Internationalisation of Alibaba

Alibaba Group China’s biggest internet conglomerate after tapping the highest proportion of market in China(though more than 50% is still untapped), went global to connect tens of millions of merchants to a consumer base of 2 billlion all over the world, with focus mainly on the emerging economies of southeast Asia comprising of more than 1 billion consumers alone. The strong presence of Amazon and Ebay in the developed world (US and Europe) makes it difficult for the Chinese company to stand against them. But the growth rate of Alibaba outside China is increasing insanely, no less than 280% year on year but its revenue is less than 10 % outside China. In 2014, it recorded the world’s largest initial public offering (IPO), raising a total of $25 billion.

The group having realized its potential to expand globally rightly targeted the South East Asian market by acquiring stakes in various internet companies through its various entities. Alibaba acquired controlling stakes in LAZADA South East Asia’s biggest e-commerce giant also called as ‘Amazon of South East Asia’s the biggest reason of groups success outside China. South East Asia is facing the same situation that China was facing 10 years ago and its market is fragmented not dominated by Amazon or Ebay. Lazada operates in Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam and Alibaba’s investment in the company is around $1 billion. The region has around 200 million internet users and population of more than 550 million. E-commerce in southeast Asian countries such as Malaysia, Thailand and Vietnam has started to grow with online commerce accounting for less than 1% of the total retail market. The Southeast Asian e-commerce market would be $ 20 billion in size if this reaches 5% and hence it was a bold move for Alibaba to aquire stakes in Lazada instead of directly entering the market.

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According to a survey, total annual retail sales across Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa and Turkey could reach up to $3.5 trillion with the rise of internet access in these areas. As internet usage rises to the levels of developed nations, the region could add 1 billion online shoppers. In India, Alibaba made large investments in Snapdeal and Paytm. Alibaba is going to pick up 40% stake in Paytm’s e-commerce business. It’s entry will start a three way battle in e-commerce between China, India (with Flipkart) and the US (with Amazon).But the acquisition strategy of Alibaba will reduce its struggle to gain momentum in Indian Market. India’s internet population, has crossed the US, and still has a lot of scope. Alibaba also opened country headquarters in Australia and New Zealand with an aim to share their world-famous products with billions of customers around the world. Alibaba’s Tmall and Tmall Global house more than 1,300 Australian and 400 New Zealand brands. Alibaba did this to expand its footprint in the areas of cloud computing, payments, digital entertainment and logistics. E-market Sales are likely to be around 30% of total retail sales in China by 2018. So It’s major revenue source would still be China, but in the longer run it’s this global expansion strategy of Alibaba that is going to help when the Chinese economy matures.

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Mark Holland

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