In the name of Allah

Subject: Strategic management

Authors: Narinj Mammadrezayeva, Narmin Najafova, Mahdi Nouri Niyaraki

Teacher Name: Rasul Hajiyev

Case: Alibaba – the Yangtze River Crocodile

Introduction
In today’s world, it is difficult for us to compare today’s life with past and after the
second world war the earth changed its way to new direction and because of
globalization and improvement in technology we can see the raising the number of
rivals in the market and their ultimate goals are to satisfy the customers and make
the profit. From may years ago, people started to use technology, especially the
internet in order to contact one and another easily and among those people, the
organization tried to sell their products through social networking. The reason why
I am telling this information is that today we will give you some information about
one of the successful companies which have put the significant influences on the
market. When we talk about the cheap products and market domination, the first
thing which comes into our mind is Chinese products which became the nightmare
of many countries especially the United State of America. China because of the
resources including human resources on his hand, it became one of the strongest
exporters of goods and services all over the world and among the corporation in
China, Alibaba became one of the best companies in the world.

Alibaba is a Chinese multinational technology company specializing in e-

commerce, retail, Internet, and technology. Founded on 4 April 1999 in Hangzhou,
Zhejiang, the company provides consumer-to-consumer (C2C), business-to-
consumer (B2C), and business-to-business (B2B) sales services via web portals, as
well as electronic payment services, shopping search engines and cloud computing
services. Alibaba is one of the three largest retailers in the world and has many
competitors like Amazon, eBay etc. After growth of online consumers and e-
business websites in China has attracted a large number of organizations to
participate in the e-business industry; many of them have gone through several
stages of evolution and aggregations.

But to survive in this market it is not easy as we think, it requires to have qualified
employees and be aware of other rivals and using the analyses like SWOT,
PESTEL in order to be superior in the market. In this section, we will discuss the
Alibaba’s PESTEL and SWOT as well.

As we know PESTEL is a useful starting point for environmental analysis.

Although there are many positive opportunities in the Macro-environment, there
are also many threats. It might be worth observing how many of these
opportunities and threats are tied to state policy, not exclusively just under the
Politics category: for example, the state’s policies regarding supporting e-
commerce and moving away from heavy industries are positive, but the anti-
corruption campaigns and the anti-forgery investigations are potentially negative.
Overall, this analysis would suggest that the balance of opportunities and threats is
turning more negative for Alibaba.

 Opportunities P Threats
Sector support E Anti-corruption
campaign
S Chinese economic
slowdown
Strong networks T Chinese aging
demographics
E Shift to mobile
commerce
Shift a heavy industry L Anti-forgery
investigations

PESTEL analysis report is a framework used to understand the impact of external

factors on the macro environment that influences the business of Alibaba. The
PESTEL analysis is a handy technique to analyze the incumbent external factors
like political, economic, social, technological, legal and environmental and their
effect on Alibaba’s business model, growth trajectory, its business case, and
market strategy.

The E-commerce industry has seen extensive growth in recent years, high demand
for online shopping between consumers has been the major reason for the rapid
growth of e-commerce. Chine is a second largest E-market in the world, after the
US; this acts as a competitive advantage for Alibaba. 80% of online retail sale in
Chine happens through Alibaba. Alibaba Group is highly dependent on the
Chinese markets for the lion’s share of its sales, hence the effect of political and
legal factors plays a crucial role. After China’s approach in WTO, the Chinese
government effort to support e-commerce organization and this political transit is a
boon for Alibaba. While the government policies are favorable towards Alibaba,
there is a legal threat from the increasing forged products sold on its e-commerce
platform. China’s dense population and rapidly expanding economy, both factors
positively influence Alibaba’s business. Due to an increase in the number of small
and medium enterprises, there are so many products available which demand
market expansion. Alibaba gains the highest advantage of this factor.

Alibaba’s business model fits ideally in today’s social and cultural environment,
where people are drastically shifting towards online shopping. Alibaba has taken
full advantage of this time and space becoming the largest online retailer.

Political Economical
1. Chinese Government’s push for 1. Impact of Macroeconomic factors
AI and digitalization. on business.

Social Technological
1. Growing population in target 1. AI and big data-driven user
markets experience
2. Effective CSR activities 2. Technical Advancements in core
3. Aging Chinese population operations.
Legal Environmental
1. Lawsuit against counterfeits. 1. Water Conservation.
As you can see above, we can see the importance of the analyses and for setting
new business these elements can affect directly to your companies. Additionally, to
answer to the second question I should say that Sociograms are diagrams in which
individuals are represented by points, and links between points represent the
strengths of different relationship. What will be immediately apparent from this
sociogram is the international connections enjoyed by Alibaba under Jack Ma,
pictured in the middle: he is well-connected in China, Japan and the United States.
It is noticeable that these connections are not just business connections but also
political.

Eventually, this network is useful because it may help Alibaba deal with political
threats, a growing issue in the PESTEL analysis above. Connections with leading
investment bank Goldman Sachs will help with access to capital markets in the
United States, possible acquisition opportunities, political contacts and favors, as
well as general market access. Softbank and Yahoo may help with connections to
latest Japanese and American technological and consumer trends, though very
likely links with the second company are a declining asset. A good question to ask
is the extent to which these kinds of connections might be important for example in
Russia and Brazil, where they are growing fast but so far do not seem to have made
the equivalent links.

The end.