Critical Analysis of Marketing Strategy of Alibaba

Critical Analysis of Marketing Strategy of Alibaba
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Critical Analysis of Marketing Strategy of Alibaba
Executive Summary
This report focuses on Alibaba, a leading company in the e-commerce industry. Specifically, the report delves into the marketing strategies used by the company. The report provides a brief overview of Alibaba and then proceeds to outline the external operating environment for the company. Next, the report outlines key issues facing the company's marketing strategies. In this regard, the analysis identifies the inability of the company to expand overseas as a limitation that the company needs to deal with. Further, the company is prone to the influence of the Chinese authorities, which can adversely affect its operations if the government interferes. The report recommends that Alibaba makes more efforts toward marketing overseas. Moreover, the company needs to take advantage of technology to innovate more products.
The Firm
Alibaba (Also known as Alibaba Group Holding Limited) is a Chinese multinational holding company. It specializes in e-commerce, retail, the Internet, and technology. It was founded in 1999 by Jack Ma in his apartment. The founders believed that Alibaba should champion small businesses hoping that the Internet would level the playing field by allowing small businesses to leverage technology and innovation to expand their operations locally and domestically (Alibaba Group, 2022). It became the first company in China to deal in online business. The company has grown to become a multinational business with subsidiaries, namely; Taobao, Alibaba, and Tmall. In September 2014, Alibaba made an initial public offering, the largest. Today, Alibaba is one of the largest retailers and e-commerce companies. The company serves clients in China and overseas.
The company has developed an ecosystem that consists of consumers, merchants, retailers, and third-party service providers. Alibaba offers digital marketplaces for both merchants and consumers. The largest business for Alibaba is its core e-commerce operations (Yazdanifard & Li, 2014). The company continues to work towards becoming the leader in developing the infrastructure of commerce. Alibaba also invests in research and development to create innovative solutions facing commerce. Alibaba serves a wide range of clients from B2B (Alibaba.com), C2C (Taobao), and B2C (Tmall). Through Alibaba.com, the site connects suppliers with buyers. The suppliers sell products to other businesses looking for inventory for the firms. Manufacturers and wholesalers worldwide can obtain the products they need to run their businesses. The company’s C2C (Taobao) is an enormous online store operating on the C2C model. The system permits random people to sell their products directly between themselves. The company’s B2C is done via Taobao Mall (TMall), a commercial website where an organization or legal entity provides goods and services to final consumers.
External Operating Environment
(a) PESTLE Analysis
Political factors are a major factor for Alibaba. The uncertain political situation in China creates an uncertain future for the business. For instance, since Alibaba decided to list its shares on the Hong Kong Stock Exchange, China's direct show of power in Hong Kong has made it challenging to thrive in the particular market. China is an authoritarian nation that can seize power and control it (Lake, 2017). Such a move would be disastrous to the investors, who are bound to lose if the Chinese government took over the operations of Alibaba. However, despite the threat of the government, Alibaba also enjoys government support in China, which has accelerated its growth to be the leading e-commerce platform in China. There is also a concern regarding the departure of the founder Jack Ma, which can shake investor confidence in the company.
The economic factor affecting Alibaba is changing economic issues like inflation and exchange rates. An increase in the inflation rate in China and the economic slowdown led to poor results in the e-commerce sector. Further, the fluctuating exchange rate makes it challenging for the business to deal with its clients. As a result, Alibaba has to work harder to acquire new clients by investing heavily in advertising and cloud computing.
Various social factors impact the way Alibaba undertakes its business. Firstly, growing populations in the target market provide a broader company market. In particular, an increase in a young population that embraces technological solutions is an opportunity for the company. Secondly, Alibaba engages in vigorous corporate social responsibility activities, which earns it a good reputation inside China and overseas. Thirdly, the Taobao mobile application allows people to interact with their sellers. The app has social media-like features that increase user engagement and spend more. Customers are also allowed to share their experiences and give opinions regarding products.
One of the reasons for the thriving of Alibaba is the use of technological solutions. Alibaba employs technical solutions like artificial intelligence (AI), cloud computing, and machine learning. The use of big data and AI-driven user experience enhances users' experience on Alibaba’s platforms. For instance, the AI chatbot assists buyers and sellers in communicating by translating the other party’s text into their language. The company has also invested heavily in an AI-based logistics platform Clients can track and check the status of their imported products, allowing them to plan accordingly.
Regarding legal factors, Alibaba faces lawsuits against counterfeits. American brands are the most affected by counterfeiting. Alibaba needs to enhance intellectual property protection to ensure sellers do not infringe on intellectual property rights. When approaching investors, the company needs to demonstrate its commitment to intellectual property protection. The move will build confidence in the products listed and expand its market overseas.
Lastly, Alibaba faces environmental factors. The company is making more efforts toward environmental sustainability. Alibaba believes in the protection of the environment while undertaking its business. It argues its partners to protect the environment. Alibaba’s recent emphasis on water conservation is a significant step toward ensuring that businesses are conscious of their environment. Engaging in environmental protection efforts is critical in ensuring that Alibaba remains at the forefront in ensuring environmental sustainability.
(b) Industry Analysis
Alibaba faces numerous competitors in the eCommerce sector. In China, Alibaba faces competition from Global sources and Made Made-inChina.com. The competitors challenge Alibaba because of their experience and being in the market more often than Alibaba. However, Alibaba continues to lead in e-commerce in China because of its brand image. Alibaba is the market leader in China, with its subsidiaries accounting for more than 80% of the market share. On the international front, the main competitors are eBay and Amazon. The two American e-commerce companies have established themselves in the US and other countries. There is a need for Alibaba to focus on expanding globally. While it has captured the Chinese market, it needs to venture more deeply into other countries and compete with eBay and Amazon. Despite its enormous presence in China, Alibaba is not a well-known brand to most Americans.
Key Issues Analysis
(a) Internal resources capabilities
The analysis of Alibaba’s available resources can be done via VRIN analysis to establish how one particular resource leads to a unique standing and a competitive advantage. VRIN analysis measures Value, Rareness, Imitability, and Non-substitutable. The table below shows the VRIN analysis of Alibaba.
Resource

Valuable

Rare

Imitable

Non Substitutable

Competitive advantage

Financial capabilities

Yes

Yes

No

No

Yes

Human resource

Yes

Yes

No

No

Yes

Innovation

Yes

Yes

No

No

Yes

Supply chain management

Yes

Yes

No

No

Yes

Brand image

Yes

Yes

No

Yes

Yes

Alibaba takes advantage of both tangible and intangible resources to gain a competitive advantage. For instance, the company has established a brand image with a competitive advantage, especially in China. The company has established itself as a trustworthy online retailer, which has increased the number of clients using its platform. At the same time, the company employs innovation to remain ahead of its competitors. Because of innovation, Alibaba has employed cutting-edge technology to improve its supply chain. The innovation has come up because it uses highly qualified staff and invests in their training. The company can hire qualified staff and invest in research because of its financial capabilities.
(b) Key resources/capabilities and competitive advantage
i) Cost leadership
It entails gaining a competitive advantage through lowering costs (Roy, 2019). The main aim of employing this strategy is to preserve the market leadership position. Alibaba uses the strategy to expand to more markets with the middle class. The middle class is price sensitive and is more likely to m...