By September 2018, Trump had imposed more than $250billion worth of tariffs on Chinese exports to America (or 50% of total exports to the US in 2017) with the threat of a further $267billion worth of tariffs in the near future. If implemented, total tariffs would cover 100% of all Chinese exports to America, which would put macroeconomic pressures on Chinese export-led firms such as Alibaba. Alibaba, in fact, had to cancel the creation of 1million US jobs by 2020 as a result of the tariffs, consequently shifting its revenue strategy to focus on the domestic economy and become less reliant on exports. After all, Alibaba generates approximately 80% of all online sales in China.
The consequences of Trump's tariffs on Chinese firms like Alibaba demonstrates perfectly how external actions, from political forces, in this case, can become emergent threats for firms. As will be demonstrated in this report using Alibaba pestle analysis, changes in the macro environment can present opportunities for expansion and market growth but they can also be fatal for organizations. A Swot analysis of Alibaba will tell you more clearly how Alibaba can take advantage of new opportunities in its domestic market such as the rising Chinese middle class, to mitigate against emergent threats such as Trumps Tariffs.
Alibaba Strategy Case Study
Key Learning Outcomes
- Understand the broad macro-environment of Alibaba and the online retailing industry in terms of political, economic, social, technological, environmental and legal factors (PESTEL/PEST/STEEPLE).
- Use our swot analysis example to gain an overall understanding of Alibaba's strengths and weaknesses and strategic options arising from the opportunities and threats that have been identified from the Pestle analysis example on it's business environment.
- To apply strategy business models and frameworks such as Pestle/Pest/Steeple, Swot etc to real company cases.
Analyse the external business environment of Alibaba using Pestle and Swot. Identify the major macro trends impacting its industry environment and the key drivers of change shaping opportunities and challenges for Alibaba.
Alibaba Group Holdings is a Chinese company founded in June 1999 by Chung Tsai and Yun Jack Ma with headquarters in Hangzhou, China (Reuters 2018). Through various subsidiaries, Alibaba engages in online, mobile commerce and offers services, products, and technology that helps transform the way brands, merchants and other businesses market and operate in China and internationally (Reuters 2018).
Alibaba operates under the following segments; core commerce, cloud computing, digital media and entertainment, and innovative initiatives among others (Nikkei Asian Review 2018). The Chinese online giant generates 80% of all online sales in China from its B2B portal connecting Western businesses and Chinese manufacturers, commanding a market share of 51.3% under the TMall shopping website while its biggest rival JD.net commands a distant 32.9% market share as of 2017 (Chadha 2017; Absolunet 2017).
The company’s revenue has been on a steady growth, increasing from $8.576m in 2014, $15.903m in 2016, $23.521m 2017 to $37.762m in 2018 while enjoying profit margins of 25.56% (Nikkei Asian Review 2018).
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