Published by MBA Skool Team, Last Updated: March 08, 2020
PESTLE Analysis of Alibaba analyses the brand on its business tactics. Alibaba PESTLE Analysis examines the various external factors like political, economic, social, technological (PEST) which impacts its business along with legal & environmental factors. The PESTLE Analysis highlights the different extrinsic scenarios which impact the business of the brand.
PESTLE analysis is a framework which is imperative for companies such as Alibaba, as it helps to understand market dynamics & improve its business continuously. PESTLE analysis is also referred to as PESTEL analysis.
The political factors in the Alibaba PESTLE Analysis can be explained as follows:
One of the major macro-environmental threats to Alibaba’s business is the uncertain political situations. Recently, Alibaba decided to list its share in the Hong Kong Stock Exchange. But the recent direct show of power from China in Hong Kong has made it difficult for Alibaba to flourish in the Hong Kong market as it raises questions over the company’s Initial Public Offering. Also, China being an authoritarian nation, its Government can seize power anytime and take control of the company which is a cause for some of the investors and can be the reason behind experts valuing Amazon’s stock more than the BABA’s (Alibaba’s) stock. Another concern for Alibaba can be the departure of its founder Jack Ma; this can shake the investor and stakeholder’s confidence and can have short term as well as long term repercussions. Apart from the mentioned threats, it cannot be denied that Alibaba enjoys the Government support and it is one of the prime reasons behind Alibaba’s expansion and success.
Below are the economic factors in the PESTLE Analysis of Alibaba:
China is currently going through an economic slowdown and the latest Gross Domestic Product (GDP) growth rate has been dropped to 6%.
The E-Commerce sector has also shown poor results. This is a major cause of concern for Alibaba. Although its revenues have increased but the company is witnessing the slowest growth rate since 2016. This hints that the customer confidence is going down. Alibaba, with the hope to acquire new customers is heavily investing in other fields like advertising, cloud computing etc. But this can lead to some other competitor attacking the company’s core competency i.e. E-commerce and capturing a chunk of its customer base. The company should focus on the rural or tier 3 cities as this sector has a huge potential. The company has itself recognized that more than 70% of its new customers come from these areas only.
Following are the social factors impacting Alibaba PESTLE Analysis:
Alibaba’s mobile application, Taobao, is a commercial platform where people can shop from the line of products listed on the application. The application provides users attractive social-media like features which increases user engagement and pushes them to spend more. The company proudly claims that an average user visits Taobao more than 7 times a day. The application also allows its customers to be a part of the live sessions where people can come and share their experiences and give their opinions about a product.
The technological factors in the PESTLE Analysis of Alibaba are mentioned below:
One of the prime reasons behind why Alibaba is thriving is because of its extensive use of various technologies like Artificial Intelligence, Cloud Computing, and Machine Learning etc. Alibaba’s customers are able to track and check the delivery status of their imported orders from its portal “Tmall Global”. The company has also invested huge money in a Logistics platform, Cainiao, for the handling of products. The Cainiao platform also makes use of a Cloud based RMS (Remote Monitoring System). Also, the AI Chatbot launched by the company helps buyers and sellers to communicate with each other by translating the other party’s text in their own language.
The Chatbot supports languages like English, Russian, Chinese, Indonesian, Thai etc.
Following are the legal factors in the Alibaba PESTLE Analysis:
Alibaba is a company which is globally infamous for ‘Counterfeiting’. The most affected by this counterfeiting are the American brands. There were also reports of fake GUCCI wardrobes that were listed on one of Alibaba’s portals. In order to do the damage control, Alibaba has come out with new changes in its current Intellectual Property Protection Platform so that proper action can be taken in case of any infringement. In order to make its presence in other nations and attract more investments, the company should lay down strict reforms to protect Intellectual Property. Otherwise, it will have a hard time convincing the investors.
In the Alibaba PESTLE Analysis, the environmental elements affecting its business are as below:
Alibaba is doing its part to contribute to the environmental sustainability. The company claims to be supporting towards the following corporate social responsibility programs like job creation, rural development, poverty alleviation, environmental sustainability. As per the company’s website, the company claims to have provided more than 8 lakh health insurances till now.
The company boasts of contributing more than $37 million dollars as donations to charitable organizations. 4 years back, Alibaba started encouraging its employees to serve atleast 3-4 hours in community service. Alibaba needs to maintain these initiatives in the coming years in order to increase its customer’s loyalty.
To conclude, the above Alibaba PESTLE Analysis highlights the various elements which impact its business performance. This understanding helps to evaluate the criticality of external business factors for any brand.
This article has been researched & authored by the Content & Research Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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