ANALYZING THE ALIBABA IPO

AND THE SECRET OF ITS SUCCESS

Section C, Group 8
Archit Raj 7C
Chaitanya Patil - 13C
Nimit Malhotra - 29C
Ruhi Gupta 42C
Vikas Selwal 54C

Agenda

Alibaba: Timeline and Evolution

Alibaba: Porters Five Forces Analysis
Alibaba: Financial Analysis

Alipay v/s PayZippy

Singles Day

Battle of the Giants : Alibaba v/s Amazon

Indian Perspective- Major players

Indian Perspective- Challenges and Growth

ALIBABA : Future Growth Prospects

ALIBABA IPO IMPLICATIONS

Alibaba: Timeline and Evolution

Alibaba Founded in
Jack Mas Apartment

1999

Alipay Launched

2003

Taobao Marketplace
Launched (C2C Portal)

2004

C2C portal launched to

complement Taobao

2007

2008

Alimama Monetization
platform launched

2009

Aliexpress launched

2010

Alibaba Cloud
computing launched

Singles day Huge

Success

2011

Alipay separated
from the company

2013

Alibaba: Porters Five Forces Analysis

For Alibaba.com the customers are the small
and medium size firms which dont have the
ability to build up their own websites
To negotiate with the biggest B2B eplatform, these firms dont have too many
advantages to fight for lower cost and nearly
all the standards are decided by Alibaba.com

Intensity of
Competitive Rivalry:
Low

Bargaining Power of
Suppliers: Low
When customers require
special customizations,
they are less likely to
switch to producers who
have difficulty meeting
their demands
When there are large
numbers of customers,
no one customer tends
to
have
bargaining
leverage.
Limited
bargaining
leverage
helps Alibaba.

Barriers to Entry:
Medium

High returns will draw firms. This results in many

new entrants, which will decrease profitability.
The most common way to enter B2B market is to
try and position its target market to a single
industry.
Although these firms dont have the broad market
of Alibaba, they share a special market because
they are more professional and targeted

Bargaining Power of
Buyers: Medium

Threat of Substitutes:
Medium

The most important substitute service is the

self website of large companies.
For the customers which prefer to make
business with large companies, they will not
turn to alibaba.com but directly contact
these companies

Chinas online shopping

market size was $295 billion
in
2013
and
Alibaba controlled 80% of
this pie
The most competitive firms
of Alibaba are the search
engines like Google.com,
Baidu.com
The potential customers
may search the results
through these free and
simpler websites and not
through the B2B platform

Alibaba: SWOT Analysis

Weakness

Strengths
The world's largest Chinese Forum has created a
great convenience for traders around the globe
to exchange, and also closer to the distance
between the various traders, but also to
enhance the visibility of the website.

Alibaba's business platform large and cluttered

that it had 27 industries, 800 - 900 categories of
industries as a business platform to optimize the
greatest obstacles.
Alibaba's Web site model is an intermediary
form, and replicability of this model, is easy

SWOT
Opportunities
China is now speeding up the development of ecommerce legal provisions, and actively creates
a safe and regulated business environment.

China's existing small and medium enterprises

can not afford to start their own b2b business
website, so that online intermediaries have large
opportunities

Threats
More players coming up in the E-commerce
segment like Amazon, Rakuten, Flipkart means
the industry will be tremendously competitive in
a few years

Alibaba: Analysis of Product Categories

Alibaba: Financial Analysis

Alibabas 5 Big numbers

Key Figures for Analysis

1) $248 billion GMV

2) 31 million orders
per day
3) 5 billion packages
4) 136 million
monthly active users
5) $5.8 billion USD on
singles day

Key Takeaways:
Alibaba Revenue is lower than that of Amazon and eBay.
The primary reason is the business model, Alibaba makes money by charging merchants for advertisement on their
website and transaction fees.
While Alibabas revenue is less that Amazon and eBay, however, Alibaba is highly profitable company as compared to
Amazon or eBay.

Alibaba: Growth Analysis

Alibaba: Analysis of Advertisements

Alibaba sells advertising on its marketplaces, such as search ads on Taobao and Tmall
But its revenue was dwarfed by Baidus market share, with the search engine hovering up around a
third (32.2%) of online advertising revenue
Google Chinas decline continued, with the company coming in third with 5.2%

Alipay vs PayZippy

Alipay IPO

800 million userbase

Handled $660 billion worth
of transactions in 2012
The IPO will be listed in a
mainland Stock Exchange

Shuts down after only 1 year of

operations since it fails to achieve
desired results

Reason of shutdown: Indian

consumers seem to have skipped
e-payments and gone on straight
to m-payments

Singles Day

Sales of $9.3 billion in one day

Participation by 27,000 vendors
Vendors advertised prices as
early as October 15
Biggest Challenge: Shipping 260
million packages in 3 days

First Indian online mega sale

Results in sales of over $100
million
Gets 1 billion website hits on 1 day
Plagued by technical errors
Leads to huge scandal and the
founders have to issue a written
apology

Battle of the Giants : Alibaba v/s Amazon

Philosophy

Amazon is obsessed with the customer with a long standing goal to build the worlds most customer centric
company
Jack Ma and Alibaba want to help small businesses grow by solving their problems through Internet technology.
They fight for the little guy.

Key Aspects

Geographic Focus

Battle of the Giants : Alibaba v/s Amazon

Revenues and Profitability

Why Such a Difference?

Amazon had a 0.94% profit margin in 2013. Alibaba,
by contrast, had a 49% profit margin in 2013 more
than 50x higher.
So what explains this monumental difference?
In a phrase, warehouses vs. software.
Bottom line? Software tends to scale better than
warehouses do.

The Future

So what will happen?

Are these two

powerhouses
destined to meet in a
spectacular pay-perview battle for
eCommerce
supremacy?

As fun as that would be

to watch, its unlikely in
the near future.

Whatever happens, it will undoubtedly

be exciting to watch

A potentially even bigger

opportunity for Alibaba would be to
help Western merchants reach the
massive and still largely untapped
pool of Chinese consumers.
Given Alibabas more profitable and
scalable model and their
momentum they have the
advantage for any head-to-head
battles in new markets.
But Amazon does have a better track
record of expanding internationally
and, has never been one to shy
away from a fight.

Indian Perspective- Major players

Made profits in two financial years since

entering India
The Indian unit of Alibaba posted a profit of
more than Rs 1 crore on sales of Rs 20 croreMarch13
It bought Easy Business India E-commerce in
Dec 2010 to enter the market
Gross Merchandise Value (GMV) of 248$
billion

Alibaba in talks with Snapdeal to enter India

Continues to be in the red
after more than six years of
operations

Has 6 warehouses
GMV of $1 billion
Launched Flipkart Kaarigar
Ka Dwaar

So far, Alibaba been linking Indian merchants

with overseas buyers and sellers.
If it aligns with Snapdeal, it will be competing
directly against Flipkart and Amazon
Snapdeal launched 40 warehouses across 15
cities
GMV OF 1$ billion

Indian Perspective- Challenges and Growth

Growth avenues
Financial services to small businesses
Semi-closed prepaid wallet

Expansion of high-speed internet and

communication infrastructure
Reducing the trust deficit between
Indian consumers and suppliers
Engaging with global players rather than
limiting to the local Indian market

ALIBABA : Future Growth Prospects

An opportunity to
reach new markets

Plan to strongly expand in the U.S. and

Elements
of Growth

Focus on unlocking markets that are

Staying ahead
of competitors

European markets after its U.S. listing

relatively new to ecommerce

Advanced targeting
and consumer
insights

Working to effectively erode skepticism and

to build trust among customers

ALIBABAs STRATEGY

Launch of online marketplace like 11Main and

e-commerce site like AliExpress for foreign
customers who want to buy retail goods from
Chinese merchants.
Investments in U.S. tech companies, and not
just in the e-commerce sectors like the funding
of ShopRunner, an online retail site with free
two-day shipping, messaging app Tango and
ride-sharing service Lyft

WHAT DOES IT MEAN ???

Ready to buy its way into the U.S.

market

More interested in learning how

things are done in the U.S. tech
sector, rather than outright buying
companies

Alibaba IPO Implications

IPO will help the Chinese company generate

international public awareness among
consumers, businesses and investors in the
short run

Funds raised may let Alibaba make capital

investments globally in the areas of
infrastructure, data centers and cloud
computing

As the firm attracts new users and businesses to

its sites, and becomes active in more areas
outside of e-commerce, the real gold for the
company could be consumer data. Its already
been trying to expand in China, by launching its
own mobile operating system, search engines
and messaging app

Analysts are also not ruling out the possibility

that Alibaba could use the IPO dollars to make
an acquisition or two

Alibaba, like Google or Facebook, is broadening

its scope, branching out into all aspects of the
Internet

Cloud
Computing

Technological
Innovations

Data
Provider

PATH TO
SUCCESS

Quality
Control

Warehouse
and Logistics
Management