The invention of e-commerce in China started in 1993 when the Chinese government enacted certain regulations known as “golden projects”. Those were aimed at establishing and improving internet service for commercial purposes and national credit card network. After five years, in 1998, first online marketplace in China “Alibaba Online” was established. In 2003, the first consumer-based platform was launched.
The knowledge of local culture and market peculiarities gave Alibaba more advantageous starting position when overcoming obstacles that were faced in the first phase of e-commerce establishing. One of the biggest hurdles was the fact that Internet was limited and controlled by the government. It raised huge challenges to e-commerce companies from abroad. However, for Alibaba, a national e-commerce company, the government gave a rare privilege of Internet access, which put the company ahead of foreign competitors. Furthermore, Alibaba was the first to offer consumers a free try-out period in order to evaluate products. As a result, the company gained new customers since the trust of company’s services increased.
With the appearance of eBay on Chinese market, Alibaba had to review, renew and shift its focus from its B2B business services (where it already played the dominant role) in order to win leading positions in C2C business. This was a simple defensive reaction. At that time, the main priority was not to make money but to prevent eBay taking consumers from Alibaba. As an alternative for Chinese market and a competitor for eBay Taobao e-commerce company was launched. Its success over eBay can be explained by several reasons. First of all, eBay did not have a well-developed customer support service. Consumers did not have the possibility to argue about the product quality. Secondly, eBay listings put more emphasis on products while Taobao listings were more customer-oriented. EBay listings grouped users together according to their purposes: there were “Buyers” and “Sellers”; Taobao listings were organized into categories “Men” and “Women”. Thirdly, since Taobao knew local market better, it launched more successful advertising campaign. For instance, eBay Eachnet invested money into Internet advertisements missing the fact that there was a small number of Internet users in China. Knowing that most of the small business representatives would watch TV, Taobao secured advertising on television as it would reach more clients (DeKrey & Griffin, 2010).
As an e-commerce company Alibaba with its affiliates works in all major types of businesses: B2B, B2C, and C2C. This allows spreading services among a wide range of customers. To expand globally, Alibaba should use the strategy of inorganic growth, which is implemented by mergers, acquisitions or takeovers. However, what should be taken into consideration is the negative experience of eBay failure on Chinese market, when a German manager and a U.S. technology officer without the knowledge of Chinese culture and language tried to apply Western business strategies to the local market. Furthermore, Alibaba must be prepared to be very flexible and to meet the needs of customers from different countries. For this, Alibaba has to carry out mergers with companies that work on a local scale and, therefore, have a more thorough understanding of the local market. This would help avoid unnecessary expenditures on an advertising campaign and on developing unsuitable services. As a result, new customers will be attracted; company’s reputation and profit will be increased. Another aspect that e-commerce companies have to care about is a developed customer service, and quality assurance, in order to make clients satisfied and confident in the quality of services.
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