What is the decision facing Alibaba?What factors are important in understanding this decision situation?What are the alternatives? The company recently acquired a controlling stake inSingapore e-commerce firm, the Lazada Group, which operatese-commerce portals in other Asian countries including Indonesia,Malaysia, the Philippines, Singapore, Thailand, and Vietnam. Theportals are online shopping and selling destinations that offermobile and web access, multiple payment methods, customercare, and free returns. Alibaba will be able to contribute its ex-tensive infrastructure and advanced logistics abilities to Lazada.The shared tools and knowledge are important because parts ofSoutheast Asia do not have the necessary distribution networksand information technology management.Of course, there are still challenges for the Alibaba Group.The company's home market of China is struggling with slow-ing development as the overall economy faces some chal-lenges. Expansion means dealing with Southeast Asia's weakinfrastructure and slower Internet speeds. Alibaba also facesgrowing competition. Western competitors such as Amazon.com and eBay.com are less of a threat that homegrown com-petitors. These include Tencent, primarily an entertainmentand social media company, that is getting into e-commerce;JD.com, more like Amazon.com involving direct sales, holdinginventory, and managing logistics and shipping; and Baidu,China's dominant Internet-search engine, that is very similar toGoogle in both services and products. Marketing in Action CaseReWhen you're already big it can be hard to get bigger. That'swhy Alibaba is working hard to continue to expand its e-tailing empire.In 1999, Jack Ma, inspired by a trip to the U.S. where hefirst encountered the Internet, led a group of 17 friends to formAlibaba.com. Initially, the website was a business-to-businessportal to bring together Chinese exporters, manufacturers, andentrepreneurs with overseas buyers. Today, the Alibaba Group,often called the Chinese Amazon, is a leading online and mo-bile marketplace in retail and wholesale trade, cloud comput-ing, and other services. As of 2016, the group's retail businesseshad more than 423 million active users, 12.7 million annual or-ders in its marketplace, and 86.2 percent of the Chinese mobileshopping market.According to research by McKinsey Digital, only 19 per-cent of rural China is using online buying services. Due tothe constraints of lower incomes, dispersed populations, andpoor logistics, rural traditional retail options are limited, havehigher prices, and inferior product quality. These limitationsmake for tremendous prospects for expansion of online sales.To take advantage of this opportunity, Alibaba's e-commercebusiness, Taobao, has opened service centers in many ruralvillages. There, residents can search for deals on productslike mobile phones, toothpaste, apparel, and more usingcompany-provided computers. To implement this strategy,Alibaba has committed to investing over USD$1.5 billionon logistics, hardware, and training in more than 100,000villages.Michael Evans, President of Alibaba, says "Globalization is acritical strategy for the growth of Alibaba Group today and wellinto the future." E-commerce accounts for less than 1 percentof retail sales in Southeast Asia, compared with 6 percent inEurope and 8 percent in China and the U.S., according to datafrom consulting firm A.T. Kearney. Credit Suisse, a multinationalfinancial services company, found that as a share of total retailsales, e-commerce may soon be larger in emerging markets thanin developed countries. They assert that nearly 1 billion onlineshoppers will emerge in these markets in the next few years.

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What is the decision facing Alibaba?

Principles Of Marketing

17th Edition

ISBN:9780134492513

Author:Kotler, Philip, Armstrong, Gary (gary M.)

Publisher:Kotler, Philip, Armstrong, Gary (gary M.)

Chapter1: Marketing: Creating Customer Value And Engagement

Section: Chapter Questions

Problem 1.1DQ

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Concept explainers

Purchase Process

Purchasing refers to the act of procurement of products or services from a market of resources. The procedures used to accomplish the acquisition of the requisite resources are referred to as the purchasing process. Consumer behavior, customer strategy, product pricing, consumer necessity, and other variables are various parts of the process.

Question

What is the decision facing Alibaba?

What factors are important in understanding this decision situation?

What are the alternatives?

The company recently acquired a controlling stake in
Singapore e-commerce firm, the Lazada Group, which operates
e-commerce portals in other Asian countries including Indonesia,
Malaysia, the Philippines, Singapore, Thailand, and Vietnam. The
portals are online shopping and selling destinations that offer
mobile and web access, multiple payment methods, customer
care, and free returns. Alibaba will be able to contribute its ex-
tensive infrastructure and advanced logistics abilities to Lazada.
The shared tools and knowledge are important because parts of
Southeast Asia do not have the necessary distribution networks
and information technology management.
Of course, there are still challenges for the Alibaba Group.
The company's home market of China is struggling with slow-
ing development as the overall economy faces some chal-
lenges. Expansion means dealing with Southeast Asia's weak
infrastructure and slower Internet speeds. Alibaba also faces
growing competition. Western competitors such as Amazon.
com and eBay.com are less of a threat that homegrown com-
petitors. These include Tencent, primarily an entertainment
and social media company, that is getting into e-commerce;
JD.com, more like Amazon.com involving direct sales, holding
inventory, and managing logistics and shipping; and Baidu,
China's dominant Internet-search engine, that is very similar to
Google in both services and products.

Marketing in Action Case
Re
When you're already big it can be hard to get bigger. That's
why Alibaba is working hard to continue to expand its e-
tailing empire.
In 1999, Jack Ma, inspired by a trip to the U.S. where he
first encountered the Internet, led a group of 17 friends to form
Alibaba.com. Initially, the website was a business-to-business
portal to bring together Chinese exporters, manufacturers, and
entrepreneurs with overseas buyers. Today, the Alibaba Group,
often called the Chinese Amazon, is a leading online and mo-
bile marketplace in retail and wholesale trade, cloud comput-
ing, and other services. As of 2016, the group's retail businesses
had more than 423 million active users, 12.7 million annual or-
ders in its marketplace, and 86.2 percent of the Chinese mobile
shopping market.
According to research by McKinsey Digital, only 19 per-
cent of rural China is using online buying services. Due to
the constraints of lower incomes, dispersed populations, and
poor logistics, rural traditional retail options are limited, have
higher prices, and inferior product quality. These limitations
make for tremendous prospects for expansion of online sales.
To take advantage of this opportunity, Alibaba's e-commerce
business, Taobao, has opened service centers in many rural
villages. There, residents can search for deals on products
like mobile phones, toothpaste, apparel, and more using
company-provided computers. To implement this strategy,
Alibaba has committed to investing over USD$1.5 billion
on logistics, hardware, and training in more than 100,000
villages.
Michael Evans, President of Alibaba, says "Globalization is a
critical strategy for the growth of Alibaba Group today and well
into the future." E-commerce accounts for less than 1 percent
of retail sales in Southeast Asia, compared with 6 percent in
Europe and 8 percent in China and the U.S., according to data
from consulting firm A.T. Kearney. Credit Suisse, a multinational
financial services company, found that as a share of total retail
sales, e-commerce may soon be larger in emerging markets than
in developed countries. They assert that nearly 1 billion online
shoppers will emerge in these markets in the next few years.

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