Select two of the more prominent cooperative linkages that Alibaba has made. Make sure that there are meaningful differences between the two different alliances or joint ventures you have selected. Begin your paper by summarizing key details about Alibaba’s two alliances or joint ventures that you are using for your paper.
Next, for each alliance or joint venture:
Assess the type of business-level or corporate-level cooperative strategy the organization is following.
Evaluate how the cooperative strategy enhances the competitiveness and performance of the organization relative to what could be done without the cooperative agreement.
Evaluate the risks that arise from this alliance or joint venture.
Finally, summarize two or three important take-aways from your research into Alibaba’s alliances. In essence, what did you learn and what strategic development and implementation lessons might you apply?
Alibaba alliances :
1) Alibaba and Meeras Holding Joint venture :
Alibaba is a giant ecommerce company and its cloud computing arm called Aliyun entered into joint venture with Meeraas Holding for creation of data centers in Dubai. Alibaba is now focussing more on the data. The creation of data center in Dubai is a move to target the competitors and build an edge for itselves since IT sector is huge in Dubai hence the expenditure incurred on IT is going to rise. The creation of data centers has rigtly tapped the business opportunity available.
Corporate level strategy Alibaba is following with respect to Meeras Holding:
The company is adopting global expansion or growth strategy to enter new markets in Middle east and establish itselves before the competitors. Also the company is following a diversifiactions strategy by diversifying itself in other sectors.Alibaba understood that there is high demand of IT services by both the government and the enterprises and hence the IT expenditure will be high and hence decided to form an alliance to enter the market.
Enhancing the competitiveness :
The alliance enhances the competitiveness of Alibaba. Dubai is growing at a very fast rate and the cloud computing market has not yet been tapled by others. This alliance will provide an opportunity to provide cloud computing services such as analytics and also focus on big data operations. The company got the major competition from Amazon web services and Microsoft. By this expansion , it has further increased its scale of operation thereby bringing its costs more down due to economies of scale and also reaching more consumers. This would lead to enbanced competitiveness and performance of the organization.
Risks that arise from the joint venture:
Economy risks and political risks might arise. Dubai is still an oil country and depends on the oil price for its revenue. If there is a huge drop in oil price, Dubai will be affected. The businesses in turn will also be affected since the business as well as the government are highly debt laden. Hence in the case of joint venture where risks need to be shared , problems might arise if economy does not function well and there is lot of exchange risks.
2)Alibaba and Suning commerce Group Company Limited Alliance:
Alibaba invested in suning commerce by buying stake in the company. The company currently maintains a stake in Suning at around 20%.Suning commerce is an electronics retailer in china. This move enables Alibaba to integrate both online and offline shopping. Customers can try out a phone from Suning physical store and later buy the phone from Alibaba website. Suning would also benefit by utilising Alibaba distribution network and would deliver products much faster. Later Alibaba and suning together decided to form joint venture which would be an ecommerce firm.
Corporate levels strategy :
The corporate level strategy followed by Alibaba here is to integration along with expansion. The company is expanding itself and intensifying competition. The crux is also to integrate the physical and online sectors so that more and more customers engage with the company. Electronics company which sells their products through physical stores of Suning and online stores of Alibaba can increase their sales through this platform and Suning would also provide fast delivery of the products which would lead to happy customer.
Enhancing the competitiveness :
Suning is a giant electronic retailer and building an alliance with it is surely a big advantage. Electronics need has increased and Alibaba can use the opportunity. Suning would open stores on Alibaba online tmall.com platform and its logistics and distribution network would help to deliver faster. Customers can easily make payments by Alipay. This would bring more customers as the entire shopping experience is enriched and made faster and easier. If the alliance would not have been there the consumers would have to physically visit the stores and the the products would be delivered and installed later which consumes a lot of time. Integration of online and offline store would benefit a lot.
Risks that might arise is failure to win the competition . The major reason of this alliance to defeat the main competitor JD.com. The price it paid for the alliance is high and it might affect the growth rate if alliance fails to attract more customers. It aims to increase in sales and earn more revenue in future. But such future oriented approaches which need hefty prices are always risky.The electronics segment might become dull to consumers and prices might fall heavily which can add to risks.
1) Keep track of competition : Alibaba has always focussed on competition. The moment it identifies that competitors are intensifying it starts taking action. In some cases it takes the first step to start competition. For example it formed an alliance with suning because it was facing stiff competition from jd.com.
2) Diversification: Not all the eggs shall be put in one basket. Hence Alibaba keeps diversifying from mobile payment to cloud computing to data centers etc. This helps in staying profitable even if one segment fails.
In essence it is essential to develop a strategy according to the market scenario and focus on reducing the competition by taking right action at the right time. Strategies shall be built to exploit the weakness of rival and build our competitive edge and bring more consumers.