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MGMT 35200 Strategic Management
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MGMT 35200 Strategic Management
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Course Code: MGMT 35200
University: Purdue University
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Country: United States
Question:
The Entrepreneur’S Dilemma: Alibaba, Tencent And Amazon As E-Commerce Platforms
On October 10, 2011, Taobao Mall (Tmall), the business-to-consumer (B2C) online retail market operated by China’s largest e-commerce company Alibaba Group Holding Limited (Alibaba Group), unexpectedly announced its new policies that included significant increases in the annual service fee and cash deposit for stores on Tmall. With these changes, the cash deposit required for each store with a TM trademark would increase from the original RMB10,0001 to RMB100,000 or RMB150,000 per year.2 All store owners had to pay in full by the end of 2011.
This sudden change was hard on Karz Tmall (Karz), a new women’s apparel store on Tmall. Eric Chen, one of the owners of Karz, had planned to make it big on Tmall. But the new regulations caught him in an acute dilemma. He found it hard for their store to survive in the face of both financial strain and the time constraint within which to comply with the requirements. What should he do? Would it be wise to keep running the business on Tmall under the risk of potential collapse? Or should Karz be pulled out of China’s most visited B2C online retail website to avoid the effects of the significant fee increase? If so, among the many available e-commerce platforms in China, such as Alibaba Group’s Taobao Marketplace, Tencent Group’s Shop.QQ.com and Amazon.com’s Amazon.cn, which one should Chen choose to restart their online business?
Task:
1) Describe brief background of the company2) Describe the problems or issues the firm encounters3) Conduct analyses strategically and operationally4) Include ethics and sustainability issues5) propose action plans6) conclusion
Answer:
Introduction
Taobao Mall (Tmall) is a popular online B2C platform in China, set up in July 2011 by Amazing Corporation founders namely; Becky Huang, Wilson Liu, and Eric Chen, with a major business of selling branded women’s apparel. Tmall is focused on facilitating e-commerce for small and medium enterprises (SMEs) and has been constantly improving its services to SMEs (Yukun et al. 1). Therefore, the paper seeks to analyze the problems faced by Tmall, strategic and operational techniques, ethics and sustainability issues, and action plans that improve the company’s productivity.
Background of the Company
Taobao Mall was formed by Amazing Corporation and marketed accessories, trousers, upper garments, skirts, and coats at its start. The company exercised six customer service guides which worked for the company. These included one for wholesale consulting, two for after sale consulting, and three for presales consulting. Due to the changes and policies, the required cash deposit for each individual store bearing the TM trademark increased. Additionally, Amazing Corporation also ran another wholesale clothing business on Alibaba.com which dealt in Korean-style clothes.
Problems Faced by Taobao Mall (Tmall)
Taobao Mall (Tmall) is facing a great challenge of lacking a full understanding of the clothing industry, hence facing tough times in the market as it tries to survive in the flooded online industry. The lack of understanding in the industry slows down their process of capturing trends accurately, market patterns and market forecasting (Yukun et al 3). Sometimes, the company strategized on producing large volumes of certain styles or products but the sales turnover became low. Furthermore, all expenses occurred in the promotion of cloths such as employees, temporary staffs, like photographers, models and editors became the sunk cost.
The company also faces a stiff competition from other companies offering the same services such as Taobao Marketplace, ShopQQ, and Amazon which are considered to have high market shares and attractive market segmentations (Hu et al. 325). Furthermore, some competitors have most functions for supporting e-commerce on a platform such as managing warehouse, uploading product information and distributing goods, and organizes free marketing campaigns for small stall sellers which are very costly when Tmall exercises them due to the difference in profit margins.
Strategic and Operational Analysis
The operational and strategic strength of Taobao Mall enables the company to operate on a competitive edge against other alternative e-commerce platforms (Liang et al. 1530). Tmall’s strengths include low costs for buyers and sellers, user-friendly features of the company’s website, corporate cooperation with banks, promotional efforts that are powerful, and the diversification of its marketing models. Since the founding of Tmall, the company has evolved from a simple online storefront to a massive online platform that hosts and serves millions of consumers in a very competitive environment, with created features outcompeting international opponents like Amazon and eBay.
Ethics and Sustainability Issues
Taobao Mall has experienced two successive online rioting waves since its significant increase in online vendor fees on Tuesday. The unrest which was organized reflected the discontent of merchants by the company’s increased tendency of overreliance on bigger merchants for the supply of goods hence highlighting the crisis of the monopoly rampant in the industry. The company announced its plans to overhaul its management system for the business, with an intention of significantly raising the rate of commission and the premium fees which the company charged on online shops (Yan 26).
Proposed Action Plans
Tmall should look for an effective way of improving customer and client support through updating its website and keeping it current so that both new and existing customers can be in a position to identify the arrival of new products. Furthermore, the company should also provide effective training to the staff for customer delivery purpose. The firm should also review customer base through reviewing of the competitors’ offer and target their weakness so as to maximize the sales.
Conclusion
Taobao Mall operates in a very competitive industry through the integration of client support for survival in the competitive market. The user interface of the website is friendly and offers some variety of products to the customers although all payment plans need to be offered to customers. Tmall needs to invest more in advanced technology such as customization of its website so as to provide different product varieties which is convenient for customers while shopping for items online.
References
Hu, J., Marques, J., Holt, S., & Camillo, A. A. “Marketing Channels and Supply Chain Management in Contemporary Globalism: E-Commerce Development in China and its Implication for Business.” Handbook of Research on Effective Marketing in Contemporary Globalism. IGI Global, 2014. 325-334.
Liang, B., Tu, Y., Cline, T., & Ma, Z. “China’s E-Tailing Blossom: A Case Study.” Mobile Commerce: Concepts, Methodologies, Tools, and Applications. IGI Global, 2018. 1530-1555.
Yan, Zhang. “A study of factors affecting purchase intention on mobile shopping towards Tmall. Com of University Students in Kunming, China.” (2015).
Yukun, Y., Yulin, F., Ning, S., Haibin, Y., & Xin, Q. “The Entrepreneur’s Dilemma: Alibaba, Tencent and Amazon as e-Commerce Platforms.” (2015).
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