization. Alibaba.com (B) case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Reoriented Alibaba.com can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Reoriented Alibaba.com can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Reoriented Alibaba.com can use these opportunities to build new business models that can help the communities that Reoriented Alibaba.com operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Better consumer reach
– The expansion of the 5G network will help Reoriented Alibaba.com to increase its market reach. Reoriented Alibaba.com will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Reoriented Alibaba.com can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Reoriented Alibaba.com can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Threats Alibaba.com (B) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Alibaba.com (B) are -
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Alibaba.com (B), Reoriented Alibaba.com may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Reoriented Alibaba.com will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Increasing wage structure of Reoriented Alibaba.com
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Reoriented Alibaba.com.
Consumer confidence and its impact on Reoriented Alibaba.com demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Shortening product life cycle
– it is one of the major threat that Reoriented Alibaba.com is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Reoriented Alibaba.com in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Reoriented Alibaba.com can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Reoriented Alibaba.com with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Reoriented Alibaba.com in the Strategy & Execution sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Reoriented Alibaba.com has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Reoriented Alibaba.com needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Reoriented Alibaba.com needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Alibaba.com (B) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Alibaba.com (B) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Alibaba.com (B) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Alibaba.com (B) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Alibaba.com (B) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Reoriented Alibaba.com needs to make to build a sustainable competitive advantage.
