| Name | Alibaba Group |
| Industry | online commerce |
| Founded | 1999 |
| Headquarters | Hangzhou, China |
| CEO | Daniel Zhang |
| Revenues | US$72 billion, 2020 |
| Profit | US$7 billion, 2020 |
| Competitors | Amazon, JD |
Company Overview
Alibaba is an e-commerce company that owns different businesses around the world. Headquartered in Hangzhou, China, it was founded in 1999. Some of their activities include online shopping platforms, such as Taobao and Tmall.com, cloud computing services through Alibaba Cloud Computing, wholesale on Alibaba.com, mobile payment solutions through Alipay, and many more. The company has now grown into a global player, reaching a market cap of $495 billion in 2018. Let’s now go over the SWOT analysis of the company.
Table of Contents
Alibaba Strengths 2021:
- Market segmentation and product portfolio.
Alibaba’s product offering is extremely vast, based on the global demand. They offer food, fashion accessories and apparel, vehicles and car parts, health and beauty products, electronics, and many more categories in more than 200 countries. For governments, companies, and startups, they offer cloud computing services, while Alimama is a marketing service provider that helps corporations expand their market reach. Cainiao Network provides logistics services in order to connect merchants with consumers on a large scale. Ant Financial supports startups, small, and micro-enterprises. Alibaba comes across as the leader in all of these segments. - Growing TMall.
The platform is known as the largest B2C platform in China for imported goods. They sell premium-quality products internationally, and they have a growing presence in many countries around the world. For example, they are quickly expanding in Australia because of the growing demand of Australian health and nutritional supplements in China. TMall charges its merchants with an annual service fee, so the growth of the platform leads to increasing revenues (Walk-Morris, 2019). - Growing global demand.
Alibaba’s growth was fueled by its online marketing services, reaching 450 million active users in China. This increase determines more businesses globally to use their services to boost market penetration. - R&D focus.
The company recognizes the importance of their R&D department, aiming to achieve maximum automation and optimization of their processes, according to MarketLine (2019). One of the main advantages is that they will improve their position in the emerging field of Artificial Intelligence and machine learning, positioning themselves against fierce competitors, such as Amazon. - Financial growth during the pandemic.
The first three months of 2020 came with a 22% increase in revenues, regardless of the restrictions associated with the pandemic. This growth was unexpected was it was mainly the results of groceries, revenues, and even cloud computing increased by 58% (BBC, 2020).
Alibaba Weaknesses 2021:
- International expansion is quite limited.
Despite their reach in more than 200 countries, China remains the main market for the company. Expanding overseas is a crucial step for the company, but they have been unable to gain significant market share in any other important economies, such as India. - The revenue streams are not very diversified.
Despite their numerous operations, the core business remains its e-commerce platform, making for 84% of the total revenue in 2019. International markets account for less than 10% of its revenues, so the company is depending on its online platform and China as the main market.
Alibaba Opportunities 2021:
- Expansion in Southern Europe.
McMorrow and Liu (2020) report that Alibaba actually recorded a spike in its activity in Spain and Italy. The company decided to focus on Southern Europe in particular because online shopping is not as popular as in other countries, such as the US, Germany, or the UK. This proved to be beneficial as AliExpress’s traffic in the two countries mentioned above increased by 20% and 14% respectively. - Positive outlook.
Alibaba enjoys positive forecasting regarding the global online retail marketplace. They have numerous opportunities in most of the sectors they are active in, cloud computing, global expansion, forming new partnerships and contracts. Their platforms have recently become the most favorite channels for consumers around the world, which can potentially empower the company to strengthen its international market presence.
- New acquisitions and partnerships.
Alibaba can partner with other well-established brands in other countries in order to help their business grow quicker. They have already engaged in partnerships with other brands, such as Office Depot, Starbucks, Walgreens, and Guess. Next, they could also look into acquiring smaller Chinese companies, or other global brands.
Alibaba Threats 2021:
- Legal aspects and tax collection.
Bloombergtax (2019) discusses the importance of sellers’ compliance with tax collection systems while they use Alibaba’s Taobao platform. More specifically, they must work proactively to ease tax collection proceedings because their lack can generate negative customer experiences. Another issue is that if sole proprietors do not fulfil their tax requirements when they use Taobao, this can negatively impact Alibaba’s integrity and brand image. - Competitive landscape.
Many global companies, such as Baidu, Amazon, eBay, and others, are actively engaged in the race for Alibaba’s consumers. The company must create and maintain unique competitive advantages in order to keep their monthly active users with the purpose of financial stability. - Trade barriers and the geopolitical environment.
The escalation of the tensions in the US-China trade relationships can have a detrimental impact on any major Chinese business, including Alibaba. This is because the tensions might lead to major trade barriers, pressuring profits and revenues. Also, Ma (2018) argues that this also resulted in the slow growth of the main Chinese companies engaged in overseas activities. - Coronavirus and the Chinese economy.
The broad impact of the coronavirus pandemic took a toll on the Chinese economy. It is changing buying patterns as food delivery becomes more popular, at the expense of electronics and clothing. In addition to this, the outbreak comes with significant uncertainties, such as denting consumer spending (Chen et al. 2020).
Alibaba SWOT Analysis Conclusion:
- In conclusion, Alibaba enjoyed tremendous growth since it joined the stock exchange in 2014. In 2019/2020, the company’s revenues continued to improve across different sectors, including food and cloud computing. It enjoys strong brand loyalty in the Chinese market, but international expansion remains troublesome. At the same time, the company must invest in R&D and marketing to ensure growth and improved market position. Alibaba should seek to decrease its reliance on the Chinese market by consolidating its position across the world.
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References
BBC (2020). Chinese retail giant sees “recovery” after the virus. | BBC News.
Bloombergtax (2019). Alibaba Purges 200,000 Tax-Avoiding Vendors as Nations Crack Down. news.bloombergtax.com.
Chen, L.Y., Lindberg, K. and Huang, Z. (2020). Alibaba: Coronavirus is having a broad impact on China’s economy. | Al Jazeera
Ma, J. (2018). A trade war could hurt retail, jobs, and opportunity. | Retail Dive.
MarketLine (2019). Key Facts table. Alibaba Group Holding Limited. Company Overview.
McMorrow, R. and Liu, N. (2020). Subscribe to read | Financial Times.
Walk-Morris, T. (2019). Alibaba launches English-language site to lure brands. | Retail Dive.
