By Mirela Todorova

Overview of Alibaba Group Founded in 1998, based in Hangzhou, China By 2010, over 50% of B2B e-commerce and 70% of online shopping for China Connects millions of users in more than 240 countries and regions Employs almost 20,000 people in B2B sales, computer engineering, customer service Private company with estimated valuation $55 billion to $120 billion

Alibaba Group Company Portfolio Alibaba.com international B2B marketplace Alibaba.com.cn Chinese, Japanese, Korean Taobao.com Chinese largest online shopping Alimama.com Chinese online marketing Alisoft.com Chinese management software and cloud computing services Alipay Chinese online payment services China Yahoo! strategic partnership with Yahoo!

Alibaba Group Timeline December 1998, Jack Ma and other 17 founders of Alibaba Group named Alibaba.com and raised $25 million from SoftBank, Goldman Sachs, Fidelity and SOFTBANK December 2002, Alibaba.com achieved profitability May 2003, Taobao.com was founded as a consumer e-commerce platform December 2004, Alipay.com became an independent business service October 2005, Alibaba Group took over the operation of China Yahoo! November, 2007, Alibaba.com successfully listed on the Hong Kong Stock Exchange. April 2008, Taobao established Tmall.com (originally called Taobao Mall) B2C platform September 2008, Alibaba Group R&D Institute was established September 2007, Alisoft.com established with own sales team May 2010, announced a plan to allocate 0.3% of its annual revenues to fund environmental protection initiatives June 2011, Alibaba Group reorganized Taobao into three separate companies: Taobao Marketplace, Taobao Mall (Tmall.com) and eTao July 2011, Alibaba Cloud Computing launched its first self-developed mobile operating system, Aliyun OS over K-Touch Cloud Smartphone January 2012, Taobao Mall changed its name to Tmall.com to sell brand-name products

Alibaba.com History 1998, over 40 million private small and medium-sized enterprises (SMEs with 50 to 100 employees) in China needed a good communication channel and info source to market, sell products, evaluate trading partners Jack Ma began as an English teacher in China, worked for the Chinese government business deals, started online China Pages company similar to Alibaba.com but was bought out by China Telecom 1999, Jack Ma started Alibaba.com to connect mainly small Chinese manufacturers with retailers, trading companies, downstream manufacturers Started as a free service to registered users By 2008, 1% of users paid for value-added international Gold Supplier and China Trustpass membership programs Gold Supplier provided enhanced online storefronts, prioritized listings, company profile authentication, real-time performance analysis China TrustPass provided similar services globally, and more payment services David Wei is CEO of Alibaba.com

Growth of Chinese B2B Market

Alibaba.com Revenue and Growth By 2008, operating profit increased by 48% to $172 million, total revenue to $432 million By end of 2008, alibaba.com (international) had 7.9 million users and 970,000 storefronts and alibaba.com.cn (domestic) had 30.2 million users and 3.6 million storefronts—today over 40 million domestic Paying customers increased by 41% yearly to 432,031 in 2007 Launched Alibaba.com in Korean and Japanese as well Revenue stream: value-added services and commissions from financing, shipping and insurance services ordered by users in bulk

Alibaba.com Business Model B2B e-commerce between suppliers and wholesale buyers Company profiles, online catalogues called storefronts with listings of products and services Over 30 industry categories and 5,000 product categories Buyers can search using keywords, browse online industry directory, or post listings to buy Active listings, instant messaging, email, discussion forums and other community features Trust ratings for suppliers and buyers Free or fixed subscription fee Mission Statement: “To make it easy to do business anywhere”

Value-added services Gold Supplier and TrustPass memberships Keyword bidding services: Ali-Advance used by Alibaba.com and Zhi Tong Che used by Taobao.com Sellers can bid for keywords and preferential ad ranking on Chinese search page “Pay for performance” contracts meant sellers paid only when customers clicked on their ads Ali-loan program partners with Chinese banks and uses sales, payments and collections data to offer loans to Alibaba.com's paying customers: Credit loan: company-established credit score on Alibaba.com assists businesses in borrowing Security loan: borrow (with a mortgage) to buy equipment Joint liability loan (group loan): Multiple small companies in one supply chain borrow using their credit scores online and guarantee to support each other Ali-Talk real-time communication service on Alibaba.com

Other Alibaba.com supporting businesses 2005 purchased China Yahoo! (www.yahoo.com.cn) to offer search, email, entertainment but Chinese search engine market share fell from 21% to 6% by 2009 competition from Google and Baidu Alipay escrow service held customer payments until purchased goods were delivered—built trust By 2008, had 50% of all online payments in China Competes with PayPal internationally 2006 started Alisoft.com to provide enterprise management software, inventory management, financial management, and Cloud Computing and mobile OS by 2011 2007 started Alimama Chinese advertising exchange Small and large ad publishers can offer their ad inventory and ad agencies can book the ads Inventory of billions of ads

Competition Global Sources: Hong Kong-based international B2B website Reaches 230 countries, but has less total users Offers similar services as Alibaba.com Has additional services such as monthly trade magazine for consumer products, other monthly magazines and sourcing research reports, trade-specific exhibitions in China ChinaChemNet: vertical coverage of chemical industry in China Other marketing service providers and trading channels like search engines and magazines

Alibaba.com goes Public Alibaba Group remained private but listed 19.25% of Alibaba.com and Alibaba.com.cn on Hong Kong Stock Exchange in Nov. 2007 IPO $1.7 billion and stock tripled in value on first day, trading at 306 times projected 2007 earnings Benefits Publicity and recognition for B2B customers Attracted management talent Equity-based incentives for management CEO Jack Ma continued to focus on building a Chinese brand rather than quarterly profits

Corporate Strategy: Decentralization To maximize flexibility, Alibaba Group subsidiaries have independent technology teams—no Chief Technology Officer Technology platform includes systems architecture and development, data analysis, data storage, and application development Bottom-Up process for annual budget, strategy and operating plans: Every fall, subsidiary Presidents submitted plans to Group corporate headquarters for review by Chief Strategy Officer, CFO, Chief People Officer and CEO Presidents encouraged to do what’s best for their subsidiaries and not to force BU synergy

Corporate Culture: Entrepreneurial “Company will remain a start-up no matter how long it has been in existence”—Jack Ma Values Entrepreneurial and innovative spirit Customer service Transparency in processes, systems, decisions Solid financial ground, ethics Contribute to welfare of society Rotate managerial talent Harmonious and supportive internal environment

Alibaba.com Future Alibaba Group CEO Jack Ma plans to step down in 2013 Plans to expand through acquisitions, investments, licensing and partnerships Expand user base and value-added services Widen geographic coverage Advance technology with user demand Cross-selling and marketing with other Alibaba Group subsidiaries

Quiz Question 1 Tmall.com is typically categorized as a A. B2B website B. C2C website C. B2C website

Answer 1 Tmall.com is typically categorized as a A. B2B website B. C2C website C. B2C website

Quiz Question 2 Which Alibaba.com supplier value-added service provides authentication and enhanced online storefronts, prioritized listings, and real-time performance analysis? A. PassTrust B. Gold Supplier C. Alibaba Platinum D. Ali-Business

Answer 2 Which Alibaba.com supplier value-added service provides authentication and enhanced online storefronts, prioritized listings, and real-time performance analysis? A. PassTrust B. Gold Supplier C. Alibaba Platinum D. Ali-Business

Quiz Question 3 Who is the CEO of Alibaba Group? A. David Wei B. Jack Ma C. Daniel Wong D. John Min

Answer 3 Who is the CEO of Alibaba Group? A. David Wei B. Jack Ma C. Daniel Wong D. John Min

Quiz Question 4 True or False? Both suppliers and buyers can post on Alibaba.com for free

Answer 4 True or False? Both suppliers and buyers can post on Alibaba.com for free

References “Alibaba.com: A Smiling Community with A Dream.” 2005. http://www.ft.com/intl/cms/c6aba388-74a6-11db-bc76-0000779e2340.pdf Farhoomand, Ali. “Alibaba.com” Asia Case Research Centre University of Hong Kong. 2008. Wulf, Julie. “Alibaba Group.” Harvard Business School. April 2010. 9-710-436 www.Alibaba.com