Business Analysis:
Discuss the on-going competition between Alibaba, Amazon, and eBay. Alibaba, Amazon, and eBay are all participating in the business to business (B2B) and business to consumers (B2C) e-commerce industry. E-commerce is a method of doing business, which allows transactions to occur place over the internet via sites that links vendor, host and buyer over a network. Amazon and eBay have been business to business e-commerce competitors with their primary customers coming from the US market for the past few years of existence. The emergence of Alibaba, which is presently the world leader in B2B e-commerce, coming out of China, is due to the fact that both Amazon and eBay failed or neglected to infiltrate the Chinese market. Therefore, the need for China’s own e-commerce mecca was realized and established by Jack Ma in 1999.
Alibaba grew unknowingly to Amazon and eBay, and has become the competing force that currently offers products and makes profit that is greater than both Amazon and eBay combined. The product lines for these companies are similar, since all three companies’ offer various goods and services and advertising. Alibaba focuses more on the business to business sales which can be argued is a more revenue generating route. While Amazon’s and eBay’s primary market is the US and Alibaba’s is China, they are all global e-commerce competitors because e-commerce allows them to have the global community as their potential customers and not just their home country. EBay in 2002 tried to enter the Chinese market but Alibaba was able to negate this new entrant to the market by fortifying the company’s position in the market when it secured an investment from Yahoo, thereby diminishing eBay’s efforts causing them to abandon all efforts in 2006.
Alibaba’s main market (China) is twice the size of Amazon’s and eBay’s market (USA), which means they have no need to enter the US market anytime soon. However, the e-commerce power houses of the US need to have strategies in order to counter the competition that is bound to intensify. Since consumers in China are not seemingly loyal, and this might cause Alibaba to tread into US territory to secure loyal repeat consumers. But the competiveness does not end there as Alibaba might soon face another competitive treat from its rival company Tencent. But separate and apart from home competition Alibaba has an IPO offering in the US stock market and ShopRunner one of Amazons main competitors is joining forces with Alibaba, in an effort to aid Alibaba’s entry in the US and in hopes of making the Chinese market more attractive to American retailers.
Analyze the five forces and discuss the competitive intensity. The five forces of competition are still utilized in e-commerce and has adverse effects for all participating stakeholders. Firstly, customers by means of the internet can interact with companies more directly, and this tends to dampen the channels bargaining power. Secondly, the bargaining power of buyers are increased dramatically because the internet provides them ease of access to various products and their suppliers. Thirdly, entering a specific market is more easily done than before, since the internet diminishes the barriers to entry, allowing small and large companies to enter the market by offering their products and services online.
E-commerce also creates a route for substitutes as the internet enables numerous new ways to meet the needs of stakeholders and perform various functions. Lastly, the rivalry among competitors is continuously amplifying because the internet allows the expansion of geographic markets, therefore every company in similar markets are competing for buyers across the globe. The numerous benefits of the internet (e-commerce); the ease of access to information, purchasing, distributing and marketing is much easier and affordable to accomplish. But making business transaction between buyers and sellers easier has intensified the competitiveness among companies, and this in many cases leads to companies engaging in price competition, which can be a destructive route.
Alibaba’s competitive position and its Strengths and weaknesses. Limiting the number of new entrants to the market is Alibaba’s main focus in an effort to achieve the company’s goal of building the consumer market in Asia and eventually the world. eBay Eachnet is one of Alibaba’s main rivals, and not because both companies are operating in the same Chinese e-commerce industry. Alibaba and eBay are close competitors because is making the most of its global brand recognition to make similar offering to the Chinese market. Taobao, one of Alibaba’s subsidiaries, uses Alipay, which is the payment tool for B2B e-commerce websites. eBay Eachnet subsequently launched a similar payment processor called Escrow that offers an online payment that offers more security for members. Even though eBay gained quick access to the Chinese market when they launched their Eachnet auction site, Alibaba has a stronger hold in the market.
Amazons e-commerce software is being used by over 2000 online merchants, and with Alibaba’s current IPO offering Amazon may face a long tern business treat if Alibaba decides to use the proceeds from its IPO to move its business model into US territory. The company’s competitive advantage is bound to increase drastically as it has already started to pave its way into the US e-commerce market by buying or investing in small US Companies. Alibab has already invested in ShopRunner, Tango.Inc, search engine Quixey, and have also agreed to buy Vendio Services and Auctiva online market place companies.
A few of Alibaba strengths, are the fact that it has a global reach in many of the largest countries in the world. It also uses acquisitions as a developmental strategy, one such case is its tie to Yahoo China. This acquisition put the company in a position to have an even larger and stronger hold in the market as yahoo is a global company and China is a growing e-commerce market. This strategy also opens up opportunities for the company as acquisitions are a great way to enter new markets, and tends to place companies in a position of rapid growth.
The weakness of the company that stands at the forefront is its narrow use of technology, when it competitors have more complex and attractive technology and sites. The company has over 4000 well paid employees, which means for a company that operates online, they are too labour intensive and a large chuck of their expenses goes towards paying salaries. Finally, the company’s marketing is either limited on ineffective because even though they are a global company they are relatively unknown to one of the world’s largest economies, which is the USA.
Conclusion. Alibaba, Amazon, and eBay are competitors among themselves, and all three have their own portion of competitors outside of each other. Ebay is considered a leader in the industry with its auction site, Alibaba has propelled past the competition. Since the company was able to capitalize on the strategies of eBAy Eachnet to develop and institute changes to their own for a better global offering. Amazon features a complex e-commerce system offered to B2B e-commerce retailers, Alibaba main customers are retailers, as it has found a niche market of suppliers. Which means when Alibaba enters the US market, they will be a formidable treat to Amazon who is the current leader in providing services to e-commerce suppliers. Therefore, online retailers need to realize that they are competing globally, with not just dot com companies but every brick and mortar company that has an online presence. So, customer service must be a key element in their growth strategy in order to anchor customers to their sites, as in the case of Zappos, who has an effective customer service model. Because offering free delivery will no longer be enough in this ever expanding industry.
References
Alibaba Company Profile. (n.d.). CrunchBase, The Free Tech Company Database. Alibaba.com. Retrieved from http://www.crunchbase.com/company/alibaba
Liedtke, Michael. (2014). Alibaba Group, the king of e-commerce in China, is dangling a deal that could turn into one of the biggest IPOs in history. San Francisco Press. Retrieved from http://news.msn.com/us/chinas-alibaba-seeks-blockbuster-ipo-in-us
Loeb, Walter. (2014). 10 Reasons Why Alibaba Blows Away Amazon and Ebay. Forbes. Retrieved from http://www.forbes.com/sites/walterloeb/2014/04/11/10-reasons-why- alibaba-is-a-worldwide-leader-in-e-commerce/
McGuinness, Ross. (2014). China’s own Google, Amazon and eBay rolled into one: The rise and rise of Alibaba. Metro. Retrieved from http://metro.co.uk/2014/05/12/chinas-own-google- amazon-and-ebay-rolled-into-one-the-rise-and-rise-of-alibaba-4725258/
Satariano, Adam. (2014). Amazon Profit Weakness Highlighted by Alibaba IPO Filing. Bloomberg. Retrieved from http://www.bloomberg.com/news/2014-05-07/amazon-s- profit-weakness-highlighted-by-alibaba-filing.html
