Disadvantages Alibaba

Relocating headquarters

In interviews with various media outlets, Jack Ma has said that Alibaba was established in the living room of his 150-square-meter apartment in Hangzhou city in 1999.

As the company expanded, thanks to the support by one of its original founders, Joe Tsai, the firm secured $5 million (S$6.3 million) from a consortium of investors in October that year, and raised $20 million from an investor group led by Japanese SoftBank a year later.

After securing the money, Ma decided to relocate the domestic headquarters from Hangzhou to Shanghai, the so-called business centre of China, and to move the global base to Silicon Valley.

It turned out that the environment was not right for the firm. The headquarters in the US took a hit when the dot-com bubble exploded, while the Shanghai office faced the reality of few small manufacturing companies interested in going global. The strategy caused distress and dismay to its number one priority, the customers.

Wu Xiaobo, a financial analyst, said this was the first mistake Ma made.


Operating cost

After attracting series of venture capitalists, Alibaba began expanding globally. However, the rapid increase in labour cost, marketing, advertising and zero profits drove the firm into financial trouble in 2000. By January 2001, Alibaba had less than $10 million in its account.

Later, Savio Kwan, a senior manager at General Electric, joined the company and became the chief operating officer. Immediately after taking over, Kwan began laying off staff. The number of employees in the US was reduced from 40 to three, and subsidiaries located in Hong Kong, Beijing and Shanghai were closed down. Salaries of the remaining staff were cut by 50 per cent while their share options went up 100 per cent.

After three months of drastic cuts, the company survived with its operating cost falling from $2 million to $500,000.


Dearth of experts

During the 15 years of Alibaba's history, lots of professional managers both foreign and Chinese have been hired at the senior level by the company.

But at the time of IPO, not many of them were still with the company. Most of them quit for various reasons. Among the 28 copartners, only seven out of 18 who helped Ma establish the firm remain. "I didn't expect what we'll achieve 10 year ago," said Ma in a public speech when he talked about his cofounders.


Yahoo China

It took only three months for Alibaba to acquire Yahoo China after negotiations began. By signing the deal, Alibaba received $1 billion investment from Yahoo while 39 per cent of its stock rights were given to Yahoo! Inc.

Later developments showed that Yahoo China made little contribution to the entire group's expansion, and Alibaba lost crucial period to develop its middle- and small-sized companies' search engine strategy.

Even worse, a report released during Alibaba's IPO in Hong Kong in 2007 revealed that from 2010 onwards Yahoo planned to increase its power at the board and did not rule out removing Ma from the board.



In 2004, Li Zhiguo, a former employee of Alibaba, established koubei.com, an e-commerce site focusing on living consumption information, and its growth rapidly reached 1 million users.

In 2006, Alibaba invested $6 million in koubei.com and bought the entire company two years later. With the help of Alibaba, koubei.com became the biggest competitor of dianping.com, a firm that offered living services online.

In 2009, koubei.com was integrated into Taobao, a strategic move that proved to be the death knell of koubei.com. Things turned out to different from what the firm had predicted. Koubei.com did not fully utilize the huge users' resource of Taobao.

In 2011, Alibaba had to spend $50 million in MeiTuan.com, the original competitor of koubei.com, to take on Tencent in online-to-offline (O2O) business.

Stars Express

Stars Express, a logistics firm established in 2009, received 70 million yuan investment from Alibaba in 2010. At that time, JD.com was not one of the country's leading e-commerce companies yet. However, due to bad management of Stars Express in the following years, the firm shut down operations in March 2012.

By investing in Express, Alibaba lost an opportunity to develop its own logistics system and that failure has given JD.com a chance to race ahead.


In October 2011, a new regulation was announced by Tmall.com to increase the annual technical service fees from 6,000 yuan to two level, 30,000 yuan and 60,000 yuan. Meanwhile, the penalty level for merchants on the platform was increased from 10,000 yuan to 50,000 yuan, 100,000 yuan and 150,000 yuan.

The policy change left middle- and small- sized merchants dissatisfied. Few days later, Tmall.com had to postpone the policy and spent 1.8 billion yuan to support the business growth of the merchants on the platform.


In 2010, according to new regulation authorised by People's Bank of China, China's central bank, all third-party payment companies should apply for management license.

Before June, 2009, Alipay, Alibaba's affiliated payments business, was a fully foreign-owned company. In order to secure the license, Alipay was transformed as a domestic-funded company by Ma in 2010. But during the stock right transferring process, share holders of Alibaba, such as Jerry Yang from Yahoo and Masayoshi Son from SoftBank, disagreed with Ma's decision.

Although Alipay got the license at last, the argument within Alibaba's board dented Ma's reputation.

B2B platform

In 2010, Wei Zhe, CEO of Alibaba's Business-to-Business Division, resigned due to his team's involvement in helping its Chinese customers cheat on the platform.

In an email released publicly in February of that year, Ma acknowledged the entire case and his management's failures.


In Sept 2013, laiwang, a messaging app created by Alibaba, was released. However, it did not see a satisfactory increase in users, especially when compared to the formidable WeChat of Tencent.

Early this year, reports claimed that Alibaba failed to purchase a similar instant messaging company momo, the latter was valued at more than $10 billion. In March, 2014, Alibaba invested in Tango, an US-based instant messaging app. It has been interpreted as a failure to develop its own app, laiwang.


Shortcoming of AliExpress:

  • Bag searching at the site. Results or searching can be wrong or show others goods or different categories , even at through requests.
  • Little number of goods categories. Sometimes category is so general that many goods can be there. It hamper s continuously work with site and search of necessary product.
  • On AliExpress clothes are not so popular like electronics and gadgets. Shortcoming in discrepancy in size with description , it is smaller very often. This problem is everywhere, not only in Chinese shops, it can be and you should know about it beforehand.
  • Absence of possibility to combine sending goods. If there are 3 goods in order from different seller , you will take 3 parcels.
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Views: 3 414
Date: 11-06-2016, 15:52
Category: Disadvantages

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