Whenever any organization expands their business globally, they face various strategic problems like, uncertainty, innovation, globalization, technology, governmental policies and regulations, diversity, overload of information, complexity, strategic problem solving approaches and thinking and the problems related to supply chains (Smith 2013). The major strategic problems for the multinational organizations are as follows –
Most of the studies with regard to the strategies of international business are concerned about the above mentioned three issues. The strategic problem among the global integration and local responsiveness is the important issue for doing the business, particularly in the markets of the developing countries (Macher and Nickerson 2015).
Further, the multinational companies adopt various strategies for their domestic markets. These strategies are as follows –
The purpose of this report is to focus on the strategic problems related to growth faced by Amazon in China as compared to Alibaba in China. The report will state various debates and issues regarding their strategic issues, the researches that will be carried out to get wide idea regarding the study, various relevant theories and concepts, controversies related to the research, if any, inconsistence in the finding and finally any gap that may exist in the research procedure. Moreover, the research will present the peer review literature between Amazon and Alibaba. The report will also state in brief the methods that will be used for conducting the research and the findings from the research methods (Martins, Rindova and Greenbaum 2015). Finally, based on the outcomes, the report will recommend some factors to overcome the issues and will conclude the report taking into consideration all the research questions and findings.
Definition of terms
Strategy – strategies of the business includes science, art, craft, formulation, evaluation and implementation of cross-functional choice that will enable the company to attain their long-term objective. There are four types of business strategies that include product differentiation, growth, acquisition strategy and price skimming strategy that will measure the access of Alibaba as well as Amazon in china (Grant, R.M., 2016). Amazon and Alibaba both use the growth strategy to gain the competitive advantages over the competitors. The intensive growth strategies of both the organizations are answerable for the business expansion and growth. For example, the the provision of the company for the e-commerce services reveals the plans for the global growth. Through efficient implementation of the generic intensive strategies and competitive strategies for the purpose of growth, Amazon and Alibaba both succeeded in the global market for e-commerce (Ward 2016).
Strategic planning – creation of strategic planning is the major component of the growth planning. It will assist in preparing the realistic vision for future prospect of the business which in turn will maximise the growth potential of the business. All businesses strive to gain more customers positive cash flows, more sales, higher volume, larger sized of deals and justification for higher prices. As the business develops the strategic plan, the organizations recognize various paths for sustainability and growth strategies (Armstrong et al. 2015). It will also suggest the organization regarding how travelling to more than one direction can create opportunities for growth.
Strategic operation – with regard to thrive, survive and create the real values in the competitive international markets and adoption of various complex strategies, the organizations executes more and more innovative complex strategies to face the challenges beyond their previous experience. The success of the organization depends on its strategic execution. The facts are not only depended upon the intelligence level of the executives and managers, their capabilities and energies. Rather, it focuses on the inherent difficulties in converting the organizational goals into the real outcomes (Christensen and Raynor 2013).
For transforming a strategy into results it requires the coordination of different people and processes through various activities including strategy development, strategic and operational planning, budgeting, talent management, initiative management, forecasting, and technology. Presiding over each of these domains is a manager with deep expertise in his or her particular area, but with little natural inclination to coordinate across the domains (Purce 2014). After all, the generator of operational forecasts might wonder, what is the relationship between forecasting and strategy development? Even the CEO often fails to understand the importance of linking strategy with operating processes. Gartner Inc. stated that “Using Corporate Performance Management for delivering the CEO’s Strategic Vision,” released this April: “The challenge is that too many CEOs see strategy as something ‘special’ or ‘unique’ that only they are equipped to understand and manage. This means they rarely apply a structured approach to the processes of creating, planning, and managing strategy, instead relying on informal approaches and spreadsheets”. On top the failure of the people to understand that strategy and operations truly need to be linked, the second truth that has been discovered over the years is that coordinating these disparate elements requires a performance management process that links strategy to operations and demands that all parts of the organization work in concert to deliver performance. Amazon to successfully penetrate itself in China and compete with the well established competitor Alibaba in china must take into consideration the above mentioned factors.
The research questions are the answerable query for the issues or specific concerns. It is initial steps of the research study. The initial step states that the researcher has the idea of what he is going to study in the project. The research question is the 1st active step of the research project. The research questions for this particular study are –
Amazon.com was among the major organizations that started selling their good over internet and soon became the established name all over the world. The company was founded by Jeff Bezos during 1994 and they initially started as the bookstore. Owing to their huge success, they diversified their business into various other products like, electronics, groceries and the merchant programs. Eventually, they developed distinct websites for various other countries like UK, Canada, France, Germany, Japan and China. Their main vision was to become the biggest selection in the world and to become the most customer centric organization all over the world (Amazon.com 2017).
On the other hand, Alibaba became the biggest mobile commerce and largest online organization in world in last few years that anyone hardly expected to become successful. It offered various business opportunities for medium and small business enterprises to leverage the innovative technology for competing more effectively globally and domestically (Kim, Kang and Park 2015). Various key factors for the success of Alibaba are their marketing strategies, strong brand image, superior value proposition for the customers, facing various challenges, better experience of shopping, economies of scale and high volume of sales. (Alibaba 2017)
The strategic planning of the business is to create the direction and future management vision of the company. Various strategic planning questions will be as follows –
Amazon is more concerned regarding the customer’s preference and always tries to provide them with their requirements with least possible prices. To achieve this goal they even influence the content partners, suppliers and publishers through conducting meeting with them. However, the focus of Alibaba is different (Babones 2015). Their simple strategy is to help small businesses to grow through solving their issues by using the internet technology. Since their establishment in 1999, they helped lakhs of small businesses to attain their goal for a bright future. However, the similarity between both the organizations is that they both keep the interest of their shareholder at the bottom line.
Business model – Alibaba was primarily been well known in the United States as Alibaba.com – their B2B gateway that associates Chinese manufacturing plants and organizations. In any case, that is not the reason why people been hearing widely about them recently (Yoo 2015). They are actually making profit through influencing e-Commerce inside China. Alibaba’s Taobao division is the place they make most of their cash till now, is in charge of over 80% of Alibaba’s deals and comprises of two principle properties:
Deals on the Taobao commercial centers make up over 80% of all online buys in China. That is quite impressive. To state they have a stranglehold on e-Commerce in China is putting it mildly. Amazon’s offer of the U.S. advertises is no place close to those levels. What’s vital to note is that Alibaba’s stages simply encourage the exchanges (Liu et al. 2016). They deal with the commercial centres and charge a little commission, however don’t hold – or offer – any stock themselves. Amazon in comparison plays under both the markets. On Amazon.com, people can discover a wide range of products people can by straightforwardly from outsider organizations (Lahza, Alhasawi and Marx 2016). However, Amazon is also involved in stocking things and offering items specifically to purchasers. In many occasions, they’re contending straightforwardly with similar dealers who are utilizing their stage to offer. The two organizations have different kinds of business. Each has distributed computing division (in spite of the fact that Amazon’s is substantially greater), both are included with media creation and Alibaba even possesses a stake in an expert Chinese soccer group. Be that as it may, the commercial centers where they offer items are the bread-and-spread of every one’s business (Soper 2016).
Geographical focus – As Alibaba’s essential cash generating operations are from the operations inside China. So the diagram shown below will not be a shock. There’s been loads of discuss how Amazon should fear the passage of Alibaba into the U.S. advertise – and it will be fascinating to perceive how that plays out (Zeng, Veeravalli and Wang 2016). However, what is motivating is the amount of Amazon’s business originates from outside North America – an incredible 40%. However, if the question arise that who has the better reputation of growing outside their home market, the answer shall be Amazon obviously.
Selling of stuffs – In 2013, Alibaba revealed GMV (net stock volume) of around $250 billion. That implies more than $250 billion worth of exchanges were made/encouraged by means of their stages. Amazon, on the contrary, had 2013 item incomes of roughly of $61 billion – essentially not as much as Alibaba (Turban et al. 2015). However, the data can be misleading on the grounds that Amazon doesn’t include any of the deals made by outsider shippers in this number. They just tally deals where they were the business specifically pitching to the purchaser. Therefore, making the correlation is troublesome in light of the fact that the two firms don’t uncover similar measurements (GMV) (Cakir 2015). In a current study, it is forecasted that Amazon’s real GMV (the measure of aggregate stuff that gets sold on their site) could be in the scope of 2x what they list as the product income.
Revenues from fees and services – It’s critical to comprehend that GMV – the estimation of the considerable number of products sold or orders puts on a stage – isn’t the same as what the organization really gathers in incomes or benefits. For instance, assume that somebody submits a $100 order request on one of Alibaba’s locales for a camera (Huang and Benyoucef 2013). The $100 will tally toward the GMV detailed, yet Alibaba will just get a little division of that as a posting/exchange charge – say $2. That modest charge is at last what’s critical, in light of the fact that it’s what Alibaba gets the opportunity to keep as benefit. When looked into the measure of cash that Alibaba and Amazon create (and get the chance to keep) from benefit expenses, an alternate picture as far as size rises.
Irrespective of the fact that Alibaba has a market place that moves with the more quantity of goods significantly, they collect less amount of fees or sales commission as compared to Amazon (Andam 2014).
Profitability – Alibaba sells more products. However, Amazon creates higher revenues from fees significantly. However, it is not clear who make more profits ultimately. Therefore, the final question is who actually make more money and the answer is Alibaba surprisingly with big difference. The reason behind this is that though Amazon creates more revenues, big parts of its revenues are spent for meeting its operating expenses which in turn leaves Amazon with less amount of profit.
During 2013, Alibaba were able to earn more than 10x as much cash as Amazon. While Alibaba’s profits have reliably increased in the previous couple of years, Amazon’s have decreased and even they lost cash in 2012 (Belleflamme, Lam and Vergote 2017). The reason behind such wide gap is unlike Alibaba, Amazon really stocks their own particular items. Moreover, working out distribution centres to assume control over the eCommerce world is not affordable or small accomplishment.
Cash flow – Without getting excessively specialized, free cash flows reveal how much money an organization is producing and eliminated the gap presented by accounting procedures and other one-time occasions (Fang et al. 2016). To put it simply, it can offer more clear scenario of a business’ wellbeing. Typically, the costs required with building new distribution centres (called capital uses) would be removed from free income. However, to standardize our examination given Amazon’s wild building binge, these distribution centres have been added for the development costs back in. Amazon has a slight edge, yet the two organizations both created roughly $5 billion under free trade stream during 2013 (Wang et al. 2016). From the below shown chart, it is identified that Amazon had a profit margin of 0.8% during 2013. On the contrary, Alibaba had a profit margin of 44% during 2013, that is 50x higher as compared to Amazon.
Alibaba does not deal their products themselves. Rather, they just offer a web stage that encourages the trading of good. They’re the biggest e-Commerce organization in the world, however, in reality they are significantly more likely a software organization than a retailer (Chiu et al. 2014). On the contrary, Amazon sells their products directly to customers and needs to manage the greater part of the strategically unpredictable and costly physical perspectives that accompany it, for instance, building a large warehouse. It is this distinction that clarifies why Alibaba has possessed the capacity to develop so rapidly and remain exceptionally gainful, while Amazon had to give up benefits for last two decades to reach the position where they are today (Laudon and Traver 2013).
For the purpose of this study, secondary qualitative research method will be applied, that is the data will be collected from the existing source like various websites, journals and official websites of the companies.
Figure: Research Onion
(Source:Taylor, Bogdan and DeVault2015)
Positivism
Positivism is a philosophical theory where specific knowledge is based on natural phenomenon as well as their properties and relations. In addition, it is the information gained from the sensory experience as well as interpreted through reason and logic that is exclusive sources of knowledge.
Realism is one of the types of philosophy that relates to a given object that exists in reality independently in the conceptual scheme. Realism is the combination of both Positivism and Interpretivism research philosophy.
Interpretivism is one of the philosophies that oppose positivism of natural science. This research philosophy takes into account qualitative research data for evaluation purpose by the researcher.
Objectivism means the philosophy where moral truths exist independently from certain opinion given. It is related to philosophy of rational individualism.
In this particular study, researcher had used Interpretivism research philosophy as they have conducted secondary and qualitative research. Positivism research philosophy is not possible in this research as they take into account quantitative data and primary research. Realism is the combination of both positivism and Interpretivism that means using both primary and secondary data together that is not feasible in this study. In order to compare the data, qualitative research technique is employed by asking questions to the managers of both Amazon and Alibaba to understand their emotional side and analyze the information in the findings sections.
There are two types of research approach that need to be evaluated by the researcher within a given period. Deductive approach and inductive approach are the two types of approaches in the given research study (Panneerselvam2014).
Deductive approach provides proper reasoning from one statement to other in order to reach certain conclusion. This approach links premises with conclusions.
Inductive approach concerns with the generation of new theory that emerges from primary data. Inductive approach takes into consideration aspects that are innovative and primary that is not mentioned anywhere else.
In this research study, the researcher had used deductive approach that helps in investigating whether the known concepts relating to strategic problems of Amazon are valid or not. The researcher cannot use inductive approach in the present research as the data used are already existing and no new concepts are used in the study that need to be evaluated by the researcher in any form.
Experimental research strategies is the blueprint of procedures that help researcher to test his hypothesis by reaching valid conclusions on matters relating to relationships between independent as well as dependent variables.
Survey research strategy is the method of collecting information or data as reported by individuals. This reveals the fact that surveys are questionnaires that are prepared in order to ask questions to the research participants and analyse the data by using statistical tools.
Case study research strategy is one of the methodologies that take either qualitative or quantitative approach. In addition, case study approach refers to the in-depth analysis of a single or small number of units. This research strategy may include single person, organization, and group of people or institution.
In this research study, researcher had been using several case examples in the literature review that links with the research objectives. The cases are related to strategic problem of Amazon and comparing it with Alibaba in China.
Mono-method research choices use only one type of data. It can be either quantitative or qualitative research data.
Mixed method is one of the methodology that are used by the researcher at the time of conducting the research that involves collecting, integrating and analyzing quantitative and qualitative research choices. Here, quantitative means experiments and surveys. Qualitative means focus groups or interviews.
The researcher had conducted mono research for linking it with the research topic that is strategic problems of Amazon in China as compared to Alibaba in China (Vaioleti2016). Mono research includes either qualitative or quantitative research that needs proper evaluation by the researcher at the time of conducting the present research study. In this study, qualitative research data are used as the researcher had conducted interview with the managers of Alibaba and Amazon.
Research Design
The primary and secondary research had been used by the researcher based on mono- method research design that takes into account qualitative research design.
Quantitative research design is one of the research designs that take into account understanding of cause and effect relationships (Tarone, Gass and Cohen 2013). As far as current study is concerned, the researcher cannot make use of quantitative research design as they are not conducting any survey or distributing questionnaires to the respondents. The research topic is related to highlighting strategic problems of Amazon and compares it to Alibaba in China. It is not possible to collect data from customers or public on strategic problems of any company.
Qualitative research design is other type of research design that considers being systematic subjective approach that defines life experiences and denotes connotation at the same time. The researcher had conducted qualitative research that is both primary and secondary in form. Qualitative in primary means recording of information by conducting interview sessions from the managers (Smith 2015). Qualitative in secondary means conducting thematic analysis based on the research questions and objectives.
Sampling methodology
Population (Qualitative)
The researcher had conducted interview from 2 Managers of Amazon and 2 managers of Alibaba and then evaluating their answers so that analysis becomes easier (Neuman and Robson 2014).
Sampling Technique
Convenient sampling is one of the non-probability sampling techniques that are used by the researcher where subjects are selected because of their convenient accessibility as well as proximity to the researcher. Here, the subjects are managers of Amazon and Alibaba that are selected based on their convenience accessibility. Convenient sampling had been used by the researcher to select the managers of Alibaba and Amazon. This sampling method is used to select manager as per their convenience who is willing to come up for the interview session and answer the question.
Sample size
2 manager of Amazon and 2 manager of Alibaba had been interviewed. There was no specific rules that are used by the researcher at the time of determining an appropriate sample size in the qualitative research (Mackey and Gass 2015).
Data Collection Technique
Face-to-face interview had been conducted by the researcher for interviewing the managers of Amazon and Alibaba. Responses were finding by using convenience sampling method.
Qualitative data had been analyzed by use of thematic data approach where the researcher had made themes that link with the research questions and objectives.
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Ethical guidelines |
Clarification |
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Validity and reliability of data |
The researcher should be collecting data that is valid and reliable at the same time. In the present study, the researcher had collected data from the managers of Amazon and Alibaba to gain insights of information regarding strategic problems faced by these companies within stipulated time. The information should be recorded during face to face interaction with the managers and then analyzed without any discrepancy. The information collected from the managers should be valid and reliable otherwise it will hamper the outcome of the research as a whole (Leary 2016). On the other hand, the researcher had even collected information through use of thematic analysis where data need to be collected from authentic sources such as journal articles, books and websites. The articles should be taken after 2012 as it is recent and possibility of genuine data will be more than outdated data (Humphries 2017). |
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Informed consent and rights to refusal |
The researcher cannot force any manager to participate in the interview process. The manager can anytime refuse their participation even during the interview session. The manager has the full liberty to skip any question if they have no interest to answer that question at any point of time. The researcher has to get the ethical forms duly signed by the managers before conducting the interview session (Glesne2015). |
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Confidentiality and Anonymity |
Confidential information shared by the manager during the interview process should be kept secret and the researcher cannot misuse the data at any point of time. If the researcher failed to maintain confidentiality, then they will be punishable under Data Protection Act. The information collected about the company such as Amazon and Alibaba should be only used for research purpose and should not shared with any third-party (Gast and Ledford 2014). |
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Safety of participants |
The researcher cannot harm the sentiments of managers during the interview session at any point of time. No question asked should be constructed that can harm the reputation of the company or the person at any form (Flick 2015). |
During the research process, the researcher had to face several challenges that had been overcome with great difficulty. With every challenge, there is some positive sign or learning. Due to limited time, it was not possible for the researcher to conduct in-depth analysis. The researcher even had limited financial resources that restrict use of expensive tools or techniques for completion of this project. Qualitative method of data was selected for this study and this was main limitation as several aspects that are highlighted are qualitative aspect that cannot be measured in any mathematical or statistical form. Interview process or session with the managers of Amazon and Alibaba was considered as collecting data through qualitative means. The sample size selected was very small (2 managers from Amazon and 2 managers from Alibaba) because managers are too busy with their work and could not get much time from their busy schedule to invest in the interview process. The researcher had to wait for long hours to get access of these two managers and completed the research by asking questions to them and then started with the analysis process.
Qualitative Data Collection
Findings from the interview session from the managers of Alibaba and Amazon
On interviewing the manager of Amazon and Alibaba, it was interesting to find out certain marketing facts. The marketing manager of Amazon was of the opinion that they do get bad press for its tax status as well as working practices but the reason remains meaningful to customers and it became indispensable part in the daily lives. China will be costly market to enter due to lack of infrastructure makes logistics challenge. Amazon suffers from intense competition and industry prices fades with downward pressure. Amazon may be making several strategic mistakes. For years, Amazon had been building warehouses as well as distribution centres an expanding its subscription customer base by keeping the price for its products and services low. It was close to 75 billion dollar in revenues at razor thin margins. On the contrary, Alibaba believes in collective entrepreneurship that will help customers in providing a platform for merchants in providing products. We use model based on profit-sharing where our company maintains good relationship with Chinese Government as government plays important player in the Chinese economy. Our company would like to expand in the developing countries such as India.
On interviewing the manager of Amazon and Alibaba, it was interesting to find out certain financial facts. The finance manager of Amazon was of the opinion that the comoany faces various strategic problems but has succeeded because no other company has been able to match the scale of its online operation until now. That was one place ahead of my company that fell into four places to 13th with a valuation of 62.2 billion dollars. As far as profitability is concerned, revenue of Amazon hit 88 billion dollars but it posted a loss of 240 million dollars as it continues to plough its profits for improving the delivery infrastructure at the core of its business operations. Gross profit growth may slow down because of greater investments in business like original video content as well as same-day delivery applications. The web series suffers intense competition that heats up as well as industry pricing faces downward pressure at the same time.
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Financial Metrics |
Amazon |
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Forward PE |
83 |
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Operating Margin |
1.00% |
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Return on Assets |
1.28% |
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Profit Margin |
0.37% |
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Total Debt or Equity |
62.96 |
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Revenue |
74.45 Billion |
On the contrary, Alibaba has attracted significant investor attention starting from its successful Initial Public Offering. Other issue that we are facing is Chinese market place as it is the massive presence of counterfeit products. Alibaba faced criticism from China regulatory authority State Administration for Industry and Commerce for not doing enough to curtail illegal activities on its Tobacco marketplace. The prospects of the quantitative growth of our company key segment are questionable. It is the experience of other companies that indicate the basic need for growing the client base that ensure stable capitalization growth. Our company stopped publishing growth diagrams of annual active buyers in its presentations as mentioned in the financial report of the company.
Amazon runs the risk of facing the opposite problem from which eToys builds up capacity. Amazon believes in following different strategy where it builds the warehouses that stacks the books as well as fills the orders. Secondly, it mainly launches a shrewd strategy of promotions such as discounts as well as free shipping. It is where the company need to attain economies of scale. Thirdly, it branch up with all sorts of merchandise for attaining economies of scope especially for signing up for affiliates. It requires expanding into the content developmental business after collaborating it with first time as well as recently with experienced authors.
On the other hand, Alibaba is a value-based company that had been driven by the mission to make the company function in better way to perform business in and across the world. It is true that strategic problems faced by Alibaba may lead to loosing the customer base than before. We try our best to solve the queries of customers and listen to their grievances so that we can compete in the recent marketplace.
Over the last years, it is noted that there had been striking pattern that emerges at Amazon where the sales in the United States are soaring and doubled up in the previous years. Hence, international sales have not yet kept where the revenue had rose by 40% in the previous years as well as slower than the rest of the group. In order to boost sales in the international markets, our company will be working on replicating one of the main strategic responsible for the United States growth.
On the other hand, the mission statement of Alibaba is to make it impossible for us to become an empire like business. Alibaba creates an open, collaborative as well as prosperous ecosystem that enables its constituents for fully participating and helps small business as well as consumer customers. Alibaba mainly believes in putting time and energy on initiatives as it benefits ecosystem and different participants.
Amazon uses demographic as well as psychographic segmentation for segmenting the markets. Amazon segmentation is based on actual purchase behaviour. Amazon micro-level segmentation targets customers as well as allows company for converting visitors into long-term as well as high-value customers at the same time. In this, I would like to state the fact that E-commerce segmentation aims at creating personas that targets middle class and upper class people who understand basic technology and prefer convenience over shopping from physical outlets.
On the other hand, Alibaba need to position itself as the largest company of commerce as well as mobile in and across the world. Alibaba believes in giving opportunity to small business that can benefit from its advantages so that they can stand both nationally as well as internationally. Alibaba believe in implementing innovative marketing strategies for solving strategic issues so that they can expand its business. Alibaba believe in offering free membership for attracting more potential clients.
Amazon creates deep as well as structured network for making the product available at remote locations that are free of delivery charges for a certain specified limit. Amazon had developed an extensive global distribution network that will help in growing at frenzied rates.
On the contrary, Alibaba sells more products as compared to other competitors. There are two sources of profits that come from advertising costs as well as come from customers with value-added services. We deal in two markets such as global market that targets international exporters as well as importers. The other market is Chinese market that mainly aims at helping suppliers as well as buyers. With more than 560 million internet users, it is noted that China considers being largest internet market in and across the world. In order to attract more customers, our company uses strategy by offering gifts as well as encourages consumers for using more attributes in e-commerce platform.
Strategic problem faced by Amazon and compare it with Alibaba
On analysis, it is understood that it is a provocative claim but it is based on actual development and observed at internet companies such as Amazon and Alibaba (Brinkmann2014). Both the companies have become extraordinarily good at automatically retooling their offerings for millions of individual customers as well as leveraging real-time data on their behavior. Furthermore, constant updates are driven by algorithms but the process and technologies underlies the algorithms that are not possible in the settings. The algorithms present in the recommendation settings at Amazon that are iconic examples. In order to remain effective, it needs to strike the optimal balance that exploits known preferences as well as exploring various items that have potential for surfacing new preferences.
Amid a rash of retail bankruptcies as well as store closings, both online giants such as Alibaba and Amazon continue to face problems in recent marketplace. Amazon is one of the online retailers that ranks in the 83rd position as the powerful public companies as measured by a composite score of profits, revenues as we as market value and assets. The company had been pushing in areas such as fashion that rolls out private labels as well as snapped up with other online retailers (Blumberg, Cooper and Schindler 2014).
Approaches used by Alibaba and Amazon to mitigate the strategic problems
Recently, the two online retail titans take into account famous business mode differs and delve into trends shaped by the financial results. There is big difference between Amazon and Alibaba that uses approaches so that it can mitigate strategic problems as far as possible. Amazon sells directly to the consumers as well as building a network of warehouse and distribution centres with a goal of improving the services as well as provides platform and directly to consumers (Brinkmann2014). On the other hand, both the company offers a platform for other sellers where Amazon focuses on the logistics as well as engages directly to the consumers. It is noted that Alibaba does not engage with consumers but that is not a part of the full retail purchase cycle in the most appropriate way.
Both the companies are more than just being a retailer where Amazon s a leader in cloud services to business, be it small and large. The capital intensive model produces higher margins as well as free cash flow. The company manufactures as well as sells electronic devices. Capital intensive business focus on investment where Amazon offers online streaming of movies as well as TV episodes. Furthermore, it is into online publishing, peripheral supporting services as well as co-branded credit cards and the other three are under such as e-retail, electronics manufacturing and web services. Another way to look into the matter is that Amazon is likely for creating jobs internally within the company after destroying jobs at brick and mortar retailers. In addition, the company creates a medium with which retailers compete efficiently as well as entering new markets. Thus, it help in creating competition with the retailers and help creating jobs externally within small as well as medium sized retailers in global platform. Amazon is a company that competes directly with its partners (Neuman and Robson 2014).
Executive Chairman Jack Ma is of the opinion that there is a problem with people who calls for the e-commerce platform for the companies such as Amazon and Alibaba that is based in China. There is difference between Amazon and Alibaba operational aspects. Here, Amazon is more like an empire and controls themselves towards purchasing and selling of things. The philosophy of the companies is when they empower ways where people can sell and help others for selling services in the current global marketplace(Tarone, Gass and Cohen 2013). With the advanced use of technology, innovation means taking help of partners who are 10 million small business sellers when they start competing with Microsoft as well as IBM. The company started using internet technology for attainment of future goals as well as objectives.
In order to hire people for delivering purpose, the company needs 5 million people for selling the things. Hiring 5 million people is difficult when it is needed for empowering the service companies and the logistics companies. On the contrary, Executive Chairman of Alibaba had discussed Alibaba ambitions with Donald Trump so that they can provide job to 1 million people through use of e-commerce platform. The company also needed to create job opportunities by taking help from millions of third-party sellers.
On the other hand, Amazon had more than 2, 30, 800 employees that creates other jobs through its sellers, supporting services as well as contractors. It is noted that Amazon does not control over all aspects of commerce that takes place in the present platform where thousands of independent vendors perform their own business in an effective way. It is never possible to have a single model or a correct model so business leaders should believe in their models and implement it.
The Chinese E-commerce platform enters United States where Trump vows for imposing heavy tariffs on Chinese trade. It is not possible to have trade war between China and United States even when it means for destroying the business model of Alibaba. It was noted that everyone likes a good showdown when Alibaba had recently engaged in Initial Public Offering when people are eager to pit the other E-commerce against each other with Amazon faceoff.
In that case, Alibaba was misunderstood in various things and despite an enormous e-commerce peer when it is extremely differs from Amazon. Alibaba is a company that is well-known in the United States and uses Business to business portal as it connects Chinese factories as well as business for facilitates E-commerce within China. It is a known fact that Taobao division of Alibaba keeps majority of money that has 80% of sales as well as other two main properties such as Taobao marketplace. It is as similar to eBay as well as allows customers and small business for misting merchandise for sale. Furthermore, there are other main platforms such as Taobao Mall that is used by Amazon. It is a Business to customer platform that mainly allows large business as well as brands for selling directly to customers.
Alibaba accounts for more than 80% of all the online purchases for countries like China. It is essential to understand the fact that E-commerce platforms for facilitating the transactions. It is required for managing the marketplace as well as charging a small commission but do not hold or sell in any of the given merchandise. On making comparison, Amazon deals in markets where they find thousands of products that direct towards third-party business. Furthermore, the company stocks items as well as sell products to consumers. For instance, it is important to compete directly with merchants that are selling in the online platform. Amazon and Alibaba have other business arms where each company engages in cloud computing division and involves in media creation. Alibaba as a company has its own stake in the professional Chinese soccer team.
It had been argued or created a sense of fear on how Amazon should react on entrance of Alibaba in the United States market. It is important to understand on which company has better record of expanding outside or home market. The answer is Amazon as it deals 60% in North America and 40% in international grounds.
Alibaba is profitable as compared to Amazon. For the year 2015, Alibaba generates $5.5 billion profit but Amazon faced loss of $241 million. In addition, Amazon reports for gaining small profits that need proper attention by the management. There is big difference in revenue due to various business models. For this, Amazon need to cut from sales from getting goods from the company as well as sells web services. On the contrary, Alibaba earns money from ads as well as add-on services for its vendors.
On analysis, revenues are more in Alibaba than Amazon because of its Initial Public Offering is. Next, it is noted that revenue of Alibaba is lot more diverse after comparing it with Amazon. It is recommended to both the companies for protect the sentiments of consumers as well as some of the macro-economic swings at the same time. It is due to the fact when Alibaba start investing heavily for some time in a multitude of companies.
After comparison, it is noted that some investors are of the opinion that Alibaba remain too much exposed towards the slowdown of China. The company became more valuable because of exposure to China. The business practices of Alibaba need to gain confidence of investors. In accordance to the Chinese Government, it mainly reports for taking a lax approach for eliminating counterfeit goods on Taobao. It is important for the researchers to understand the fact on how vendors need to boost up sales that is apparent to sales figures as well as customer reviews. It is where Alibaba was fined for violation against price as mentioned by the merchants that had been slowed down for previous year. On the other hand, the share price of Amazon remains far ahead because of revenue base as well as grip present in E-commerce websites.
Conclusions and recommendations
From the above discussion it is concluded that the Alibaba Group from China is becoming the serious threat for Amazon. Amazon .com was among the major organizations that started selling their good over internet and soon became the established name all over the world. On the other hand, Alibaba became the biggest mobile commerce and largest online organization in world in last few years that anyone hardly expected to become successful. Alibaba has strong hold in the Chinese market whereas Amazon is undoubtedly the leader in U.S. Both the companies had big start and in-depth knowledge of the business models and market. It is quite tough for any other company to beat them. However, Alibaba is planning to invest in the U.S. market and Amazon is already well known for their competitiveness. Alibaba also planning for taking over the companies like Etsy or Ebay that will enable it to strengthen it’s position in China. The smaller U.S. independent merchant can easily sell and ship their products to the Chinese consumers. However, the crucial issues in this are the difficulties in language, culture, logistics and various other legal issues. With the scalable and more profitable model and the momentum, Aibaba is in the advantageous position to give a head to head battle in the market as compared to Amazon. However, Amazon has a better record of international expansion and is always ready to compete.
Amazon’s strategy is mainly focussed on the creation of customer loyalty through enhancement of market dominance. They mainly focus on the smooth customer services, lower prices, faster deliveries and Amazon prime service. On the other hand, strategy of Alibaba is more focussed towards strengthening and engaging their seller community and assuring trust in the marketplace. It is achieved through storefronts of the merchants in the marketplace, vendor services, lending to smaller businesses, verification services and community building programmes for the merchants. Therefore, where Amazon is winning the international e-commerce game, Alibaba is leading the way in its own country China. However, if Alibaba spread its business globally, it will blow the minds of global shoppers with the price advantages and wide range of products, which in turn, will be a big threat to Amazon. Though the growth history of Amazon to dominate the e-commerce market has position well, for continuing the success is not ensured as it faces various challenges. The proposed recommendation to Amazon for continue to grow in future are as follows –
Therefore, Amazon can further improve the quality of their products, convenience and reliability. To continue the growth, they shall use the economies of scale for providing broadest range of products. Further, they may improve the logistic delivery standard for the delivery of products through the e-commerce channels.
From the above discussion it is evaluated that Amazon does get bad press for its tax status as well as working practices but the reason remains meaningful to customers and it became indispensable part in the daily lives. China will be costly market to enter due to lack of infrastructure makes logistics challenge. On the other hand, Alibaba uses the model based on profit-sharing where the company maintains good relationship with Chinese Government as government plays important player in the Chinese economy. Further, Amazon has succeeded because no other company has been able to match the scale of its online operation until now. That was one place ahead of my company that fell into four places to 13th with a valuation of 62.2 billion dollars. As far as profitability is concerned, revenue of Amazon hit 88 billion dollars but it posted a loss of 240 million dollars as it continues to plough its profits for improving the delivery infrastructure at the core of its business operations. On the contrary, Alibaba has attracted significant investor attention starting from its successful Initial Public Offering. Other issue that we are facing is Chinese market place as it is the massive presence of counterfeit products. Amazon faced criticism from China regulatory authority State Administration for Industry and Commerce for not doing enough to curtail illegal activities on its Tobacco marketplace. They run the risk of facing the opposite problem from which eToys builds up capacity. Our company believes in following different strategy where it builds the warehouses that stacks the books as well as fills the orders. However, Alibaba is a value-based company that had been driven by the mission to make the company function in better way to perform business in and across the world. Over the last years, it is noted that there had been striking pattern that emerges at Amazon where the sales in the United States are soaring and doubled up in the previous years. The mission statement of Alibaba is to make it impossible for us to become an empire like business. Our company creates an open, collaborative as well as prosperous ecosystem that enables its constituents for fully participating and helps small business as well as consumer customers.
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