Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Innovation & Entrepreneurship
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle
In April 2016, Alibaba Group Holding Limited (Alibaba) acquired the cash-strapped German e-commerce company Lazada Group (Lazada) to enter the Southeast Asian market and gain an additional source of revenue. Lazada's value proposition of an effortless shopping experience, combined with rising competition, had caused Lazada to over-invest in logistics infrastructure. The cash injection from Alibaba's acquisition would allow Lazada to continue to pursue its strategic imperatives while leveraging Alibaba's online experience and other resources in China. Given the competitive environment in China, was the entry into Southeast Asia through the acquisition of Lazada an appropriate strategy for Alibaba? Had Lazada made the appropriate decision to sell its company to Alibaba? How should Alibaba implement its post-merger integration in 2017? Wiboon Kittilaksanawong is affiliated with Saitama University. Noor Izzati Binti Harun is affiliated with Nagoya University of Commerce & Business.
Authors :: Wiboon Kittilaksanawong, Noor Izzati Binti Harun
Swot Analysis of "Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle" written by Wiboon Kittilaksanawong, Noor Izzati Binti Harun includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lazada Alibaba facing as an external strategic factors. Some of the topics covered in Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle case study are - Strategic Management Strategies, IT, Marketing, Mergers & acquisitions and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle casestudy better are - – supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, there is increasing trade war between United States & China,
technology disruption, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lazada Alibaba, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lazada Alibaba 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 Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle can be done for the following purposes –
1. Strategic planning using facts provided in Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle case study
2. Improving business portfolio management of Lazada Alibaba
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lazada Alibaba
Strengths Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lazada Alibaba in Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle Harvard Business Review case study are -
Analytics focus
– Lazada Alibaba is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Wiboon Kittilaksanawong, Noor Izzati Binti Harun can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Training and development
– Lazada Alibaba has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle 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.
Ability to recruit top talent
– Lazada Alibaba is one of the leading recruiters in the industry. Managers in the Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Lazada Alibaba 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 Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Lazada Alibaba 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 Lazada Alibaba is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle 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.
Strong track record of project management
– Lazada Alibaba is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Lazada Alibaba 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 Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle firm has clearly differentiated products in the market place. This has enabled Lazada Alibaba to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Lazada Alibaba to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Lazada Alibaba 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.
Low bargaining power of suppliers
– Suppliers of Lazada Alibaba in the sector have low bargaining power. Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lazada Alibaba to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Lazada Alibaba has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Weaknesses Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Lazada Alibaba is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Lazada Alibaba products
– To increase the profitability and margins on the products, Lazada Alibaba needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though Lazada Alibaba has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Lazada Alibaba 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.
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 Lazada Alibaba supply chain. Even after few cautionary changes mentioned in the HBR case study - Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lazada Alibaba vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Lazada Alibaba 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. Lazada Alibaba 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.
Need for greater diversity
– Lazada Alibaba has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow to strategic competitive environment developments
– As Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle HBR case study mentions - Lazada Alibaba 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.
Interest costs
– Compare to the competition, Lazada Alibaba 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle, in the dynamic environment Lazada Alibaba has struggled to respond to the nimble upstart competition. Lazada Alibaba has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– It come across in the case study Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle 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 Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle can leverage the sales team experience to cultivate customer relationships as Lazada Alibaba is planning to shift buying processes online.
Opportunities Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle | 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 Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle are -
Better consumer reach
– The expansion of the 5G network will help Lazada Alibaba to increase its market reach. Lazada Alibaba 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.
Loyalty marketing
– Lazada Alibaba 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lazada Alibaba to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Lazada Alibaba to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lazada Alibaba in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
Buying journey improvements
– Lazada Alibaba can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle 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.
Manufacturing automation
– Lazada Alibaba can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship 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.
Using analytics as competitive advantage
– Lazada Alibaba 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 Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lazada Alibaba to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Lazada Alibaba 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.
Developing new processes and practices
– Lazada Alibaba can develop new processes and procedures in Innovation & Entrepreneurship industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lazada Alibaba 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. Lazada Alibaba 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lazada Alibaba can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lazada Alibaba in the consumer business. Now Lazada Alibaba can target international markets with far fewer capital restrictions requirements than the existing system.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lazada Alibaba is facing challenges because of the dominance of functional experts in the organization. Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle 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.
Threats Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle are -
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 Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle, Lazada Alibaba may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
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.
High dependence on third party suppliers
– Lazada Alibaba high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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 Lazada Alibaba in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lazada Alibaba 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 Lazada Alibaba with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lazada Alibaba can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle .
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. Lazada Alibaba 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.
Regulatory challenges
– Lazada Alibaba needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Innovation & Entrepreneurship industry regulations.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Lazada Alibaba in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship 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.
Technology acceleration in Forth Industrial Revolution
– Lazada Alibaba has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Lazada Alibaba needs to keep up with the evolution of technology in the Innovation & Entrepreneurship 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.
Shortening product life cycle
– it is one of the major threat that Lazada Alibaba is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Lazada Alibaba.
Weighted SWOT Analysis of Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle 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 Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle 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 Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle 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 Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle 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 Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle 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 Lazada Alibaba needs to make to build a sustainable competitive advantage.