Case Study Alibaba Group

CaseStudy:Alibaba Group

CaseStudy:Alibaba Group

AlibabaGroup refersto theChinese largestonline commercefirm that providesbusiness-to-business, customer-to-customer, andbusiness-to-customer salesservicesthrough thewebportals.Thecompanyhas severalsubsidiaries (includingAlipay, Taobao, UCWeb, andTsmallamong others) that operatewith somelevels of autonomy(Wulf, 2010). Thispaperwill discusstheissuesthatare affectingAlibaba Group with a focuson howthegroupshould incorporateits subsidiaries into its organizational structure,benefitsandcostsof havingthenewbusinessreportdirectlyto theCEO, whethertheCEO should createtheofficeof theChief Operating Officer, andwhethertheCEO should centralizemorefunctionsat thecorporate level.

Incorporatingnewbusinessesinto theorganizational structure

Thenewbusinessescreatedby theAlibaba Group should bemaintainedas subsidiaries with somelevels of autonomy.ThismeansthattheAlibaba should functionas theparentcompanywith theheadsof individualsubsidiaries reportingto theboardsof eachsubsidiary. By allowingthenewbusinessto functionas autonomoussubsidiaries, Ma will havegiventheleadersof thosesubsidiaries an opportunityto transformtheir respectiveunitsas leadersof their industries(Wulf, 2010). Therefore,theintroductionof newbusinesseswill not changetheoverall organizational structureof theAlibaba Group since eachbusinessunitwill be reportingto its independentboardof directors.

Benefitsandcostsof havingnewbusinessesreportdirectlyto theCEO

Havingthenewbusinessesreportingdirectlyto theCEO will giveAlibaba Group four majorbenefits.First,directreportingwill speedup theprocessof decision-making.Thisis becauseitwill be fasterforMa as an individualto makedecisionsthan a groupof directorssittingin theboardmeeting.Secondly,directreportingwill givetheCEO an opportunityto motivatethemanagementof thenewbusiness(Wulf, 2010). Third,directreportingwill facilitatetherapidgroupof thenewbusinesses.Forexample,Alipay grewrapidlyandreportedan increasein its paymentvolumeto $ 24 million in 2008 whentheunitsstartedreportingdirectlyto Ma (Wulf, 2010). Fourth, reportingdirectlyof thenewbusinesswill enhanceefficiencyof thebusinessoperations.Forexample,Alipay increasedits dailytransactionsto 4million soonafter itstartedreportingdirectlyto Ma.

Thereare two costsassociatedwith directreporting.First,themoraleof managersof businessesthat are requiredto reportdirectlyto Ma will reducewith timesince theyare not givensufficientautonomyto exercisetheir abilities.Secondly,directreportingmight createa conflictingsituationwheresalesteamsof businessthat are reportingdirectlyandthosethat havesomeautonomywill be performingsimilarandcompetingtasks.

Decisionto createthepositionof theChief Operating Officer

Mashould goaheadandcreatethepositionof theChief Operating Officer. Althoughthecreationof theCOO positionwill attractsomecriticisms,thepositionwill giveMa additionaltimeto dealwith strategyandleadershipfunctions,insteadof focusingon HR functions(Wulf, 2010). In addition,positionof will enhancecross-platform developmentandeconomiesof scale.

Decisionto centralizebusinessfunctions

Althoughdecentralized functionshavehelpedAlibaba in thepast,thematurityof e-commerce andtechnology marketdemandcallsforthecentralizationof somefunctions.Centralizationof variousfunctionswill helpdifferentbusinessunitshavea focused vision,executetheir innovationsfaster,andreduceconflicts.Someof thekeyfunctionsthat should becentralizedincludesystemdevelopment,developmentof systemarchitecture,data storage,anddata analysis(Wulf, 2010). In conclusion,Alibaba Group should maintaintheautonomyof its subsidiaries, butcentralizesomefunctions(suchas thedevelopmentof thesystemarchitecture)at thecorporate level.

Reference

Wulf,J. (2010). AlibabaGroup.Boston, MA: Harvard Business School.