Why Did eBay Lose to Alibaba in China? - Essay Sample

Introduction

Alibaba is one of the largest eCommerce platforms in China. This online company has offered trade openings for small and medium firms to utilize innovative technologies to gain a competitive advantage. This paper aims to explain why eBay lost to Alibaba and factors contributing to the success of Alibaba. It also elaborates on the possible external and internal factors affecting the company's performance through PESTE and SWOT framework analysis.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Order now

Why eBay Lost to Alibaba In China and The Lessons We Can Learn from Non-Chinese Ecommerce Companies Such as Amazon

Despite having excellent business strategies, eBay was unable to grasp the needs of consumers in the Chinese market fully (Ou & Davison, 2009). E-Bay lost its competitive advantage following a decision resulting in the termination of EachNet's custom platform and moved its users to another platform based in the United States. From the migration to the US eBay platform, data had to flow across international borders, including firewall owned by the Chinese government, which slowed page load times at eBay (Ou & Davison, 2009). Moreover, most of the decision on eBay had to receive approval from their headquarters in the United States, which slowed down operations.

Online companies like Amazon should learn to focus on customer preferences in addition to establishing solutions fit for different geographical markets (Pang, 2015). Moreover, non-Chinese eCommerce companies should learn that the creation and implementation of business strategies are inadequate in helping companies maintain their competitive advantage. Instead, business leaders should design measures of incorporating organizational culture, structure and control mechanisms towards safeguarding their competitive advantages. (Pang, 2015)

How Alibaba Became the Most Successful Ecommerce Company in China- The Standards, Network Effects, And the Crossing-The Chasm Framework

Alibaba is the first Chinese e-commerce company to explore the global market after its success in the Chinese market. Administration in Alibaba solely belongs to small business ventures and people. This business model resulted in the creation of a unique eCommerce opportunity, that focuses on the strengths of small business, introducing a variety of choices for shoppers.

Secondly, Alibaba does not charge for affirmation but administration for promotional and technical support (Havinga, Hoving & Swagemakers, 2016). Therefore, Taobao was able to make numerous clients from allowing small ventures to enroll free, unlike eBay, that charged for foundation exchanges (Pang, 2015).

Alibaba also had strong credit demonstration (Pang, 2015). On the eCommerce stage, confirmation of personality data is through passing a web certification test. Personality confirmation allows for security checks, thus eliminating any possible illegal data exchanges (Havinga, Hoving & Swagemakers, 2016). Additionally, Alibaba offers benefits that improve customer experience by availing a peaceful environment and over the internet encounter (Pang, 2015). This online company has extended its network by having several sellers and dealers to provide a range of commodities to customers. Finally, Alibaba utilizes modern exchange designs. The company also collaborates with banks to monitor the movement of money between buyers and sellers on the eCommerce platform.

Factors That Contributed to Alibaba's Loss in Performance and Its Internal Weaknesses and External Threats

Alibaba faces the pirate problem, where the organization faces accusations that some of its sites such as Taobao and Tmall are prone to fake orders and counterfeit goods (Zhang et al., 2018). As a result, the eCommerce firm is under supervision by regulators, which scares some of the potential investors. Also, Alibaba faces stiff competition from other organizations. One of the main competitors that are a threat to this undisputed leader of the Chinese eCommerce is JD.com (Li, 2013).

High expenses and massive investments by Alibaba aiming at increasing generated revenues is an internal factor contributing to its loss in performance (Li, 2013). The dip in profitability at Alibaba is due to costs incurred in cloud computing, digital entertainment and attempts to expand beyond China (Zhang et al., 2018). The companies operating income has decreased regardless of revenue from its various investments. Other factors include political factors such as trade tensions (Li, 2013).

Recommendations on How Alibaba Can Mitigate Some of The External Threats

Alibaba's CEO should focus on mobile shopping by the creation of mobile applications. Recently, there has been significant growth in mobile commerce (Li, 2013). The company should set aside resources to improve eCommerce experience for mobile clients. Developed mobile app should allow customers to search or browse a variety of products before making a purchase (Li, 2013). Wining the customers' trust over these developed mobile applications can increase comfortability when shopping. Alibaba should also invest in social media platforms like Facebook after the recent increment of social shoppers (Li, 2013). Today, social media is becoming an essential part of eCommerce (Li, 2013). The company should focus on designing strategies to enhance Alibaba's position on social media (Pang, 2015). Majority of the consumers spend time on social media, and moving to these platforms can help Alibaba discover its target audience. Also, the business can link some of its internet stores to social media sites and allow customers to make purchases, which can enhance customers' comfort. Alibaba can use Artificial Intelligence to improve services offered to the customer. Artificial Intelligence would give the company a competitive advantage. The company should also search for new avenues to provide personalized customer services (Pang, 2015). With the most recent AI tools, Alibaba can improve the efficiency of marketing platforms and the provision of customer care services (Li, 2013).

PESTEL Framework to Analyze Alibaba's External Environment

Alibaba has utilized China's e-market to gain a competitive advantage. Most of the sales over the internet in China are made through Alibaba (Li et al., 2018). Dependence on the Chinese market makes Alibaba a subject to legal and political factors in China. Some of the political influences include a recent push by the Chinese government for Artificial Intelligence and digitization (Li et al., 2018). This measure has enabled Alibaba to penetrate in other economies in addition to maintaining dominance in China. These measures have contributed to the reduction of trade barriers for Alibaba in new markets since the company offers digitized services to customers and utilizes AI platforms. The legal requirements include a lawsuit against counterfeits (Li et al., 2018). Recently, Alibaba faces accusations of defrauding shareholders. Alibaba had concealed the counterfeits' regulatory warning according to the lawsuit. There are social factors that the organization has considered, such as the ageing Chinese population (Pang, 2015). The business model by Alibaba fits in social and cultural environments which are characterized by migration to online shopping. Some other factors that are contributing to the growth of the company include dense Chinese population. Moreover, Alibaba's market expansion is due to the increasing number of small and medium-sized firms that avail numerous products.

SWOT Framework to Analyze Internal and External Factors for Alibaba

Having a well-segmented product portfolio is a strength for Alibaba (Li et al., 2018). The company has a range of services availed globally on geographical demand basis. Alibaba offers automobiles and spare parts on the internet wholesale and retail markets in more than two hundred countries (Pang, 2015). The diverse portfolio in the company allows an emerging leader in its various segments. The company enjoys increased growth of the customer base of TMall, which serves as an online market for imported goods (Pang, 2015). The platform deals with the sale of premium products across borders. Subscription paid for with annual service fees contributes to raising the company's revenue. Another strength of the company is the growing demand for marketing services. The main weaknesses are the increased drop in productivity in the company (Li et al., 2018). Generally, eCommerce firms are dropping due to the emergence of new firms that pose stiff competition. Such organizations include JD.com and Tencent (Pang, 2015). As a result, the company embarked on new measures such as increased investments and cost on cloud computing technologies to contain the competition. Also, most of the investors are scared of investing in the company.

Conclusion

In conclusion, Alibaba has revolutionized eCommerce not only in China but also in the international market. Though faced with stiff competition in the eCommerce market, Alibaba's success is strategic. It is based on the awareness of both local market and global market needs which enables the firm to provide a segmented product portfolio that meets its consumers' needs effectively. Alibaba will continue to be a giant eCommerce firm due to its continued excellent business strategies.

References

Havinga, M., Hoving, M., & Swagemakers, V. (2016). Alibaba: A Case Study On Building an International Imperium On Information and E-Commerce in Multinational Management (pp. 13-32). Springer, Cham. https://link.springer.com/content/pdf/10.1007%2F978-3-319-23012-2.pdf

Li, J., Zhang, J., Qu, F., & Zhao, Y. (2018). The Influencing Factors Model of Cross-Border Ecommerce Development: A Theoretical Analysis. In Wuhan International Conference on e-Business. Association for Information Systems. https://aisel.aisnet.org/cgi/viewcontent.cgi?article=1000&context=whiceb2018

Li, Z. (2013). The Situation, Problems and Trends of E-Commerce Logistics Management in China. Applied Mechanics and Materials, 336-338, 2504-2507. https://doi.org/10.4028/www.scientific.net/amm.336-338.2504

Ou, C., & Davison, R. (2009). Technical Opinion Why eBay lost to TaoBao in China. Communications of The ACM, 52(1), 145-148. https://doi.org/10.1145/1435417.1435450

Pang, J. (2015). Chinese E-Commerce Model: Using ALIBABA as A Case Study. https://www.theseus.fi/bitstream/handle/10024/103215/pang_jie.pdf?sequence=1&isAllowed=y

Zhang, Y., Pan, P., Zheng, Y., Zhao, K., Zhang, Y., Ren, X., & Jin, R. (2018). Visual search at Alibaba. In Proceedings of the 24th ACM SIGKDD International Conference on Knowledge Discovery & Data Mining (pp. 993-1001). https://dl.acm.org/doi/pdf/10.1145/3219819.3219820