What International Strategy should Alibaba adopt in the e-Commerce industry in
Southeast Asia?
The international strategies vary in terms of two dimensions-the need for global integration
and the need for local responsiveness. (see Figure 1) Alibaba adopts transnational strategy in
order to effectively compete on a global scale but still have strong local responsiveness.
Figure 1. Source: M. A. Hitt, R. D. Ireland & R. E. Hoskisson.
(2017). Strategic
management:
Competitiveness
&
globalization: Concepts and cases. New York: Cengage
learning.
Need for Local Responsiveness
With high mobile penetration and fast-growing Internet market, Southeast Asia region contains
only 3% online retail penetration. (Lisa Lacy ,2018) Therefore, potential of e-commerce is
enormous in Southeast Asia. Due to rising competition in Southeast Asia, the e-commerce
market is highly fragmented. Some e-commerce players have already attracted to enter the
market by high potential of it. For example, e-commerce giant Amazon entered Singapore
market in 2017 and regarded Singapore as the initial entry point of Southeast Asia. Chinese
firm JD.com, the largest competitor of Alibaba, also aggressively expanded in the region by
developing a new online shopping platform in Thailand, launching a local online retail business
JD. id in Indonesia and investing in local-ecommerce firm Tiki.vn in Vietnam. (Zen Soo, Celia
Chen, 2018) However, it is still uncertain which player would get the largest chunk of pie in
Southeast Asia. Therefore, Alibaba need a strong local responsiveness in a short time in order
to increase possibility of grabbing the largest chunk of pie. To acquire important market share
in Southeast Asia, Alibaba should put lots of efforts to know about the market in the region
and accordingly adapt the product to better meet the taste of local market. In order to more
efficiently enter market in the region, Alibaba could acquire control of a well-established
platform in the market, such as Lazada. Lazada is one of major e-commerce platforms in six
Southeast Asian countries (i.e. Singapore, Malaysia, Indonesia, Thailand, Philippines and
Vietnam). Lazada is an existing player who knows well about local market and is more flexible
to respond to local condition. Acquisition of well-established player Lazada increases
Alibaba’s competitiveness by overcoming lack of knowledge of foreign markets and
possessing a strong local responsiveness in the short time.
Need for Global Integration
Global integration makes use of worldwide resources and amalgamates Alibaba’s business in
order to achieve the aim of realizing global economies of scale with cost efficiency. Why does
Alibaba want to expand its market to Southeast Asia? One of reason is that high domestic
market competition and slow economic growth in China drive Alibaba to look for new
opportunities to sustain its development. According to Bartlett and Ghoshal (1998), the need
of efficiency serves as the incentive of global integration. Lazada is well-established player
that has already built a strong platform ecosystem containing reliable merchants, large
customer base and logistic infrastructure across Southeast Asia region. By acquisitioning
Lazada, Alibaba could improve performance of Lazada based on Lazada’s existing resource.
Alibaba could save money on heavily investment in logistic infrastructure and other investment
to build customer base.
The lack of efficient logistics and fulfilment is one of factors about slow growth e-commerce
in Southeast Asia. User-friendly platforms make customer shop online easily but delivering
products to customers in a cost effective and timely manner is still challenging in the region.
The lack of familiarity with e-payment is another reason. Alibaba could use its technology in
logistics and e-payment to improve this scenario. Alibaba’s mission is to launch business
everywhere easily. In order to provide standard service and establish a stronger global grand
presence, Alibaba increases the coordination between it with Lazada. As one of the world’s
biggest e-commerce company, Alibaba could share its experience and technology with Lazada.
Lazada is shifting its business model by increasingly brokering transaction between buyers and
merchants rather than directly selling products itself. (Alibaba Bets on Frenchman to
Lead High-Stakes Southeast Asia Expansion, 2019) This new business model is same as that
of Taobao (owned by Alibaba) in China. Alibaba shares Lazada its successful online sales
strategies, technology and resources (e.g. e-payment, logistics, its large data, data analytics
technology) to improve the platform by improving payment process, speeding up delivery and
targeting customers more precisely. With its outstanding business management, accomplished
hypervisor, advanced marketing technique and strong financial position, Alibaba hopes to
increase Lazada’s competitiveness but also bring consumers in the region great online shopping
experience as consumers in China do. Why does Alibaba need strong global integration? For
example, technology companies want to broaden manufacture to a global scope and achieve
economies of scale, causing greater levels of standardization of products. Technology firm
produces standard product and distribute to customers through the world. Alibaba uses
Lazada’s existing resource to provide its excellent services which allow relevant participants
in Southeast Asia to take part in commercial activities with Alibaba easily.
Founder Jack Ma preaches the statement “Global vision, local win”. Alibaba hopes to provide
an effortless experience to its platform users through the world, but also have ability to make
decisions strategically according to local environment. These are the reasons why Alibaba
adopts transnational strategy to enter market of Southeast Asia. Alibaba hopes to build a shared
vision through the world but still meet the taste of local market.
Reference
Alibaba Bets on Frenchman to Lead High-Stakes Southeast Asia Expansion. (2019, March
03). Retrieved from:
https://www.businessoffashion.com/articles/news-analysis/alibaba-bets-onfrenchman-to-lead-high-stakes-southeast-asia-expansion
Bartlett, C. A. & Ghoshal, S. (1998) Managing across borders – the transnational solution.
2nd ed. Boston: Havard Business School Press.
M. A. Hitt, R. D. Ireland & R. E. Hoskisson. (2017). Strategic management: Competitiveness
& globalization: Concepts and cases. New York: Cengage learning.
Lisa Lacy (2018, December 3) Why 2018 Was the ‘Year of Ecommerce’ in Southeast Asia.
Retrieved from:
https://www.adweek.com/digital/why-2018-was-the-year-of-ecommerce-in-southeastasia/
Spandan Sharma (2018, March 19) Alibaba is investing an additional $2.6B in ecommerce in
Southeast Asia. Retrieved from:
https://yourstory.com/2018/03/alibaba-fresh-2-6-billion-investment-lazada
Zen Soo, Celia Chen (2018, June 19) JD.com hastens e-commerce race in Southeast Asia
with US$550 million stake sale to Google. Retrieved from:
https://www.scmp.com/tech/article/2151282/jdcom-hastens-e-commerce-racesoutheast-asia-us550-million-stake-sale-google