B2C Business Model, Competitive Advantage, Supply Chain, Recommendations

Alibaba Company
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Executive Summary
Alibaba is a well-recognized e-commerce business in China. The Alibaba online shop was founded by Jack Ma and other seven founders in the year 1999. The Company name was created to signify the gap of a mysterious portal and it originated from a businessman in One Thousand and One Nights known as Ali Baba. Alibaba is among the three companies in China that have shaped the economy of the country. Alibaba Group Holdings work smart to ensure that they develop sturdy customer loyalty and service in order to create a meaningful change in the business of their customers. There are several factors that give Alibaba is a competitive advantage compared to other business. The first advantage is its location, economies of scope, and scale. Alibaba operates three markets which make it more successful among its competitors. The sources of revenue to the company are advertisements and transaction costs.
The strength of Alibaba lies on the global influence of the company, its high evaluations, and its market position. However, Alibaba has a low brand recognition and the company lacks the capability of competing with other worldwide competitors. Alibaba can address some of the issues facing its efficiency by implementing its technologies to expand the business to the rural suppliers with the help of the B2C model reach as a company. The paper will focus on the competitive advantage of Alibaba, and analyze the current strategy of Alababa by considering some factors like the brick-and-mortar model, barriers to entry, competitors, supply chain, and value chain. The paper will later recommend some strategies the company can implement to improve its success in the e-commerce world.
Key Words: B2C business model, Competitive Advantage, Supply Chain, Recommendations
Introduction
Alibaba is Chinese Company which is also the world’s leading online commerce Company as stated by Greeven and Wei (2017) in their interesting book ‘Business Ecosystem in China.’ Alibaba is a three in one company which involves a market place, a bank, and a search engine. The Company is the trendiest target for online shopping and the fastest rising e-commerce globally. According to Chu (2017), the firm began in 1999 with the main aim of connecting Chinese manufacturers overseas. The Company was founded by Jack Ma, however, currently it is owned by Soft Bank, Yahoo and Joseph Tsai among others. The Company name was intended to signify the gap of a magical portal and it originated from a smart and kind businessman in One Thousand and One Nights known as Ali Baba. The Company was worth $713 in 2017 as the estimated cost. The Company was considered one of the most treasured firms in China after raising $25 billion from its United States IPO (Greeven and Wei, 2017). The table below shows Alibaba’s performance as compared to other technology firms.
Company

Worth in dollars($)

Apple

615

Google

397

Microsoft

384

Alibaba

215

Face book

204

IBM

191

Oracle

172

Samsung Elcetronics

170

Intel

170

Tencent

142

Alibaba Company has a broad market base that enables its business flow to dwarf that of other companies; however, the company is believed to be earning less revenue as compared to other firms. Greeven and Wei (2017) in their book states that, the main source of income for the company is mainly through advertisement and transactions costs charged on merchants who majorly rely on the company’s shopping sites for advertisement. Micklethwait and Dimond (2017) indicate that the company’s profit has been growing very fast as compared to its peer companies. Alibaba’s largest shopping site is the Taobao which is hosts over seven million merchants advertising everything from origami decorations to leather jackets (Greeven and Wei, 2017). Taobao is a Chinese word meaning the search for treasure.
Revenue Model of Alibaba Company
Alibaba Company is for B2B sale. Taobao operates small business to consumer and to a consumer –consumer sales. The Company was launched to open doors for small and medium-sized firms to link up with the global market. The Company’s B2B eCommerce is recognized as the only business that could outdo Amazon. Micklethwait and Dimond (2017), records Alibaba’s major revenue earning services for the Company as data-centric cloud computing, marketplace, and electronic payment services. Alibaba B2B global marketplace brought together manufacturers from China who offered a larger variety of goods and services attracting more buyers (Ding et al. 2018). The Company uses a closed loop system whereby most of the company’s revenue came from advertisement. Over the years the company has focused on creating a platform for suppliers to sell goods in bulk to medium-sized and small businesses at wholesale price and sell them globally (Micklethwait and Dimond, 2017).
The second source of revenue to Alibaba was through the search engines. According to Ding et al. 2018, Alibaba ensured that it blocked search engines from over flooding Taobao thus a strategy to train buyers to go directly and perform a search at Taobao. Through the adequate traffic of buyers, Alibaba launched a Tmall whose uniqueness was its pay-to-play model. Alibaba’s success is attributed to its continual focus on customers (Chu 2017). By 2017, the Company had net revenue of $630 dollars. Alibaba operates with six other subsidiaries namely Alimama, Aliexpress, Alibaba cloud, Cainiao Network, and Ant Financial. The buyers consist of manufacturers, trade agents, wholesalers, retailers and SMEs who participate in export and import businesses.
Other products for export or import offered by Alibaba include VAT refund, trade financing, customs clearance, and logistics services (Ding et al. 2018). The sellers list their products for free on the Company’s website as well as pay for extra features including unlimited product listing and greater exposures. Alabama .com acts as an intermediary where sellers from across the world such as Hongkong, China, and Taiwan meet and a commission is charged as recorded by Chu 2017. Thus commissions are another revenue source. Taobao makes money by listing the results of a specific keyword and allows merchants to make payment for advertisement and other marketing strategies to outdo the rest. It has a special site that reflects the number of transactions successfully completed by each seller (Ding et al. 2018).
Competitive Advantage of Alibaba Company
Alibaba offers three distinct products to its customers. The portals are Alibaba for B2B businesses, Taobao for consumer-consumer and small business-to-consumer sales and lastly Tmall deals in B2C sales (Ding et al. 2018). Each of the portals tailors their product to the demands of specific markets. Taobao concentrates on tiny companies and doesn’t depend on transactions but an advertisement. Micklethwait and Dimond (2017) states that, unlike Amazon or eBay, Alibaba doesn’t charge any transaction fee but instead buys ads hence making their products more visible. Taobao offers hundreds of products and serve millions of users making it the largest shopping website in China (Micklethwait and Dimond, 2017). Tmall serves large companies for instance Ray-Ban. Tmall charges entry and transaction fee which are its major source of revenue thus making huge profits. Tmall provides Chinese consumers with authentic branded products, unlike other firms who offer bootleg imitations.
The Competitive advantage for Alibaba group can be attributed to its three markets who offer essentially one product that is customer-oriented. This has helped the company to offer just the same product for a different market. Alibaba Company made a slight change to its products so as to deliver exactly what software the customer required. Unlike Amazon.com, Alibaba B2B Company does not enter into competition with its customers (Chu, 2017). The main focus of the Company is to offer probable experience for its clients rather than challenging such customers. Alibaba gathers data about the best-selling product and uses the information to enter in the market; this strategy is as well used by Amazon however the latter is not consistent. Alibaba has 2 subscriptions that free whereby the listing is free for sellers but they pay a certain commission and Premium or Gold seller whereby sellers pay a fee for listing and being ranked high for searches.
Alibaba B2B success in eCommerce model can be attributed to factors such as its focus to customer needs, the economy of scales, tailoring of the similar product to diverse markets, its belief that it succeeds when the consumers achieve something in return and lastly Alibaba doesn’t competes with its customers. According to Chu (2017), the three markets attained a GMV of $394 billion from approximated 350 million yearly dynamic buyers that is the value of complete orders of the goods during the FY15. In FY15, the three markets attributed about 78.4% of the tot...