PART B INDUSTRY ANALYSIS – ALIBABA Competitive Rivalry (HIGH) Alibaba faces severe competition from its rivals. They include a variety of online sites within and outside China. E.g. amazon.com and eBay both are its competitors. Even within many nations, it faces competitions such as Daraz.pk, Yayvo.com in Pakistan. However, a
ALIBABA GROUP |7 variety of products offered and connecting buyers directly with manufacturers give Alibaba a competitive advantage over others. Also, the rates offered by Alibaba are less than the competitors. A drawback is the lack of trust many customers have on Chinese products that put Alibaba in a tough spot. Therefore, the competitive rivalry is high for Alibaba. Threat of new entrants (LOW) Setting up an online market as large as Alibaba requires initial large investments and strong distribution channels worldwide. Also getting manufacturers to register themselves with you for a fee requires their trust. Long time high profits and establishment in the market have earned Alibaba a strong reputation. Another aspect is that a new entrant will not be able to achieve the economies of scale that the existing players are at making their operating costs higher and profit slower (Kudasov, 2015). Thus, the threat of new entrants is low for Alibaba. Threat of new substitutes (HIGH) There are a number of substitutes for Alibaba. The largest being the physical retail stores that are offering low price goods. Secondly, a number of suppliers of China are now directly shipping to customers. Suppliers are also selling through social websites. Many companies have also set up their own retail websites oering the same prices as Alibaba, saving the supplier the membership costs (Zheng, 2015). Thus, the threat of substitution is high for Alibaba. Bargaining Power of Buyers (MEDIUM) The buyers of products from Alibaba are both individual customers as well as businesses across the globe. Due to the low prices, wide variety, and a strong distribution network that Alibaba offers, most buyers do not have a choice to switch to. The number of buyers is very large for Alibaba, making it tougher for the buyers to be able to influence the market. But recently, specialized online marketplaces have started emerging that are focusing on particular segments and being successful in grabbing market share. These can be the choices for the buyers. Thus, the bargaining power of buyers is medium against Alibaba. Bargaining Power of Suppliers (LOW) The suppliers of Alibaba are in fact the manufacturers that are members of its selling pages. For every category of products, there are a large number of suppliers available to Alibaba. Due to its strong reputation, suppliers are required to pay a membership fee to have their products listed on the website. There are always new suppliers from China that are willing to register with Alibaba at any given time. Therefore, any supplier that attempts to increase the market rate will not be successful as Alibaba will easily be able to bring in more suppliers that are willing to sell at market rates. There is no switching
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- Spring '16
- Alibaba Group, Alibaba.com, The Alibaba Group