Over the years digitalization has contributed greatly to the changes in the business operations particularly due to the growing adoption of e-commerce. Perhaps, electronic commerce (e-commerce) has been fueled further by the rise in the mobile use. Since China is documented as one of the technologically advanced countries, its economy is driven majorly by the m-commerce market. Mobile e- commerce refers to the modes of payment transaction for the purchase of a wide range of goods and services using mobile handset. Incorporation of m-commerce market bears the advantage of improving the brand image of companies besides providing faster and efficient business processes which act as a wholemark for the achievement of the customer satisfaction goal. According to Deresky (2017), mobile e-commerce was growing at a faster rate in China. Apparently, with the projection of reaching $ 78,380 million in 2014 as compared to $344 in 2010, the republic of China was expected to be ranked as second largest m-commerce market in the world after the leading United States of America by 2018 (Deresky,2017). As mentioned earlier, the versatility in the use of mobile phones, coupled with the invention of the internet were among the major factors that significantly lead to the growth of the m-commerce market. In particular, the eminent growth of China’s m-commerce market is attributed to the above factors. Interestingly, in the year 2014, eighty percent of the 618 internet users were using their mobile phones to access the internet besides gaining interests in the online platforms for purchasing goods.
The success of China’s m-commerce has essentially been influenced by major players who were initially lured by the rising m-commerce markets. Among the many internet players, the Chinese web giants, Alibaba and Tencent stand out as the major players. To begin with, Tencent was developed by Jack ma in 1998 and it started off as an instant messaging platform. On the other hand, Alibaba was introduced by Huateng Ma 1999 and while operating as an online B2B model and later adopted the B2C and C2C models. Business models comprise of a set of activities and processes that leads to the attainment of sustainable profit through desired revenue (Aithal, 2016). Having different classifications, the Business to business (B2B) model creates situations where commercial transactions occur between one businesses and the other. In contrast to the B2B model, the Business to Consumer (B2C) is more improved version that entails the selling of services and products direly between companies and end users who happen to be the consumers. Lastly, Consumer to Consumer (C2C) creates an environment where consumers trade with each other, typically with the aid of the online platforms. Therefore with the gradual changes in the business model to final appreciation of online platforms, Alibaba was ranked as China’s leading e-commerce market player.
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Although Alibaba and Tencent began with distinctive line of business operation, since October 2013, the duo was involved in various frenzied acquisitions with an aim of outdoing each other especially in the then lucrative m-commerce sector (Deresky, 2017). Although at the beginning, the competition was invisible, the invention of taxi-calling apps intensified the rivalry making it visible. The apps, Didi Dache and Kuadi Dache were backed up by Tencent and Alibaba respectively. Other factors that intensified the competitive spirit between Alibaba and Tencent entailed the rampant shift of consumers’ behavior from the desktop-based operation towards mobile device usage as well as the use of mobile internet.
In my view, the case study demonstrates a comprehensive analysis that corresponds with global market operations. It’s evident that the rivalry underlies the development of core strategies aimed at staving off the competition and determining the strongest and leading party in the lucrative China’s m-commerce market space.
The competition between Alibaba and Tencent
The rivalry between Alibaba and Tencent is centered on the battle for domineering China’s M-Commerce space. Based on the case study, the competition between the two leading companies is defined by various corporate resources that enhance the collective learning capabilities for the organizations (Deresky, 2017). Intriguingly, although Tencent started off as instant messaging platform while Alibaba was the leading e-commerce market, the changes in individual strategies to invade each others’ lanes of operation marked the beginning of competition and rivalry between the two.
First, in an attempt to sustain the competitive pressure, Tencent launched a mobile payment platform in 2014. Apparently more than 200 users subscribed to the service within a short period of fifteen days. To counter the competition, Alibaba developed several strategies. Secondly, the specification of mobile payment unraveled the completion between Alibaba and Tencent with the development of the Alipay Credit Card and Tenpay Credit card respectively.
Thirdly, in an effort to enhance online education, Alibaba was at the forefront of venturing into the online education marketplace by introducing Tongxue, a vertical site alongside the initially developed Taobao, an app that was rated as a leading m-commerce platform. Tongxue provided online videos among other online education materials for the various courses in the country as well as offering tutor prepared material for vocational training in fields such as makeup tips and bakery lessons. Amazingly, Tencent reorganized its strategies to compete with Alibaba in 2013 by the launching of its own online education site with the aid of QQ IM. In this case, Tencent’s online education site provided services such as PowerPoint presentation and group video chatting.
Fourthly, although Tencent initially monopolized mobile messaging through apps such as WeChat which attracted approximately 355 active users in 2014, efforts by Alibaba to starve off the competition were manifested by the aftermath development of Laiwang. Interestingly, to further outdo the flourishing nature of WeChat, Laiwang adopted the promotion strategy of awarding New Year bonus to employees who would sign a minimum of 100 new users to the app.
Also, in 2014, Tencent invested in China South City a logistic firm that boosted the shares of Tencent in the China’s stock exchange market. The investment provided an opportunity for the growth of Tencent’s e-commerce business. A move that was counteracted by the Alibaba’s investment in Haier.
On this view, it’s evident the overlap in the e-business space and online messaging between Alibaba and Tencent collectively contributed to the mobile internet market in relation to meeting consumer demands thus leading to the revival of the China’s m-market which was once nascent. Therefore, the case study highlights the need for unraveling competitive elements among parallel business entities (Medlin & Ellegaard, 2015) . As a fundamental tool for sustainability in the ever changing market, there is need for companies to manage rivalry by alleviating the negative impacts by capitalizing on the positive effects of competition to enhance strategic development and business growth within the diverse corporate arena.
The Opportunities and Challenges for Alibaba and Tencent in China’s Market
Based on the case study, various opportunities propagate the success of Alibaba and Tencent in China’s market. First, mobile commerce is among the top opportunities as facilitated by the high numbers of mobile subscribers. As indicated in the case study, China recorded the largest number of mobile subscribes. Therefore, for Alibaba and Tencent, the higher the subscription to mobile use, the higher the likelihood of adopting the mobile related company services ultimately providing remarkable opportunity for the expansion of m-commerce in the country.
Secondly, smartphones offers an opportunity for both Alibaba and Tencent in China’s market. Survey indicated that there was an increase in the purchase rates of smartphones by Chinese users. For instance in 2013, approximately more that 360 million smartphones were purchased by Chinese consumers and currently China is amongst the leading countries in the global Smartphone shipment. With such rates of Smartphone usage, there is an increased likelihood for mobile use and the adoption of the mobile e-commerce.
Thirdly, the trend towards the rampant use of smartphones has been fueled by the rapid development of 3G networks. Eventually, the increased accessibility to Wi-Fi hotspots, 3G subscribers along with the available mobile platforms and app stores, constitutes the extensive opportunities for Alibaba and Tencent dominance in the China’s market.
Also, the increase in the use of mobile payments and transactions provides an opportunity for both Alibaba and Tencent. Apparently, with the interest for convenient and faster mobile buying and shopping, china recorded a sixty-nine percent rate of consumers who used smartphones to purchase products when compared to the 46 percent that was recorded in the United States. Moreover, the increased need for mobile advertising offers a growth opportunity for m-commerce for both Alibaba and Tencent in China’s market.
Although, the factors above outlines the potential growth for Alibaba and Tencent in China’s, the fragmented nature of the mobile payment mode in China’s marked posed a great challenge to both businesses. For instance, due to security concerns, the unexpected ban of the use of virtual credit cards and QR codes created a new challenge for both firms with regard to ultimate impact of the ban on mobile payments. Besides, with the convergence of the businesses in the m- commerce related products, industry dynamics as characterized by the rivalry of the firms is a major challenge for Tencent and Alibaba.
In conclusion, by highlighting the challenges and opportunities for both Alibaba and Tencent, the case study provides an overview of assessing factors that determine business growth. The aforementioned opportunities and challenges align with the need for companies to regularly undertake SWOT (strength, weaknesses, opportunities, Threats) analysis. Such measures form the framework for assessment of productivity, performance and identifying rectifiable loopholes as part of the strategic plan to stay competitive in the dynamic business environment.
References
Aithal, P. S. (2016). A Review on various E-business and M-business models & Research Opportunities. International Journal of Management, IT and Engineering , 6 (1), 275-298.
Deresky, H. (2017). International management managing across borders and cultures: text and cases (9 th Edition). Boston: Pearson.
Medlin, C. J., & Ellegaard, C. (2015). Conceptualizing competition and rivalry in a networking business market. Industrial Marketing Management , 51 , 131-140.
