Case review and analysis

Alibaba Case

Does the "bird cage" theory when applied to China's Internet policy constitute a serious threat to the development of the B2B e-commerce industry?

Yes, the bird cage theory does limit the development of the B2B e-commerce industry. Bill Clinton, former America's president, believed that trying to control the internet in China would be like trying to "nail Jell-O to the wall" (The Economist, 2013). The internet was so largely decentralized that nobody believed its power could be harnessed by a central regulating force. However, the Chinese government was largely able to "cage the (internet) bird" with much success.

The Chinese state has shown great skill in bending the technology to its own purposes, enabling it to exercise better control of its own society and setting an example for other repressive regimes (The Economist, 2013). However, there are also many costs to this strategy. One example is with innovation. Chinese citizens and business professions can only access a "caged" amount of information and to "cage" information it takes time. Therefore, many of the industries such as B2B commerce do not have the agility to be found in more free societies.

2. What is the focus of Alibaba's business and what makes it so different from U.S. ecommerce companies?

The focus of Alibaba's target market is much different than the traditional model. The site focuses on small businesses whereas most U.S. companies would focus on larger clients. Focusing on bigger clients can have many benefits especially in regards to marketing. However, at the same time, there are many more smaller businesses that collectively are larger than even the biggest corporations. Alibaba focused on this fact and connected small businesses from all over the world.

3. Would Alibaba have been as successful today without the leadership of someone like Jack Ma?

The site probably would not have been as successful. Not only did Jack Ma develop the idea earlier than everyone else, he had unique insights that proved to be innovative on a global scale.

4. What are the benefits of the strategic cooperation with China Post?

In the Chinese market, a successful ecommerce solution must include as much as the country as possible. The cities in China can be thought of in tiers. The largest cities can be thought of a first tier, the second largest group represent the second tier and so on. Jack Ma, chairman of Alibaba Group, said at a signing ceremony in Beijing that (Jing, 2014):

"China will see the emergence of online platforms that can handle transactions of more than 10 trillion yuan ($1.6 trillion) a year. We need to make sure that the development of a logistics system in China can support the surging development of e-commerce," he said, adding that third - and fourth-tier cities and rural areas offer "unimaginable growth potential."

Thus for Alibaba to truly be successful, it also needs an infrastructure that can support it as well.

5. What are the current and future benefits of the cooperation with Yahoo?

The benefits that Yahoo and Alibaba shared were multifaceted. Alibaba was able to utilize many of the technological advantages that Yahoo had while Yahoo was able to acquire greater access to the Chinese market. Alibaba was trying to keep market share from EBay and Yahoo could help to in this effort. Yahoo paid $1 billion for a 40% stake in Alibaba in 2005 and is now reaping a huge return; more recently Alibaba is paying $7.1 billion in cash and stock to buy back half of Yahoo's holdings and another $550 million is being paid to Yahoo under a revised technology and patent licensing agreement with Alibaba (Liedtke, 2012). Thus the deal turned out to be better for Yahoo than Alibaba however it is likely that both sides profited from the partnership.

6. Is there room for Alibaba in the global race for online supremacy, and what would you do to secure the future for the company?