Alibaba group PESTEL Analysis
Alibaba group is a leading Chinese e-commerce brand. Apart from that, it is also a leading cloud player that has quickly surged to a leading position in the Chinese market. The company is in a strong financial position and its sales and revenue have grown faster within the last three years. Alibaba’s number of monthly active users has grown significantly in 2018. The company invests a large sum each year in research and development. However, it has not been able to expand outside the Chinese market significantly. In the near future, it will focus upon expanding its footprint in Asia, Europe and Middle East. However, the international environment is full of challenges and apart from the strong position of Amazon, other challenges including political and technological are also there. Still, Alibaba has achieved a significantly strong position in the Chinese market.
Read more about Alibaba and its opportunities and challenges in the global environment in this PESTEL analysis.
Political factors have acquired a significant role in the 21st century. Around the world, the political forces are playing a very important role in the context of business. Governments are now playing a more active role in terms of oversight and control of businesses. The technology industry specifically is facing higher control. The Chinese government encourages regional businesses which has proved beneficial for businesses like Alibaba which have seen very fast growth. Political forces are affecting international businesses in other ways too. Trade relationships between countries also affects international trade. The trade relationships between America and China have reached the point of being the worst. This is not beneficial for Chinese businesses operating in America. Moreover, It can be a hurdle to expansion of Alibaba in the European countries.
Economic factors also play a dominant role in the context of international business. Apart from the condition of the global economy, the situation in the regional economies also affects global businesses and their sales as well as profitability. Post the recession, the world economy has returned fast on track. This has proved beneficial for the international business. The Chinese economy has also flourished a lot and reached the second position at the global level. This has resulted in higher sales and profits for local brands. Alibaba is a leading Chinese brand and a major reason behind its strong performance is the healthy economy of China. Now more and more people are shopping online and the use of technology by both individuals and enterprises has grown a lot. When the economy is in good condition, the level of employment is higher. People have higher dispensable income in such a situation and spend more on technology and lifestyle items. The reverse happens when the economy’s performance is poor. It is why the role of economic factors in the context of business cannot be overlooked.
Social factors have also acquired a central role in the context of business. Apart from changing social trends, there are other factors too which affect businesses. From society to society and culture to culture, the patterns vary. However, in most of the societies and cultures globally, the use of internet and internet based services has grown. This trend has proved profitable for ecommerce brands including Amazon and Alibaba. China itself has become technologically advanced and a very large part of its population uses internet to access online products and services. Moreover, when it comes to expanding internationally to other markets, then companies cannot ignore the central role of these factors. The same business and marketing strategies do not work in all societies and cultures. Instead businesses need to make changes to their style and strategy to be successful in each market. This could also be a reason that while Alibaba has seen a lot of success in the Chinese market, it has been unable to penetrate significantly into the overseas markets.
Technological factors are now playing a core role in the growth of most industries. Alibaba group is a technology business and an ecommerce leader in China. The company has acquired enormous growth within a short period. This has happened due to its focus on technology and innovation. The brand invests a large sum each year in R&D. Apart from e-commerce, it is also a leader in the cloud industry in China. Due to its focus on customer convenience and technological innovation, the brand has seen impressive growth in number of active users as well as sales and revenue. Around the world, apart from growing internet usage, now more and more people are using the internet and smartphones to shop online. While overall use of digital technology has grown globally, companies like Alibaba have flourished with these trends. Alibaba is also a leading cloud player and has brought a web of services for its enterprise customers. Its revenue from cloud business also saw significant growth in fiscal 2019. In this way, technology plays a core role in the growth and expansion of ALIBABA group’s business.
Environmental factors have acquired a distinctly important role in the area of business and especially the large companies including leading technology brands are making major investments in environment and sustainability. Businesses are investing in both social responsibility and sustainability to achieve a socially responsible and strong image. Alibaba has made CSR and sustainability a part of its business model. Right since its foundation, the company has been investing in CSR and sustainability projects. The company has remained committed to supporting and participating in charitable and socially responsible projects that align with its core values and mission. Apart from creating job opportunities it has invested in a large number of socially beneficial projects. One of them is its reunion system which uses its technological resources to find out missing children. The company also dedicates its resources to helping small businesses and encouraging women entrepreneurs. Not just this the company is also working to reduce its environmental impact and in this direction, apart from making its own processes sustainable, it is also investing its supply chain and logistics and encouraging sustainable practices there.
Law and legal factors have also acquired a larger role in the context of business. Especially, for the large and international businesses the challenge is bigger. Compliance is essential since world ver legal agencies have grown the level of oversight of businesses so that they adopt responsible practices and are held accountable for everything they do. Non-compliance can result in heavy fines and the fines can be a major share of a company’s net revenue. Apart from product quality and environment, there are other laws related to labor and other things which also affect businesses in their domestic markets as well as internationally. While Alibaba has not had any significant legal issues in the past, it always pays to be careful.
- Alibaba Annual reports 2018 & 2019