Role in Alibaba Value Chain

IT role in Value Chain

With mounting pressures from market competitors driving ever-evolving business needs, firms are seen to increasingly count on information technology/systems for competitive advantage and attaining business agility. Differentiation can help achieve value creation throughout a business’s value chain, via activities that create services and products that increase performance or reduce costs. Business information systems are pervasive and impact all points on a business value chain. Further, they also impact competitive scope, whilst reshaping how a business’s offering fulfills consumer needs. All value activities of an organization possess an information processing element which incorporates steps needed for capturing, manipulating, and channeling requisite data for performing the activity (Role of IT in Michael Porter’s Value Chain Framework, 2009).

Right from logistics activities to servicing, information systems carry out the functions of control and optimization, and hence, transform processes and products to provide more critical functions. They aid companies in redesigning manufacturing devices, promoting marketing, improving logistics operations, enhancing customer service, and boosting performance of products. They facilitate organizational globalization, establish industry attractiveness, and can influence industry structure through altering of every one of the 5 competitive forces. Information systems assist businesses in establishing competitive edge via cost-cutting and enhancement of differentiation; generating new business through making current businesses technologically practical; establishing novel businesses within current ones; and ensuring derived demand develops for new offerings (Role of IT in Michael Porter’s Value Chain Framework, 2009). Alibaba e-Business’s information system generates significant value for Alibaba, and includes the areas of company finance, production, performance management, business intelligence and supply chain. Value creation expands to cover all primary and secondary value chain activities. Value creation in Alibaba’s e-business systems occurs via:

Transactional efficiencies — These are attained through distribution of cost reduction, inventory management restructuring, simplification of transactions enabling individual clients to enjoy the benefits of scale economies via bulk purchases and demand aggregation, supply chain streamlining, and speedier order fulfillment and transaction processing, thus benefiting customers as well as vendors (Role of IT in Michael Porter’s Value Chain Framework, 2009).

Complementarities — Alibaba and other e-businesses will be able to leverage value creation potential through offering complementary service/product bundles to clients (Role of IT in Michael Porter’s Value Chain Framework, 2009).

Novelty — New manufacturing methods, tapping new markets, designing new services or products, new marketing or distribution methods/channels, or innovation in business operations (or transaction restructuring) may create value (Role of IT in Michael Porter’s Value Chain Framework, 2009).

Lock-in — e-Businesses’ value creation potential can be improved by the degree to which their clients are driven to repeat purchases as well as by the degree to which their strategic partners possess incentives for maintaining and improving their associations (Role of IT in Michael Porter’s Value Chain Framework, 2009).

Factors affecting IT role Alibaba’s value chain

Organizational resources

E-Business Alibaba operates major mobile and online marketplaces in the wholesale and retail trade domains, in addition to services like cloud computing. The organization offers services and technology for allowing customers, vendors, and other parties to conduct business within its system (Alibaba: Company Overview, n.d).

Mission and strategy

Alibaba aims at building the future commercial infrastructure. Its vision is for its clients to meet, live, and work at Alibaba. It reckons it will last in the e-business marketplace for more than a century (Alibaba: Company Overview, n.d).

Nature of products

The enterprise allows several million social and commercial interactions among users, among businesses, and between customers and vendors, on a daily basis. Customers are empowered with basic data technology and commercial infrastructure, for building businesses and creating value which may be shared with ecosystem participants. The company endeavors towards expansion of its services and products, for becoming a central part of customers’ everyday lives (Alibaba: Company Overview, n.d).

Location of markets and customers

Alibaba represents the most favoured of online shopping destinations, in the most rapidly-growing global e-business market. Last year, Alibaba’s online site transactions reached a total of 248 billion dollars, more than that of Amazon and eBay combined. The company is not only China’s, but the world’s (by certain measures), largest e-commerce firm. Its 3 key sites — Alibaba.com, Taobao, and Tmall – have several hundred million users, and are host to millions of enterprises and vendors. Alibaba handles the most business of all e-commerce firms. Since it possesses an extensive customer base and runs marketplaces, the quantity of business flowing over Alibaba’s sites surpasses that of the remaining e-commerce firms (What is Alibaba, n.d).

References

Alibaba: Company Overview. (n.d.). Retrieved April 20, 2016, from http://www.alibabagroup.com/en/about/overview

Role of IT in Michael Porter’s Value Chain Framework. (2009). Retrieved April 20, 2016, from http://www.managedecisions.com/blog/?p=6

What is Alibaba? (n.d.). Retrieved April 20, 2016, from http://projects.wsj.com/alibaba/