How Alibaba was founded by a former school teacher and transformed into a multinational technology company
This post was originally posted on Medium, and can be found here.
Today, the name Alibaba is known to most people through the range of Chinese goods on offer. With more than 100,000 employees and more than US$ 60 billion in revenue, it is often described as the Chinese equivalent of Amazon.
Alibaba was founded in 1999 by 18 people under the leadership of Jack Ma, a former English teacher from Hangzhou, China. Right from the beginning, the founders’ mission was to leverage the opportunities of the Internet to enable small businesses applying innovation and technology to grow and compete more effectively in the domestic and global economy. Since launching its first website to help small Chinese entrepreneurs and manufacturers sell globally, Alibaba has become a global leader in online and mobile commerce.
With this approach, 20 years later, Alibaba has managed to grow into a corporate group that in 2019 had more than 674 million active users and holds 56% of China’s market share in e-commerce.
For a long time Alibaba has not only focused on the core business anymore, but is active from business credit cards to mobile commerce, cloud services, logistics and of course the various online marketplaces. In order to be able to position itself so broadly, Alibaba started 2010 with a $100 million investment plan for its global online retail business AliExpress, among others. In this context, Alibaba acquired the US e-commerce software provider Vendio in a first transaction. Besides its home market China, Alibaba was mainly focused on the Western market over the next 5 years, which can be seen from the fact that over 90% of the 17 investment rounds conducted during this period were in Western companies.
From mid-2015, a drastic change in Alibaba’s investment strategies could be observed, with the company broadening its view of investments beyond the Western market. David Lloyd, managing director of Alibaba in the U.K. and Nordics, explains this decision in an interview as follows: “In , we have 552 million active consumers [in Asia], and that grew by 37 million last year. It’s honestly quite hard to even find 37 million consumers in the U.K.”
For this reason, and the other fact that the Western market already has strong competitors like Amazon. Alibaba’s goal for Europe is not only to invest in companies, but it is also to connect more companies and brands in Europe with consumers in China. In this context, Alibaba last year introduced the possibility for brands to create their own business within the platform with the help of a landing page. Especially with commissions on sold goods of 5% to 8%, Alibaba makes it attractive for European retailers to join the platform and positions itself clearly below the margins of competitor Amazon, which takes 7% to 15% on the sale of the products.
In addition, Alibaba focuses on its services. These are mainly Alipay, Alibaba’s payment method with around 520 million users, which is not yet accepted in most parts of Europe. Alibaba would like to offer its Chinese travellers its usual service in Europe as well. Just like Fliggy, the travel and hotel booking app from Alibaba, which has around 200 million users, and another way for Chinese tourists to use their usual service from China in Europe.
In September 2019, Jack Ma stepped down as the chairman of the board of Alibaba. Nevertheless, Ma intended to stay on the board of directors until the 2020 annual shareholder meeting. Former CEO Daniel Yong Zhang took over Ma’s place as a chairman.