Alibaba
Connecting the world's businesses
Alibaba is a trading platform for the new world order, enabling a small business in remote China to deal directly with a large corporate, for any entrepreneur to access a global marketplace.
Jack Ma grew up in Hangzhou, China. Having twice failed the entrance exam, he trained to be a teacher, but soon found himself, at the age of 25, lecturing in international trade. Friends in the USA helped him develop his first website, China Yellow Pages, which friends back home were amazed by. But Jack had bigger ambitions, for himself, and Chinese business.
In 1999, Ma was back in the USA, sitting in a San Francisco coffee shop thinking about the name Alibaba. He asked a waitress what she thought of the name. “Open sesame” she replied. He found 30 more people in the street and asked them the same. “Alibaba is a kind, smart business person, and he helped his village” concluded Ma (with no mention of thieves). The name fitted his website that he believed would open up a world of possibilities to thousands of small and medium Chinese businesses. It is now a global business exchange, with 80 million companies using the online platform to buy and sell anything across the world.
Alibaba.com became the only publicly traded part of the Alibaba Group, the other major businesses being Taobao, an online consumer shopping mall with 370 million users. The Group has also extended in North America, acquiring Vendio an online retailer similar to Taobao, and Auctiva, a database and digital marketing business.
Alibaba.com developed three business models. The company’s English language international marketplace (www.alibaba.com) serves to bring together importers and exporters from more than 240 countries and regions. The China marketplace (www.1688.com) is developed for domestic business-to-business trade in China. In addition, Alibaba.com offers a transaction-based wholesale platform, AliExpress (www.aliexpress.com), which allows smaller buyers to buy small quantities of goods at wholesale prices.
Taobao Marketplace, or simply Taobao, is the biggest consumer to consumer shopping platform in China, launched in 2003. Tmall.com was introduced in April 2008 and is now a major online shopping destination for quality, brand name goods in China. eTao is an independent engine, particularly focused on comparison shopping, whilst Alipay is an online payment platform, similar to but significantly bigger than Paypal.
Alipay has been particularly important, in a market where consumer trust in online payments is low, consumer protection laws are weak, and there is limited credit card penetration. Alipay is an escrow payment, meaning that consumers only release their payment if they are happy with goods received.
Jack Ma’s exit
In 2019, Jack Ma stepped down as executive chairman. His exit marked a turning point for the company, as it had to navigate a rapidly changing business environment and adapt to new regulatory challenges, market conditions, and internal restructuring. Here’s a detailed look at how Alibaba has evolved since Jack Ma’s exit.
Daniel Zhang, who had already been serving as CEO since 2015 took on the lead ole. Zhang was considered a natural successor due to his deep understanding of Alibaba’s core businesses, having previously led the company’s cloud computing arm and overseeing its logistics and retail operations. While Ma had been the charismatic public face of Alibaba, Zhang was seen as more of a steady hand, with a focus on operational efficiency, sustainability, and long-term growth.
Zhang’s appointment came at a time when Alibaba was facing increasing regulatory scrutiny from the Chinese government, and his leadership would be tested by these pressures. Under Zhang, Alibaba expanded its cloud services, deepened its commitment to digitalization, and embraced e-commerce innovation, while also navigating significant regulatory changes.
Additionally, in 2021, Joseph Tsai, co-founder and executive vice chairman of Alibaba, played a prominent role in overseeing the company’s restructuring efforts and managing its strategic direction. Tsai, who is often described as the “calm and collected” counterpart to Ma’s more flamboyant style, focused on driving long-term value and ensuring Alibaba’s international expansion.
He was also better suited to addressing the intense regulatory scrutiny by the government. Since 2012, the Chinese Communist Party is said to have established a Party Committee inside the company and has over 2,000 party members as Alibaba employees “to facilitate communication and expedite projects”. While alien to western business structures, this is relatively normal in Chinese companies.
Ma’s public remarks in late 2020 criticising China’s financial regulatory system was the flashpoint that drove change.In November 2020, just days before sister company Ant Group’s highly anticipated IPO, Chinese regulators abruptly suspended the listing. While Ant Group had hoped to raise as much as $37 billion, the IPO’s suspension marked the beginning of a broader clampdown on the tech industry.
In 2021, the state imposed a record $2.8 billion antitrust fine on Alibaba for anti-competitive behaviour, particularly for forcing merchants to choose between its platform and its competitors (a practice known as “exclusivity” or “choosing one from two”). Alibaba undertook a series of internal changes. A significant restructuring of the businesses followed.
Strategic shifts
Alibaba began rethinking its strategy in response to both regulatory pressures and evolving market conditions. The company faced growing competition from rivals like Pinduoduo and JD.com, especially in the e-commerce space, and from Tencent in digital entertainment and gaming. As such, Alibaba began to refocus on certain key areas to ensure continued growth:
- E-commerce Evolution: While Alibaba remains the leader in Chinese e-commerce through platforms like Taobaoand Tmall, the company had to adapt to changing consumer behavior. During the pandemic, consumers increasingly turned to online shopping, but they also began to demand more personalized and social shopping experiences. Alibaba responded by ramping up its investments in livestream shopping, which had gained popularity on platforms like Douyin (TikTok). The company integrated more interactive and immersive shopping experiences into its platforms, blending e-commerce with social media to compete with the likes of Pinduoduo, which pioneered the “social commerce” model.
- Cloud Computing and AI: Alibaba’s Cloud Computing division became one of the most critical areas for growth. Despite the regulatory challenges, Alibaba Cloud remained a leader in Asia and was one of the top players globally in terms of revenue, competing with Amazon Web Services (AWS) and Microsoft Azure. Alibaba Cloud’s expansion into global markets, particularly in Southeast Asia and Europe, helped diversify its revenue streams beyond e-commerce. The company also doubled down on its AI and big data capabilities, offering businesses cloud-based AI solutions for everything from supply chain management to customer engagement.
- Digital Entertainment and Media: Alibaba has also maintained a strong presence in digital entertainment and media, particularly through its Youku video platform, Alibaba Pictures, and its investments in live-streaming platforms. However, the company’s focus on this sector has shifted somewhat as it faces increasing competition from Tencent in online entertainment and gaming.
- Rural E-commerce: Another strategic shift post-Jack Ma was Alibaba’s push into rural e-commerce. With China’s government focusing on rural revitalization, Alibaba leveraged its vast logistics network to help bring e-commerce to more remote areas of the country. This allowed the company to tap into a largely underserved market of potential consumers while helping to drive digital inclusion across China’s rural areas.
Global ambitions
Alibaba had already been expanding its footprint internationally before Jack Ma’s exit, but since 2019, the company has continued to pursue global growth, particularly in Southeast Asia, Europe, and the Middle East. The company’s global ambitions are driven by the need to diversify its revenue streams and reduce its reliance on the increasingly saturated Chinese market.
- Lazada: One of Alibaba’s flagship international acquisitions, Lazada, a Southeast Asian e-commerce platform, has become an important vehicle for Alibaba’s expansion in the region. Since Ma’s departure, the company has been investing heavily in Lazada to improve its logistics and expand its market share in countries like Thailand, Indonesia, and Malaysia.
- AliExpress: Alibaba’s global e-commerce platform AliExpress, which allows consumers from around the world to purchase goods directly from Chinese manufacturers, has also seen growth. The platform is particularly popular in Europe, Russia, and parts of Latin America.
- Cross-Border Logistics: Alibaba has invested heavily in cross-border logistics through its Cainiao network, which aims to streamline international shipping and facilitate e-commerce growth globally. This is especially important as the company faces increased competition from rivals like Amazon in key markets outside of China.
1+6+N
Under Jack Ma, Alibaba was known for its unique corporate culture, characterized by a blend of idealism, entrepreneurship, and a focus on the “Alibaba spirit.” However, with Ma stepping down from the public spotlight, the company has had to shift its culture in response to both internal and external pressures.
While Ma’s philosophy of “customer first, employee second, and shareholder third” remains a guiding principle for the company, Alibaba’s leadership under Daniel Zhang has focused more on pragmatism and operational efficiency. The company has also faced increasing pressure to curb the excesses of its corporate culture, particularly in light of China’s crackdown on big tech and its growing emphasis on social responsibility.
In 2023, Alibaba announced their “1+6+N” restructuring plan, apparently engineered by Jack Ma in collaboration with his co-founder and successor as chairman, Daniel Zhang.
“1+6+N” reorganised the business structure into six independently run entities: Cloud Intelligence Group, Taobao and Tmall Group, Cainiao Smart Logistics Network, Local Services group, Alibaba International Digital Commerce, and the Digital Media and Entertainment group. Each business unit has their own CEO and board of directors and be able to seek their own fundraising and market listings.