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Alibaba Group Pestel Analysis

Essay by   •  January 29, 2019  •  Case Study  •  1,982 Words (8 Pages)  •  221 Views

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1. Introduction

In the task given, we will be researching about Alibaba Group. During the past few years e-commerce has been a growing trend in Singapore. The idea of online shopping fits the hectic lifestyles of Singaporeans. In any cases, shopping in Singapore is expensive (Kaur, 2014). Founded in 1999, Alibaba consist of only a mere number of 18 people with Jack Ma as the leader. The purpose of Alibaba at first was that, with the use of the internet they could help small exporters in China to reach out globally allowing a global platform for them. It is actually simpler to state what Alibaba does not do (Broad, 2014) after 17 years its reach now does not end at online markets, the success of its core business Alibaba expanded into new areas ranging mostly from IT services to film industries and even football clubs. For the past years since the beginning of Alibaba, they have hoped to achieve their goal of improving China’s economy and creating a market whereby the Chinese have domination over as such improving the lives of many. This is the reason why since a decade ago, there has been an incredible increment from zero number of billionaires to a significant amount of more than 300 (Gracie, 2014). With that the Alibaba Group has already became one of the biggest e-commerce market in the whole world. They aim to sustain their company for at least 102 years for that is an achievement few corporation can do as Alibaba Group claims that their culture and systems are long lasting (Alibabagroup.com, 2016).

2. PESTEL Analysis

  1. Political Factors

The success of companies and businesses are connected with political stability of the country (Alesina, Ozler, Roubini & Swagel, 1996).Singapore gained independence during 1965 and since then it has been dominated by the same political party known as the People’s Action Party(PAP) (Guidemesingapore.com, 2016).

The People’s Action Party were in charge of the economic growth and the stability of political issues therefore allowing Singapore to thrive. This can only mean that Singapore is managed by leaders who are worthy and thus Singapore is ranked number one as the most politically stable country in Asia (idemesingapore.com, 2016).

  1. Economic Factors

The e-commerce in Singapore has been increasing throughout the past 5 years from a mere $1.1billion to a prediction of $.4.4billion in revenue (Wee, 2011). Singapore was the third fastest growing economy in the world, with a real GDP growth rate of 14.471% (Economywatch.com, 2010). Relatively Singapore has a small home-grown market and thus reaching out to foreign markets to thrive, this gives opportunity to companies like Taobao a subsidiary of Alibaba Group to tackle into the market of Singapore.

  1. Social Factors

Although only 1.2million online shoppers with the age of above 18 had only an average spending per person of $1.492 in 2010, $730million out of the $1.1billion reported in retail e-commerce revenue was from the middle income and above groups in Singapore.

With such a materialistic culture where Singaporeans strives for a better standard of living at the same time trying to save in areas they can. Alibaba provides a virtual platform coming with a range of products and at a lower price which therefore attracts consumers who do not have time to shop as they are busy working but also those who wants to save money.

  1. Technological Factors

Singapore is a tech-savy nation whereby 72% of its population uses internet and 84% of households have internet.  With the widespread of internet users and IT infrastructures in Singapore, it has attracted foreign companies like Alibaba Group to set up regional operations in Singapore.

Alibaba Group is constantly finding ways to make transactions more secured between the consumers and seller on their website, by coming up with different schemes on mode of payments. Alibaba Group has a strong stand against illegal practices and will not tolerate scams as trust is what represents their company.With technology so advanced, customers may track their packages anytime to estimate when and where their parcel is, should there be any hiccups Alibaba’s customer service is always there to assisit

  1. Environmental Factors

The government puts in a lot of efforts to maintain the environment quality of the country. Singapore natural environment makes it a safe place for its citizens as it does not face the dangers of natural disasters except during exceptional cases whereby minor floods occur. It is mostly hot or wet throughout.

Singapore boasts of a competitive, corruption-free, open business environment (Quality of Life in Singapore, n.d). This is mainly the reason why companies from all around the world would invest in the country, as they provide a transparent platform where hard work is paid off.

With such an environment, companies like Alibaba Group could create many business opportunities from the country.

  1. Legal Factors

E commerce has grown throughout the years and Singapore has to stay ahead of the trend in order to progress. The Electronic Transaction Act was introduced in the 1998 to provide a legal foundation for electronic signatures, and to give predictability and certainty to contracts formed electronically (Ida.gov.sg, 2016).

Recognizing the importance of transparency the country lay down laws which protect consumers from falling into victims of a scam or illegal acts. Alibaba Group also have policies themselves in regards to transactions and the credibility of the seller even though Alibaba Group is only the third party material which makes it even more safe for consumers and sellers.

3. Porter’s 5 Forces

  1. Threats of Substitutes Products : LOW

Alibaba Groups handles consumers on a global scale with wide variety of products. They have many different subsidiary sites that cater to specific needs of the consumers, which are based on the customer trends that are monitored by their company. With such ability to adapt to customer trends, Alibaba group is not threatened in terms of their products or services being replaced as they are constantly moving with the globe.

  1. Threats of New Entrants : LOW

The ecommerce market has a low criterion to enter, thus presenting potential growth for newcomers as the ecommerce era has only just begun and its poses many wealth opportunities out there in the market. It is easy to set up an ecommerce business, with just a small knowledge of IT skills and a well manage site to showcase your products together with a team of about two will do to manage the delivery and customer service part.

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