Group members

: Duong Thi Phuong Anh

1311140004

: Le Thuy Lien

1311140042

: Nguyen Hong Ngoc

1317140062

: Tran Nguyen Phuong

1314140073

ALIBABA BUSINESS MODEL REPORT

Alibaba.com,

is

successful

E-Commerce

Business-to-Business

(B2B)

company, which offers an extensive portfolio of services and can be

described

as

combination

of

Amazon,

PayPal,

Google

and

eBay.

Alibaba.com is a pure-play business model because it is an Internet-based

business with no physical shop. Transactions processed by Alibaba.com is
larger than the number of Amazon and eBay put together, with transition
volume of $163 billion. It links Chinese manufactures and suppliers to
overseas businessmen, connecting importers and exporters from more than
240 countries.
Wanting to know the key to success of one of the leading ecommerce
company in China, and even all over the world, we are analyzing Alibaba
using Business Model with 8 key elements as followed: Value Proposition,
Revenue Model, Market Opportunity, Competitive Environment, Competitive
Advantage,

Market

Strategy,

Management

Development.
1. Value Proposition
1

Team

and

Organizational

Value proposition defines how a companys product or service fulfills the

needs of customers. The slogan of Alibaba.com is Global trade starts here
with its aim of using technology development to connect China domestic
manufacturers to suppliers and buyers from abroad.
a. CONVENIENCE/ACCESSIBILITY/CONNECTIVITY
Alibaba enable their customers, both buyers and sellers, to discover, connect
and transact with each other on the e-commerce marketplaces easily,
efficiently and internationally. Businessmen can access the wholesale
marketplaces for materials used in operation, or final goods. Sellers use the
marketplaces for establishment on the Internet and market their products
and services to a wide community of worldwide consumers.
b. COST REDUCTION
Sellers and Companies could easily set up their online store on Alibaba.com
platforms and create a presence to an enormous group of consumers. Online
store is inexpensive as compared to physical format, and reduce cost and
time in searching for products/customers.
c. INFORMATION DENSITY/CHOICE
Updated database of R.A.T (Reliable, accurate and timely) information of
participants are available on the marketplaces. Buyers to choose the most
competitive price and product from a great deal of suppliers. It also
facilitates wider range of product offers to consumers enabling long-tail
economics.
d. RELIABILITY/TRUST
2

AliPay is established as an important part of Alibaba Group's ecosystem, as it

provides a secure, trustworthy and convenient mean of processing payments
online and on mobile phone for customers. It is a third-party online payment
service provider with no transaction fees.
e. COMMUNITY
Alibaba allows buyers to write review on product and service satisfaction,
and for sellers to receive feedback ratings and rankings.
f. CUSTOMIZATION
Alibaba enable buyers to search for a specific product that they want through
keyword search engine tool on the platforms. They can also find products
according to the different categories such as type, design, seasonal, brands,
etc.
2. Revenue Model
Revenue Model describes how the firm will earn revenue, produce profits and
produce a superior return on invested capital. Alibaba has a very broad
customer

based

therefor,

its

revenue

model

includes:

advertising,

transaction, commission and subscription. For their wholesale marketplaces,

users are charged fees for membership and their value-added services.
Revenues

are

also

generated

from

cloud

computing

and

Internet

infrastructure services primarily from time and usage based provision of

cloud computing services.
3. Market Opportunity

Market opportunity refers to the companys intended marketspace and the

overall potential financial opportunities available to the firm in that
marketspace. Alibaba's online marketplaces offer a vast selection of products
from individual sellers and small and medium size enterprises (SMEs).
Currently, Alibaba's e-platforms are mainly cater and dependent on the
Chinese market, with its gigantic potential customer base of 1.4bn people in
China alone. Though it may seems limiting but the market segment is big
considering the number of online users in China and that 80% of China's
online shopping is done via Alibaba. To promote online business, the Chinese
government has promoted the development of e-commerce legal provisions
so as to create a safe and regulated business environment and encouraged
SMEs to use third party online platforms. With the growing number of SMEs
in China and use of the Internet for business, as well as the improvement in
technology and process innovation; Alibaba is able to strive in this industry.
Moreover, Alibaba recent listing in the USA stock exchange will open up a
larger market for China SMEs to global B2B & B2C via Alibabas platforms.
4. Competitive Environment
Competitive environment includes other companies operating in the same
marketplace selling similar products. Major direct competitors of Alibaba are:
eBay and Amazon from USA. Jingdong Mall, Made-in-China and Global
Sources from China. Indirect competitors are the search websites such as
Google and Baidu, where the potential customers may search through these
free and simpler websites and not through Alibaba's e-commerce platforms,
4

which will lead to loss in profits. As well as, Tencent Holdings Ltd, a mobile
gaming and social media giant in China which also operates popular WeChat
mobile chat application. It competes against Alibaba's online platform with
its mobile platform in terms of e-commerce services.
5. Competitive Advantages
The firm possesses competitive advantage if it can consistently outperform
other players in the industry.
Language was not a barrier for Alibaba, unlike its major rivals. It offers
platforms in different languages to cater to different market segments, such
as 1688.com in Mandarin for Chinese businesses, Alibaba.com in English for
the international customers and alibaba.co.jp in Japanese for Japanese
customers. Therefore, Alibaba has first-mover advantage in the Chinese
market as compared to its USA rivals such as eBay and Amazon.
Alibaba also created a trusted online payment service called Alipay to ensure
smooth, secure and fair transactions for its customers. Revenue model is
based on revenue sharing rather than listing fees, makes it easier for
additional merchants to join the network and attracts a large volume of
customer traffic. Good relations with Chinese government is particularly
important as they are the gatekeeper of the economy.
6. Market Strategy
Market Strategy is the plan a company put together that details exactly how
you intend to enter a new market and attract new customers. Alibaba
functions as an intermediary third party platform between buyers and sellers,
5

where it is cost and time efficient to connect and do business anytime and
anywhere. Alibaba also established a third party online payment service
called Alipay so as to build trust and a reliable platform for its users to make
transaction safely, hence making Alibaba's e-platforms an attractive site to
do business. Discounts are also given to customers when they buy in bulk or
during festival seasons.
7. Organizational Development
Organizational development describes how the company will organize the
work that needs to be accomplished. In 2011, reorganized Taobao into three
separate companies Tmall.com, Taobao Marketplace and eTao to better
adapt to Chinas fast-growing B2C market for e-commerce in June.
In July 2012, reorganized into seven business groups: Alibaba B2B
International Operations, Alibaba B2B China Operations, Taobao Marketplace,
Tmall.com, Juhuasuan, eTao and Alibaba Cloud Computing. Alipay was
separated from Alibaba Group and became an affiliate of Alibaba Group.
In 2013, reorganized again into 25 business units. Alibaba Small and Micro
Financial Services Group which includes Alipay, insurance, loans and
guarantee services to small businesses was formally founded in March 2013.
Alibaba operates a collaborative ecosystem where all participants have an
opportunity to prosper, which includes consumers, merchants, third party
service providers and others. It is structured around six key elements:
teamwork, commitment, passion, integrity, and customer-first and to

embrace change. As for Alibaba, collective entrepreneurship and innovation

between partners equals success and growth.
8. Management Team
Management team includes employees of the company who are responsible
for making the business model work. There are 11 most important people in
the Board of Directors that contribute to Alibabas today success.

Jack Yun MA

Brje E. EKHOLM

Founder and Executive Chairman

Independent Director

Joseph C. TSAI

J. Michael EVANS

Executive Vice Chairman

Director and President

Jonathan Zhaoxi LU

Chee Hwa TUNG

Vice Chairman

Independent Director

Jerry YANG

Wan Ling Martello

Independent Director

Independent Director

Masayoshi SON

Daniel Yong ZHANG

Director

Director and Chief Executive Officer

Walter Teh Ming KWAUK

Independent Director