Alibaba and Chinas E-Commerce: open Sesame Comes True,

In the arabic tale of Ali Baba and the forty thieves, Ali Baba the poor woodcutter opened the cave with hidden treasure by saying the magic words open sesame. In modern-day china. Alibaba is a family of e-commerce businesses which the Wall Street journal described as comparable to eBay, Amazon, and Paypal all rolled into one,with a stke in Twitter-like Weibo thrown in to boot. Alibaba main trading platforms are Taobao and Tmall;together they processed $170 billion in transactions last year.THis is more than Amazon and eBay combined. So what is Alibaba magic?

Alibaba had a humble beginning in 1999 a former English teacher named Jack Ma started the company with a team of 18 in his apartment in Hangzhou, a city some 100 miles southwest of Shanghai. The year 1999 also marked the start of China's explosive growth of Internet users grow to 564 million a compound annual growth rate(CAGR) of a Whopping 37.6 percent.

Initially, Alibabas website was a business to business(B2B) platform where china's small and medium-sized businesses could showcase their products to buyers around the world. Alibaba was not the first company to do so online. In its first year of operation Alibaba signed up new members at a rate of 1,200 per day. By 2002 the young startup was already profitable. By 2012 Alibaba facilitated transactions in basically every country in the world.

In 1999, EachNet another Chinese Internet venture was founded in Shanghai by two harvard MBAs who wanted to create a "chinese eBay" an auction site for locals to sell and bid for goods. By 2003, EachNet had 2 million users and 85 percent market share in China's consumer to consumer(C2C) transactions. At the time, eBay was actively looking to expand in China and eventually acquired EachNet as its china operation for $180 million in 2003.

Fearing eBay would lure away small businesses Alibaba lauched a competing C2C platfrom, Taobao(meaning digging treasure in Chinese) as a defensive strategy. Unlike EachNet which charged listing and transcation fees from sellers. Taobao was free for the users. But Taobao's free service did not erode EachNet's loyal customer base. EachNets dominant market position meant more products and more opportunities for both buyers and sellers to trade. Although EachNet was competing head to head with Taobao on advertising campaigns, ebay made a decision to terminate EachNets homegrown techology platform and move all EachNet users to eBays U.S. platform in 2004. Internally, this was called a migration at eBay. The intent was to create one global trading platform that would allow eBay users to trade with each other,no matter where they where located.

The problem was that eBay's U.S. platform did not have the set of features that EachNet needed to compete in China. The outline data that once freely flowed within China now became cross-boarder traffic and had to pass the chinese government firewall. The speed to load EachNets web page slowed significantly.Frustrated users left EachNet in droves and turned to Taobao for a better alternative. While most decisions at EachNet had to go to eBays U.S. headquarters for approval,Alibaba swiftly launched a number of innovative services to assist transactions on Taobao. One was Aliwangwang and instant messaging service helping buyers and sellers interact. Another was Alipay an escrow payment system to reduce online transaction risk. Just three months after eBay's migration,Taobao had captured 60 percent of the C2C market share,leaving EachNet at 30 percent. In 2006, eBay shut down EachNet and folded its China operation altogether.

Aliabab,meanwhile continued to build its e-commerce venture around Taobao. In 2007 it set up Alisoft where Taobao sellers could buy customized third-party software to help with their day-to-day operations and Alimama,where Taobao sellers could post ads on a network of specialized websites. Anticipating a growing share of business-to-consumers (B2C) transactions of online retailing,Taobao launched TMall,a dedicated B2C platform to complement Taobao in 2008.

By 2012, Alibaba employed 24,000 people and had over $4 billion in revenues,becoming the clear market share leader in all three e-commerce areas (B2B,C2C,B2C) in China. Alibabas initial public offering is highly anticipated because the company is valued at somewhere $55 billion and $120 billion. Chinas internet e-commerce market expected to grow to $600 billion by 2020. The U.S. online search from Yahoo owns a 24 percent stake in Alibaba.

Please use the information above to answer the following below with in afive double spaced pages in 12 point Arial font with 1 margins ( additional pages for a cover, bibliography, endnotes, tables, charts, etc.). Your paper should address the four questions, Alibaba and Chinas E-Commerce: open Sesame Comes True, plus the following additional question (to be addressed first):

Question

*(to be answer first)Apply a PESTEL framework to analyze Alibabas external environment. Then, conduct a SWOT framework to analyze internal and external factors for Alibaba*

1. How was Alibaba able to become the leading online trading platform in China? Think about standards, network effects, and crossing the chasm

2. Apply the CAGE distance framework (see Exhibit 10.3) to help explain why eBay was not successful in the Chinese market. Why do you think Amazon has only 1.9 percent market share in China (see Exhibit MC17.3 ), while it holds some 26 percent market share of the $226 billion U.S. e-commerce market. What general conclusions do you draw?