Essay: The Success of Alibaba

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  • Subject area(s): Business essays
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  • Published on: January 22, 2020
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  • The Success of Alibaba
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According to the public announcement, it has been agreed that Alibaba group will contribute the Russian units of AliExpress and Tmall to the joint venture as well as injecting an undisclosed amount of investment, they have also exchanged 24% of AliExpress for 10% of MegaFon. Mail.Ru group will contribute Pandao and “support cash and distribution “to the joint venture for 15% of AliExpress. AliExpress Russia is now split between Alibaba (48%), MegaFon (24%), Mail.Ru (15%) and the RDIF (13%). (Digitalcommerce) This illustrates the involvement of all the parties in the joint venture. Using a Joint venture facilitates the entrance to the market drastically for Alibaba. It allows for Alibaba to come into this new market with some solid foundations and logistics. Alibaba has gotten a very good deal out of the joint venture, had the political situation in Russia been different this opportunity might not have been a possibility. E-commerce in Russia is growing rapidly, in 2017 it was a market estimated at €13.7 billion and it is expected to grow to about €46 billion by 2023, which would represent a 170% increase from 2017(Morgan Stanley). This is to show the huge potential that the e-commerce industry has in Russia alone. In Russia online sales only represent 3% of the retail industry whereas in China it represents 23.8%. In order for an e-commerce market leader to succeed in Russia, three points have been pointed out by Morgan Stanley analysts, first of all, to develop a reliable marketplace model, secondly to invest in logistics and finally to provide financial support for merchants. As you can see these three points make up what Alibaba did in China to settle themselves as the market leader. The problematics faced in China are quite similar to the ones in Russia.  This shows the huge potential for Alibaba to expand in Russia. Russia has similar issues to China regarding its distribution service. The postal service in Russian is known for being particularly unreliable and due to its enormous size, it is difficult for goods to reach the more secluded areas of Russia. This is a very recent example and it is therefore hard to evaluate the success or the failure of the strategy taken by Alibaba. However, the forecasts are very promising. This is a great example to display how an MNC can take advantage of the political environment to make space for new business opportunities. In the past various international firms have tried to break into the Russian e-commerce market. It was however unsuccessful mainly due to Russian laws that restrict foreign ownership. You can, therefore, see that a joint venture strategy is the safest yet most promising way for Alibaba to enter the Russian market from a political point of view.
Conclusion:
Throughout this essay I have looked at how Alibaba has gone from being a small company to the multinational ecosystem it is today. The success of Alibaba in China was unprecedented and the power they have to introduce change both locally and globally is extraordinary. They have managed to create an ecosystem through their portfolio diversification. They have invested heavily in so many different industries which creates synergies with their logistics and other operations. It is a safe bet to believe that Alibaba will be successful in its endeavours due to its large size and capital as well as their will to change the world.
It is however very difficult to evaluate the strategies that Alibaba has taken globally. First, because their move to the international scene is relatively recent and it is therefore hard to get accurate insight as to how it will evolve in the future. Furthermore, because of the nature of Alibaba being an online platform, the traditional theories of global strategies are not applicable as it would be for a manufacturing company.

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