The Company
Alibaba Group Holding of China runs many different entities, including consumer e-commerce, business-to-business platform, Alibaba Small Business Operations, online payment, Taobao, cloud computing and among others (MarketLine, 2015b). The company mainly serves China, but it can also be found in other Asian countries, the UK, and the US. Alibaba became the only technology company to raise the biggest IPO of over $21 billion in the US, making it the only firm to raise such a large sum in the US IPO history. The success of Alibaba can be attributed to innovative policies and products.
Innovative Policies and Products
The growth in mobile and e-commerce innovation has changed the landscape of business in China, and e-commerce firms such as Alibaba have taken full advantages of such opportunities (Stanat, 2015). Alibaba, for instance, has been credited with changes in consumer buying habits in China. Shoppers currently have gained access to a wide range of products they previously could not get (Larson, n.d). Alibaba has achieved these impressive changes through innovative products and policies. Many Chinese shoppers now frequent Alibaba’s digital market, including Tmall and Taobao. These Web sites act as platforms for sellers, brokers and manufacturers can establish online storefronts, just as EBay does. For large brands, Alibaba imposes strict policies to ascertain that the listing firm is a licensed distributor. It is estimated that marketplaces are responsible for 90% of online sales in China because many customers opt for Taobao when they do not know where to find an item and compare product bargains (Larson, n.d).
Alibaba policies favour open innovation (IO). Open innovation has gained significant recognition among academics, policymakers and industry professionals. It reflects the application of “purposive inflows and outflows of knowledge to accelerate internal innovation and to expand the markets for external use of innovation, respectively” (Fu & Xiong, 2011, p. 196). It is noted that Chinese companies have exploited various models of open innovation since the reforms of 1980s that favoured science and technology. Such policies encouraged outbound and inbound open innovation, as well as open innovation networks.
A study conducted on the leadership of Jack Ma showed that the CEO became more open to new ideas and expertise of other specialists as the company expanded and grew rapidly. This open policy introduced innovation into the company (Ee & Yazdanifard, 2015).
Several studies have discussed mobile payment across the globe (Zhong & Nieminen, 2015). However, they established that such innovative technologies, products and services have not reached the majorities. In this case, mobile payment refers to any forms of payment that rely on wireless solutions by depending on wireless technologies. Today, innovative approaches and policies to mobile payment have ensured that solution can now go beyond its old sphere of acting as a payment platform. Instead, it has become the key means of interconnection for buyers and sellers in smart cities. Successful innovation from firms like Alibaba has led to their survival in the mobile-led services.
In China, for instance, the use of mobile payment is expected to grow rapidly as many consumers seek for convenience. In this case, Alipay from Alibaba has been revamped to meet needs of e-commerce and remote payment. Alibaba has been able to use its massive resources to introduce innovative features to Alipay, dominate the sector and create competitive advantage. While major players in the financial sector have been banks, credit card issuers and mobile operators, Alibaba has been able to create a niche through its readily accessible, ease to use platform. Many companies focus on collaborative and innovative approaches by utilising their resources in a competitive environment in which only more innovative firms can thrive. Hence, Alipay is popular because it is more robust than competitors’ services.
Following the trend in cloud computing, Alibaba also introduced an innovative solution referred to as Aliyun. Alibaba introduced innovative features in Aliyun by providing scalability for both data management and cloud computing services. Alibaba can now offer a broad suite of cloud computing applications to supports its online operations, including e-commerce and payment. At the same time, other firms can only get such services from the company. Alibaba invested massively in three large data centres across China and recently opened another data centre in Hong Kong because of increasing usage and uptake (MarketLine, 2015b). Alibaba has been able to develop relationships with small businesses and enterprise clients while its cloud services have attracted new customers. Further, the market outlook is strong and, therefore, most innovative companies such as Alibaba will realise incremental growth, improve revenues and client base.
Through innovative practices, Alibaba has identified opportunities in over-the-top content (OTT) to generate more incomes and enhance diversification. These are innovative strategies to enhance Alibaba growth objectives. It is expected that the Chinese online television and video markets with continue to grow rapidly. On this note, Alibaba resorted to acquisition by buying majority stake in ChineVision Media Group and Wasu Media Holding (MarketLine, 2015a). At the same time, Alibaba signed a deal on online content and Internet television collaboration. Alibaba will grow its market share and revenues by exploiting these online platforms.
The company has focused on sustaining few virtual products to ensure convenience for users who would like to update information or upload important data about their products. The ease of use allows users to navigate the system freely and can directly contact customers overseas (Yazdanifard & Li, 2014). Innovative multi-functional features such as product description, display and pictures based on specific product grouping are available to both buyers and sellers on the platform. That is, Alibaba has been able to create a ‘mini Web site’ for interactions. Users can exchange ideas through blogs, forums and user groups. These platforms provide valuable data, which Alibaba mines to gain important insights for improving customer experience on the Web site. Besides, communication between different parties has become more convenient, affordable and efficient (Yazdanifard & Li, 2014).
Alibaba should understand account for laws and regulations in different countries where it operates. While e-commerce and related technologies move faster than legislation, it is necessary for the company to evaluate emerging legal issues against its innovative approaches and business strategies (Hu, Wu, & Wang, 2004). The company must therefore not wait for the laws to catch up with it. Instead, Alibaba strives to make sound business decisions by considering the necessary policies.
Chinese e-commerce industry will continue to grow steadily. Alibaba however seems to have monopoly. Any new business that seeks entry into this market must develop highly innovative products and services that can beat Alibaba. Understanding of the target consumers is mandatory while their adoption and usage of technologies are also important for new entrants (Stanley & Ritacca, 2014). By providing innovative solutions, Alibaba seems to have locked out many potential competitors and entrants in the Chinese e-commerce sector. The company has recognised the diverse needs of customers and developed strategies to cater for such needs.
Alibaba also uses freebies as innovative approaches to promote its brand. Consequently, it attracts more customers to its Web site. For instance, Alisoft offers free accounting package referred to as Shopkeeper TM. This strategy enhances the company’s brand. Besides, the name Alibaba is simple and memorable for most clients around the world.
The company also offers free membership for new entrants. However, Alibaba will generate more revenues from transactions. This strategy creates competitive advantage for the company. The company has been able to utilise two core aspects for revenue generation in e-commerce. The major source of revenues is advertisement fees while customers also pay the company for value added services, listing and membership fees (Yazdanifard & Li, 2014).
The company has also embraced social media as critical aspect of e-commerce strategy because customers have increasingly embraced these modes of communication in their everyday activities.
Recommendation
Alibaba has succeeded in Chinese e-commerce market because of its innovative policies and products. Despite its dominance, Chinese e-commerce market is big enough for new entrants. Such potential competitors should be more innovative than Alibaba for them to succeed. In fact, some other competitors such as 360buy.com and Jingdong have done well thus far. However, specific market niche is necessary for such competitors, and they must leverage innovative technologies and expertise and make it simple for partners to conduct business everywhere through online platforms to succeed. It is therefore recommended that Alibaba must continuously innovate and develop new policies to meet dynamic needs of customers and explore new markets.
Reference List
Ee, CT & Yazdanifard, R 2015, ‘The Review of Alibaba’s Operation Management Details that have Navigated them to Success’, Global Journal of Management and Business Research, vol. 15, no. 4, pp. 50-55.
Fu, X & Xiong, H 2011, ‘Open innovation in China: policies and practices’, Journal of Science and Technology Policy in China, vol. 2, no. 3, pp. 196 – 218. Web.
Hu, Q, Wu, X & Wang, CK 2004, ‘Lessons from Alibaba.com: government’s role in electronic contracting’, Info, vol. 6, no. 5, pp. 298 – 307. Web.
Larson, C n.d., ‘E-commerce: In China, It’s Meet Me at Tmall’, Bloomberg Businessweek, p. 39.
MarketLine 2015a, Alibaba Group Holding Limited, MarketLine, London.
MarketLine 2015b, Asia-Pacific – Online Retail, MarketLine, London.
Stanat, M 2015, The innovation generation in a changing China. Web.
Stanley, T & Ritacca, R 2014, ‘E-commerce in China: Driving a new consumer culture’, China 360, no. 15, pp. 1-6.
Yazdanifard, R & Li, MT 2014, ‘The Review of Alibaba’s Online Business Marketing Strategies Which Navigate them to Present Success’, Global Journal of Management and Business Research, vol. 14, no. 7, pp. 32-39.
Zhong, J & Nieminen, M 2015, ‘Resource-based co-innovation through platform ecosystem: experiences of mobile payment innovation in China’, Journal of Strategy and Management, vol. 8, no. 3, pp. 283 – 298. Web.