Introduction:
Electronic markets have empowered buyers and sellers to bypass geographical boundaries as well as overcome economic barriers to exchange goods and services with one another. Moreover, with the current growth rate of innovations in information technologies, the time and cost of processing and communicating data have enabled firms like Alibaba and Amazon to leverage their dominant positions in the market to further develop their IT mobile capabilities such as cloud computing, as well as their mobile payment solutions for facilitating trades.
Business Model [Amazon]:
Amazon currently has five primary revenue driving models that make up the vast majority of the its business. Undoubtedly notable for dominating the e-book market with the Kindle(1), this ecosystem alone brings in revenue streams by selling e-readers and e-books, as well as a publishing platform for authors. Amazon Marketplace(2) is a platform acting as a sales channel for private users and business re-sellers. Fulfilment by Amazon(3) is a system for reselling partners, which manages orders and inventory in exchange for a fee per item. Amazon Prime(4) is a top-tier membership offering all premium Amazon services for an annual fee. Finally, Amazon Web Services(5) offers their rapidly growing cloud computing services in addition to several other services more aimed towards corporate clients.
Business Model [Alibaba]:
Alibaba has its roots and business models embedded in electronic markets. Despite many similarities to Amazon however, their approach towards innovation was distinct. Alibaba’s primary operations were founded on a service-based e-commerce model, an online sales platform for buyers and sellers Taobao(1). This is complemented by Tmall (2), which merely focuses on the increasingly affluent Chinese consumer base. In 2004 the online payment system Alipay (3) was launched, processing roughly half of all online payment transactions within mainland China. Similarly, Amazon also offers Amazon Payments, but it does not cover anywhere near as much of the market as Alipay in Asia. Alibaba cloud, (Aliyun (4)) is the final notable business model for Alibaba and was first established in 2009, providing cloud computing services covering IaaS, SaaS in addition to big data solutions.
SWOT Analysis:
Future Prediction of Technologies:
With the current pace of IT evolution, technology infrastructure and IT capabilities remain significant factors for both Amazon and Alibaba to be able to adapt to future customer preferences. This is primarily due to the exponentially growing number of consumers who are shifting to mobile payment solutions.
Like Amazon, Alibaba’s cloud service emerged from the enormous CPU power needed to handle millions of online shopping transactions. Unlike Amazon however, it enjoys home-field advantage in a vast Chinese market where internet-based computing is still novel to many enterprises. Consequently, in order to succeed in China’s developing retail technology infrastructure, Alibaba will need to stay as agile as possible in the mobile space, as more consumers (500 million) have begun to use mobile devices to make purchases. This strategic decision led AliBaba to release a mobile OS.
Ultimately, whilst cloud computing remains merely 4% of Alibaba’s overall business, it has the potential to account for more than $1 billion of sales by 2018. By comparison, Amazon Web Services’ revenue was just over $2.6 billion in the March quarter. This emphasizes the importance for Alibaba to effectively manage their cloud computing strategy, given the market position of Amazon and as a result, the attractive competitive environment.
GROUP 95
Video Link: https://youtu.be/dBhUREVs704
