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 - – cloud computing is disrupting traditional business models, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, wage bills are increasing, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, technology disruption,
increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, 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 -
Ability to recruit top talent
– Alibaba.com Trading is one of the leading recruiters in the industry. Managers in the Alibaba.com 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
– 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.
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.
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.
Highly skilled collaborators
– Alibaba.com Trading 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 HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
High switching costs
– The high switching costs that Alibaba.com Trading 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.
Learning organization
- Alibaba.com Trading 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 Alibaba.com Trading is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Alibaba.com Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Alibaba.com Trading in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
Weaknesses Alibaba.com | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Alibaba.com are -
Slow to strategic competitive environment developments
– As Alibaba.com HBR case study mentions - Alibaba.com Trading 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 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.
Lack of clear differentiation of Alibaba.com Trading products
– To increase the profitability and margins on the products, Alibaba.com Trading needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though Alibaba.com Trading 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.com should strive to include more intangible value offerings along with its core products and services.
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 star products
– The top 2 products and services of the firm as mentioned in the Alibaba.com 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 Alibaba.com Trading has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Alibaba.com, is just above the industry average. Alibaba.com Trading needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
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.
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.
Aligning sales with marketing
– It come across in the case study Alibaba.com 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 can leverage the sales team experience to cultivate customer relationships as Alibaba.com Trading is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Alibaba.com Trading 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. Alibaba.com Trading 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.
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 -
Learning at scale
– Online learning technologies has now opened space for Alibaba.com Trading 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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Alibaba.com Trading to increase its market reach. Alibaba.com Trading 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Alibaba.com Trading can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
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.
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.
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. Alibaba.com Trading can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
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.
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 -
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 .
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.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Alibaba.com Trading can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Alibaba.com Trading
– 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 Alibaba.com Trading.
Stagnating economy with rate increase
– Alibaba.com Trading can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
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.
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.
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.
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.
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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Alibaba.com Trading with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.