Our PESTLE Analysis of Alibaba examines what external factors impact one of the most significant e-commerce and shopping platforms with global reach.
Imagine you find a time machine and you travel 100 years back to 1923. Can you explain how people in 2023 just sit in their homes and shop from different countries through e-commerce stores like Alibaba? I doubt it.
No one from the past can imagine how people could shop from any part of the world and receive their orders at their doorsteps. What seemed impossible a few decades ago has become possible due to the e-commerce industry.
Alibaba is one of the best shopping and e-commerce platforms. Alibaba was one of the first global online shopping platforms. It played a vital part in revolutionizing the e-commerce industry.
Since Alibaba is one of the most significant e-commerce and shopping platforms with global reach, today, we will conduct a PESTLE Analysis of Alibaba to see what external factors impact the operations of Alibaba. Earlier, we also conducted a SWOT analysis of Alibaba to extract some useful information about the company.
Before we proceed further and conduct the PEST analysis, let's discuss how Alibaba came into being and evolved over the years.
Alibaba was an online platform founded in 1999 by Jack Ma. The purpose of this platform was to connect Chinese manufacturers with businesses across the globe. Initially, Alibaba was a B2B marketplace where manufacturers could list the products they had made.
As the B2B model of Alibaba succeeded, It launched another platform called Taobao. This platform had a C2C model. It connected consumers and facilitated the buying and selling of products from consumer to consumer.
The model of Taobao was very similar to Ebay, that's why Taobao managed to replace Ebay in China. As Alibaba gained more and more customer base daily, the company kept growing. In 2005, Alibaba acquired Yahoo to further consolidate its position in the market.
In 2007, Alibaba Group was formed, and all its operations were aligned under this banner. The group had a few businesses operating, such as Taobao, Tmall, and Alipay.
In 2008, the Alibaba group launched an online retail platform called AliExpress. AliExpress was a shopping platform that targeted customers from all across the globe.
AliExpress gained popularity quickly due to its distinct features and easy-to-use nature. Over the years, Alibaba invested in international companies and ventures to increase its returns.
In 2014, Alibaba got registered on the New York Stock Exchange. Alibaba's IPO is the largest. The company generated $25 billion; no other tech companies had raised this much money through IPO till then.
After the IPO, Alibaba began to expand and diversify its operations. It started investing in the latest technologies, such as cloud computing, digital media, and regional e-commerce platforms of Southeast Asia.
A few years back, the founder of Alibaba stepped down as the company's CEO. However, Alibaba continues to expand. Currently, Alibaba is the 40th most valuable company. It has a market cap of $236.18 billion.
Due to the diverse and widespread operations of Alibaba, the company requires many employees. Alibaba has a workforce of 235,216 workers.
The company managed to generate revenue of $129.223 billion in 2022 from all its platforms and investments. Now that we have discussed Alibaba in detail let's proceed further and discuss what PESTLE analysis is.
PESTLE analysis is a business tool businesses use to analyze what external factors impact different businesses and industries. The external factors that PESTLE analysis considers are Political, Social, Environmental, Technological, Legal, and Economic.
Now that we have also made you aware of the PESTLE analysis, let's proceed further and discuss what political factors impact Alibaba.
Political Factors That Affect Alibaba
Government policies and the political environment that impact businesses in an economy are considered political factors in a PESTLE analysis. This section will examine how different political factors will impact Alibaba.
China is a significant player in global politics. It has good relations with some countries and bad with others. The geopolitical tensions between China and other countries can impact the international operations of Alibaba.
For example, a few years back, the US took strict measures to limit importing Chinese products due to the political tension between China and the US. Such trade restrictions and barriers can affect the operations of AliExpress since it operates worldwide.
Besides that, trade policies made by the governments also impact the operations of Alibaba. Suppose if countries restrict imports to overcome the trade deficit, the demand for products on Alibaba's e-commerce platforms from that country will fall. This will impact the operations of Alibaba negatively.
Other than that, government subsidies and support also have a great effect on Alibaba. Suppose the Chinese government decides to give subsidies to Alibaba. In that case, the company will grow and increase its domestic and international market share.
Moreover, regulations imposed by the government also impact Alibaba. Suppose the Chinese government decides to limit the expansion of Alibaba so the market remains competitive. In that case, the government will take action against Alibaba. This will have an adverse impact on the company.
Economic Factors That Affect Alibaba
Economic factors in a PESTLE analysis take into account factors that are linked to a country's economy. This section of the PESTLE analysis will discuss what economic factors Affect Alibaba.
Various economic factors impact the operations of Alibaba. For example, exchange rates have a great impact on Alibaba. Suppose the exchange rate of a country depreciates against USD; in that case, the prices of products on AliExpress will rise for the residents of that country. Hence, the orders on AliExpress would fall from that country.
However, other countries would then demand products from the country whose exchange rate has been depreciated since now the products of a country whose exchange rate has been depreciated would seem cheap to other people from other countries.
Moreover, the global economic situation also impacts Alibaba. In healthy economic conditions, suppose in case of an economic boom, Alibaba will flourish because, in general, consumption increases during economic booms.
However, during recessions, the company would suffer since people's purchasing power and consumption would fall. This will limit the operations of Alibaba and make it suffer.
Furthermore, Interest rates across the globe also impact Alibaba. Suppose a country has a high-interest rate, in that country. In that case, people will prefer depositing money in a bank in expectation of a high return.
Due to this, the consumption of people in that country will fall. Hence, Alibaba will suffer since it won't be able to earn much from its retail platforms.
Furthermore, inflation also Impacts Alibaba significantly. In case of high global Inflation rates, people's consumption will fall. This will cause orders on the retail platforms of Alibaba to fall. As a result, the total revenue of Alibaba will fall.
Social Factors That Affect Alibaba
Social factors are the cultural and societal factors that affect businesses in a country. This section of the PESTLE analysis will discuss how different social factors impact Alibaba.
Alibaba operates in international markets, so the company needs to understand cultural values. The marketing campaigns of Alibaba can cause trouble for the company.
For example, suppose Alibaba's marketing campaign contradicts the values of a society. That entire society might end up boycotting the company.
Moreover, the level of mobile and internet penetration also impacts Alibaba. In societies with little internet penetration and smartphone access, Alibaba won't be able to generate much revenue from these societies.
Furthermore, social media is currently being used for marketing purposes, and Alibaba is one of the companies with effective social media marketing. However, there are countries where people don't use social media.
In such countries, Alibaba needs different marketing strategies, or else the company won't be able to capture that country's market.
Technological Factors That Affect Alibaba
Technological factors in the PESTLE analysis account for technological innovations and advancements that affect different industries. In this section of the PESTLE analysis, we will examine how different technological factors affect Alibaba.
The operations of Alibaba are significantly impacted by the level of digital infrastructure in the country. More people will use online platforms if a country has developed a digital infrastructure.
On the contrary, in countries with less developed digital infrastructure, fewer people would be aware of the operations of Alibaba.
Moreover, Alibaba operates in diverse fields. One of the fields where Alibaba operates is cloud computing. As technological advancements are taking place in cloud computing, the operations of Alibaba are becoming more efficient and effective.
Furthermore, the emergence of Artificial Intelligence has had an impact on Alibaba. For example, Alibaba can now ask for AI recommendations to improve the user experience. Other than that, Alibaba can take help from AI in fraud detection and logistics optimization.
Legal Factors That Affect Alibaba
A country's laws and legal framework hold great significance for every business that operates in that country. In this section, we will look at what legal factors impact the operations of Alibaba.
Alibaba has a large workforce of more than 235,216 employees. With such a large workforce, Alibaba has to ensure that its employees are treated fairly and in line with countries' labor laws. Otherwise, governments might impose heavy fines on Alibaba or even ban the company.
Besides that, governments are now paying great attention to data protection laws. Alibaba has to ensure that its users' data doesn't leak, or else the company will face heavy penalties.
Furthermore, Alibaba has to ensure that it complies with the laws made by the Chinese government to ensure competition in the market. If Alibaba adopts means to create a monopoly, the Chinese government will take strict action against the company.
Environmental Factors That Affect Alibaba
Environmental factors are factors that are related to the environment. This section will take a look at how different environmental factors impact Alibaba.
Alibaba has a number of e-commerce platforms, due to which it is responsible for a lot of plastic waste involved in the packaging. As people are becoming aware of the protection of the environment, pressure is mounting on Alibaba to adopt environmentally friendly packaging materials.
Many people blame Alibaba for an increased level of carbon emissions because of its successful retail platforms where people order products from different countries. They claim that due to e-commerce, carbon emissions have increased since a lot of transportation is involved in this industry.
Being one of the largest e-commerce companies, Alibaba is held responsible for the increased level of carbon emissions, due to which the image of Alibaba is being distorted.
Moreover, as global warming has increased, natural disasters have also increased. Due to natural disasters, the orders made on the retail platforms of Alibaba get delayed or go missing, affecting the reputation of Alibaba.
Furthermore, natural disasters also cause disruption in the internet. Whenever there is a disruption in the internet due to storms and floods, Alibaba suffers great financial losses since traffic on Alibaba's platforms decreases as fewer people can access its platforms.
PESTLE Analysis of Alibaba: Final Word
Alibaba is one of the leading tech companies. It has different sister companies that have diverse operations. In today's article, we discussed the history of Alibaba and discussed how the company evolved over the years.
The company was established in 1999. Its initial purpose was to connect Chinese manufacturers with global businesses. However, as the company gained popularity, it diversified its operations.
Currently, Alibaba generates a huge revenue each year and employs a large workforce. After discussing the operations of Alibaba, we proceeded further. We conducted the PESTLE analysis of the company to see what external factors impact the operations of Alibaba.
The PESTLE analysis framework helped us in analysing how different external factors affect Alibaba. We hope that you would have enjoyed reading this article. If this article intrigues you and you are interested in conducting a PESTLE analysis, here are more examples.
