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Diversification Initiatives of Alibaba Group
Diversification is the expansion of the product range and reorientation of sales markets, as well as the development of new types of production implemented to improve business efficiency, develop perspective areas, or prevent bankruptcy. It should be noted that diversification by its nature, can be related and unrelated. Related diversification is a frequently used strategy that assumes that the corporation does business in several different industries, with transactions in them being somehow connected.
Unrelated diversification involves entering a new market through a business unit that does not have such operational connections. As a rule, different types of diversification occur in distinct ways. Internal development is more suitable for related diversification, and alliances, mergers, and acquisitions for unrelated diversification.
In recent years, AliBaba Group, having finally strengthened itself in the e-commerce market, is actively exploring new promising areas of business. In addition to the e-commerce platforms themselves, the company has launched AliFinance, a private loan platform for entrepreneurs, and Aliyun, a cloud computing and data mining service (Havinga et al. 17). Also, AliBaba Group has initiated eTao (search engine for products) and Yuebao (personal finance) (Havinga et al. 17).
These platforms, which starts to provide new products and services, were operationally connected with e-commerce activities. Therefore, the company has not resorted to interaction with external market participants but created them through internal development.
At the same time, when the new business areas in which the company enters are very different from e-commerce, other diversification options are used. For instance, an alliance and acquisition were used to create AliHealth. AliBaba Group jointly with the Yunfeng Capital acquired then called Citic 21CN, which manages data on pharmaceutical products (Ahmad par. 1). Also, in spring 2018, Alibaba Group purchased Chinese online food delivery service Ele.me as a ready-made start-up (Hitters par. 4). Thus, it can be argued confidently that the company used internal development resources to diversify in the spheres more related to e-commerce, and alliances and acquisitions for unrelated diversification.
Works Cited
Ahmad, Ruzaini. Can Alibaba Health Information Technology transform Chinas pharmaceutical industry? BusinessTech Insider. 2020. Web.
Havinga, Marieke, Martijn Hoving, and Virgil Swagemakers. Alibaba: A case study on building an international imperium on information and e-commerce. Multinational management, edited by Rien T. Segers, Springer, Cham, 2016, pp. 13-32.
Hitters, Heavy. Alibaba merges its two food delivery platforms Ele.me and Koubei. Technode. 2018. Web.
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