Alibaba Group Analysis
The external factors include customers, technology, competitors, partners, trends and other things that are outside the control of the company. These external factors are summed up as a list of opportunities and threats. StrengthsAs Alibaba is amongst the largest retailer in the world, the company has many strengths which help them prosper and grow in the marketplace.
Ambitious Leader
Alibaba’s founder, Jack Ma has a strong presence and vision that contribute to the company’s success and allow the company to grow. This qualitative strength has help make Alibaba Group one of China’s largest and most high-profit companies.
Broad product portfolio
It offers variety of product globally with a wide selection from beauty products, clothing and accessories to agricultural goods and food. From televisions, automobile to garden supplies. Anyone can pretty much sell anything on their sites. This helps attract clients and sellers to join them on the platform.
High market shares As of 2018, Alibaba has risen above other Chinese competitors with market share of 58. 2% which make them a market leader in their industry.
Strong Free Cash Flow Alibaba has strong free cash flows that provide resources to the company which allow them to invest and expand into the new business activities in the future.
Economies of scale
The company also benefit from economies of scale due to its large size and its volume of sales enabling the company to save some coin.
Global connection of all participants
Alibaba connects all participants including buyers, merchants, producers and third-party service providers from all over the world together. This allows negotiation and transaction between buyers and sellers to take place. Moreover, wIth the help of Alipay, Alibaba’s own payment system, a digital wallet which is basically a chinese version of paypal provides customers with access to carry transaction directly from their mobile devices.
Weaknesses
Redundant number of sellers
There are way too many sellers in which it can benefit buyers but not so much for the sellers which lead to high competition among sellers. As a result, some sellers might call it quits and withdraw from the contact since they are unable to make good profits out of it.
Very high discounts
In addition to the redundant number of sellers, Alibaba also offers a very high discount to the customers. This cause sellers to be unable to sell at a profitable rate causing some sellers to drop out. Since the company are making money out of selling advertising space to sellers, less number of sellers can result in less revenue for Alibaba.
Credibility risk
As the online marketplace allow people to sell almost anything, there are some counterfeit goods being sold. However, the company failing to detect that can cause them to lose their credibility.
Slow delivery time
Opportunities
Increasing number of online shoppers
Nowadays, the number of people shopping online are skyrocketing as the trend is moving toward that direction where people has the world at their fingertips. With easy access to the internet by customers, Alibaba is likely to grow more in the future.
Experience in China
Since it has an experience and a sound base in Chinese market in which China has the second largest economy in the world, it allows them to have a thorough understanding of how e-commerce business works. This gives them a huge opportunities to tap other markets.
Support of ecommerce from the Chinese government
The government has had relatively hands-off policy in the e-commerce space, and Alibaba is an excellent example of innovative entrepreneurship that can count on the government’s kind support
China’s gradual shift to a more consumer-driven economy
As China is moving from an export-driven economy toward one that focus more on its local customers, this can create an opportunities for Alibaba to improve the relationships between Chinese retailer and buyers with foreign sellers and consumers. Threats1. International expansion risks An expansion into other countries can be a threat especially when there are already a market leader in that country. For instance, Amazon in the U. S. which has a significant loyal customer base can cause Alibaba to face some difficulties while attempting to penetrate the U. S. market just like what Amazon china has faced when trying to get more shares from Alibaba in China.
Increasing concerns about counterfeit goods on online shopping community worldwide
In the past, Alibaba faced a problem with fake products and unauthorized retailers on Tmall which is operated by Alibaba. Tmall is a marketplace specifically for trusted brands only. However, when that problem occurs, it can cause many brands to feel hesitant to work with Tmall. Moreover, it can lose its customer base due to raising awareness of counterfeit products in all over the world.
Competition
Due to a rising number of online shoppers and the trend moving toward e-commerce, the market in overall will become more competitive as both small and big internet companies will continue to invest heavily in gaining customers and selection of products.
Increasing regulation from the Chinese government
Since China is ruled by the Chinese Communist Party, it is necessary to watch out for the regulation which could be a threat to the company. There has been an increasing regulation from the Chinese government over Alibaba’s market activities as it has some sort of monopoly power in the market.
