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Global Trade Starts Here TM Presented By: Anil Kumar Sahu – 20104004 Abhik Tushar Das - 20104001 Sitanshu Pathak - 20104007

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Page 1: Alibaba Final

Global Trade Starts Here TM

Presented By:Anil Kumar Sahu – 20104004Abhik Tushar Das - 20104001Sitanshu Pathak - 20104007

Page 2: Alibaba Final

Itihaaas: Alibaba.com

• Lead founder: Jack Ma (native of Hangzhou , near Shanghai , PRC).• Founded in Dec’1998 as online marketplace: Alibaba Online in English language.• Started as a online bulletin board to post,buy,sell trade leads.• June 1999: Alibaba Group formed by Jack Ma and 17 founding partners.• Simplified Chinese website Alibaba.co.cn inaugurated to serve mainland China.• Sept’1999: Alibaba.cn launched in simplified Chinese serving Mainland China.• In few months 3 websites of “Alibaba” launched in English(for International users)

Korean(for Korean users) & Trad Chinese (for Chinese users outside China).• Oct’2000: Gold supplier membership scheme launched to support Chinese Exptrs.• Aug’2001: website International TrustPass a membership service launched for

exporters outside China.• Mar’2002: China TrustPass launched to cater to serve SME’S in China engaged in

domestic trade within China.• Sept’2006: after restructuring; “Alibaba B2B” went Public thru IPO (17% of shares

went to public, remaining retained by parent company, employees, consultants.

Page 3: Alibaba Final

Retrospective: Alibaba.com

• 6th Nov’2007: Alibaba.com went public through a IPO on HKSE .• Raised US$1.5 billion , became world’s biggest internet offering since Google’s IPO.• Stock price overshoots by 193% making it 4th largest such event in HKSE history.• Share price closed at US$5.09/share enabling market cap value at US$25.6 billion.• After IPO it’s stock became among the most expensive in Hong Kong.• Stock traded at 306 times of projected 2007 earnings of US$83.6million.• Stake holders Yahoo!(39% PRE-IPO)& Softbank(29.3% post-IPO) traded at around 60

times of projected earnings showing “great confidence among investors” on it.• With in a week after IPO it was reported to be prospecting a JV with Softbank in 2008

to expand its business in Japan which was impenetrable till now.• Proved its mettle by dominating EachNet (backed by eBay) its old rival.• Founder Chairman Jack Ma aimed to propel the Alibaba Group among the world’s 3 largest internet companies and also a "Fortune 500 company”.• Optimism shadowed Ma’s mission after the IPO in coming times.

Page 4: Alibaba Final

Internet & e-commerce growth in PRC

• By 2007 PRC had 162 million internet users, Globally 2nd only to US as net-surfers.• Internet use penetration rate in PRC at 12.3% only compared to above 65% in US.• Penetration rate grew annually at @ 3% / annum and still rising.• Online-shopping done by only 25.5% internet users in PRC compared to 71% in US.• Online sales, marketing utilization rate in PRC at 4.3% compared to 15% in US.• Only online stock transactions rate higher in PRC at 14.1% compared to 13% in US.• As pe iResearch consulting group, online shopping market of PRC at US$1.5 billion.• onlineC2C biz segment accounted at US$1.3 billion oi.e 89.7% of market in PRC.• Online shopping market recorded a 14.8% rise in Q1 of 2007 over Q4 2006 and a

rise of 64.1% on previous Y-O-Y rate.• Online B2B market segment valued at US$65.7billion in Q2 2007 ;implicating a

rising by 10.4% on Q-O-Q and grew at a Y-O-Y growth rate of 69.8%.

Page 5: Alibaba Final

Sparking of a business idea in Jack Ma

• Jack Ma grew up during Chinese Cultural Revolution in Hangzhou, PRC.• Keenly interested in learning English Language since age of 12.• To improve English ascent gave free guided tours to foreigners.• Was poor in studies; failed university exams twice; joined low paying teaching

job.• Later employed by Chinese Govt for interpreting in a dispute between a

Chinese firm an its US partner.• Due to knowledge of English, pressurized by US firm to partner in internet

startup.• Had first encounter with a computer and Internet in Seattle in US.• Returned to China started a website “China pages” with borrowed US$2000.• Primary purpose of website was to link Chinese companies to foreign traders.• China Telecom forcefully bought out his entire stake and made him a civil

servant.• 1998: Still holding to his vision to establish his dream venture, Ma stepped

out of Civil service and restarted his venture as Alibaba Online.

Page 6: Alibaba Final

Growth driver for Alibaba: extensive usage of e-commerce by SME’S in China

• 2004: SME’s contributed to 68.8% of gross industrial output(at present prices).• Estimates forecasted SMEs to grow from 31.5million(2006) to 50 million(2012).• Only 28% (8.8million) out of 31.5 million SME’s used B2B e-commerce platform.• Encouragement of The 11th five year plan of Chinese Govt. for promoting usage of

e-commerce by SME’s and increase business and boost exports.• Revised estimates projected SME’ to grow to 41 million and 82% (2012). • E-commerce usage expected to quadruplet between 2007 and 2012.

Driving factor for growth of e-commerce among SME’s: • geographic trade limitations enabled the need of SME’s to venture globally.• Scattered suppliers, Overseas buyers lacked a proper communication channel.• Small scale of operations limited SME’s resources for sales & marketing.• Absence of mechanisms to evaluate trustworthiness of trading partners.

Page 7: Alibaba Final

Business Model

• Connects the buyer (outsourcers/ whole-sellers) with the seller (suppliers/ manufacturers) on a common platform called “Storefronts” where products were listed.

• No transactions between buyer and seller on platform• Wide coverage; 30 industries and 5000 product categories; 2.4

million storefronts and 2.9 million listings• Basic account (free): Premium account (paid) high; exposure

and visibility• Revenue generation; premium accounts; growth rate of 50-

80% (Y-o-Y)• Subscriber base; basic account; growth rate 80% (Y-o-Y)

Page 8: Alibaba Final

Results

All Users

2004-2005

2005-2006

02468

1012141618

TotalChina MarketInternational Market

Paid Users

2004-2005

2005-2006

0%10%20%30%40%50%60%70%80%90%

100%

TotalChina MarketInternational Market

Page 9: Alibaba Final

Profits

2004

2005

2006

2007

0 5 10 15 20 25 30 35

Profit After Tax (PAT) as % Revenue generated

Profit After Tax (PAT) as % Revenue generated

Page 10: Alibaba Final

Expenses

2004

2005

2006

2.7

9.1

10.1

Expenses as % revenue

Expenses as % revenue

Page 11: Alibaba Final

Market Share

Market-share (by revenue)

Alibaba.comGlobal SourcesMade-in-China.comHC360.comChinaChemNetOthers

Page 12: Alibaba Final

Strengths

•Built a premium brand in e-commerce domain; highest traffic in B2B segment•Attracted suppliers with the wide coverage which cascaded into more and more buyers•Exclusive focus on the high potential, cost sensitive SME sector awarding credibility through “Trust Ratings”.•Strong and dedicated sales team; 1900 salesmen in 30cities in China; 800 tele-callers; 400 customer service personnel.

Page 13: Alibaba Final

Strategy

•Strong mission statement – “To make it easy to do business anywhere”•Strategic plan to expand user-base by encouraging growth in Basic Accounts to encourage more sellers.•Improved GUI’s on its website; improving community bonding through meetings, trainings and offline activities.•Convert Basic users to Premium users by offering VAS.•Tap international markets through Gold Supplier memberships (Hong Kong) and joint ventures in Japan.•Expanding its scope into Business Processes like CRM and Operations (Alisoft Export Edition)•By business strategies like acquisitions, cross-selling, cross-marketing, licensing etc.

Page 14: Alibaba Final

Competition

• Please remember our learning from Marketing Myopia..

• Competition may be or may not be from same industry..

• Alibaba was strong in B2B marketing, based on internet, for SMEs. Essentially it fulfils the need of contact between sellers and buyers.. Anyone doing that is a threat to Alibaba.

Page 15: Alibaba Final

Competition From Global Sources

50%

21%

14%

10%

4%

1%

Market Share of China's E Commerce Market by Revenue

AlibabaGlobal SourcesMade-in-China.comHC-360ChinaChemNetOthers

November 2007 data. China’s B2B E commerce Market reached Rmb 489.1 billion in Q2 of 2007

Page 16: Alibaba Final

Major Competitors

• Global Sources (HK Based)o Buyer network in over 230 countries – something which Alibaba

lackedo Published 13 monthly magazines and over 100 sourcing research

reports per yearo Trade Specific Exhibitions – 22 times a year in 7 citieso That means, apart from strong virtual presence, there was physical

presence too.o Started as monthly trade magazine in 1971 but by 2006 its 40%

revenue was coming from online business

Page 17: Alibaba Final

Major Competitors (cont..)

• Global Sources (HK Based)Market Penetration:o Increased revenue by exhibitions – more booths and more revenue

per boothNew Product Development:o 11 new online market places in 2007o 8 new exhibitions planning in 208 / 09Expansion in China’s Domestic B2B Market:o Global sources already had presence in China’s import export market. o Launched Global Sources Online to enable international suppliers to

sell to China’s domestic B2B market. Increased ExhibitionsAcquisitions and Alliances:o Acquired assets of Beijing-based Blue Bamboo China Ventures

Page 18: Alibaba Final

• Global Sources (HK Based)Market Penetration:o Increased revenue by exhibitions – more booths and more revenue

per boothNew Product Development:o 11 new online market places in 2007o 8 new exhibitions planning in 208 / 09Expansion in China’s Domestic B2B Market:o Global sources already had presence in China’s import export market. o Launched Global Sources Online to enable international suppliers to

sell to China’s domestic B2B market. Increased ExhibitionsAcquisitions and Alliances:o Acquired assets of Beijing-based Blue Bamboo China Ventures

Major Competitors (cont..)

Page 19: Alibaba Final

Major Competitors (cont..)

HC360.COM - Domestic B2B e-commerce platform in China

ChinaChemNet – catering to domestic chemical industry of china and having more vertical depth

Other competitors like Search Engines, Traditional trading channels, Trade Magazines, Classifieds, Outdoor Advertising.

These other competitors are not exactly same industry that is internet based B2B marketing yet they threat Alibaba just as Teleconferencing facility threats Aviation Industry or Aviation Industry threats Hotel industry.

Page 20: Alibaba Final

Founder’s Vision

Not keen on holding on to the company for ever but eventually exit to make room for next generation

Executives Education in foreign Universities.. – A move to make company ready to take on global business challenge.

(It may be a move to create strong leadership so that Jack Ma can retire peacefully?? )

Page 21: Alibaba Final

Have a look at the Web Interface

Page 22: Alibaba Final

Product Category, Sub Category, Pricing Everything arranged Beautifully…

Page 23: Alibaba Final

The interface showing the global presence of the company…

Page 24: Alibaba Final

Online Instant Messaging software developed based on client feedback…!

Page 25: Alibaba Final

Presence in India ??

Yes Of Course…!!They call it: Passage to India

Entry Year: 2008 Mumbai, Delhi, Chennai, Ahmedabad

CEO SpeakAlthough there is a bureaucratic red tape, barriers are diminishing.. Hope to do it again..

India’s E commerce looks like that of China’s 7 years back.

Page 26: Alibaba Final

Thank You