Question 1: Summarized below is different market segments each of the division of Alibaba compete in.

Retail Consumer Business (Small and Large) Publishers Ad Agencies

Alibaba.com X

Alipay X X X X

Alisoft X

Taobao X X

Alimama X X X

China Yahoo! X

Based on this analysis we believe that the current degree of competition among business units is appropriate. From the customer segment landscape perspective, there are likely synergies from a customer value chain point of view. Alibaba can bundle offering from Alibaba.com, Alipay, Alisoft, Taobao and Alimama and market them to small and large businesses. From a future growth and expansion strategy perspective, Alibaba.com has already achieved significant market share in China and has aspirations to compete globally. In contrast, Taobao still has a significant potential to grow within China through internet penetration in China, which currently stands at 28%. Hence Taoboa would need a China focused strategy to retain and grow market share in a highly competitive market contrast that with a global strategy that Alibaba.com would need to pursue.

With the on going growth of e-commerce especially with China centric companies, Alipay has an opportunity to increase their transaction value and compete against Paypal more effectively on a global scale. While some of Alibaba’s business units might have potential synergies, Alimama and China Yahoo share little in common with them.

Given the disparate growth and expansion strategies, lack of significant synergies in Customer segment focus areas, and demonstrated abilities of these business units to rapidly grow in a decentralized environment the benefit of letting them compete independently far outweighs the value from efficiencies from cooperation.

Question 2: At Alibaba different divisions work independent of each other with little to no co-operation between them. This system has worked for the company, and they have seen tremendous growth and success over the years. However we believe that there is potential for improved co-operation between the divisions that would promote greater growth for the company.

We recommend that Alibaba as a company encourage co-operation in the following areas:1. Upper management: Alibaba is already cooperating on this front, by organizing annual retreats

for senior management from different divisions. Also personnel from senior management are rotated among different divisions. This helped build similar leadership styles across divisions, as well as a sense of one company across different divisions.

Strategy II

2. Sharing of ideas and business intelligence: Different divisions can benefit from ideas and knowhow from different divisions. Also they can leverage from customer relations developed by reps from different divisions, to share sales opportunities. In cases where 2 divisions are competing for the same customer, and if one division is potentially loosing sale, then they can share the sales lead with other divisions.

3. Creation of ‘Technology Council’ under Jack Ma, to achieve free technology transfer among different divisions. This will prevent the cases where each division wouldn’t have to ‘reinventing the wheel’. Other task of this council would be to provide non-binding recommendations on what technologies to use for new products/platforms, to build long-term synergies.

4. Company wide vendor contracts: Alibaba should sign company wide contracts with different vendors to get higher discounts. However they should maintain flexibility that they shouldn’t have to club purchase from different divisions to get the discount. They should be able to make individual purchases and get the higher discount.

However we would not recommend increased cooperation among the divisions for day-to-day operations. This has helped each division chart its own path, and make it easier to make changes to achieve the target profit and loss, without being dragged down by what is happening at other divisions. This also reduces operational issues/overhead related to cooperating between divisions. We also avoid challenges related to prioritizing needs of one division over needs of other divisions.

We do lose efficiencies achieved by shared resources, but we feel the cost of operational challenges reducing the pace of growth will far outweigh the benefits achieved by sharing of resources.

Question 3: Small Businesses FinancingYes, Alibaba should enter into Small Businesses Financing. This will be an opportunity for Alibaba to increase the amount of business it’s doing with clients across its verticals. Alibaba will be able to leverage its amalgamation of transactional data on its clients sales, payments and collection through its various business units as a point of differentiation. They would be entering an underserved market with virtually no competition and benefit from being a first mover. Alibaba has a clear advantage in its client database. Small Business Financing can start its micro lending operation with existing customers before expanding beyond Alibaba borders. The new small business-financing unit should be established as a new business unit. Lending markets have a high barrier of entry, which Alibaba will have to overcome including, but not limited to, raising capital and obtaining licenses. The regulatory environment is currently complex for banking institution and thus it would be wise to establish it as a separate unit to prevent other business units to adhere to the strict requirements of lending institutions. For example, lending institution have strict capital requirements and if the lending institution is part of the business unit, the whole unit would have to adhere to the capital requirements, which could have an adverse affect on the business unit. In addition, after establishing a strong foothold through Alibaba’s business units, they should expand to non-Alibaba customers both in and out of China, which could be difficult if established within the business unit. Ma should encourage cooperation for it’s new micro financing business unit, because it will help both the business unit and the financing unit. By financing it’s small businesses, clients could increase the amount

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of business they do through Alibaba. For example if a current customer of one of the business units does X amount of business, through financial leverage, our new small business financing unit can allow them to do X* the amount of business. This will be benefit the new small business-financing unit and the associated business unit making it a win win for Alibaba. The ability to provide financial leverage into an underserved capital starved market will help increase the stickiness of Alibaba customers. By building a brand through our new micro financing business unit as a competitive lender of choice we can begin to look to expand Alibaba borders similar to Alipay.

Mobile PlatformWe believe given Alibaba’s leadership position in online e-commerce by 2008, it makes strategic sense for Alibaba to leverage the exponential growth in smartphone usage in China by launching mobile apps for all its core business units before potential competitors could get into the market. Below are the primary drivers for getting into the mobile platform development business:

1. E-commerce: Increasingly more consumers and businesses will attempt to search and buy products from different Alibaba marketplaces on their smartphones, so not having division specific mobile apps will result in lost e-commerce revenue, negative customer experience and potential customer loss.

2. Expanding into Mobile Advertising: Use native advertising on the in-house mobile platforms as a learning tool before expanding the Alimama Ad Exchange portfolio to include 3rd party mobile apps.

3. Data Initiative: Finally this could enable them to add mobile device/location specific data to their existing customer behavioral data to build out a comprehensive Data Management Platform for more audience based targeted advertising for premium advertisers.

Should the new business be organized as a separate unit or an existing unit?

In terms of organizational setup, we strongly recommend that a centralized division be set up to provide the core development framework to ensure consistency in app experience, app event tagging and user data management. However each division should own and customize their mobile platform, enhancements and marketing strategies. Below are few of the other reasons why we are recommending this approach

1. Streamline App Development: The centralized division will provide the ‘App Implementation Guide’ to the divisions and this should accelerate the app launch and delivery timing1. Cross-platform ecosystem: Utilizing the same app code framework will help all apps to be integrated into the Alibaba ecosystem of suppliers, individual buyers, enterprise buyers and advertisers.2. Mobile Analytics: Consistent tagging of the Apps will help in combining cross-divisional Mobile Uniques and other engagement metrics that can be used to provide better cross-selling opportunitiesIn Summary, in order to capitalize on the opportunities in mobile e-commerce and advertising there needs to be deeper level of cooperation between the different business units along with direct oversight from the newly formed unit to reduce development cost, accelerate user adoption and generate cross-divisional monetization.

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