Alibaba: A Giant Among Giants - [Business Breakdowns, EP. 03]

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Apr 9, 2021

Ram Parameswaran, founder of Octahedron Capital, shares his expertise on China's e-commerce giants, while Claire Cormier Thielke, managing director of Hines Asia Pacific, offers insights into Alibaba's unique ecosystem. They discuss Alibaba's evolution from a basic online platform to a massive business model, its advertising-centric strategy distinguishable from Amazon, and the heavy competition in China's e-commerce landscape. The conversation also delves into cultural attitudes towards competitiveness and the distinct consumer experiences shaping the future of retail in both China and the U.S.

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INSIGHT

Alibaba's Business Model and Scale

Alibaba is frequently compared to Amazon, but its core business model is advertising-based, similar to Google.
It operates on a larger scale than Amazon, processing $1.2 trillion in sales in 2020 and projected to reach $2.5 trillion by 2025.

INSIGHT

Alibaba's Ecosystem

Alibaba has a vast ecosystem beyond e-commerce, including cloud computing (AliCloud), financial services (Alipay), logistics, and media.
Alipay, 33% owned by Alibaba, is a dominant force in China's financial landscape, even bigger than JP Morgan.

INSIGHT

Alibaba's Country-Scale Impact

Alibaba's scale makes it comparable to a country, boasting 800 million active customers and impacting every facet of Chinese life.
Its disappearance would have a more significant impact on the Chinese economy than Amazon's disappearance would on the US.

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Today, we will be breaking down the world's largest e-commerce company, Alibaba. Alibaba was founded in 1997 by Jack Ma and almost 20 other co-founders as an online bulletin board that allowed small Chinese manufacturers to tell buyers around the world that they were open for business. Today, Alibaba operates a sprawling ecosystem of businesses that includes e-commerce marketplaces, cloud computing, food delivery, logistics, and financial services.

In this breakdown, we discuss the staggering scale Alibaba's business, how Alibaba went from copycat to innovator, the looming threat to Alibaba from the next generation of Chinese juggernauts, and how competition is viewed differently in China versus the West.

For this episode, I'm joined by a special guest host, Claire Cormier Thielke, who many of you will remember from her appearance on Invest Like the Best. Claire is the managing director of Asia Pacific for Hines and brings her first-hand view of what Alibaba has built in China and her daily experience using the company's products.

To help us break down Alibaba, we're joined by Ram Parameswaran, the founder and managing partner of investment firm Octahedron Capital. Ram has invested in some of the biggest Chinese companies of the past decade, including Pinduoduo and Bytedance, and is the first person I thought of when wanting to discuss Alibaba.

For the full show notes, transcript, and links to mentioned content, check out the episode page here.

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Show Notes

[00:03:13] - [First question] - What Alibaba is

[00:04:29] - Tmall and Taobao

[00:06:48] - The many faces of Alibaba as a country-scale business

[00:09:58] - What defines a company as being country-scale

[00:11:29] - Adaptive business models for cities of multiple tiers and mimetic behavior of other large-scale companies

[00:18:15] - Alibaba’s ability influence the physical infrastructure of cities and China as a whole

[00:19:01] - Full stack solution company JD Global

[00:21:03] - Tencent

[00:21:47] - Key players in the monetization of commerce in China: JD, Pinduoduo, Meituan [00:26:35] - Reducing friction may be the number one reason for internet businesses to scale

[00:31:15] - Is it worth it for Alibaba to explore the social media space?

[00:34:05] - Why Chinese companies are naturally more competitive and aggressive than North American ones

[00:38:46] - How China perceives and adopts language such as the Seven Powers framework

[00:40:23] - What the West can learn from China and Alibaba

[00:43:28] - Adopting Chinese practices for Western brick and mortar stores

[00:45:35] - Connectography: Mapping the Future of Global Civilization

[00:45:51] - Learning more about Alibaba; The House That Jack Ma Built