Case

On

A Little Electronic Magic at Alibaba.com

International Business

IBS- 363

Prepared for

K.M. Raziuddin Taufique

Assistant Professor

School of Business

Prepared by

Mahmudul Hasan Rony ID: 073-154-025

Md.Mahbub Hossain ID: 082-003-025

Md. Sazzad Hossain ID: 082-069-025

Tanvir Ahamed ID: 082-070-025

Md. Khalid Hossain ID: 082-114-025

Md. Nurul Islam ID: 082-208-025

18 March 2011

A Little Electronic Magic at Alibaba.com

Letter of Transmittal  

18 March, 2011

To

K. M. Raziuddin Taufique

Assistant Professor

School of Business

Sub: Submission of Case on Alibaba.com.

Dear Sir,

We  would  like  to  thank  you  for  giving  us  the  privilege  of  conducting  the  case on

“A little Electronic Magic at Alibaba.com”.

 Within  this  short  period,  we  tried  our  level  best  to  make  this  case a  successful one. Preparation  of  this  case has  enriched  our  conception  on  the  above  subject  and has helped us  in  getting  a  thorough  understanding about International Business. The practical exposure while on this case helped our team of bridge the academic work and the practical knowledge. We have prepared a case on how to handle the situation mentioning in the case while doing business internationally.

Although  it  was  not  an  easy  task,  particularly  the  information  collection  phase was  full of  many  tough  experiences  but  we  enjoyed  and  learned  a  lot  in  the process  of  carrying out  that report. Then we tried our best to finish this case according to all of your requirements. We hope this case will meet your expectations. We will welcome any clarification and suggestion regarding this report.

Sincerely yours,

Mahmudul Hasan Rony ID: 073-154-025

Md.Mahbub Hossain ID: 082-003-025

Md. Sazzad Hossain ID: 082-069-025

Tanvir Ahamed ID: 082-070-025

Md. Khalid Hossain ID: 082-114-025

Md. Nurul Islam ID: 082-208-025

Acknowledgement

This is too tough to prepare a case study without guidelines & help of others. For

preparing this case study we took help from some people. First of all, we would like to

convey our sincerest thanks to our course instructor of IBS-363(International Business

Studies), K.M. Raziuddin Taufique. For being provided and equipped with all kind of

knowledge and guidelines to prepare this case. Without his guidance and support, solving

this case would be a lot more difficult. The thought and focused guidance that our

instructor has provided us from the academic and professional perspective helped us

immensely while solving this case. In addition, we would like to give cordial thanks to

my others class mates. They provided us a lot of related information about alibaba.com.

So we are really grateful for their valuable time, constructive opinion, support and

encouragement. We also give thanks to our group members for providing knowledge,

hard working passions and various suggestions for solving this case.

Table of Content

Content Page No.

1.Introduction 1

1.1 Case summery 1

1.2 Alibaba.com overview 2-5

2.Choosing Strategy 6

2.1 SWOT Matrix 6

2.2 Confrontation Matrix 7

2.3 Confrontation analysis 7-8

2.4 Conclusion 8

3.Case Analysis 8

3.1 Benefits and Costs of alibaba.com 8-9

3.2 Speculation 9-10

3.3 Compare and contrast other sites 10

3.4 Analyze the process 10

3.5 Transparency 10-11

4.Recommendation 11

5.Conclusion 11

Reference 12

Appendix 13-14

List of illustration

Serial No. Content Page No.

Figure

1 General information of Alibaba.com 2

2 Business structure of Alibaba.com 4

3 Buying and Selling process ofAlibaba.com 5

4 Benefits of Alibaba.com sites 9

5 Costs of Alibaba.com site 9

Table

1 SWOT matrix of Alibaba.com 6

2 Confrontation matrix of Alibaba.com 7

1. Introduction

Alibaba.com is the world's largest online B2B trading platform for small businesses.

Paragraph 1.1 provides short summary of the case.

1.1Case Summery

E-commerce is easy to engage, provides faster and cheaper delivery of information,

generates quick feedback on new products, improves customer service, accesses a global

audience, levels the field of competition, and supports electronic data interchange (EDI)

with both suppliers and customers. Alibaba.com is the word largest online B2B

marketplace for both imports and exports. Alibaba founded in 1999 by Mr. Jack Ma, who

has been dubbed the father of the Chinese internet. This is the site known for leading the

e-commerce of China on both an international and domestic level. Alibaba.com is also

the parent company for China’s most used payment method called AliPay and Yahoo!

China.

Other web sites that have created similar online marketplaces include

www.global.kita.net focused on products from Korea, www.trade-India.com for Indian

products, and www.europages.com for Europe. These electronic trading venues have

changed the mechanics of importing and exporting and opened up tremendous

opportunities, especially for smaller enterprises. The impact has been especially dramatic

for small Chinese manufacturers, who now have ready access to a global market for their

products. Alibaba enables smaller companies with import and export ambition but

shoestring budgets to reach the global market. More specifically, most of Alibaba’s users

are SMEs in developing countries around the world. Operationally, buyers around the

world use Alibaba to find potential suppliers that often have some of the lowest costs in

the world. Increasingly, as sites like Alibaba inject more transparency into trade, buyers

worry less about fraud. Users of Alibaba, like those on similar e-commerce sites, post

information about their companies on the site and access information about the reliability

of other users.

Mr. Jack Ma found the chance to expand the historic outward flow of China products to

the world to include flows throughout the world.

1.2 Alibaba.com Overview

In this paragraph there will be a short review on alibaba.com.

1.2.1 General Information

Type e-commerce

Industry Internet

Founded jack Ma, China (1999)

Headquarters 699 Wang Shang Road,

Bingjiang District,

Hangzhou, 310099, China

Owner(s) Alibaba Group (owns 70%)

Website http://www.alibaba.com/

Figure-1: General information of Alibaba.com

Companies in Alibaba Group

Alibaba.com (HKSE: 1688) - publicly traded company in e-commerce for small

businesses (B2B market place)

Taobao .com - online retail marketplace

Alipay - third-party online payment platform

China Yahoo! - - one of China’s leading internet portals

1.2.2 What is Alibaba.com?

Alibaba.com is an international directory of suppliers from all around the world. The

most common reason for using alibaba’s is so that companies can locate manufacturers

and suppliers in foreign countries. These products can then be imported to save money

and increase profit margins. The alibaba’s site is very easy to use and there are a number

of tools to make finding exporters very easy.

Searching for a product will bring up a list of potential suppliers who produce similar

products to the consumer are looking for. Consumer can then contact the suppliers using

instant messenger and email messages. The deal will then be handled by the supplier

themselves. 

1.2.3 Product Pricing

The prices for different products on Alibaba will vary depending on the supplier that

consumer import from and the number of products consumer want to purchase.

1.2.4 Membership

In order to use alibaba consumer will have to sign up and register for an account.

Accounts are free to register and it only serves as a directory listing various companies of

interest.

1.2.5 Education and Support

Alibaba simplifies the whole process because the site is very easy to use. Education and

support are both well catered for on alibaba. Alibaba also has a really helpful forum

where consumer can ask other people advice. This is especially useful when importing

products because everybody has different circumstances. Consumer can also use this

forum to help consumer understand exactly what duties and taxes consumer will be

expected to pay.

1.2.6 Who is the site suitable for?

Alibaba.com is a different type of directory site because it lists international

manufacturers. This means that consumer can use this site if consumers are interested in

importing products from a foreign country. Importing is complicated however alibaba

makes it possible for anyone to import. This makes it possible to maximize consumer’s

profit margins by reducing consumer’s costs.

1.2.7 Alibaba.com Features and Benefits

- Helpful online forum to get advice

- Online guides to teach consumer the basics

- Find suppliers in foreign countries

- Import products at lower costs

- Make greater profit margins

1.2.8 Business Structure and Operations

Figure-2: Business structure of Alibaba.com

Alibaba.com also offers business management software and Internet infrastructure

services for businesses across China. Alibaba.com has offices in more than 60 cities

across China, Taiwan, Hong Kong, India, Japan, Korea, Europe and the United States.

In July 2010, Alibaba.com bought U.S. e-commerce site Vendio Services Inc., making its

first major U.S. acquisition. In November 2010, Alibaba.com is a founding partner of

Globaltrade.net, a new marketplace for the international trade service providers. Third

quarter 2010 profit of Alibaba.com stood at 366 million yuan, up from 236 million yuan a

year ago.

1.2.9 Listing in Stock Exchange

Alibaba.com was listed in the Hong Kong Stock Exchange at the IPO price of HK$13.5

on 6 November 2007. The offering raised HK$13.1 billion (US$1.7 billion) in the biggest

IPO at the time since Google Inc's offering on the NASDAQ. It closed at HK$39.5, more

than 190% higher than the offer price.

1.2.10 Strategic Partner

Alibaba.com is represented by Ludatrade.com in Brazil.

1.2.11 Buying and Selling process

Figure-3: Buying and Selling process of Alibaba.com

2. Choosing Strategy

In paragraph 2.1 there will be a SWOT matrix presented and after this the confrontation

matrix can be given in paragraph 2.2. In paragraph 2.3 confrontation matrix analysis is

given.

2.1 SWOT- Matrix

Table- 1: SWOT matrix of Alibaba.com

Strength Weakness

How to Buy

Step 1

Search Products

Step 2Contact Suppliers

Step 3 Check Messages

How to Sell

Step 1

Join Alibaba.com

Step 3Display Products

Step 2Get a Website

S1: World largest online B2B marketplace

S2: Less possibility about fraud on exporting

and importing process

S3: Organized more than a thousand product

categories each with many subcategories

S4: Finding suppliers at a lowest cost

W1: More depended Chinese market

W2: Only who are familiar the technology they

doing export and import

W3: Use less promotional tools

Opportunity Threat

O1: More technological Advance

O2: Advantage of globalization

T1: Competitors of other e-commerce sites

T2: Lacking of secrecy

2.2 Confrontation matrix

In the confrontation matrix the different strength, weakness, opportunities and threats are

confronted with each other. It is built in the basis of the SWOT matrix:

Table-2: Confrontation matrix of Alibaba.com

O1 O2 T1 T2

S1 ++ + - -- 0

S2 + 0 0 - 0

S3 ++ ++ -- - +1

S4 + + 0 0 +2

W1 0 -- 0 + -1

W2 - 0 0 0 -1

W3 0 0 - 0 -1

+5 +2 -4 -3

2.3 Confrontation matrix analysis

S1 & O1 = (++)

Now a day’s global world runs by technology. Day by day world is becoming more

technological advance. That advance technology creates an advantage for make the trade

easier and cheaper. Alibaba.com should take the advantages to the purpose of more

expand their B2B marketplace.

S3 & O1 = (++)

Technological advance create an opportunity to persuade the global supplier registered on

Alibaba.com and increase the product categories for potential buyers.

S3 & O2 = (++)

Globalization influence buyers and sellers make an interdependent relationship. That

result creates an advantage, which advantage Alibaba.com, should take to increase their

supplier to the purpose of more organized product and sub product categories.

W1 & O2 = (--)

Present world is globalized world. Globalization increase trade across the world but most

of the supplier’s of Alibaba.com, are china based manufacturers.

S3 & T1 = (--)

Alibaba.com, one of the strength is they organized thousand type of product categories

with each subcategories by registered free of suppliers. But threat is that other

competitors of e- commerce sites are developed their service and using more promotional

tools. After sometime that action of other competitors should create a affect on alibaba’s

supplier.

S1 & T2 = (--)

Alibaba.com, access their information easily to the potential foreign buyers on the

supplier’s company profile and product profile. That creates an opportunity to the

competitors to get information easily which can be great threat of that supplier’s

company.

2.4 Conclusion

The main conclusion from the confrontation matrix is that opportunity should be

combined the strength. Alibaba.com should make a possibility to reach a comfort zone,

where no external threat or competitors can be affecting their business.

3. Case Analysis

In paragraph 3.1-3.5 analysis the case.

3.1 Alibaba.com provides lot of benefits, that’s why the site takes a number one position.

In the below the benefits and costs of Alibaba.com are shown-

Figure-4: Benefits of Alibaba.com sites

Figure-5: Costs of Alibaba.com site

Grieve is a small firm located near Chicago, Grieve Corporation manufactures laboratory

and industrial ovens, furnaces, and heat processing systems for the U.S. market. When

moving into international markets have proved to be a major factor in the firm’s

continued growth and success. Companies like Grieve need to make web sites such as

Alibaba.com a central part of their export strategy. The benefits of using these services

reduce the costs and profit will make grater.

3.2 Yes it is reasonable because the rapid growth of the use of these sites and the

corresponding increase in trade among SMEs, it is very reasonable to speculate that

eventually most trade between SMEs might take place in this context. Our inclination to

consider importing and exporting rises dramatically with powerful tools such as these at

our disposal.

Benefits of Alibaba.com sites

Help to purchase high quality product at a low cost

Access to many suppliers/buyers

Quick transaction

More transparency in transaction

Lower risk of fraud

Easy to make contacts with SMEs

Get thousand of product categories with subcategories

Helpful online forum to get advice

Online guides to teach consumer the basics

Import products at lower costs

Make greater profit margins

Costs of Alibaba.com sites

Listings are free

Searches are free

Personalized Web pages cost additional

Certification costs some

3.3 Compare and contrast these web sites are-

Alibaba has a Chinese emphasis and focus, while Trade-India is of course

directed to India and Europages to Europe.

Of the three, Alibaba has the broadest appeal, but all are very useful.

Trade-India gives more direct access to product catalogs for some companies,

but does not have the certification and authentication features of Alibaba. Also,

the Alibaba contact templates are much more user friendly than both Trade-India

and Europages.

Europages is available in many different languages, while the others are more

limited and are mostly in English.

3.4 The using Alibaba.com process is very easy, useful, and has tremendous potential value.

Because-

It takes only seconds to find a long list of potential suppliers.

One drawback is the urge to contact too many suppliers to find the best possible

terms.

The method of contact is made very easy by the use of templates and drop-down

menus that help to standardize requests. If the suppliers will respond to these

requests in a timely manner, the process has huge potential value.

3.5 Alibaba.com sights increase transparency and reduce the risk of fraud. Alibaba allows

suppliers to post information about their companies, including video tours of their

facilities. Buyers can access Alibaba’s basic screening and background checks on its

registered users. Too they can access the seller’s posted references, like one from the

seller’s bank, to verify the seller’s status.

In addition, Alibaba has developed the TrustPass designation. In order to obtain this

designation, companies must pass an authentication and verification test from a third-

party credit agency. Also available is the “Gold Supplier” designation, which also

requires third party verification of trustworthiness. These mechanisms greatly reduce the

risk of fraud, but do not eliminate it entirely. Mechanisms such as letters of credit should

still be used to safeguard transactions from commercial risk.

4. Recommendation

After case analysis we find out some recommendation, which create an opportunity to the

Alibaba.com. This are-

Create B2C marketplace. Because Alibaba.com lists international manufacturers. This

means that consumer can use this site if individual consumers are interested in importing

products from a foreign country.

Use more promotional tools by social websites, magazines, event marketing also.

5. Conclusion

Right this moment the present world is imagining a global village. Technology advancement is

one of the key factor globalization. Technology helps business in various ways which reduce

time and cost .E-commerce is such a site where we can do business without any trade barrier.

Alibaba.com is e commerce based web site. Alibaba.com is the world's largest online business-to

business trading platform for small businesses. Alibaba.com offers a transaction-based wholesale

platform, which serves smaller buyers seeking fast shipment of small quantities of goods. It

claims it had more than 50 million registered users in more than 240 countries and regions.

To sum up the case we can get e-commerce is a strategy, which strategy use Jack Ma, and

created an opportunity to transform Alibaba.com from a China-focused e-commerce provider

into a global Web marketplace. That’s result in future the chance to expand the historic outward

flow of China products to the world to include flows throughout the world.

References

Daniels Jhon D.Radebaugh Lee H. and Sullivan Daniel P. International Business: Environment

and Operations, 11th Edition. PEARSON Education.

“Alibaba.com to buy U.S. e-commerce site Vendio”. [June 24, 2010].

http://www.globaltrade.net/partners.html [June 24, 2010]

http://www.thestandard.com.hk/news_detail.asp?

we_cat=2&art_id=104877&sid=30272217&con_type=1&d_str=20101112&fc=8 [June

24, 2010]

www. encyclopedia center.com [June 24, 2010]

http://www.tradeindia.com/ [June 24, 2010]

http://www.alibaba.com/ [June 24, 2010]

http://www.europage.com/ [June 24, 2010]

www.naturesworkshop.com.au [June 24, 2010]

http://www.alibaba.com/trade/advancesearch?advancedSearchText [June 24, 2010]

resources.alibaba.com › ... › Industry Knowlege › Chemicals Knowledge [June 24, 2010]

ask.alibaba.com/.../804353147-How-do-I-find-transparent-yoga-ball.htm/ [June 24, 2010]

Appendix

Question of Case-

1. List, in separate columns, the benefits and costs of using sites like Alibaba’s to trade

internationally. What does your analysis say to companies like Grieve (in our opening

case) as they think about their export strategy?

2. Is it reasonable to speculate that eventually most trade between small- and medium-sized

firms might take place in the context of sites like Alibaba.com? If so, does that influence

your inclination to consider importing and exporting?

3. Visit www.alibaba.com, www.trade-india.com, and www.europages.com. Compare and

contrast these Web sites.

4. Visit www.alibaba.com, go to “Advanced Search,” and enter the product you seek in the

relevant box. Select required criteria and click on “Search.” Review the list of companies

that qualify and find a suitable one. Analyze this process for ease, usefulness, and

potential value.

5. How transparent do sites like Alibaba.com make the import-export transaction? Would

you still worry about fraud?

Development History of Alibaba.com

In December 1998, Jack Ma and other 17 founders released their first online

marketplace named "Alibaba Online".

From 1999 to 2000, Alibaba Group raised a total of US$25 million from SoftBank,

Goldman Sachs, Fidelity and some other institutions.

In December 2001, Alibaba.com achieved profitability.

In May 2003, Taobao was founded as a consumer e-commerce platform.

In December 2004, Alipay became an independent business.

In October 2005, Alibaba Group took over the operation of China Yahoo! as part of

its strategic partnership with Yahoo! Inc.

In November, 2007, Alibaba.com successfully listed on the Hong Kong Stock

Exchange.

In April 2008, Taobao established Taobao Mall, a dedicated B2C platform, to

complement its C2C marketplace.

In September 2008, Alibaba Group R&D Institute was established.

In September 2009, Alibaba Group established Alibaba Cloud Computing in

conjunction with its 10-year anniversary.

In May 2010, Alibaba Group announced a plan to earmark 0.3% of its annual

revenues to fund environmental protection initiatives.

Review Grieve Corporation

A small firm located near Chicago, Grieve Corporation manufactures laboratory and industrial

ovens, furnaces, and heat processing systems for the U.S. market. Grieve began losing business

as (i) foreign competitors began to penetrate the U.S. market and (ii) its customers began to

move overseas and started sourcing locally. With the help of the International Trade

Administration of the U.S. Department of Commerce, Grieve was able to identify potential Asian

distributors. During a business trip to Asia, the president of Grieve met with potential candidates

and successfully recruited exclusive agents for each country visited. Once Grieve had gained

sufficient experience in the Asian market, export activities were expanded to other regions.

Moving into international markets has proved to be a major factor in the firm’s continued growth

and success.

Appendix

Confrontation table 2.0

-- The two opposites have a high negative interaction effect

- The two opposites have a low negative interaction effect

0 The two opposites have neither a positive nor a negative interaction effect

+ The two opposites have a low positive interaction effect

++ The two opposites have a high positive interaction effect