Part C

Challenges to online medium:

Since the online platform of Alibaba works on the basis of marketplace model, it does not
have its own warehouses or any sort of inventory.
In order to facilitate the exchange of goods and services, they’re focusing on the softwares.
This creates a challenge here because the software brings in a lot of dependency upon their
supply chain. As there are no warehouses and the products are directly delivered through the
seller, there is a high risk of product quality. Since Alibaba cannot perform any quality check
of the product being sent, there are high chances of old, damaged, defected goods being sent
over because of the lack of a mediator.

Another major challenge Alibaba faces is the increasing prices of labor. It is one of the aspect
which Alibaba has leveraged to provide product delivery of around 100 Million products in
2-3 days during the Singles’ Day through their company Cainiao. Thus, a rise in the labor
disrupts the whole channel. Alibaba is deriving major amount of profits through its
operational costs which includes the labor costs which may not be the factor anymore if the
labor prices increase.

Being the aggregator, Alibaba implements Big Data and Machine Learning technology to
predict the demand of goods and thus make it ready for the anticipated purchase. This
requires a huge amount of data collection from across the country. Alibaba is able to optimize
its logistics with huge amount of data sets which cannot be done so if data is not available so
easily in the Chinese market. Since the companies still think Alibaba as their competitor, they
avoid giving the piles of data they have which might be useful for the company to manage its
supply chain. Thus, the challenge here is to gain as much data as Alibaba can without facing
any restrictions.

The power is decentralized, which gives lesser control to Alibaba over its operations, which
might be a weak spot sometime in future if not managed properly.

Another uprising challenge is the facility of mobile payment. Though Alibaba is promoting
its own mobile payment apps and other payment facilities, but with the uproar of Tencent in
China, parent company for the most used app in China, WeChat, there are chances that
people may shift to it for making payments.
Since Tencent is spending a huge amount of money to promote their online payment services,
there is a scope that people shifting to it will lead to a huge loss in terms of data for Alibaba
and also affect its supply chain.

A point to note here is that Alibaba earns from its sellers who advertise on its platforms to
promote their products. Now since the sellers who invest more in advertising are promoted
more and are purchased from more. This turns into a cyclical process because of which,
normal sellers who are unable to shell out money for advertising are left out and may not be
benefitted from Alibaba as others might be. This will lead to sellers disassociating with the
company. Since Alibaba leverages its wide array of product from plethora of sellers, it
becomes challenging to give the customers a huge number of choices.