On 6 November 2007, Alibaba.com debuted on the Hong Kong Stock Exchange, raising US$1.5 billion to become the world's biggest internet offering since Google's initial public offering in 2004. A frenzied purchase of the stock pushed prices up by 193% on the first trading day, making it the fourth-largest first-day gain in Hong Kong's stock exchange in three years. The closing price of US$5.09 per share valued Alibaba.com at about US$25.6 billion and made it the fifth-largest among global internet companies and the largest in Asia outside Japan. It also made the company one of the most expensive stocks in Hong Kong, trading at 306 times the company's projected 2007 earnings. In contrast, globally recognized brand names such as Yahoo and Japan's Softbank, both major stockholders of Alibaba.com, were trading at only 60 times their projected earnings. Shareholders were therefore displaying extreme optimism towards Alibaba.com's earning prospect by paying a significant premium to own the company's shares. As observers and venture capitalists have remarked, China is becoming a center of technology and a major pole for innovation. Many successful dot com strategies in the West have been copied and refined by Chinese technological gurus who have honed their technical and entrepreneurial skills in the West. These "sea turtles" are beating international giants likes Google and eBay in the burgeoning Chinese market and have their sights set on global domination. Armed with proceeds from a record-breaking IPO, Alibaba.com is poised to stay ahead in the increasingly-competitive online B2B market in China. What strategies can the company pursue and what pitfalls must it avoid?
Swot Analysis of "Alibaba.com" written by Ricky Lai, Ali Farhoomand includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Alibaba.com Trading facing as an external strategic factors. Some of the topics covered in Alibaba.com case study are - Strategic Management Strategies, Growth strategy, IPO, IT, Performance measurement, Strategic planning, Succession planning and Global Business.
Some of the macro environment factors that can be used to understand the Alibaba.com casestudy better are - – supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, there is increasing trade war between United States & China, increasing energy prices, talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings,
competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Alibaba.com case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Alibaba.com Trading, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Alibaba.com Trading 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 can be done for the following purposes –
1. Strategic planning using facts provided in Alibaba.com case study
2. Improving business portfolio management of Alibaba.com Trading
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Alibaba.com Trading
Strengths Alibaba.com | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Alibaba.com Trading in Alibaba.com Harvard Business Review case study are -
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Alibaba.com Trading digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Alibaba.com Trading has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Ability to lead change in Global Business field
– Alibaba.com Trading is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Alibaba.com Trading in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Alibaba.com Trading is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Alibaba.com Trading 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 Alibaba.com Trading in the sector have low bargaining power. Alibaba.com has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Alibaba.com Trading to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Alibaba.com Trading is one of the most innovative firm in sector. Manager in Alibaba.com Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Successful track record of launching new products
– Alibaba.com Trading has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Alibaba.com Trading has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Effective Research and Development (R&D)
– Alibaba.com Trading 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 - 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
– Alibaba.com Trading is present in almost all the verticals within the industry. This has provided firm in Alibaba.com 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.
Operational resilience
– The operational resilience strategy in the Alibaba.com 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.
High brand equity
– Alibaba.com Trading has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Alibaba.com Trading to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Alibaba.com Trading
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Alibaba.com Trading does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Alibaba.com | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Alibaba.com are -
Need for greater diversity
– Alibaba.com Trading 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.
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 Alibaba.com Trading supply chain. Even after few cautionary changes mentioned in the HBR case study - Alibaba.com, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Alibaba.com Trading vulnerable to further global disruptions in South East Asia.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Alibaba.com, it seems that the employees of Alibaba.com Trading don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Alibaba.com Trading is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Alibaba.com can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– After analyzing the HBR case study Alibaba.com, it seems that company is thinking about the frontier risks that can impact Global Business strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Interest costs
– Compare to the competition, Alibaba.com Trading 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.
Capital Spending Reduction
– Even during the low interest decade, Alibaba.com Trading 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.
Skills based hiring
– The stress on hiring functional specialists at Alibaba.com Trading has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Workers concerns about automation
– As automation is fast increasing in the segment, Alibaba.com Trading needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High cash cycle compare to competitors
Alibaba.com Trading 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 operating costs
– Compare to the competitors, firm in the HBR case study Alibaba.com has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Alibaba.com Trading 's lucrative customers.
Opportunities Alibaba.com | 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 are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Alibaba.com Trading 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 Alibaba.com Trading to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Alibaba.com Trading can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Alibaba.com, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Alibaba.com Trading in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Alibaba.com Trading 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. Alibaba.com Trading 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.
Loyalty marketing
– Alibaba.com Trading 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.
Creating value in data economy
– The success of analytics program of Alibaba.com Trading has opened avenues for new revenue streams for the organization in the industry. This can help Alibaba.com Trading to build a more holistic ecosystem as suggested in the Alibaba.com case study. Alibaba.com Trading can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Alibaba.com Trading can use these opportunities to build new business models that can help the communities that Alibaba.com Trading operates in. Secondly it can use opportunities from government spending in Global Business sector.
Buying journey improvements
– Alibaba.com Trading can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Alibaba.com 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.
Developing new processes and practices
– Alibaba.com Trading can develop new processes and procedures in Global Business 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.
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 Alibaba.com Trading in the consumer business. Now Alibaba.com Trading can target international markets with far fewer capital restrictions requirements than the existing system.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Alibaba.com Trading to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Alibaba.com Trading can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Alibaba.com Trading can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Global Business segment.
Threats Alibaba.com 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 are -
Shortening product life cycle
– it is one of the major threat that Alibaba.com Trading is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Environmental challenges
– Alibaba.com Trading needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Alibaba.com Trading can take advantage of this fund but it will also bring new competitors in the Global Business industry.
High dependence on third party suppliers
– Alibaba.com Trading 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.
Technology acceleration in Forth Industrial Revolution
– Alibaba.com Trading has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Alibaba.com Trading needs to keep up with the evolution of technology in the Global Business 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.
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 Alibaba.com Trading.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Alibaba.com Trading business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Alibaba.com Trading 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 Global Business industry regulations.
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.
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. Alibaba.com Trading 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.
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, Alibaba.com Trading may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Consumer confidence and its impact on Alibaba.com Trading 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.
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. Alibaba.com Trading needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Alibaba.com 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 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 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 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 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 Alibaba.com Trading needs to make to build a sustainable competitive advantage.