Organizational Structure Design-Alibaba

Background information

Alibaba Group is a China-based multinational conglomerate specializing in e-commerce, Internet and technology. Since 1999, it has grown to become one of the largest e-commerce companies in the world. It offers a wide range of services including online B2B & B2C, cloud computing, local lifestyle services, entertainment, and digital innovation businesses etc.

Broad Mission and Goals

From my experience working for Alibaba, I know its mission is "To make it easy for anyone to do business anywhere." In the digital economy, Alibaba aims to connect buyers and sellers worldwide, provide seamless online shopping experiences, and enable businesses to thrive. Digital innovation and inclusive business practices are used to empower small and medium-sized enterprises (SMEs) and promote economic growth.

(This is the Double 11 shopping festival in 2019. We take Chinese goods and sell them to overseas countries including Canada through the Internet.)

Following is an analysis of Ali's external environmental factors based on the PESTEL strategy (political, economic, social, technological, environmental and legal).

External environmental factors

1. Political Factors

• Government Intervention: Since Alibaba is based in China, government policies and regulations have a significant impact on Ali's operations and expansion plans.

• International Relations: Tensions between China and other countries can affect Ali's international business and trade. We developed our U.S. B2C online business in 2018 with plans to sell Chinese goods to the U.S. and set up an office in Pasadena, LA. However, with the change in China-US relations, the office eventually had to close and operations were suspended.
  

2. Economic Factors

• Economic growth or recession can affect Alibaba's business performance in China and globally. China's GDP growth of just 3% in 2022 negatively impacts both e-commerce and consumer spending.

• Exchange rates and inflation: Changes in exchange rates and inflation will also have an impact on Alibaba's financial position, including sales and earnings abroad. Recent reports indicate that "The yuan is approaching a 15-year low versus the greenback". Ali faces a very challenging time.
  

3. Social factors

• Consumer Behavior: In the past 2022, consumer trends "with many consumers suffering from a kind of Covid burn out, and consumer confidence in Q4 at a record low." Alibaba's product planning, profit structure, and marketing strategies will be affected by this trend.

4. Technological factors

• Ali pioneered artificial intelligence and cloud computing early on, allowing the market to see the potential for business growth and increasing the stock price for a while. Despite this, there still seems to be no product that has the potential to disrupt the industry like Chatgbt. This could be a crucial ongoing factor.

5. Environmental Factors

• Supply chain adaptation, such as natural disasters and environmental events (e.g., epidemics in the past 3 years) compromise Alibaba's supply chain efficiency, with logistics of delivering B2C orders being impacted.

6. Legal Factors

• In each jurisdiction where Ali operates, it is required to comply with different laws and regulations. Occasionally, it must also deal with legal disputes and litigation. Gucci sued Ali in 2015 for allegedly using Ali's B2C platform to sell counterfeit and substandard goods. Ali must also protect its intellectual property from infringement by competitors or third parties.

In sum, if we looked at it from the sidelines, we would likely think technology played a major role. Because Ali's main business, which supported its share price in recent years, hasn't made any major breakthroughs. However, as a former employee, I think the Political and Economic factors have had the most impact on Alibaba. Because Ali's parent company is located in China, government policy intervention is a significant factor. In 2020, for instance, Alibaba was investigated for antitrust violations, and Alipay's listing plan was suspended, both having a significant impact on Ali's stock price. At the same time, since Ali's business is still mostly B2C retail, so the current economic environment and spending power will determine its performance.

Analysis of Alibaba Group's internal environment

Alibaba's organizational structure is influenced by several key factors. These factors include the organization's mission, goals, job characteristics, and growth cycle while taking into account specific circumstances such as changes in the CEO, epidemics, etc.

1. Mission and goals

Ali's mission is to make doing business anywhere easy. By providing e-commerce platforms and digital services, it facilitates global trade and connects businesses and consumers.

2. Working characteristics

Like an interdependent ecosystem: e-commerce, logistics, cloud computing, entertainment, and finance. It is normally encouraged for different business units to cooperate, innovate, and optimize between themselves.

3. Growth Cycle

As the Chinese economy has developed, Ali has experienced significant growth. It grew into a global technology group from a small e-commerce company. To be honest, however, its main business, B2C e-commerce, has reached its peak.

4. CEO Changes

It must be mentioned that in 2019, Alibaba's CEO changed. New leadership styles, a new strategic focus, and a new decision-making process were introduced. Organizational structure and culture, as well as stock price, were affected. Recently, however, this "new" CEO has been replaced again. It seems that a new cycle has started, but the good and the bad are still unknown.

Based on the above, I believe the Growth Cycle is the most influential factor. Ali's main business must break through, in order to establish new, high-value businesses that can sustain the stock price.

(Alibaba Group's stock performance on the Nasdaq looks like a cycle back to the beginning)

Organizational structure

Based on the analysis of Ali's external and internal factors, here are my thoughts on optimizing its organizational structure:

• External Factors. Ali's business is most affected by policy and economic factors. Therefore, I think government policy research and government relations need to be stressed more. Reduced the risk of being negatively affected by government policy by responding earlier to regulatory signals.

• Internal Factors. To deal with the weak innovation, in addition to the continued focus on the current technological innovation, more attention should be paid to future growth. About the group's future business growth study, do long-term value investment.

* The following is the organizational structure of Alibaba Group after adding my optimization ideas:

* References

PESTEL Analysis: An Organization and Its Environment. Granite State College. Retrieved         from https://granite.pressbooks.pub/ld823/chapter/10/ 

China Central Bank Vows to Stabilize Yuan as Slide Deepens. (2023, Jun 30). Bloomberg
       News.https://www.bloomberg.com/news/articles/2023-06-30/china-central-bank-
       vows-to-support-the-currency-as-slide-deepens

China’s GDP growth slowed to 2.9% in Q4 to an overall 3% growth in 2022, eyeing a full
       recovery in 2023. Pwc China. Retrieved from https://www.pwccn.com/en/research-
       and-insights/china-economic-quarterly-q4-2022.html

Read, K., MIEx. (n.d.). 5 Trends to Focus on in Chinese Consumer Behaviour 2023. 
      Kathryn Read. Retrieved from https://kathrynread.com/5-trends-to-focus-on-in-
      chinese-consumer-behaviour-2023/

BBC News. (2015, May 18). Gucci sues Alibaba over 'counterfeit goods'. Retrieved from         https://www.bbc.com/news/technology-32781236

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