China’s Alibaba: Great off starting block, but can it continue?
I was recently interviewed a journalist for a European financial magazine on Alibaba. He had some excellent questions, a small portion of which I’ve provided below. Also check out BC’s fall / 2014 press release on the Alibaba IPO.
What is so special about Jack Ma? What makes him stand out from other entrepreneurs – specifically western entrepreneurs?
- I’ve been fortunate to have an opportunity to annually visit China several times each year since the mid-1990’s. As a result, I’ve had a first-hand look– ringside seat!– watching the careers of several friends and business acquaintances. Many Chinese will do extensive career changes as they move between companies. But, what makes Mr. Ma’s transformation so incredible is to the extent that a) he read the market changes so well (i.e., when to begin applying different technologies to enable online commerce) and b) how he was so successful in learning the detailed nomenclature.
Why is Alibaba so successful? What is it about their business model, products or brand that has made Alibaba one of the biggest global success stories in recent years?
- Alibaba is so successful since it appeals to the Chinese culture of smaller product purchases, and seamlessly works with mobile telephony. Nearly everyone I know in China has a mobile phone— having one is more common than a landline, PC or a car. The fact that people can forsake going to a brick-and-mortar store, in favor of completing their purchases online, and the fact that Alibaba isn’t just a “one trick pony” makes it very successful.
What can we expect in the future? Has Alibaba reached it’s peak, what are the main challenges in the coming years, and who are the main competitors?
- Given the size of the company when it IPO’d, the big question is how much growth will be possible in its core business moving forward, in order to make it a meaningful long-term investment. If investors (or VC firms) buy their stock, they’re hoping for a consistent annual return of, say, 7-10%. It might be challenging for Alibaba to do that organically, but almost definitely through acquisition. Although down from its IPO price of $119, the stock has nonetheless been performing well in the 2nd half of May, closing yesterday at $93.88.
