What possible reaction other e-commerce players (such as Amazon) have to this strategic move?
This case study revolves around the Chinese e-commerce giant Alibaba Group and its efforts at dominating the e-commerce South Asian Market via its extensive investment and acquisitions. The case is taking place in 2016 in South Asia. The e-commerce industry is one of the highly competitive industries, and the South Asian region is considered as the prime market. The rapid growth of the e-commerce market in the South Asian region has marked as the prime attraction for global players, including Amazon Inc (Kittilaksanawong & Binti-Harun, 2018).
Alibaba is going global as aligned with the Chinese globalization policy. It brings us to the e-commerce cold war, which has been going on between Amazon and Alibaba Group. It is the battle which is more likely to direct decades of future business roles for the e-commerce giants. Looking at the strategies of the e-commerce players, we can see that in India, Snap deal and Flipkart are being faced by the rich e-commerce American rival pumping $3 billion in the market. While on the other hand, in Indonesia Amazon is investing $600 million.
It seems to show that Amazon is trying to conquer South Asia from East and West while having a center point in Singapore. Alibaba, on the other hand, has recently acquired the heavy spending player Lazada for a whopping $1 billion. It is, along with its financial arm, benefiting Alibaba in establishing a footprint in the financial sector as well. While Chinese and American companies are entering South Asia from all sides, it is certainly evident that South Asia has become the new battleground for the e-commerce players which would then extend to the Middle East and African region in long-term perspective (Do, 2016).
For the other players other than Amazon, this is not good news. The existing e-commerce sites, retailers, and local companies are certainly unprepared for this onslaught. In the US, Wal-Mart had to fend off the assault of the Amazon in 2015. Retailers of South Asia would certainly not be as prepared as Wal-Mart had been. These two elephants are most probably going to stomp everyone in their way. The reaction of the other players is thus important for the overall market growth. In case the government’s aid foster incumbents and innovative startups or the governments stand idle and let the giants suck all the value from the South Asian market, the success of the acquisition of the Alibaba Group would be affected. Recently, Alibaba has purchased the stake of Reliance Capital in Paytm for $42 million. It is other than the $177 million that was invested in the Indian commerce and payment platforms. China and Alibaba have its eyes set on the south Asian market. While Amazon is establishing its footprint I India, Alibaba is stabbing it with investing $3 billion in India.
How such reaction will influence the success of this acquisition by Alibaba?
It can be now seen that Amazon presence in this region is close to none. If Amazon is waiting to strike at the right time, then it is a possibility that it may find out that the time has passed. With the investment in Lazada Alibaba has firmly grasped on the South Asian e-commerce market. With Jack Ma is advising the Malaysian government personally on their digital economy, the potential of Alibaba to dominate this region is certainly bright. It is an exact opposite to the potential of Amazon in this region. It can be seen that South Asia has an importance similar to that of Asia to Amazon. Europe tends to be the extended market of the US, and the Chinese consider South Asia similarly as an extended market (Kittilaksanawong & Binti-Harun, 2018).
The business model of Amazon also does not align with South Asia. India is the second largest populated country in the world with the dominance of JD and Alibaba in the e-commerce sector does not make a preferable position for Amazon. Amazon can certainly try to enter the South Asia market as it holds the key to the Middle East, and Eastern Europe regions as well. The rippling effect would aid Alibaba with its dominance in South Asia. Amazon reaction thus to delay the entry into the Asian market is not wise unless it has something big in store. Even though Amazon holds a major market in the US and Europe, the most prosperous market is present in the Asian region with its high birth rate, and high young population (Minh Do, 2017).
The reaction of Amazon until now has made the Alibaba acquisition strategy look highly successful. Analysts have even suggested the Acquisition of Lazada as one of the crucial and most important blows for Amazon to finish its role in this region. Even though it is early to consider it as a final blow, however, it is certainly a fact that with the reaction of Amazon delays its entrance into the South Asian market; Alibaba has only strengthened its position in the South Asian market (CB Insights, 2018).
To conclude, it can be said that the reaction of the existing e-commerce companies including multinationals, local private and public companies, and innovative startups hold the crucial position for the success of Alibaba investment decision in Lazada. This reaction would show how successful this step had been. So far, with Amazon decides on delaying its entry into the South Asian market, Alibaba decision and strategy for the acquisition of Lazada has certainly paid off and thus can be considered as successful. However, it is too early to conclude this.
References
CB Insights. (2018). Amazon Strategy Teardown: Amazon’s Barreling into Physical Retail, Financial Services, Healthcare, And AI-Led Computing. Retrieved from CB Insights: https://www.cbinsights.com/research/report/amazon-strategy-teardown/
Do, A.-M. (2016, November 27). Alibaba And Amazon Are in an E-Commerce Cold War for Asia, And Stakes Are High. Retrieved from https://www.forbes.com/sites/minhdo/2016/11/27/alibaba-and-amazon-are-in-an-e-commerce-cold-war-for-asia-and-stakes-are-high/#667da0371640
Kittilaksanawong, W., & Binti-Harun, N. I. (2018). Alibaba Group: Acquiring Lazada to Win the Southeast Asia E-Commerce Battle. Ivey Publishing, 23-37.
Minh Do, A. (2017, March 9). Why Alibaba’s Latest Paytm Buy Proves Amazon Is Playing A Losing Game In Asia. Retrieved from https://www.forbes.com/sites/minhdo/2017/03/09/why-alibabas-latest-paytm-buy-proves-amazon-is-playing-a-losing-game-in-asia/#eb65ee52c84f
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