Alibaba Company And Governement Accusations

Alibaba Company and Governement Accusations Case Study

Executive Summary

Alibaba is a mega e-commerce firm that has dominated the Chinese market and ventured into the worldwide e-commerce trade. In 2014, Alibaba entered the New York Stock Exchange, which implies that it has turn into a world firm. Recently, the Chinese authorities leveled accusations towards Alibaba for condoning the sale of counterfeit products in its platform. Such accusations have important implications on Alibaba if it really offers with suppliers, who provide counterfeit merchandise.

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External surroundings evaluation by way of the impression of counterfeiting on Alibaba signifies that it has serious impacts. The economic impression of counterfeiting is that it makes suppliers lose billions of profits owing to considerable lower in sales. In this view, counterfeiting makes major associates not to prefer selling their merchandise by way of Alibaba resulting in buyer decline and large financial downturn.

Since Alibaba has carved its market niche, the counterfeiting impacts the sociocultural elements, corresponding to buyer loyalty, buying conduct, and lifestyles of shoppers. In global circles, Alibaba loses its market share as a result of suppliers and customers favor different markets. Counterfeiting reduces the protection and safety of online markets as counterfeiters not solely current fake merchandise, but corrupt fee methods and provide chains.

As consequence of counterfeiting, Alibaba faces political and legal repercussions, which include commerce sanctions, lawsuits, and different types of restrictions. Counterfeiting transforms the demographics of Alibaba clients from excessive-end clients to low-finish customers. The total influence of counterfeiting is that Alibaba makes vital losses owing to the decline within the number of prospects and suppliers.

Analysis of the e-commerce trade using Porter’s forces reveals that counterfeiting destabilizes the web market. The bargaining power of suppliers will increase because they’re unwilling to sale their products in counterfeit markets. Moreover, the bargaining energy of consumers will increase as a result of customers prefer to purchase merchandise cheaply, simply as faux products. The threats of substitutes improve for counterfeiters give you many substitutes, which threaten the existence of the genuine merchandise within the markets.

Counterfeiting also increases competitors and compels Alibaba to undertake in depth advertisement and improve quality of companies to outcompete competitors and counterfeiters. Given that the e-commerce trade has entry limitations, corresponding to excessive switching costs, and high capital requirement, counterfeiting will increase these obstacles as a result of world governments impose stringent regulations, which make it difficult for new entrants to venture into the market.

Analysis of aggressive environment exhibits that Amazon, eBay, Walmart are major opponents of Alibaba. These firms apply each horizontal and vertical integration methods as enterprise-level methods of boosting their profits, sales, and market share. Financial analysis shows that Walmart is main within the generation of revenues ($746 billion), nonetheless, it has low working capital ratio and quick ratio. Alibaba ranks second ($529 billion) adopted by Amazon ($88 billion), whereas eBay generates the least quantity of revenues ($17.9 billion).

The analysis of the case research indicates that Alibaba needs to curb the problem of counterfeiting for it to stay aggressive in the e-commerce business. Therefore, the research advocate that Alibaba ought to collaborate with its enterprise affiliates, governments, enterprise our bodies, and shoppers in making certain that counterfeit products do not enter their market. To implement the advice, Alibaba should be sure that its business associates, that are major players, should provide and commerce genuine merchandise.

Moreover, enterprise associates, who’re suppliers, ought to register their products with relevant bodies in order that Alibaba can take appropriate measures when they provide and trade counterfeit products. The measures should embody hefty penalties and elimination from Alibaba. To curb international counterfeiting, Alibaba must collaborate with governments and business bodies in figuring out, monitoring, and prosecuting counterfeiters.

For customers to take part in curbing counterfeiting, Alibaba ought to educate them through press data, boards, demonstrations, and case studies regarding the harmful results of counterfeit merchandise on economy, firm, and themselves. Education of consumers modifications their buying behavior of shoppers because it makes them insist on buying genuine merchandise from online markets.


Alibaba is among the giant companies the world over within the e-commerce industry. It is a Chinese firm that Jack Ma and other co-founders began in 1999 and has exponentially grown within a interval of lower than two decades. In 2007 Alibaba became a national e-commerce company when it entered the Hong Kong Stock Exchange and in 2014 it turned an international e-commerce firm when it entered the New York Stock Exchange.

Currently, Alibaba is a renowned e-commerce firm internationally owing to its stature within the e-commerce business. Alibaba supplies numerous merchandise to its prospects via enterprise-to-enterprise, business-to-buyer, and customer-to-customer models. The business-to-enterprise is a leading model that has propelled Alibaba to achieve international stance.

According to Yazdanifard and Li, Alibaba comprise several business associates, specifically, Taobao, eTao, Alibaba Cloud Computing, Xia Mi, Juhuasuan, Laiwang, and AliExpress amongst others (33). Currently, Alibaba is the leading e-commerce company in Asia and presents stiff competitors to American e-commerce firms, such as eBay and Amazon.

Despite the fact that the present situation of Alibaba is steady and strong, it has some challenges that need instant redress for it to realize optimum development and keep its competitive place within the e-commerce business. Company executives and e-commerce experts hold that Alibaba experiences the problem of figuring out counterfeit merchandise and preventing their sale via its on-line markets as a result of it deals with various merchandise obtained from totally different companies (Yan par. 5).

In this view, the Chinese government has filed a report that has enough proof, which point out that Alibaba is dealing with counterfeit products. Fundamentally, the Chinese authorities is accusing Alibaba for condoning illegal and unethical business actions by failing to determine and curb the sale of counterfeit products in its on-line marketplaces.

The accusation implies that Alibaba offers liberal market the place merchants can sell their counterfeit merchandise with out due regard for authorized and moral necessities of e-commerce. Since companies are subject to legal and moral necessities, their violation has important impression on Alibaba due to commerce sanctions and lawsuits. Therefore, this case examine analyzes the impact of the accusations on Alibaba by undertaking external setting evaluation and giving appropriate suggestions.

External Environment Analysis

General Environment

Counterfeiting comprise illegal and unethical business practices, which have significant impression on financial development of Alibaba. Counterfeiters steal ideas and products from trademark house owners, and thus, stop them from competing successfully and earning optimum profits.

Chu states that Alibaba uses $sixteen.1 million yearly in curbing counterfeits in its markets (par. 7). Lewis argues that counterfeit merchandise constitute 7% of world commerce and has severe economic impacts as a result of it prices the United States’ economy about $250 billion and 750,000 jobs yearly. Given that the price of Alibaba is roughly $230 billion, counterfeit goods make its associates to lose over $20 billion and 1000’s of jobs.

Counterfeiting also impacts sociocultural aspects of Alibaba, corresponding to shopper lifestyle and loyalty. Alibaba has grown exponentially as a result of it provides quality products, which have enhanced client life and loyalty. Counterfeiting normally ends in the production and sale of harmful merchandise.

For occasion, a buyer in the United States bought counterfeit drugs, which weren’t only ineffective, but in addition harmful as a result of they brought on demise (forty eight). Hence, the existence of counterfeit products makes draw back from buying merchandise from Alibaba and shift their loyalty to other e-commerce corporations, which sell high quality merchandise. In essence, prospects change their life and buying behavior in favor of rivals.

Globally, counterfeiting reduces the market share of Alibaba. Yan states that Alibaba has dangerous popularity in global markets as a result of prospects have famous that eighty two% of products that Taobao sells are fake (par. four). The impact is that present and potential customers and companies boycott promoting and buying products through Alibaba resulting in marked lower in sales. Given that online markets are very competitive, rivals such as eBay and Amazon acquire a competitive advantage and outcompete Alibaba in the e-commerce business globally.

As counterfeiting is an unlawful enterprise apply, it affects the appliance of expertise in e-commerce. Counterfeiters don’t only have the capacity to corrupt merchandise, but additionally the flexibility to deprave info methods which might be relevant in provide chain, logistics, service provision, and buy of products. Lewis argues that counterfeiting reduces security and safety of e-commerce operations (53).

Thus, counterfeiting has severe impact on the information methods that Alibaba applies in undertaking its operations and logistics. For occasion, markets that help counterfeit merchandise are prone to hacking and spoofing as a result of pirates and counterfeiters are dominant. The total effect is that counterfeiting makes operations and logistics of Alibaba to be vulnerable to hacking and spoofing.

The illegal and unethical issue of counterfeit has marked influence on the operations of Alibaba because it violates political and authorized requirements. Yan stories that the Office of the United States Trade Representative has famous that Taobao, a major business affiliate of Alibaba, offers with counterfeit products, and thus, the United States ought to take appropriate measures against it (par. 9).

In such an instance, Alibaba attracts political and authorized measures towards itself. According to Lewis, governments across the world impose political interventions, similar to decrease quotas, larger tariffs, and embargo, in curbing counterfeit merchandise (fifty six).

In this case, a number of governments the world over may impose such political sanctions on Alibaba if it doesn’t curb proliferation of counterfeit market in its online markets. In 2014, Yves Saint Laurent and Gucci and other dominant manufacturers in the United States filed a lawsuit against Alibaba for colluding with counterfeiters in selling counterfeit products (Chu par. 3). Ultimately, commerce restrictions have an effect on the market share of Alibaba leading to a massive decline in sales and earnings.

Counterfeiting influences demographic attributes of shoppers and enterprise affiliates that Alibaba offers with within the e-commerce industry. For instance, evaluation of counterfeit markets within the United States signifies that demographic attributes of customers differ considerably from that of genuine markets (Lewis fifty three). Hence, counterfeiting has marked influence demographic attributes of Alibaba’s prospects.

In this view, Lewis holds that the majority counterfeiters goal low-income earners, who don’t thoughts buying pretend products at cheaper costs than the real products (50). In distinction, given that high-revenue earners choose to purchase high quality merchandise at premium prices, the existence of cheap and faux products turns them away from Alibaba. The end result is the proportion of low-revenue earners increases, whereas the proportion of high-revenue earners declines.

Industrial Environment

In the view of the prevalence of counterfeiting, the bargaining power of suppliers will increase as a result of suppliers turn into unwilling to trade their merchandise in on-line markets. Progress, Whilhemia, and Tarisai state that prime bargaining power can discourage suppliers from promoting their products via business-to-business model, however encourage them to make use of business-to-consumer model (173).

Since counterfeiting reduces the calls for for genuine merchandise, suppliers make large losses in markets where counterfeit merchandise dominate. In this case, Alibaba experiences powerful challenges in maintaining suppliers and attracting new ones.

Counterfeit products increase the bargaining power of customers as a result of they become used to low-cost prices, and thus, unable to purchase products at premium prices that suppliers set. Progress, Whilhemia, and Tarisai argue that informed prospects have high bargaining power as a result of they understand quality of products and market prices (174).

The understanding of the counterfeit merchandise, genuine products, and their respective prices gives prospects an upper hand in purchasing. In this case, Alibaba and enterprise affiliates grapple with the excessive bargaining energy of consumers, which pressures them to reduce market costs to be in tandem with counterfeit products, which have low or related quality.

Counterfeiting increases the threats of the substitute products that suppliers can provide and clients can purchase. Progress, Whilhemia, and Tarisai state that substitute merchandise threaten to alter the dynamics of markets as a result of they trigger prospects to switch to different merchandise, which go well with their pursuits and purchasing power (174).

Depending on the profitable mannequin, suppliers can select business-to-business mannequin, enterprise-to-customer model, and buyer-to-customer model. To overcome counterfeits, suppliers could choose to promote their products via enterprise-to-buyer model. Moreover, the existence of counterfeit merchandise will increase threats of substitute products, as prospects access various products, which differ based on quality and price.

There is stiff competitors within the e-commerce industry owing to the emergence of information expertise. Alibaba is experiencing stiff competition from numerous e-commerce companies such as Amazon, Walmart, and eBay, that are within the United States. Lewis states that counterfeiting will increase rivalry amongst companies as a result of counterfeit products are cheaper than genuine merchandise (52).

In this case, it implies that Alibaba provides a robust platform for counterfeiting and fuels rivalry amongst competing e-commerce corporations in world markets. The net outcome of counterfeiting is that e-commerce companies expertise unhealthy competition, which does not favor the expansion of the e-commerce industry.

The characteristics of the e-commerce business that Alibaba operates are high fastened costs, high switching prices, high strategic states, and low exit obstacles. Low exit limitations permit corporations which are unable to remain competitive within the e-commerce industry to exit easily leaving competitive firms to dominate.

The threat of new entrants is very excessive as a result of the e-commerce is a lucrative on-line market, where clients and suppliers meet. The existence of counterfeiting in Alibaba complicates entry to e-commerce trade because of the existence of barriers, similar to large capital requirement, excessive switching costs, expensive distribution channels, product differentiation, and government policies.

Establishment of an e-commerce firm requires large capital for the development of secure and secure information systems for database, provide chain, and payment amongst others. Since e-commerce companies monitor purchasing conduct of consumers, switching prices are very high as a result of it entails the transfer or lack of clients’ data (Progress, Whilhemia, and Tarisai 174). For successful entry, an organization must assemble safe distribution channels and differentiate products in a manner that’s tough to counterfeit.

Competitor’s Environment

The three primary opponents of Alibaba are Amazon, eBay, and Walmart. Financial growth of Alibaba has elevated exponentially as a result of its revenues increased from $209 billion in 2012 to $529 billion in 2014 (United States Securities and Exchange Commission par. 12). Amazon is an American e-commerce based in Seattle, Washington, which started in 1994 is presently buying and selling on the New York Stock Exchange.

Last financial 12 months, Amazon generated a internet income of $89 billion, which reflects its growth in world markets (United States Securities and Exchange Commission par. 25). eBay is also an American e-commerce firm based in San Jose, California, which began in 1995 and has grown exponentially to turn out to be a worldwide e-commerce firm.

The development of eBay is stagnating as a result of its revenues increased from $14 billion in 2012 to $17.9 billion in 2014 (United States Securities and Exchange Commission par 14). Walmart is an American e-commerce company based mostly in Bentonville, Arkansas, which started in 1962 and entered the New York Stock Exchange ten years later. Currently, Walmart is performing well as a result of it generated $746 billion in the fiscal 12 months of 2014 (United States Securities and Exchange Commission par. 23).

In the facet of enterprise-degree methods, Alibaba, Amazon, eBay, and Walmart make use of vertical or horizontal integration methods. Alibaba uses vertical integration as a enterprise-degree strategy that has made it purchase associates in different areas across the world. Amazon also makes use of vertical integration technique in opening distribution centers and merging with related companies for it to expand market share globally.

The business-level strategy that eBay employs in increasing its progress and diversification of merchandise is horizontal integration. As Walmart goals to own its supply chain globally, it employs vertical integration as a enterprise-degree strategy. The key success elements in e-commerce business are info systems, provide chain infrastructure, availability of shipping business, the Internet, safe online payments, legislations, international commerce, and liberalization of markets.

Working capital ratio and quick ratio are two ratios that effectively assess performance of Alibaba, Amazon, Walmart, and eBay. Business analyst states that working capital ratio and fast ratio are traditional monetary ratios, that are applicable in analyzing quick-term financial liquidity of a business enterprise (Kirkham 2). The working capital ratios for Alibaba, Amazon, Walmart, and eBay are 1.7:1, 1.1:1, zero.9:1, and 1.5.1 respectively.

The working ratios imply that Alibaba, Amazon, and eBay can simply settle their liabilities using present assets, while Walmart is unable. The fast ratios for Alibaba, Amazon, Walmart, and eBay are zero.9:1, zero.8:1, zero.2:1, and zero.7:1 respectively. The ratios indicate that Alibaba, Amazon, and eBay have more money than inventories, while Walmart doesn’t have sufficient cash to settle the present liabilities.

The performance of Alibaba, Walmart, and Amazon is strong as a result of they have differentiated and diversified their products and ventured into international markets. The efficiency of eBay is stagnating as a result of its market share is small when in comparison with Walmart, Amazon, and Alibaba. The future goals of these e-commerce firms are to expand their market share and reach world markets, present quality merchandise, diversify companies, and differentiate products.

The strengths of these companies are that they entry global markets, offer numerous products, decide the provision of merchandise within the markets, and apply information know-how. The weaknesses are that they’re vulnerable to counterfeiting, delivery of products is pricey, limited to certain jurisdictions, and bargaining power of suppliers dictates their operations.


Given that the problem of counterfeiting has significant impact on Alibaba, the following recommendations are needed. The first recommendation is that Alibaba ought to collaborate with its enterprise associates in making certain that counterfeit products do not enter their market. Analysis of business operations signifies that Alibaba don’t have its own merchandise merchandise on the web market, and thus, it purely retails merchandise from its business affiliates, who are the suppliers.

Evidently, Taobao, AliExpress and Tmall are major enterprise of associates which are infamous for supplying and trading counterfeit products in Alibaba. In the implementation of this suggestion, Alibaba must delegate its anti-counterfeit accountability to business affiliates so that they will contribute to the fight towards counterfeit products. Thus, every business affiliate ought to take responsibility of guaranteeing that they don’t provide or commerce pretend merchandise in Alibaba, and additional determine and report the existence of fake merchandise.

The second advice is that Alibaba ought to make sure that suppliers register their emblems with relevant our bodies so that they’ll launch legal fits in case counterfeit merchandise seem in markets. Alibaba is experiencing difficulties in identifying counterfeit products and differentiating them from the pretend products as a result of some suppliers haven’t registered their logos.

In this case, all enterprise affiliates, which supply products to Alibaba, must ensure that they provide registered products in order that Alibaba can help them in identifying counterfeits products and counterfeiters. Moreover, Alibaba can launch litigation course of that may lead to the arrest and prosecution of counterfeiters within the e-commerce business. Hence, registration of logos enhances authorized fight towards counterfeit merchandise and counterfeiters.

The third suggestion is that Alibaba should collaborate with the Chinese government and different worldwide governments in curbing counterfeit merchandise. Since Alibaba has no powers to impose trade sanctions and political restrictions, it requires the help of the Chinese and different international governments. The Chinese government needs to impose acceptable trade sanctions on Chinese firms that supply and commerce counterfeit merchandise on the web platforms of Alibaba.

The Chinese government should formulate stringent laws and impose hefty penalties on corporations that supply and trade faux merchandise inside its jurisdictions. Moreover, Alibaba wants international governments to assist within the imposition of trade sanctions and political restrictions.

Analysis of Alibaba exhibits that the American, European, and Canadian markets have reported increased cases of counterfeit products. As Alibaba has restricted jurisdiction, it requires help of worldwide governments for they have the ability to ensure that all firms within their jurisdictions, which commerce on-line, do not engage in counterfeiting.

The fourth suggestion is that Alibaba ought to educate its shoppers regarding the harmful effects of counterfeit products on economy, company, and utility of the products. Education of consumers ought to happen by way of press information, forums, demonstrations, and case research. Alibaba must caution clients in opposition to buying pretend merchandise and encourage them to purchase real products by way of newspapers, magazines, adverts, and brochures.

Forums also provide robust means of training customers as a result of it permits them to interact with representatives from Alibaba and have their questions answered. Given that it’s tough for patrons to differentiate fake products from genuine merchandise, Alibaba needs to reveal how prospects can establish genuine merchandise through online videos.

Alibaba ought to offer case research in its websites for customers to provide their feedback regarding post-consumption experiences so that potential clients can perceive what to anticipate once they purchase real products lest they purchase fake ones.

Works Cited

Chu, Kathy. Suit against Alibaba opens window on concern of counterfeiting. 2014. Web.

Lewis, Kevin. “The Fake and the Fatal: The Consequences of Counterfeits.” The Park Place Economist 17.1 (2009): forty seven-59. Print.

Kirkham, Ross. “Liquidity analysis using money circulate ratios and conventional ratios: The telecommunications in Australia.” Journal of New Business Ideas & Trends 10.1 (2012): 1-thirteen. Print.

Progress, Hove, Smith Whilhemia, and Chikungwa Tarisai. “The delineation of Porter’s 5 competitive forces mannequin from a technological advertising perspective: A case research of Buffalo City Metropolitan Municipality.” Journal of Economics 4.2 (2013): 169-182. Print.

United States Securities and Exchange Commission. Alibaba Group Holding Limited. 2014. Web.

United States Securities and Exchange Commission. Amazon Inc. 2014. Web.

United States Securities and Exchange Commission. eBay Inc. 2014. Web.

United States Securities and Exchange Commission. Walmart. 2014. Web.

Yazdanifard, Rashad, and Merveen Li. “The Review of Alibaba’s Online Business Marketing Strategies Which Navigate Them to Present Success.” Global Journal of Business and Management 14.7 (2014): 32-40. Print.

Yan, Sophia. Alibaba has a major counterfeit downside. 12 Sept. 2014. Web.





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Case Study
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