How does Alibaba group create corporate advantage? (Why are the businesses under one roof?) Is this corporate advantage sustainable?
Is the current degree of competition amongst the business units appropriate? Do you think Jack Ma should encourage more cooperation? If so how?
The Alibaba group has thrived in the Chinese e-commerce sector from its inception in 1998. They currently account for over 70% of online shopping in China and delivered annual revenues of $636 million in the 12month period ending June 2009 (case p1-2). Alibaba’s successes are due to multiple factors that have allowed them to create corporate advantage, and thus establish market leadership in China (Case p1). The configuration and coordination of Alibaba’s…show more content… Ma has created corporate advantage through championing internal competition between subsidiaries, which although report directly to himself, are run as separate business units under the Alibaba Group. Ma provides each subsidiary with its own board of directors, operating managers and executive team to encourage competition (case p.7). Executives are rewarded through business autonomy, in conjunction employees are incentivised through stock options linked to group performance (case p.9).
The principal way in which Alibaba Group’s organisational structure creates corporate advantage is the flexibility gained from its decentralised nature. Paired with this structure, Alibaba’s shared value of ‘embrace change’ puts emphasis on innovative and adaptive practice (exhibit 11 case). This notion is best explained by CFO Joseph Tsai who stated “We sacrificed forced synergies in order to quickly pursue subsidiary opportunities” (case p.9). Alipay provides a prime example of the strength of Alibaba’s decentralised structure. Launched in 2004 as part of Taobao, Alipay held consumer’s payments until purchased goods were received, thus eliminating settlement risk. Initially incubated, Alipay became fundamental to Taobao’s growth and soon reached critical mass, this presented opportunities beyond the internal organisation leading to Ma’s decision to separate Alipay from Taobao as an independent