Things Businesses can learn From the Success of Alibaba Group

The key factor in the success of Alibaba was its leader Jack Ma.  He embraces almost all of the traits that people expect from a business titan. He is charismatic energetic and he believes in himself and in his ideas. Jack began his business working out of a small apartment Hangzhou, China.  He was not highly educated and had not been successful in earlier ventures. In starting Alibaba he displayed a willing to take a risk and a blazing spirit of entrepreneurialism.

When discussing the Alibaba Group Holdings Ltd. (BABA) it is important to define the kind of company it is.  It is a conglomerate that earns most of its revenues through three of its subsidiaries sites.

• Taobao, China’s largest online shopping site.
• Tmall which sales branded goods to China’s growing middle class.
• And Alibaba.com which connect China’s exporters to Buyers in countries throughout the world.

Alibaba’s business model was that of a B2B company, which, was a relatively new concept. By starting as a B2B business, Alibaba was able to bring together small fragmented businesses, into an organized and efficient marketplace.  Since the organized marketplace had very little competition, it grew at the rate of light speed.

In addition to the innovativeness of using a B2B marketplace Jack Ma, recognized the potential growth of a new Chinese marketplace.  That was the Chinese middle class.  At the time of Alibaba’s inception China’s Internet penetration was extremely small.  He saw the growth potential of a market driven by the internet, and the middle class, as the Chinese people were drawn to the internet, and the new efficiency’s that it provided.

In order to take maximize Alibaba’s B2B business strategy, Jack hired sophisticated executives like Joseph Tsai, along with a proficient team of executives and technical experts.  He avoided the common mistake of hiring under-qualified people to save dollars.  He then empowered them to do what they did best.

Jack, picked the right time for the IPO, and Alibaba’s IPO did not disappoint.  The stock was conservatively priced at $68 a share, because Jack, who was the face of, and Executive Director of Alibaba, insisted on a conservative price. He was smart and did not want to repeat the pricing mistake that Mark Zuckerberg made during Facebook’s (FB) IPO.

It was obvious that Alibaba had a lot of growth potential.

• It was China’s largest online retailer.
•  China’s internet penetration was just 47.9% and growing at a rate of 31% per year.
• In the critical metric of mobile internet use, China had 557 million users and during 2014, it added 57 million new mobile internet users.
• During 2014, the percentage of Chinese people that shopped on the internet increased by 20%.

That is why its IPO easily surpassed those of competing retailers, Amazon.com Inc. and Ebay Inc.