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Introduction:
Alibaba group is a leading Chinese e-commerce brand. Apart from that, it
is also a leading cloud player that has quickly surged to a leading position
in the Chinese market. The company is in a strong financial position and
its sales and revenue have grown faster within the last three years.
Alibaba’s number of monthly active users has grown significantly in 2018.
The company invests a large sum each year in research and development.
However, it has not been able to expand outside the Chinese market
significantly. In the near future, it will focus upon expanding its footprint in
Asia, Europe and Middle East. However, the international environment is
full of challenges and apart from the strong position of Amazon, other
challenges including political and technological are also there. Still, Alibaba
has achieved a significantly strong position in the Chinese market.
Read more about Alibaba and its opportunities and challenges in the
global environment in this PESTEL analysis.
Political:-
Political factors have acquired a significant role in the 21st century. Around
the world, the political forces are playing a very important role in the
context of business. Governments are now playing a more active role in
terms of oversight and control of businesses. The technology industry
specifically is facing higher control. The Chinese government encourages
regional businesses which has proved beneficial for businesses like Alibaba
which have seen very fast growth. Political forces are affecting international
businesses in other ways too. Trade relationships between countries also
affects international trade. The trade relationships between America and
China have reached the point of being the worst. This is not beneficial for
Chinese businesses operating in America. Moreover, It can be a hurdle to
expansion of Alibaba in the European countries.
Economic:
Social:-
Social factors have also acquired a central role in the context of business.
Apart from changing social trends, there are other factors too which affect
businesses. From society to society and culture to culture, the patterns vary.
However, in most of the societies and cultures globally, the use of internet
and internet based services has grown. This trend has proved profitable for
ecommerce brands including Amazon and Alibaba. China itself has become
technologically advanced and a very large part of its population uses
internet to access online products and services. Moreover, when it comes
to expanding internationally to other markets, then companies cannot
ignore the central role of these factors. The same business and marketing
strategies do not work in all societies and cultures. Instead businesses need
to make changes to their style and strategy to be successful in each market.
This could also be a reason that while Alibaba has seen a lot of success in
the Chinese market, it has been unable to penetrate significantly into the
overseas markets.
Technological:-
Technological factors are now playing a core role in the growth of most
industries. Alibaba group is a technology business and an ecommerce
leader in China. The company has acquired enormous growth within a
short period. This has happened due to its focus on technology and
innovation. The brand invests a large sum each year in R&D. Apart from
e-commerce, it is also a leader in the cloud industry in China. Due to its
focus on customer convenience and technological innovation, the brand
has seen impressive growth in number of active users as well as sales and
revenue. Around the world, apart from growing internet usage, now more
and more people are using the internet and smartphones to shop online.
While overall use of digital technology has grown globally, companies like
Alibaba have flourished with these trends. Alibaba is also a leading cloud
player and has brought a web of services for its enterprise customers.
Its revenue from cloud business also saw significant growth in fiscal 2019.
In this way, technology plays a core role in the growth and expansion of
ALIBABA group’s business.
Environmental:-
Legal:-
Law and legal factors have also acquired a larger role in the context of
business. Especially, for the large and international businesses the
challenge is bigger. Compliance is essential since world ver legal agencies
have grown the level of oversight of businesses so that they adopt
responsible practices and are held accountable for everything they do.
Non-compliance can result in heavy fines and the fines can be a major
share of a company’s net revenue. Apart from product quality and
environment, there are other laws related to labor and other things which
also affect businesses in their domestic markets as well as internationally.
While Alibaba has not had any significant legal issues in the past, it always
pays to be careful.
Sources:
Alibaba Annual reports 2018 & 2019
https://www.alibabagroup.com/en/ir/AlibabaGroup_ESG_Report_201
8.pdf
https://statstic.com/category/alibaba-group/
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A firm should not only do technological analysis of the industry but also the
speed at which technology disrupts that industry. Slow speed will give more
time while fast speed of technological disruption may give a firm little time
to cope and be profitable. Technology analysis involves understanding the
following impacts -
Recent technological developments by Alibaba Group Holding
Limited competitors
Technology's impact on product offering
Impact on cost structure in Specialty Retail, Other industry
Impact on value chain structure in Services sector
Rate of technological diffusion
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Weather
Climate change
Laws regulating environment pollution
Air and water pollution regulations in Specialty Retail, Other
industry
Recycling
Waste management in Services sector
Attitudes toward “green” or ecological products
Endangered species
Attitudes toward and support for renewable energy
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Economic reforms of the president Xi Jinping worsened China's economy by 7 percent. Respectively,
the company's profit also fell.
Slower economic growth in China overall is being matched by some slowing in the rate of growth of
the Chinese e-commerce market .
Alibaba had seen off an attack by American rival eBay in the Chinese market with a fierce price-war.
- One of the main problems of China is - population aging. On account of an ageing population and
the drying up of the traditional supply of young labour from rural villages: by 2015, the Chinese
workforce was falling by about three million workers a year.
- One child per family rule in 2013 reduced the number of people fit for work.
All these social factors lead to the destructive decline of the able-bodied employees of company.
Social threats
Social
-Early 2015, smartphone sales accounted for half of its retail Chinese sales, twice the proportion of a
year earlier
- Competing with the JD.com company, Alibaba began to engage in the introduction of smartphone
e-commerce and made a good profit.
Technological opportunities
Technological
Besides, faced with rising domestic concern about the environment, President Xi was happy to
restrain the expansion of high polluting industries such as cement, coal and steel.
These limitations influenced the company's earnings, which deal with the processing of raw
materials and the income of the Alibaba respectively.
Ecological threats
Ecological
In 2015 China’s State Administration for Industry and Commerce took Alibaba under special control.
They found counterfeit goods and fake listings on the Group’s Taobao site. It led to decline of
incomes and reputation of company.
Legal threats
Legal
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Mission:
– To make it easy to do business anywhere.
Vision:
– To build the future infrastructure of commerce. We envision that
our customers will meet, work and live at Alibaba, and that we will be
a company that lasts at least 102 years.
Goals:
– To be the world’s largest sinle e-marketplace for online shoppers
and to become a premier all-purpose e-business by leveraging its
existing brand and business model.
Objectives:
– To hit $1 trillion in gross merchandise value by 2020.
– To serve two billion customers, effectively becoming the world’s fifth
largest economy by 2036.
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