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CASE01_Alibaba.com - Alibaba.com INTRODUCTION Having...

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Alibaba.com INTRODUCTION Having achieved its objective of becoming one of the three largest internet companies in the world and having executed a successful IPO, Alibaba.com Corporation's strategic calculations will now determine whether the company proceeds on a path toward global domination in its industry or becomes a prime takeover candidate in the dynamic e- commerce marketplace. Alibaba.com's recent IPO secured the capital and profile necessary to position the company globally, and recent management actions substantiate the firm's intent to pursue a global growth strategy. The objective of this case analysis is to evaluate Alibaba.com's strategic choices and to direct the use of organizational resources to ensure success. During the analysis, it is critical to address the following strategic issues. What are the implications of the company's new ownership structure and shareholder expectations? How important is a rapidly expanding domestic market in Alibaba.com's strategic assessment? What are the merits of proposed changes to Alibaba.com's pricing strategy? How can the company position itself competitively against B2B giant, Global Sources? ANALYSIS General Environment Alibaba.com's general environment is primarily defined by the regional scope of Chinese markets, which consist of heavy buyer and supplier fragmentation and inefficient distribution and communication networks. China is an extremely populous nation, and the booming domestic economy is driven by an explosion in SME's, Alibaba.com's target market. Anticipated growth in SME's coupled with continued government promotion of 3 rd party e-commerce platforms provide a fertile domestic environment for the company's operations. However, foreign exchange controls and inadequate credit systems do interfere with the trade process. Industry Environment The internet and e-commerce are emergent phenomena in China. Although they are only surpassed by the number of U.S. users, China's 162 million internet users represent just 12% of the country's population. The 3% annual increase in internet penetration does not adequately reflect the rapid pace of technological change occurring in the industry. Online purchases are experiencing double-digit growth each quarter. With a current e-commerce utilization rate of only 28% in China and government Alibab.com - 1
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Alibaba.com encouragement for SME's to promote their businesses with 3 rd party online services, the potential for B2B e-trade to grow dramatically in the upcoming years is great. Essentially a B2B e-commerce company, Alibaba.com is faced with limited domestic competition as barriers to entry are high. The market is composed of small- and medium-scale regional and local enterprises. Communication channels for promotion of products and services are limited. Heavy fragmentation reduces the power of individual suppliers and customers. The threat of substitutes is industry-specific, and competition with other marketing service providers is indirect. However, such a growth market with a
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CASE01_Alibaba.com - Alibaba.com INTRODUCTION Having...

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