Our Alibaba SWOT analysis examines the eCommerce giant's Strengths, Weaknesses, Opportunities and Threats and where it stands in the business domain.
When you think of online shopping for different items, Alibaba has to be in the top five considerations in your mind, especially if you want to save money on the shopping. It is undoubtedly one of the most successful businesses in the world. In this Alibaba SWOT analysis, we will see what sets the company apart from its competition. Also, make sure not to miss out on our PESTLE analysis of Alibaba.
PESTLEanalysis Team
Before we move on, let’s learn a bit more about the company. Starting in 1999 in Hangzhou, Zhejiang, China, Alibaba is a company that specializes in e-commerce, retail, Internet, and technology. At the moment they offer all three types of business options; business to consumer (B2C), business to business (B2B), and consumer to consumer (C2C).
Alibaba is one of the most widely recognized names in the online retail space, recognized by even those who don’t purchase from them.
Everyone around the world turns to their business to buy literally all sorts of commodities at some of the cheapest prices found anywhere. Moreover, by allowing consumers to sell directly to other consumers, people have the option to compare items to find the best prices for their needs.
Now it is no secret that it is doing really well. But conducting this SWOT analysis will help us in understanding exactly where the business is standing in terms of four major factors. You might be familiar with the acronym, but you should also know a bit more to understand the analysis better.
The first two letters of the term i.e. strengths and weaknesses are also called as internal factors of an entity being analyzed which in this case is a company. The latter two i.e. threats and opportunities are called external factors. Allow me to explain why.
Internal factors are the ones that can be controlled and influenced by the company whereas external factors cannot be controlled. They are basically out of the hands of the company and must be dealt with as they arise. This can be explained better using an example.
If Alibaba has a global presence, it is a strength for them because they have the control to make that strategic decision possible for themselves; this is why it is an internal factor. Now if some competitor came into the market and took their share by offering better alternatives, this would be a threat.
Alibaba cannot just control their competitors nor can they avoid them; this is why threats are external factors. Now that you have some clarity regarding SWOT and its four factors, let’s see where Alibaba currently stands in the business domain.
Alibaba's Strengths
There are innumerable positives that have made this company into a huge deal, but for the sake of keeping the discussion convenient, we are only going to look at a few. Here are the main strengths that have made it possible for Alibaba to dominate the market.
They are Huge
Alibaba is one of the world’s largest online retail companies. They hold the record of having the world’s largest IPOs of all time; in 2014 they went public and had a valuation of US$231 billion!
Other than this, they were also acknowledged as the fifth largest artificial intelligence company in the world in 2020. They currently have the world’s B2B, B2C, and C2C markets in the world.
These are only a few examples of the feats they have enjoyed. It is a very big strength for the brand to have because it enables such monumental and perpetual success.
Huge Customer Base
Alibaba has a very strong market share in the most populous country of the world; its hometown is China. Chinese people all rely on their services and are satisfied with the business.
If that is not enough, they also are very popular in India which is yet one of the world’s biggest populations. Having these two countries as target markets is more than sufficient for a business to do well. They are a global company which means their customer base is very vast.
Research and Development
Because of their increasing business, they have to invest a lot of money into R&D so as to remain ahead of the competition. This is a very big strength that enables them to stay ahead in the game.
At the moment, they have really big R&D centers in Hangzhou, Beijing, Hong Kong, Singapore, Silicon Valley, and Dubai.
Growth During Pandemic
Most businesses of the world really suffered when Covid-19 hit us, however, online businesses saw a boom. Alibaba grew an impressive 30% during the pandemic in 2020 because people all around the world relied on online platforms for their shopping needs.
Their business was able to adapt to an unprecedented event because of the way they operate.
Alibaba's Weaknesses
Despite their many strengths, Alibaba does have a few weaknesses which should be eliminated before they damage the company in the long run. Here are the most important ones.
Limited International Exposure
Don’t get me wrong, Alibaba is present in many countries of the world if not all of them, but they aren’t exactly as popular of a choice in other nations as they are in China.
Their current market share has dominated all thanks to China. They just don’t have the same influence in other countries.
Limited Revenue Streams
Alibaba earns most of its revenue through its e-commerce services despite having other modes of business in its portfolio.
This kind of takes away the fruits of diversification because if for some reason their biggest revenue stream gets damaged, they have no viable fallback options to sustain the magnitude of their business.
Counterfeits
Although the goods available on the website are already very affordable to begin with, people still make cheaper counterfeit products that look the same but obviously are very low in quality.
This issue can easily be resolved by investing in more patents and trademarks. Otherwise, it takes reliability away from the business because many people cannot distinguish between an original and a fake.
Alibaba's Opportunities
Weaknesses can always be eliminated and strengths can always be amplified by recognizing more opportunities at the right time. Here are some avenues the company should look into investing its resources into.
Internationalisation
Their weakness can actually be converted into a golden opportunity because Alibaba has the resources and infrastructure to make internationalization possible.
They have many regions to infiltrate owing to the ease and variety offered by their business. They could become the world’s biggest e-commerce platform, surpassing all else if they are able to capitalize on this opportunity.
Acquisitions and Partnerships
Alibaba although already has a bunch of acquisitions all around the world, they always can have more. Forming strategic alliances of this sort can help in international expansion. It is harder to enter newer markets from scratch.
Alibaba should have strategic partners in every country who would bring their valuable knowledge and insight to the table.
Alibaba Cloud Computing
One of their businesses is cloud computing. If exploited in the correct manner, this space could be dominated by the brand because of the amount of data produced by Chinese internet users.
China does not sell their data to the western world so Alibaba can become even bigger than they presently are by providing a proper platform to store and integrate this priceless data.
The things they could do with this information are boundless. It is an interesting avenue for the company to look into.
Alibaba's Threats
Alibaba also faces many threats in the industry. Threats should be taken care of in a timely manner before they become too big to avoid. They can cause irreparable damage. Here are some of the most important ones.
Competition
Naturally, they, like any other business, also have some very strong competitors. Amazon, eBay, Baidu are some of the bigger names among these competitors.
If they make one wrong move strategically, these competitors can come for their necks in a matter of a few months. Amazon especially is gaining more and more popularity around the world. They can easily dominate the market by increasing the barriers to entering for Alibaba.
Trade Barriers and Political Tensions
China and the USA just don’t get along. China is on its way to becoming the world’s second superpower which obviously goes against USA’s interests, so both countries constantly engage in tariff and trade wars.
It is because of these barriers Alibaba hasn’t been able to dominate the market in the USA and other western countries which would bring the company amazing profits.
The Pandemic
Though on one hand, the pandemic has done this company favors in terms of growth, on the other it has also brought with itself a threat in terms of changing buying patterns.
Consumers now prefer to spend money on essential commodities such as food delivery instead of things commonly found on Alibaba.
Final Thoughts on the Alibaba SWOT Analysis
If you have managed to stay tuned till this point, it is safe to assume you now understand how successful Alibaba actually is.
It is always a good idea to understand a business and its activities beyond our relationships as consumers for them. This knowledge can help you in your own educational and professional pursuits.
To sum it all up, we have discussed what a SWOT is and then we applied it to Alibaba’s business. It is perfectly justified to say based on the information compiled here; their strengths far outweigh the threats and weaknesses.
They also have amazing opportunities to look out for in order to become even bigger. Cloud computing is the one they should focus more on with respect to the times and digitalization of the world.
Overall, with the current state of their business, they are not going anywhere anytime soon. We have yet to see a lot from the company!
A SWOT analysis is one of the easiest to understand, use and implement frameworks available for improving your organization. It can be applied to industries at large as well to understand them in more depth.
It highlights the strengths and weaknesses which occur on the inside and the threats and opportunities which linger outside. If you know these four components of the SWOT, you very easily can be on the road to improvement and growth.
Knowing how to conduct a SWOT analysis is a very useful skill to have for working professionals as well as students to have.
If you wish to work on a SWOT of your own to increase your knowledge, we recommend the use of a good template. Moreover, you can understand how the analysis works by taking a look at a few extra examples. The easiest way to understand and explain a SWOT analysis visually is to draft it in a tabular form. It is more concise, clean, and comprehendible like this.
