The Alibaba Group Holding Limited and the Aspect of Disruption - Essay Example

THE ALIBABA GROUP HOLDING LIMITED (CASE STUDY) Introduction The Alibaba Group Holding Limited is a prime case example of what the aspect of ‘disruption’ in terms of economic entails (Liu & Avery, 2009). ‘Disrupters’ wreak havoc on the economic front, the year 2014 having experienced the greatest ‘shake-up’ of what were once dominant traditional business models. As the ‘decisive year’, 2014 brought about a change of prevailing dynamics, founded upon increased technological advancement. As technology availed novel avenues to innovators, it also aided fundamentally to the breakdown of old boundaries. This invariably affected the global economic sector, especially in terms of business strategy. Notable is that innovation within human societies is as old as history itself. However, it is only from the 19th Century onwards that the greatest level of human advancement vis-à-vis the period taken has exceedingly amplified. This has in turn influenced the manner in which enterprises conduct their business, especially in the face of increased global competition. The Alibaba Group Holding Limited As a Chinese e-commerce firm-entity, the Alibaba Group Holding Limited provides platforms on which online sales services can be safely conducted, via available web portals. Most importantly is the crucial element of continuous technological advancement (Schepp & Schepp, 2010). This has availed a platform on which business can be effectively and efficiently conducted online, with some form of security assurance. With enhanced cyber security measures, and a growth in consumer confidence in e-commerce has availed a robust and lucrative market arena that remains significantly untapped (Nonaka & Zhu, 2012). As an entity concerned primarily with the provision of sales services, i.e. business-to-business, consumer-to-business or consumer-to-consumer basis, the Alibaba Group is also a provider of other services. These include data-centric cloud computing services, a very successful shopping search engine and electronic payment services. It is important to note that the entity is sector-specific, with its business strategy focusing on technology-supported and enhanced service provision. Taobao, Alibaba’s consumer-to-consumer internet portal is similar to America’s eBay.com. Due to the large-scale nature of the Chinese market arena, the entity features almost a billion products and brands, targeting the multi-billion consumer market. Globally, the website is amongst the 20 most-visited, accounting for over 60% of all parcels delivered in the PRC (Gifford, 2013). This in itself attests to the rapid uptake it has experienced in this market, further influencing future strategies of market venturing and expansion. Accordingly, it is without say that the entity is by far the leader in China’s national online sales. An auxiliary aspect of the entity is its Alipay platform, which is a payment escrow service that is online-based (Erisman, 2015). This accounts for an estimated half of all payment transactions conducted online in the nation. Future focus is on venturing into India, with talks with Snapdeal (India’s lucrative online payment platform) having been conducted. Alibaba.com increased its market-hold by way of taking over and creating various lucrative ventures as part of its greater strategic placement, i.e. China Yahoo!, Taobao Mall (Tmall.com – a retail website), Alibaba Cloud Computing, e-Tao, Taobao Marketplace, UCWeb (internet firm) and the Aliyun OS mobile operating system amongst others. Furthermore, after its IPO, the entity solidified itself by engaging in an aggressive acquisition spree. While being atypical of the entity, the numerous acquired minority and majority stakes in various entities increased its market-share, especially in service provision. True to its robust nature and organizational culture present within, the entity further dismayed many when it ventured into the sports industry. This was through its agreed uptake of 50% of China’s Guangzhou Evergrande Football Club (Ge, Jiajia, n.d.). Current Business Strategy and Market Position Founded in the year 1999 by Jack Ma as the start-up website company ‘Alibaba.com’, the entity was initially a business-to-business portal. It thus aided in connecting the growing Chinese manufacturing industry, with international buyers from oversees. Today, the firm entity is an amalgamation of various ventures, all which are targeted at enhancing consumer confidence in online-platforms in their daily interactions. This portrays business strategy, concerned with the prevailing socio-material aspects vital for such interactions (Mohapatra, 2013). As Balogun et al. (2014) portray, a strategy pertains to an accomplished action/ activity that is socially situated, something that is done within organizations as opposed to something that they posses. Accordingly, strategizing encompasses those negotiations, interactions and actions of various actors as well as the situated practices that are drawn upon when such activities are accomplished. An influential aspect in this context is that strategy of any form needs to be linked to the physical and the socio-material aspects pertinent to any interaction (Balogun et al., 2014:175). Primary operations are within the People’s Republic of China, with future plans of opening up in select market arenas. In terms of business strategy, the entity is successfully adapting to prevailing market contexts, as was showcased by its recent IPO where it was valued at a measured market price of $231 billion (Schneider, 2008). An important aspect is that the entity’s debut IPO was conducted and listed oversees (in the U.S.), a clear indication of future plans of expansion. This was after the entity’s founders could not reach an agreement (deal making) with pertinent Hong Kong regulators. The most informative aspect in this context is that towards both creating and subsequently protecting its competitive advantage, the Alibaba Group utilized rhetoric. This was in the aim of establishing the relevance of the resources sought-after, to the entity’s organizational identity. As portrayed by Sillince (2006), value as an entity’s source of competitive advantage is best established through linking available capabilities to identity. The capabilities are dramatized as the will power to endeavour in something, with identity being made positive through linkages to both social values and master myths (Sillince, 2006:800). What is interesting is that despite the obstacles encountered, the IPO is quoted as the largest in history. This is after its initial phase raised $21.8 billion, to be subsequently increased to $25 billion of raised capital (Si, Chen & Zheng, 2011). Further distinctive is that the buyers were purchasing just the shares of a Cayman Islands shell corporation, as opposed to the group’s actual shares (Ireland, Hoskisson & Hitt, 2008). This is informed by China’s regulatory frameworks that forbid foreign ownership of its national enterprises. The true value of the entity is thus projected positively, easily constructed through the entity’s single unifying message of enhancing online activity and interaction (Campbell, Edgar & Stonehouse, 2011). This is by way of establishment of legitimacy through either existing organizational capability or individual expertise. This is in addition to demonstrating viable access to, and subsequent ability to not only activate, but also successfully utilize social networks (Sillince, 2006:802). Accordingly, through rhetoric that is internally directed, there is linkage of the entity’s organizational identity uniqueness to the ‘specialness’ of pertinent stakeholders. In contrast as Balogun et al. (2014) present, when directed externally, rhetoric links the organizational identity’s uniqueness, to the rarity of resources available (Balogun et al., 2014:177). This is aimed at convincing existing and potential competitors that the resources are neither appropriable nor available. Alibaba.com is uniquely able to link rarity (as a formidable source of its competitive advantage) to its unique identity as an organization. Furthermore, it is able to aptly make unique claims, i.e. the presence of rare talents (in terms of well-qualified and specialized workers), originality claims (concerning patents) and developed systems utilized solely for in-house use. The entity’s non-imitability has been continuously protected through convincing other competitors that they cannot be able to copy such an identity. This is perhaps a key reason why the entity has continuously grown through acquisitions and partnerships in key internet-based market sectors (IFIP Conference on e-Business, e-Services, and e-Society, & Godart, 2009). Economic Disruptors: A Conceptual Analysis The scientific and technological revolution of the mid- and late-20th Century, cemented the influence that continues being experienced within various sectors of society. An important aspect is that the economic arena is one such critical sector, which has been greatly influenced by the aspect of ‘disruption.’ Currently, the concept of ‘disruption’ continues drawing heated debate between supporters on one side and its opponents on the other. Informative in this regard are the prevailing effects of the various representatives of disruption, having had subjective influence on various economic aspects. ‘Disrupters’ continue to wreak havoc on the economic front, with the year 2014 having experienced the greatest ‘shake-up’ of what were once dominant traditional business models. As the ‘decisive year’, 2014 brought about a change of prevailing dynamics founded upon increased technological advancement. As technology availed novel avenues to innovators, it also aided fundamentally to the breakdown of old boundaries (Clinton, 2013). This is from the retailing, travel and accommodation sectors to service provision such as e-commerce, crowd funding, insurance and even banking. To be noted is that there is nothing novel about the presence of ‘disruptors’, whether it be the disruptive firm-entities or their founders/ creators. Notably, it is the presence of inefficiencies within society that has been the core source or reason for the emergence of disruptive firm-entities. Thus, creators of such disruptive companies or entities are driven by the need to tackle an existing issue of concern within society (Sillince, 2006:178). As creative individuals, their aim has been and continues to be based upon the need for enhanced efficiency and effectiveness of daily social interaction. This aim or goal has not been a haphazard endeavour, but rather one that is based upon the increasing utility of technology in the daily lives of various global populations. Thus, due to increased technological advancement, as well as the availability of various tools, avenues, applications and systems, the contemporary global market arena has been changed forever (Sillince, 2006:183). Accordingly as Balogun et al. (2014) elude, what presents the contemporary arena quite distinct is the number, as well as range of individuals (inventors) and companies (disruptive firm-entities) that have and continue upending prevailing business models globally. These economic disruptors are to be found everywhere, from the ‘excess availability’ of social media, which has fundamentally challenged journalism; to increased price efficiency measures that have enhanced a general reduction in service and product pricing. Furthermore, the presence of technological advances has made life much more bearable and efficient, thereby enhancing their overall applicability in current society. Uniquely, the aspect of disruption presents itself in two-fold either as positive or negative depending upon one’s placement and contexts. On the one hand, disruption is usually viewed as being typically destructive in nature. This is based upon the fact that it has forced many firm-entities out of business due to increased market-place competition (Balogun et al., 2014:180). This has thereby led to increased unemployment as a result of job losses amongst other negative socio-economic impacts. However, on the other hand, the aspect of disruption has presented a wide platform on which huge opportunities are availed primarily to the consumers. This is in addition to opportunities being presented to the disruptors (disruptive firm-entities) themselves, as well as other entities that associated with technology. Alibaba’s mission statement is to make it easy to do business anywhere. This statement has been an important component in Alibaba’s business strategy because it has enabled it grows especially in terms of its online presence throughout the world. Alibaba had less than 20 employees in its first year of operation but it has since grown to have more than 20,000 employees in a period of about 15 years. The company became a diverse e-commerce organization with a family of online-based businesses that attract customers irrespective of their location. Technological innovations have enabled the growth of Alibaba but also increased the competition that it has to deal with in the market because many companies have integrated the online platform into their businesses. This clearly captures the aspect of disrupters (Yang & University College of Cape Breton, 2012). Conclusion As stated above, the Alibaba Group Holding Limited is a prime case example of what the aspect of ‘disruption’ in terms of economic entails. It provides platforms on which online sales services can be safely conducted, via available web portals. It is concerned primarily with the provision of sales services, i.e. business-to-business, consumer-to-business or consumer-to-consumer basis, the Alibaba Group is also a provider of other services. Alibaba.com’s meteoric rise is hence a prime example of what opportunities can avail, founded on the notion of non-substitutability. Through continuously raising the expected performance that existing competitors think is essential for substitution to be effectively profitable, the entity has been able to utilize rhetoric towards deterring competition. This has been achievable through linkage of the entity to the three capabilities of rarity, non-substitutability and non-imitability. Accordingly, due to the entity’s advantage of possessing both the capabilities and resources to venture into various markets, it is poised for greatness; based upon its underlying business strategy. 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