Alibaba and Global Supply Chains
Alibaba and Global Supply Chains
This activity is important because, as a manager, you must be able to understand global production and supply chain management as they relate to the firm’s overall strategy.
The goal of this exercise is to demonstrate your understanding of global production and supply chain management—where production should be located, whether to outsource production, and how to manage the process from raw materials to the end consumer.
Read the case and answer the questions that follow.
Alibaba Group Holding Limited (alibaba.com) was founded in 1999 by Jack Ma as an e-commerce company to facilitate sales among companies that provide consumer-to-consumer, business-to-consumer, and business-to-business products that are sold via the Internet. As the world’s largest e-commerce platform, Alibaba is on a path to realizing its vision of facilitating $1 trillion in product sales annually as it also pursues a goal of reaching 2 billion consumers. The company is headquartered in Hangzhou, Zhejiang, China, has a revenue of more than 23 billion U.S. dollars (primarily via advertisements on its sites), and employs about 51,000 people.
Alibaba’s global supply chains are constrained tremendously on “Singles Day” or Guanggun Jie, a Chinese holiday celebrated on November 11, the solitary ones of the date—11.11—suggesting “bare branches,” the common slang for singles in China. On this day alone, more than $20 billion in sales, or more than 300 million orders, takes place on Alibaba’s Internet platforms (e.g., Tmall, Taobao). When global retailers think of mega-sales online, they generally think of Black Friday or Cyber Monday, but they ought to be watching 11.11 closely as well, especially as 11.11 doubles the combined sales of those U.S. e-commerce holidays.
Each year, Alibaba handles more than 80 percent of China’s e-commerce business. The company now operates in 190 countries. Moving forward, the vision for Alibaba is simple: Bring in non-Chinese brands to the Chinese market and expand products to customers outside of China’s borders. So far, the impact is clear. Beyond its own employees, Jack Ma claims that Alibaba has created more than 30 million jobs in China related to companies that sell their products on the Alibaba e-commerce platforms. Ma has also committed to create 1 million new jobs in the U.S. With such a large scope, the global supply chains that Alibaba facilitates have to be top-notch, innovative, and always pushing the boundaries for what can be done in delivering products from manufacturers to consumers.
Alibaba does this by focusing on a differentiation strategy, partner connections, buyer protection, mobile technology, and large-scale product selections. Alibaba’s differentiation strategy entails operating as an intermediary, connecting buyers and sellers while largely avoiding the need for maintaining capital-intensive warehouses and depots. Partnering with Alibaba enables small manufacturers and suppliers to reach thousands, and likely tens of thousands, of new customers. Importantly, in these buyer–seller exchanges, Alibaba emphasizes buyer protection. That is, if a customer is not satisfied for any reason, he or she can make a refund request. This consumer focus also carries over to how customers interact with the company. Alibaba has seamlessly adapted its e-commerce sites to mobile platforms, an important part of its strategy given that more than 80 percent is done via mobile devices. The large-scale product selection that can be found on the Alibaba platforms has resulted in some 15 billion products being sold annually and 15 million packages being shipped daily (compared with 5 billion items on Amazon and 3 million packages per day).
Sources: “How to Cut Supply Chain Costs: 6 Lessons From Alibaba,” UNA Purchasing Solutions, March 26, 2017; Frank Lavin, “Alibaba’s Singles’ Day: What We Know about the World’s Biggest Shopping Event,” Forbes, November 6, 2016; Bob Bryan, “Alibaba Just Proved It’s More Than Just Some Chinese Company,” Business Insider, November 15, 2015; Catherine Cadell, “Alibaba Posts Record Singles Day Sales, But Growth Slows,” Technology News, November 11, 2016; Jake Novak, “Here’s the Really Brilliant Thing about Trump’s Meeting with Alibaba’s Jack Ma,” CNBC, January 10, 2017; Brian Deagon, “Alibaba’s Audacious Goal to Reach $1 Trillion in Merchandise Sales,” Investor’s Business Daily, May 6, 2016; Catherine Clifford, “By the Numbers: Amazon vs. Alibaba,” Entrepreneur, July 13, 2015; Nick Wells, “A Tale of Two Companies: Matching Up Alibaba vs. Amazon,” CNBC, May 5, 2016.
Each year, Alibaba handles more than 80% of China’s e-commerce business. The company now operates in 190 countries (only 196 countries and 61 territories exist in the world). Moving forward, the vision for Alibaba sounds simple: Bring in non-Chinese brands to the Chinese market and expand products to customers outside of China’s borders. Do you think this global strategy is viable?
The large-scale product selection that can be found on the Alibaba platforms has resulted in some 15 billion products being sold annually and 15 million packages being shipped daily (compared with 5 billion items on Amazon and 3 million packages per day). This puts tremendous pressure on global supply chains. Can the supply chains continuously facilitate the increased demand that we as customers place on the global supply chain systems?
Answer preview Alibaba and Global Supply Chains
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