Alibaba splits up Chinese and international businesses to tap new growth opportunities
Faced with an erosion of its growth on the domestic market, Alibaba has announced the creation of two separate divisions for its Chinese and international activities. The aim is that Alibaba’s performance outside China should become a growth driver for the Chinese e-commerce giant. The announcement was made by CEO Daniel Zhang in a letter addressed to the group’s staff, published by Alibaba’s corporate news organization, Alizila.
Alibaba has created a new division called International Digital Commerce, led by Jiang Fan, who joined the group in 2013 and was notably president of the Taobao and Tmall sites. The division will incorporate Aliexpress (Europe), Alibaba.com (B2B) and Lazada (South-East Asia), through which the group claims to reach on aggregate 285 million annual active consumers, while targeting to serve 2 billion consumers globally in the long term.
“As we continue to build a multi-engine approach to drive future growth, a ‘diversified business governance’ will become Alibaba’s new organizational strategy as we look towards the future,” wrote Zhang in his letter. “We want to explore new business governance approaches to drive more innovation and creativity across our teams and businesses (...). We will continue to focus on becoming a truly globalised company, and we believe that overseas markets present exciting potential and many opportunities for us to capture. We have confidence in our local teams, and we are charting a path forward with a holistic strategic blueprint and organizational stability for winning in our overseas markets,” added Zhang.
As a counterpart of the new international division, Alibaba has set up a division called China Digital Commerce. It is led by Trudy Dai, a founding member of Alibaba who previously held the role of president industrial e-commerce and community e-commerce. The division includes Tmall, Taobao and Taobao Deals, community marketplace Taocaicai and B2B website 1688.com.
The new divisional split is far from trivial: at a time when Alibaba's overseas business accounts for only 5% of total revenue, the group is acknowledging that domestic growth is weak. Caught between increased local competition and tighter regulatory control by the Chinese authorities, Alibaba is forecasting to grow at best by 23% in 2022, while before the Covid-19 crisis the group used to increase its revenue by 50% year-on-year. Alibaba is therefore looking for growth opportunities outside China.
The announcement came on the same day in which the group made a key appointment, that of a new CFO. On April 1, Maggie Wu will step down from the role, having been at the helm during the various stock market listings the group carried out in the last few years. She will be succeeded by Toby Xu, who joined Alibaba in 2018 and is currently the group's deputy CFO.
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