E-Business Module of Alibaba Group - Case Study Example

Student Name: Tutor: Title: E-Business Module: Alibaba Group Case Study Institution: Due Date: Question 1 How the Alibaba Group creates corporate advantage Alibaba Group creates corporate advantage by developing more business units which provide the corporation a competitive edge. It is popularly known of its portfolio companies such as B2B Marketplace, Toabao and Alipay which provide various customer services. In this Alibaba case study, it is has been reported that trough Alibaba.com, more customers are acquired at a considerably low cost. As a result, it is easier to acquire online storefront with Alibaba with access to the globally distributed 10 million buyers. Alibaba Group also launched Taobao an online shopping platform that enables retailers and other people to sell their goods to the Chinese consumers. Ma’s main concern is to ensure that eBay’s power sellers do not grow their business to outcompete Alibaba within the B2B space. This means that having critical mass is an important thing for achieving corporate advantage since it gives the executives more time to figure out the needs and wants of customers (Wulf, 2010). Although, the B2B business creates the majority of the Alibaba Group’s revenues, Taobao is contributing significantly to the achievement of a sustainable corporate advantage for Alibaba. Furthermore, the Alibaba Corporation acquires corporate advantage through Alipay that creates trust between the venders and customers. Alipay puts Alibaba at a competitive edge because it eliminates the settlement risk, rendering the payment mechanism used very important. Currently, people are used to the system of wiring money since payment is easily done in China and online. This is a corporate advantage for Alibaba since banks have failed to address the settlement risk. Today, over 80% of Taobao transactions are made through Alipay. Alibaba also selected other businesses such as China Yahoo, Alimama and Alisoft to expand and continue its e-business under private ownership. From the Alibaba case study, it can be argued that the location of a corporation on the continuum greatly constrains the set of businesses that it should compete in as well as limits its choices on organizational design. As a result, there are common mistakes associated with misaligned corporate strategies, for instance, most companies mistakenly go into businesses on the basis of products product rather than focusing on the resources that create competitive advantage within each business. Such companies fail to tailor their organizational structures and the associated systems to meet the needs of specific strategies. Instead, they create very plain-vanilla corporate offices as well as infrastructures that do not lead to sustainable corporate advantage (Ackerman 2000). The emerging question is how to tell if the company is truly more than the total of its parts. Therefore, to create corporate strategies that are viable people cannot act independently in their different internal factors of the company. This implies that even if the company well at the corporate core competencies, or do a great task of restructuring their corporate portfolios, creating learning organizations there are possibilities of not succeeding. It means that the management would be just focusing on individual aspects of corporate strategy such as resources, businesses, or it organization yet expected to be turning such elements into an integrated system or function. It is an insight into the significance of corporate advantage that indicates the manner in which a company creates its added value by configuring and coordinating its multi-business activities as illustrated below (Barney 2001). Based on Alibaba case study, it can be seen that Ma always searched for the new business opportunities within the rapidly growing and more evolving online commerce markets. Ma actively generated new opportunities by applying both the top-down efforts, leading by senior management team as well as providing some informal bottom-up initiatives which greatly encouraged the business units of Alibaba to take new ideas and the market intelligence up the corporation. Once the new business opportunities have gone through initial screening, Ma developed some corporate questions, for instance, on deciding whether to place responsibility for a given project with its corporate headquarters or with the presidents of business units. This means that Ma was careful on how to make decisions that concern the evolution of a project. It is important to note that corporate strategy involves the overall enterprise that consists of various business units. Therefore, executives should ensure that strategies they apply address the advantages achieved from the business units in relation to their affiliation with their corporations. However, there is need to determine what businesses the corporation should b e in and how to coordinate activities across the multiple businesses. Therefore, technological developments, in particular, digital channels act as touch point and will continuously dominate the e-marketing as well as sales strategies in the future. This indicates that the need for segmentation capabilities will increasingly grow since firms will be required to address a more diversified population of customers that need tailored products, solutions and higher corporate levels of service. The Alibaba marketing as well as sales executives will be required to manage a workforce that is growing in the digital age, and thus the need to cater a customer base with an ever-increasing desire for both speed and easy interaction (Adner 2006). Why are the businesses under one roof? Is this corporate advantage sustainable? Alibaba’s businesses are under one roof because of the Jack Ma the CEO’s need to have full control over the effective balancing of the current needs and the company’s future business opportunities. By having the Alibaba’s businesses developed and managed under a single roof, Ma hoped to sustainably outperform peers that are in e-business in terms of revenue growth and profitability associated with economies of scale. In addition, the management of Alibaba Group has the objective of sustaining the company’s superiority across the business cycles, changes in leadership, time and technological management to achieve corporate advantage. The corporate advantage of Alibaba Group is sustainable because its senior managers at corporate level, translates the company’s green credentials that are of competitive advantage into more and new profitable e-businesses such as the B2B businesses, Alipay for transactions, Toabao for advertising, Alimama through the strategy of better-performing the existing businesses to sustain its corporate advantage. This enables Alibaba Group to advance in its long-term position as an e-business model of corporate performance within the global arena. Question 2 Is the degree of competition among business units appropriate? The degree of competition among the Alibaba’s business units is appropriate. This is because business units focus more on the company’s broad and visionary statement that states “To enable business operation anywhere.” However, the challenge remains how to instill strong values as well as hire talented people who are willing to execute their tasks based on the mission of Alibaba. Ma did not support the idea of setting up a single agenda from the corporate center of Alibaba. He instead preferred to see each of its subsidiaries develop its own strategy. This implies that Alibaba’s governance greatly inspired all its subsidiaries to become leaders of their own industries. Ma suggested that the leaders of various business units should be given opportunity to do what suits their businesses. This means that business units must compete with each other as well as focus or position themselves as the best in their e-business markets. As a way of encouraging competition, Ma decided to assign each of the Alibaba’s subsidiaries a different board of directors and executive teams to include presidents, CFO as well as operating managers. Competition can be identified in Tsai where the primary objective of Alipay was to be a leader in the payment processing of its own developed client base of the online merchants. Do you think Jack Ma should encourage cooperation? If so, how? Jack Ma should encourage cooperation because when internal competitive conflicts took place within the Alibaba businesses, the culture of various firms favored individual subsidiaries than the Group. This implies that in cases where internal competition may lead to tangible disadvantages among the subsidiaries, then presidents of respective subsidiaries need to be responsible for resolving the emerging issues among themselves. Such decentralized approach can encourage the management of various subsidiaries to proactively apply commercial solutions to their internal conflicts. In order to encourage cooperation among the Alibaba business Group, Ma should foster internal coordination than emphasizing on more on competition. Cooperation can be achieved by promoting the use of decentralized models in leadership management, particularly in fast-growth settings. Despite the existence of high level of internal competition at Alibaba, it is apparent that Ma was keen to foster high degree of group cooperation. Alibaba’s C-suite as well as the senior management of the corporation’s subsidiaries who are internally referred to as Group organization participated in community development exercises, including annual retreats with their families. The groups also engaged in management training sessions on what leadership means within the Alibaba’s corporate university. Therefore, Ma must continuously rotate the senior managers and C-suite within the various subsidiaries, ensuring that there are few cross-functional as well as cross-business teams. This will be the best way for Ma to empower the operating subsidiaries call the shots, controlling overlay from confusing their reporting to Jack Ma. True corporate advantage to a larger extent requires a tight fit at every angle of a company’s development. It means that when the resources of a company are considered to be critical to the success of all its businesses, thus achieving competitive advantage. The Alibaba group is configured to leverage its resources into various e-businesses, its synergy is also captured and coordination well achieved. However, the corporate level management of Alibaba needs to understand the fit between their measurement as well as reward systems and the company’s businesses so as to have a sustainable strategic control. Today, majority of the senior managers or Chief Executive Officers think they are doing a great job to get their corporate strategies rightly aligned, when in the actual sense they are not. Such leaders mistakenly venture into businesses based on product similarity rather than examining the coordination of the resources that lead to competitive advantage within all the businesses. Alibaba Group will be required to have continuous tailoring of their organizational structures and the associated systems so as to meet the needs of specific strategies and avoid the habit of most traditional companies of creating corporate offices which are commonly referred to as vanilla offices and infrastructures (Aldrich & Ruef 2006). Question 3 As Alibaba develops new businesses, how should the firm incorporate them into the organizational structure? The newly developed businesses at Alibaba should be incorporated into the organizational structure by ensuring that the relevant senior managers or presidents of various subsidiaries take lead at corporate level. However, developing a supportive corporate culture will enable the corporation as well as its people to support the development of sustainable policies. Therefore, Ma should ensure that the presidents of various subsidiaries redesign their programs so as to effectively contribute to the sustainable development within the poorer countries. Effective communication will also be essential for Alibaba’s management team to incorporate new businesses into the organizational structure. At all levels of internal corporate management, senior mangers or executives will be required to understand, apply policies and achieve the required objectives of all the businesses developed. Ja Ma as the Chief Executive Officer and his senior managers or presidents of various subsidiaries should come up with locations which are strategic to Alibaba Group. As a result, a number factors must be considered when deciding where to incorporate the new businesses as well as establishing their headquarters. Since Alibaba is an online business, there is no worry about how to position the new businesses near their customers, but pay more attention to the required local labor pool. However, regardless of the company’s size, the levels of senior management of Alibaba Group must be considered. This implies that most major corporate decisions are made by the CEOs as well as other members of the top management including the Chief Operating Officers, Chief Information Officers and Chief Financial Officers. Therefore, it is important to argue that today’s CEOs and CFOs are strictly bound to regulations compared to the past. This clearly indicates that such officers are required to verify in documentation of their firms financial statements as well as the process of appointing the right candidates is becoming more complex (Aldrich & Ruef 2006). From the Alibaba C-Suite discussion, it can be noted that thriving as a C-level executive, people in such positions are required to be a good communicators, collaborators as well as strategic thinkers. This trend is expected to contribute more towards the creation of a business orientation compared to a functional orientation. For instance, in Alibaba Group, Ja Ma as the CEO would as a result of the trend count on his Chief Information Officer (CIO) to weigh in a given discussion on the corporate expansion into new markets as well as how the firm’s systems may support the expansion. However, the emerging question is determining what would be the challenges? How would the associated long-term impacts of the Alibaba IT expenditures needed to support the expansion? It would be the responsibility of the CIO to provide the required answers to the questions. What are the benefits and costs of having new businesses report directly to Jack Ma? The benefits and costs of allowing new businesses report directly to Jack Ma is to enable the corporation have continued and sustainable organizational development as well as to ensure the preservation of valued-based culture policies developed by Alibaba Group under the control of Ja Ma as the Chief Executive Officer, especially at the time when Alibaba is experiencing rapid growth. For instance, Ma identified the need to initially have the human resources function within the Alibaba’s history, and thus created the Chief People Officer (CPO) position who reported directly to him. The officer was regarded as the guardian of sustainable organization development and preservation of values-based culture policies of Alibaba Group (Wulf, 2010). Although there is pervasive acknowledgment of talent as an integral part to corporate competitiveness, the role of HR in e-business still struggles to gain momentum in the C-suite. The role of human resource has for long been considered as administrative, except within the dynamic and forward-thinking companies, most of its leaders have in the past relegated to managing policies as well as cultural initiatives. However, corporate functions have changed to the extent where instead of turning to the career HR practitioners, most companies particularly traditional firms are increasingly replacing the Chief Human Resource Officer (CHRO) role with leaders based on the business side that include operations, marketing and corporate law. For instance, financial services company like Alipay of Alibaba Group may have for a long period of time pointed to the sophisticated practices of its HR as the main source of the company’s competitive advantage would later appoint a legal professional as their CHRO. This could be in response to any complex regulatory environment. This clearly indicates that legal issues are increasingly consuming the bandwidth of HR executives and other senior managers often to ill effect. It is relevant to note that if companies that deal in e-business continue to award their top HR jobs to include non-HR executives, most of the CHROs will in the future e-commerce business understand more of the commercial models, experiencing with change management as well as finding the ideal pragmatic solutions to the emerging complex issues that may hinder them from achieving corporate advantage. A case for Alibaba Group will put extra pressure on its HR specialists to handle crucial functions such as talent management in order to shift its focus from theoretical practices to business management (Denrell 2004). Question 4 What should Jack Ma and his C-Suite be concerned about? Jack Ma and his C-Suite should be concerned about the corporation’s span of control given the challenge of Alibaba’s high growth from 18 to more than 10,000 employees. There is need for Ma and his C-Suite to have continuous coordination of Alibaba’s growth by adjusting the corporate level of control. The C-suite involving Chief People Officer, Chief Strategy Officer and Chief Financial Officer, should be concerned about the existence of any overlay that can confuse their reporting to Jack Ma. One strikingly finding from research is that once individuals reach their C-suite, technical as well as functional expertise seem not to be crucial compared to leadership skills, and thus a strong grasp of the business essentials. This suggests that the Alibaba Chief Information Officers are required to know how to develop business models, Chief Financial Officers how to come up with risk management strategies, Chief Human Resource Officers, how to provide the company with a succession plan in addition to a talent structure that can sustainably provide Alibaba businesses a competitive edge. It is a clear indication that the skills that enable the Alibaba businesses, B2B, C2C, Alipay, Alimama and Taobao climb to the top or create corporate advantage for Alibaba won’t suffice once the C-Suite gets to the top management. This creates a concern for Jack Ma and his C-suite to consider C-level executives who may appear to be more common in their functions with their executive peers compared to how they deal with the rest of other people within the functions they accomplish. Today, members in the position of senior management are not only required to support their CEOs on developing business strategies, but also to give their own insights as well as contributions on how to make key corporate decisions that can give a company a corporate advantage (Collis & Rukstad 2008). The role of the Alibaba’s CEO Jack Ma has evolved as few trends have been noted, including reporting directly to him, and thus influencing the direction to which tasks are implemented. However, there is need for Jack Ma and his entire C-Suite to consider the types of skills that can be increasingly in favor of their sustainable achievement of corporate advantage such as strong communication, empathy, high collaboration as well as rust building. One of the major skills that will be crucial to the success of Alibaba and of foremost importance to the entire corporation will be the capability to bring forth public trust as the real face of the Alibaba Group, and thus including facility and credibility with the socially responsible initiatives. Should Jack Ma centralize more functions to the corporate level? If so, which ones? Jack Ma should centralize various functions to the corporate level for easy strategy and sustainable management. Since the Alibaba’s decentralized technology strategy has already enabled the corporation to take lead in the emergent e-commerce markets of China, Ma should now centralize its technological and functional platforms, particularly, system architecture, data analysis, data storage as well as business unit application developments since the e-commerce markets have matured. This should be implemented under the Chief Technology Officer (CTO) to create sustainable corporate competitive advantage over their competitors such as Google that highly centralize their functions and technology platforms. Should Jack Ma create a Chief Operating Officer position? There is need for Jack Ma to create a Chief Operating Officer position (COO) because Alibaba has many business processes and customers. Therefore, The Chief Operating Office will promote the development of cross-platform business, and thus reduce costs because of its economies of scale while creating more time for Jack Ma to focus on executing his leadership roles and formulating sustainable strategies across the corporation’s multiple businesses. This is because the COO will provide more hands-on than the CEO as he or she will be in charge of after day-to-day activities while providing feedback to Jack Ma as the CEO. Corporate Strategy is becoming increasingly essential in today’s business world. As a result, competition, technological changes, globalization and deregulation, evolutions of e-business contexts as well as developments of new market are to a larger extent re-shaping how companies develop their corporate strategies. Alibaba Group is in the business of motivating and creating a constant change through its strategy of developing businesses for sustainable achievement of corporate advantage. 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