It is always a concern for every business to lay down appropriate strategies to enhance sustainable growth and remain competitive within the market. Among the strategies by companies in the wink of expansion is acquisition. For instance, the case of Amazon in acquiring Whole Food was completed to expand to the other markets and compete equally. Alibaba Group Holding Limited is also among the main Amazon competitors, which was started in 1999 by Daniel Zhang, and it is situated in Hangzhou, China[1]. Over the years, Alibaba has remained competitive recording high sales for instance, in 2021, the sales increased by 36%, which was $ 31 billion. Importantly, the Alibaba success strategies have resulted in a strong brand name, hence providing the clients with outstanding value on products and the best shopping experience and attaining economies of scale. However, we all understand the company has to implement other measures to sustain growth. This is exactly what Alibaba has done. I believe they have placed the company high on the competition scale with the innovative strategies. These innovations also come with unique elements hence boosting the competitive advantage for the company. Therefore, the element of competitive advantage cannot come easy rather the company has to focus on implementing outstanding innovations. The memo will focus on discussing the innovative strategies that have enhances Alibaba`s competitive advantage.
Alibaba on innovative strategies
Amazon remains a dangerous competitor to Alibaba, meaning if Alibaba fails in its strategy, it may not be able to strive. On the other hand, Alibaba has its innovations in attaining competitive advantage, including applying differentiation strategies like application of technology, low listing fees for some units, and the use of Ant Financial Services.
Alibaba Technology on Competitive Advantage
It is amazing how technology has changed the world and how businesses operate. Everything now relies on technology, but the challenge appears in situations where a company fails to embrace technology which automatically means the company will not compete. Alibaba management understands the importance of differentiation which is all about uniqueness. This is what the company has done. In terms of technology, Alibaba being an internet-based company, the company uses the internet to boost the client’s purchasing power[2]. The use of technology has enabled the company to provide a wide variety of products to clients. Ask yourself why Alibaba is succeeding in using the same technology other companies are using? I believe this is all about how technology is used, and there is nothing new in technology. Alibaba, for instance, has created a network of dealers that links both the suppliers and the consumers. The consumers and the suppliers create valuable chances for the parties involved, which is a form of collective entrepreneurship. This approach has proved the platform’s stability; hence many suppliers now use Alibaba to locate the product`s market. Alibaba can apply a broad market strategy with an effective market, which widens the network for suppliers and consumers. This has also resulted in the emergence of different platforms under Alibaba such as Alipay and Taobao to ensure the clients’ needs are made. Enhancing convenience in the platforms used by the consumers and stakeholders is the best as they are the major determinant of the business. The same way Amazon invented the Amazon Web Services in 2006 to provide cloud computing services. However, using technology as the differentiation strategy is a challenge as the company may sometimes focus on gaining the customers traffic without any profit, like the Kindle by Amazon. Similarly, Alibaba also tries to maintain the customers by expanding its platform to reach a wide number of clients.
Cost Reduction Strategy and Competitive Advantage
Enough on that strategy, and now let’s focus on reduced listing cost. Any typical client compares the prices before making any purchase; therefore, the cost is important to consumer behavior. Alibaba provides a platform for the suppliers to advertise their commodities to meet potential buyers, like Amazon, Taobao, and other companies[3]. Given that the suppliers need to pay fees to post the products, Alibaba stands out due to reduced prices on the listings. The company offers different membership with the basic starting from $2500. However, as a strategic approach, Alibaba has removed price listings from for some products and one is automatically awarded when he hits a certain target. The reduction in prices is also the cost differentiation, where most will choose the cheaper choice as long as they receive similar services. With the cost reduction strategy, Alibaba has the upper hand in gaining clients. It is the best strategy for maintaining competitiveness. However, the company still needs to understand its operations costs well so that it cannot run on losses while ethnizing the clients. The company must ensure that the products it has removed from the listing prices do not occupy a significant percentage of the organization`s operational costs.
Money Lending through Ant Financial
The introduction of Ant loans has given Alibaba one step from its competitors, contributing to competitive advantage. In 2012, when Alibaba launched Ant Financial, a loan given by a large bank, the minimal loan was 6 million RMBS, higher than the loans given by other medium-sized enterprises[4]. Several banks were reluctant to service the companies, but with Alibaba giving loans to support business activities, it has remained an important element in boosting Alibaba on the market. It is a data-driven microloan business, and in the past seven years, Alibaba has lent more than 88 billion RMBS which is more than 3 million small businesses. Alibaba partnered with Alipay, the online paying platform, which has helped capture the objective of the new companies and empower them at the same time. Alibaba Has helped several businesses expand an attractive platform for business people.
Along with reviews from the old clients, this has constantly attracted new clients who are willing to take loans in an effort to expand their business. Looking at this, it is logical, especially with these hard-financial times, every company is struggling and in dare need to be financed. Therefore, if there is an opportunity to get the finances, the company will seek it without hesitation, which has boosted Alibaba`s success.
An Online-to-Offline Strategy (O2O)
This is a marketing strategy that Alibaba adopts, allowing customers to purchase products or receive the targeted adverts only by scanning the two-dimensional code. It is an innovative strategy that has boosted its sales, and many companies have not been able to adopt this strategy[5]. Reports also indicate that Alibaba has invested more than $1.25 billion in Chinese online food intending to strengthen its position in the O2O market as a long-term catalyst to its growth. With the enhanced competitive advantage, it is stated that 63% of Alibaba`s growth is attributed to online consumer penetration and the major element behind the strategy is that it blends both online and offline retailers to create a virtuous cycle[6]. From the discussion, it is evident that the success of Alibaba China has not come easy, but rather the company has constantly improved its strategies to ensure it gains the competitive advantage over the other competitors.
Works Cited
Glowik, Mario. 2017. “Case study: Alibaba group.” Research Gate 96-105.
Jia, Wei, and Jia Li. 2015. “The O2O Mode in Electronic Commer.” International Conference on Education, Management, Commerce 2-89.
Trevis. 2021. “Why Is Alibaba Strengthening Its O2O (Online To Offline) Presence?” Forbes. Accessed 2021. https://www.forbes.com/sites/greatspeculations/2015/12/31/why-is-alibaba-strengthening-its-o2o-online-to-offline-presence/?sh=10832e891063
Zeng, Ming. 20. “Alibaba and the Future of Business.” Havard Business. Accessed 2021. https://hbr.org/2018/09/alibaba-and-the-future-of-business
[1] Glowik, Mario. 2017. “Case study: Alibaba group.” Research Gate 96-105.
[2] Zeng, Ming. 20. “Alibaba and the Future of Business.” Havard Business. Accessed 2021. https://hbr.org/2018/09/alibaba-and-the-future-of-business.
[3] Zeng, Ming. 20. “Alibaba and the Future of Business.” Havard Business. Accessed 2021. https://hbr.org/2018/09/alibaba-and-the-future-of-business.
[4] Zeng, Ming. 20. “Alibaba and the Future of Business.” Havard Business. Accessed 2021. https://hbr.org/2018/09/alibaba-and-the-future-of-business.
[5] Trevis. 2021. “Why Is Alibaba Strengthening Its O2O (Online To Offline) Presence?” Forbes. Accessed 2021. https://www.forbes.com/sites/greatspeculations/2015/12/31/why-is-alibaba-strengthening-its-o2o-online-to-offline-presence/?sh=10832e891063
[6] Jia, Wei, and Jia Li. 2015. “The O2O Mode in Electronic Commer.” International Conference on Education, Management, Commerce 2-89.
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