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Case On

A Little Electronic Magic at Alibaba.com

International Business IBS- 363

Prepared for K.M. Raziuddin Taufique Assistant Professor School of Business

Prepared by

Mahmudul Hasan Rony Md.Mahbub Hossain Md. Sazzad Hossain Tanvir Ahamed Md. Khalid Hossain Md. Nurul Islam

ID: 073-154-025 ID: 082-003-025 ID: 082-069-025 ID: 082-070-025 ID: 082-114-025 ID: 082-208-025

18 March 2011

A Little Electronic Magic at Alibaba.com

Letter of Transmittal

18 March, 2011 To K. M. Raziuddin Taufique Assistant Professor School of Business

Sub: Submission of Case on Alibaba.com. Dear Sir, We would like to thank you for giving us the privilege of conducting the case on A little Electronic Magic at Alibaba.com. Within this short period, we tried our level best to make this case a successful one. Preparation of this case has enriched our conception on the above subject and has helped us in getting a thorough understanding about International Business. The practical exposure while on this case helped our team of bridge the academic work and the practical knowledge. We have prepared a case on how to handle the situation mentioning in the case while doing business internationally. Although it was not an easy task, particularly the information collection phase was full of many tough experiences but we enjoyed and learned a lot in the process of carrying out that report. Then we tried our best to finish this case according to all of your requirements. We hope this case will meet your expectations. We will welcome any clarification and suggestion regarding this report. Sincerely yours, Mahmudul Hasan Rony Md.Mahbub Hossain Md. Sazzad Hossain Tanvir Ahamed Md. Khalid Hossain Md. Nurul Islam ID: 073-154-025 ID: 082-003-025 ID: 082-069-025 ID: 082-070-025 ID: 082-114-025 ID: 082-208-025

Acknowledgement

This is too tough to prepare a case study without guidelines & help of others. For preparing this case study we took help from some people. First of all, we would like to convey our sincerest thanks to our course instructor of IBS-363(International Business Studies), K.M. Raziuddin Taufique. For being provided and equipped with all kind of knowledge and guidelines to prepare this case. Without his guidance and support, solving this case would be a lot more difficult. The thought and focused guidance that our instructor has provided us from the academic and professional perspective helped us immensely while solving this case. In addition, we would like to give cordial thanks to my others class mates. They provided us a lot of related information about alibaba.com. So we are really grateful for their valuable time, constructive opinion, support and encouragement. We also give thanks to our group members for providing knowledge, hard working passions and various suggestions for solving this case.

Table of Content

Content 1.Introduction 1.1 1.2 2.Choosing Strategy 2.1 2.2 2.3 2.4 3.Case Analysis 3.1 3.2 3.3 3.4 3.5 4.Recommendation 5.Conclusion Reference Appendix Benefits and Costs of alibaba.com Speculation Compare and contrast other sites Analyze the process Transparency SWOT Matrix Confrontation Matrix Confrontation analysis Conclusion Case summery Alibaba.com overview

Page No. 1 1 2-5 6 6 7 7-8 8 8 8-9 9-10 10 10 10-11 11 11 12 13-14

List of illustration

Serial No. Figure 1 2 3 4 5 Table 1 2

Content

Page No.

General information of Alibaba.com Business structure of Alibaba.com Buying and Selling process ofAlibaba.com Benefits of Alibaba.com sites Costs of Alibaba.com site

2 4 5 9 9

SWOT matrix of Alibaba.com Confrontation matrix of Alibaba.com

6 7

1. Introduction

Alibaba.com is the world's largest online B2B trading platform for small businesses. Paragraph 1.1 provides short summary of the case. 1.1Case Summery E-commerce is easy to engage, provides faster and cheaper delivery of information, generates quick feedback on new products, improves customer service, accesses a global audience, levels the field of competition, and supports electronic data interchange (EDI) with both suppliers and customers. Alibaba.com is the word largest online B2B marketplace for both imports and exports. Alibaba founded in 1999 by Mr. Jack Ma, who has been dubbed the father of the Chinese internet. This is the site known for leading the ecommerce of China on both an international and domestic level. Alibaba.com is also the parent company for Chinas most used payment method called AliPay and Yahoo! China. Other web sites that have created similar online marketplaces include www.global.kita.net focused on products from Korea, www.trade-India.com for Indian products, and www.europages.com for Europe. for smaller enterprises. These electronic trading venues have changed the mechanics of importing and exporting and opened up tremendous opportunities, especially The impact has been especially dramatic for small Chinese manufacturers, who now have ready access to a global market for their products. Alibaba enables smaller companies with import and export ambition but shoestring budgets to reach the global market. More specifically, most of Alibabas users are SMEs in developing countries around the world. Operationally, buyers around the world use Alibaba to find potential suppliers that often have some of the lowest costs in the world. Increasingly, as sites like Alibaba inject more transparency into trade, buyers worry less about fraud. Users of Alibaba, like those on similar e-commerce sites, post information about their companies on the site and access information about the reliability of other users. Mr. Jack Ma found the chance to expand the historic outward flow of China products to the world to include flows throughout the world. 1.2 Alibaba.com Overview In this paragraph there will be a short review on alibaba.com.

1.2.1 General Information

Type Industry Founded Headquarters

e-commerce Internet jack Ma, China (1999) 699 Wang Shang Road, Bingjiang District, Hangzhou, 310099, China

Owner(s) Website

Alibaba Group (owns 70%) http://www.alibaba.com/

Figure-1: General information of Alibaba.com Companies in Alibaba Group

Alibaba.com (HKSE: 1688) - publicly traded company in e-commerce for small businesses (B2B market place) Taobao.com - online retail marketplace Alipay - third-party online payment platform China Yahoo! - - one of Chinas leading internet portals

1.2.2 What is Alibaba.com? Alibaba.com is an international directory of suppliers from all around the world. The most common reason for using alibabas is so that companies can locate manufacturers and suppliers in foreign countries. These products can then be imported to save money and increase profit margins. The alibabas site is very easy to use and there are a number of tools to make finding exporters very easy. Searching for a product will bring up a list of potential suppliers who produce similar products to the consumer are looking for. Consumer can then contact the suppliers using instant messenger and email messages. The deal will then be handled by the supplier themselves. 1.2.3 Product Pricing The prices for different products on Alibaba will vary depending on the supplier that consumer import from and the number of products consumer want to purchase. 1.2.4 Membership In order to use alibaba consumer will have to sign up and register for an account. Accounts are free to register and it only serves as a directory listing various companies of interest. 1.2.5 Education and Support Alibaba simplifies the whole process because the site is very easy to use. Education and support are both well catered for on alibaba. Alibaba also has a really helpful forum where

consumer can ask other people advice. This is especially useful when importing products because everybody has different circumstances. Consumer can also use this forum to help consumer understand exactly what duties and taxes consumer will be expected to pay.

1.2.6 Who is the site suitable for? Alibaba.com is a different type of directory site because it lists international manufacturers. This means that consumer can use this site if consumers are interested in importing products from a foreign country. Importing is complicated however alibaba makes it possible for anyone to import. This makes it possible to maximize consumers profit margins by reducing consumers costs. 1.2.7 Alibaba.com Features and Benefits - Helpful online forum to get advice - Online guides to teach consumer the basics - Find suppliers in foreign countries - Import products at lower costs - Make greater profit margins 1.2.8 Business Structure and Operations

Figure-2: Business structure of Alibaba.com Alibaba.com also offers business management software and Internet infrastructure services for businesses across China. Alibaba.com has offices in more than 60 cities across China, Taiwan, Hong Kong, India, Japan, Korea, Europe and the United States. In July 2010, Alibaba.com bought U.S. e-commerce site Vendio Services Inc., making its first major U.S. acquisition. In November 2010, Alibaba.com is a founding partner of Globaltrade.net, a new marketplace for the international trade service providers. Third quarter 2010 profit of Alibaba.com stood at 366 million yuan, up from 236 million yuan a year ago. 1.2.9 Listing in Stock Exchange Alibaba.com was listed in the Hong Kong Stock Exchange at the IPO price of HK$13.5 on 6 November 2007. The offering raised HK$13.1 billion (US$1.7 billion) in the biggest IPO at the time since Google Inc's offering on the NASDAQ. It closed at HK$39.5, more than 190% higher than the offer price.

1.2.10 Strategic Partner Alibaba.com is represented by Ludatrade.com in Brazil. 1.2.11 Buying and Selling process
How to

Step 1
Search Products

Step 2
Contact Suppliers

Step 3
Check Messages

How to Sell

Step 1
Join Alibaba.com

Step 2
Get a Website

Step 3
Display Products

Figure-3: Buying and Selling process of Alibaba.com 2. Choosing Strategy In paragraph 2.1 there will be a SWOT matrix presented and after this the confrontation matrix can be given in paragraph 2.2. In paragraph 2.3 confrontation matrix analysis is given. 2.1 SWOT- Matrix Table- 1: SWOT matrix of Alibaba.com

Strength

Weakness

S1: World largest online B2B marketplace

W1: More depended Chinese market

S2: Less possibility about fraud on exporting W2: Only who are familiar the technology they and importing process doing export and import

S3: Organized more than a thousand product W3: Use less promotional tools categories each with many subcategories S4: Finding suppliers at a lowest cost

Opportunity

Threat

O1: More technological Advance O2: Advantage of globalization

T1: Competitors of other e-commerce sites T2: Lacking of secrecy

2.2 Confrontation matrix In the confrontation matrix the different strength, weakness, opportunities and threats are confronted with each other. It is built in the basis of the SWOT matrix: Table-2: Confrontation matrix of Alibaba.com O1 ++ + ++ + 0 O2 + 0 ++ + -0 T1 0 -0 0 0 T2 -0 + 0

S1 S2 S3 S4 W1 W2

0 0 +1 +2 -1 -1

W3

0 +5

0 +2

-4

0 -3

-1

2.3 Confrontation matrix analysis S1 & O1 = (++) Now a days global world runs by technology. Day by day world is becoming more technological advance. That advance technology creates an advantage for make the trade easier and cheaper. Alibaba.com should take the advantages to the purpose of more expand their B2B marketplace. S3 & O1 = (++) Technological advance create an opportunity to persuade the global supplier registered on Alibaba.com and increase the product categories for potential buyers. S3 & O2 = (++) Globalization influence buyers and sellers make an interdependent relationship. That result creates an advantage, which advantage Alibaba.com, should take to increase their supplier to the purpose of more organized product and sub product categories. W1 & O2 = (--) Present world is globalized world. Globalization increase trade across the world but most of the suppliers of Alibaba.com, are china based manufacturers. S3 & T1 = (--) Alibaba.com, one of the strength is they organized thousand type of product categories with each subcategories by registered free of suppliers. But threat is that other competitors of e- commerce sites are developed their service and using more promotional tools. After sometime that action of other competitors should create a affect on alibabas supplier. S1 & T2 = (--)

Alibaba.com, access their information easily to the potential foreign buyers on the suppliers company profile and product profile. That creates an opportunity to the competitors to get information easily which can be great threat of that suppliers company. 2.4 Conclusion The main conclusion from the confrontation matrix is that opportunity should be combined the strength. Alibaba.com should make a possibility to reach a comfort zone, where no external threat or competitors can be affecting their business. 3. Case Analysis In paragraph 3.1-3.5 analysis the case. 3.1 Alibaba.com provides lot of benefits, thats why the site takes a number one position. In the below the benefits and costs of Alibaba.com are shown-

Benefits of Alibaba.com sites Help to purchase high quality product at a low cost Access to many suppliers/buyers Quick transaction More transparency in transaction Lower risk of fraud Easy to make contacts with SMEs Get thousand of product categories with subcategories Helpful online forum to get advice Online guides to teach consumer the basics Import products at lower costs Make greater profit margins Figure-4: Benefits of Alibaba.com sites Figure-5: Costs of Alibaba.com site Costs of Alibaba.com sites Listings are free Searches are free Personalized Web pages cost additional Certification costs some Grieve is a small firm located near Chicago, Grieve Corporation manufactures laboratory and industrial ovens, furnaces, and heat processing systems for the U.S. market. When moving into international markets have proved to be a major factor in the firms continued growth and success. Companies like Grieve need to make web sites such as Alibaba.com a central part of their export strategy. The benefits of using these services reduce the costs and profit will make grater. 3.2 Yes it is reasonable because the rapid growth of the use of these sites and the corresponding increase in trade among SMEs, it is very reasonable to speculate that eventually most trade between SMEs might take place in this context. Our inclination to consider importing and exporting rises dramatically with powerful tools such as these at our disposal. 3.3 Compare and contrast these web sites are Alibaba has a Chinese emphasis and focus, while Trade-India is of course directed to India and Europages to Europe.

Of the three, Alibaba has the broadest appeal, but all are very useful. Trade-India gives more direct access to product catalogs for some companies, but does not have the certification and authentication features of Alibaba. Also, the Alibaba contact templates are much more user friendly than both Trade-India and Europages. Europages is available in many different languages, while the others are more limited and are mostly in English. 3.4 The using Alibaba.com process is very easy, useful, and has tremendous potential value. Because It takes only seconds to find a long list of potential suppliers. One drawback is the urge to contact too many suppliers to find the best possible terms. The method of contact is made very easy by the use of templates and dropdown menus that help to standardize requests. If the suppliers will respond to these requests in a timely manner, the process has huge potential value. 3.5 Alibaba.com sights increase transparency and reduce the risk of fraud. Alibaba allows suppliers to post information about their companies, including video tours of their facilities. Buyers can access Alibabas basic screening and background checks on its registered users. Too they can access the sellers posted references, like one from the sellers bank, to verify the sellers status. In addition, Alibaba has developed the TrustPass designation. In order to obtain this designation, companies must pass an authentication and verification test from a third-party credit agency. Also available is the Gold Supplier designation, which also requires third party verification of trustworthiness. These mechanisms greatly reduce the risk of fraud, but do not eliminate it entirely. Mechanisms such as letters of credit should still be used to safeguard transactions from commercial risk. 4. Recommendation

After case analysis we find out some recommendation, which create an opportunity to the Alibaba.com. This are Create B2C marketplace. Because Alibaba.com lists international manufacturers. This

means that consumer can use this site if individual consumers are interested in importing products from a foreign country. Use more promotional tools by social websites, magazines, event marketing also. 5. Conclusion Right this moment the present world is imagining a global village. Technology advancement is one of the key factor globalization. Technology helps business in various ways which reduce time and cost .E-commerce is such a site where we can do business without any trade barrier. Alibaba.com is e commerce based web site. Alibaba.com is the world's largest online business-to business trading platform for small businesses. Alibaba.com offers a transaction-based wholesale platform, which serves smaller buyers seeking fast shipment of small quantities of goods. It claims it had more than 50 million registered users in more than 240 countries and regions. To sum up the case we can get e-commerce is a strategy, which strategy use Jack Ma, and created an opportunity to transform Alibaba.com from a China-focused e-commerce provider into a global Web marketplace. Thats result in future the chance to expand the historic outward flow of China products to the world to include flows throughout the world.

References

Daniels Jhon D.Radebaugh Lee H. and Sullivan Daniel P. International Business: Environment and Operations, 11th Edition. PEARSON Education.

Alibaba.com to buy U.S. e-commerce site Vendio. [June 24, 2010].

http://www.globaltrade.net/partners.html [June 24, 2010] http://www.thestandard.com.hk/news_detail.asp? we_cat=2&art_id=104877&sid=30272217&con_type=1&d_str=20101112&fc=8 [June 24, 2010]

www.encyclopediacenter.com [June 24, 2010]

http://www.tradeindia.com/ [June 24, 2010] http://www.alibaba.com/ [June 24, 2010] http://www.europage.com/ [June 24, 2010]
www.naturesworkshop.com.au [June 24, 2010]

http://www.alibaba.com/trade/advancesearch?advancedSearchText[June 24, 2010]


resources.alibaba.com ... Industry Knowlege Chemicals Knowledge [June 24,

2010]
ask.alibaba.com/.../804353147-How-do-I-find-transparent-yoga-ball.htm/ [June

24, 2010]

Appendix
Question of Case-

1. List, in separate columns, the benefits and costs of using sites like Alibabas to trade internationally. What does your analysis say to companies like Grieve (in our opening case) as they think about their export strategy? 2. Is it reasonable to speculate that eventually most trade between small- and mediumsized firms might take place in the context of sites like Alibaba.com? If so, does that influence your inclination to consider importing and exporting? 3. Visit www.alibaba.com, www.trade-india.com, and www.europages.com. Compare and contrast these Web sites. 4. Visit www.alibaba.com, go to Advanced Search, and enter the product you seek in the relevant box. Select required criteria and click on Search. Review the list of companies that qualify and find a suitable one. Analyze this process for ease, usefulness, and potential value. 5. How transparent do sites like Alibaba.com make the import-export transaction? Would you still worry about fraud? Development History of Alibaba.com In December 1998, Jack Ma and other 17 founders released their first online marketplace named "Alibaba Online". From 1999 to 2000, Alibaba Group raised a total of US$25 million from SoftBank, Goldman Sachs, Fidelity and some other institutions. In December 2001, Alibaba.com achieved profitability. In May 2003, Taobao was founded as a consumer e-commerce platform. In December 2004, Alipay became an independent business. In October 2005, Alibaba Group took over the operation of China Yahoo! as part of its strategic partnership with Yahoo! Inc. In November, 2007, Alibaba.com successfully listed on the Hong Kong Stock Exchange. In April 2008, Taobao established Taobao Mall, a dedicated B2C platform, to complement its C2C marketplace. In September 2008, Alibaba Group R&D Institute was established.

In September 2009, Alibaba Group established Alibaba Cloud Computing in conjunction with its 10-year anniversary. In May 2010, Alibaba Group announced a plan to earmark 0.3% of its annual revenues to fund environmental protection initiatives. Review Grieve Corporation A small firm located near Chicago, Grieve Corporation manufactures laboratory and industrial ovens, furnaces, and heat processing systems for the U.S. market. Grieve began losing business as (i) foreign competitors began to penetrate the U.S. market and (ii) its customers began to move overseas and started sourcing locally. With the help of the International Trade Administration of the U.S. Department of Commerce, Grieve was able to identify potential Asian distributors. During a business trip to Asia, the president of Grieve met with potential candidates and successfully recruited exclusive agents for each country visited. Once Grieve had gained sufficient experience in the Asian market, export activities were expanded to other regions. Moving into international markets has proved to be a major factor in the firms continued growth and success.

Appendix

Confrontation table 2.0 -0 + ++ The two opposites have a high negative interaction effect The two opposites have a low negative interaction effect The two opposites have neither a positive nor a negative interaction effect The two opposites have a low positive interaction effect The two opposites have a high positive interaction effect