Alibaba, the world’s largest e-commerce company, on Tuesday announced plans to split into six units that operate independently with different Chief Executive Directors and fundraising capabilities.
As the most capitalised and diversified e-commerce platform, Alibaba is known for its ability to innovate and adjust to changes in market conditions.
However, while the move is being hailed as the “most significant governance overhaul in the platform company’s 24-year history” and is believed to help Alibaba stay agile in the face of an ever-changing business landscape, the decision may not be unconnected to the Chinese government crackdown on private businesses in recent years.
In 2020, the Chinese government revamped its regulation to better cover fintech and other online companies operating within the country. This took into consideration monopolistic behaviours and unchecked growth due to anti-competition strategies that made it impossible for smaller businesses to compete with giants like Alibaba, Didi and others.
The government had claimed the exponential growth was a result of limited to no regulatory scrutiny that allowed the tech industry to grow significantly into traditional and emerging sectors. As a result, the State Administration for Market Regulation (SAMR) imposed a US$2.8 billion fine on Alibaba and US$530 million on Meituan in 2021 after an investigation revealed the monopolistic nature of the two.
China immediately announced a new policy and introduced new privacy laws that check cross-border data transfer of tech businesses with huge global customers. Also, laws were enacted to check the gaming industry and prohibited certain content online.
All these were interpreted by the western world as a crackdown on private businesses and a strategy to eventually split them up, especially coming a few days after Jack Ma’s now famous comment on the Chinese government’s attitude toward businesses and his eventual disappearance from public space for over a year.
Alibaba’s stock price dropped by over two-thirds in 2021 while Didi’s online app was suspended for suspected violation of the country’s cybersecurity law and eventually lost over 80 percent of its IPO. JD.com was down by 25 percent in 2022 when compared to the previous year.
Jack Ma returned to China on Monday after spending more than a year traveling across the Asia Pacific to announce the world’s largest e-commerce company is splitting into six new units and will operate independently.
According to the company, under the new structure, the business groups will be organized around Alibaba’s six strategic priorities.
These include the Cloud Intelligence Group
To be led by the current CEO Daniel Zhang and will focus on the company’s cloud and artificial intelligence activities.
While Taobao Tmall Commerce Group covers Alibaba’s online shopping platforms.
The Local Services Group which will be led by Yu Yongfu and will cover the company’s food delivery service Ele.me and its mapping services.
Cainiao Smart Logistics, this will be led by Wan Lin and will focus on Alibaba’s logistics services.
Global Digital Commerce Group to be led by Jiang Fan and will focus on the company’s international e-commerce businesses.
Fan Luyuan will be CEO of Digital Media and Entertainment Group unit which includes Alibaba’s streaming and movie business.
