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1Location & Ma’s understanding for the local marketWhen Alibaba first started, only 22M (1.7%) of China population were using the internet.Now, they have 750 M (50%) internet users spending 20 hours a week online, China is by far thelargest Internet market in the world, 3 times the size of the U.S. market.China was important for Internet companies not only because of its large market size but also forits vast talent pool. Ma saw the opportunity in the Chinese market & the huge potential forgrowth, his familiarity with the local environment, customers, local language, culture, anddealings with the government, he as a local player had an edge over foreign counterparts in theChinese Internet market.2-Fast response to market conditionsAlibaba was always ahead of competition by fast responding to market conditions & proposingeffective solutions to boost operation.During challenging international “dotcom” boom period in 2000, Jack Ma with his effective andefficient strategy reorganized Alibaba’s operations, he closed his international operations andstrengthened the Chinese market through adapting 3 B2C strategies (Back to China, Back to
Central & Back to Coast). He then again expanded the Alibaba’s services and reengaged in theinternational expansion strategy by acquiring Yahoo! China in 2005 & in return Yahoo! Invested$1 Billion on acquiring 40% in Alibaba.Also, when growth in the Chinese e-commerce market was troubled due to the absence of thetrust factor between buyers and sellers while trading online, buyers refused to send money tosellers before they had received the goods while sellers were unwilling to ship the goods untilthey had received payment. To counter this problem, Alibaba launched an online paymentplatform called “AliPay” payment solution that allowed customers to safely and quickly sendand receive money online.Once a deal had been finalized, the buyer paid the money through AliPay. The money was heldin an AliPay account and was sent to the seller only after the buyer informed AliPay about thereceipt of the product.3-Building a loyal customer baseDuring the late 90s and early 2000s, the Internet had not yet become too popular in China andbanks were not networked. Credit card usage was limited and providing logistics service in thecountry was difficult, to say the least. In this scenario, Alibaba thought it wisest to limit itsbusiness model to connecting buyers and suppliers. Suppliers were allowed to list their productson the website while buyers could post their requests on the bulletin boards. Deals were struckthrough e-mails or offline messages. The services were offered for free and no other value-addedservices were offered. Ma believed that Alibaba was still in its infancy stage and had to build a loyal customer basebefore it started charging for its services.