Introduction
China has a gigantic market structure that has always strived to fit all its needs in one accord. The landscape has seen various e-commerce companies build up and penetrate the vast population within its territories—the best competitors in e-commerce include; Alibaba, Taobao, JD.com, and Pinduoduo (Williams, 2019). Being a wide matric with some companies such as JD.com battling critically against Alibaba with its self-acclaimed quality assurance and the high efficiency of well-reserved logistics structure, the existence of the four companies (Alibaba, Taobao, JD.com, and Pinduoduo) will be analyzed using Ansoff Matrix Analysis and Porters Five Forces Model Analysis.
Background Information
Chinas online retail market has grown to be one of the biggest revenue-generating sources in the country. This is due to the high technology in the country and the heavy background of accessible online services. Since the opening of the e-commerce giants in the Chinese market, Alibaba, JD.com, and Pinduoduo, the e-commerce market's revolution has been felt drastically. These three giants’ success is generally attributed to the in-store retail market's deficiency, which has given the e-commerce market an added advantage over the years. Research proves that China has a high population in which the majority are computer literate. A large percentage of the Chinese population conducts their shopping online. Going by this fact, it is evident why e-commerce has taken over the waves of commercial online retail in general. The growth of these Chinese e-commerce giants has brought about stiff competition in the e-commerce market worldwide. This puts China in the global market, competing with those from foreign countries such as Amazon, which has been the biggest e-commerce company for the longest time.
Literature Review
The Chinese e-commerce market has been studied and analyzed by various scholars all over the world. Since the advancement of technology and the internet, e-commerce has been a topic of discussion in literature, raising mixed reactions among researchers. This form of commerce can be regarded as the top achievement in information communication technology (ICT) in the world of business (Jingqiao 2017). This retail model is described from its characteristic of marketing, distribution, and sales through electronic means. This kind of retail can be, therefore, concluded as quite a dynamic field. According to Tyler and Manica (2007), the returns involved in China's e-commerce business are higher than any revenue collected from other industries. This is because of the availability of a high population with internet-enabled phones.
Online shopping for the Chinese people is a norm and a usual practice due to the heavy investment the country does into developing and managing the e-commerce business. The development of the Chinese e-commerce giants came from a consistent thirst for faster and reliable online platforms which would supplement brick and mortar retail. Alibaba's entrance into the market opened up great opportunities for the growth of counterpart companies such as JD.com and Pinduoduo. These three companies have proven to be the Shakespeare of Chinese e-commerce business generation up to 36% of the country's economy, which is 1.935 trillion dollars. Immense research proves that e-commerce growth in China is set to grow rapidly in the coming years and is predicted to beat the world's e-commerce market.
This report uses Ansoff's matrix model to analyze Alibaba, JD.com and Pinduoduo, and uses Poter's five power models to analyze China's e-commerce market. The Ansoff Matrix, additionally called the Product/Market Expansion Grid, is an instrument utilized by firms to investigate and design their techniques for development. Frequently alluded to as G, the supportable development rate can be determined by duplicating an organization's income consistency standard by its profit for value.
Porter's Five Forces is a model that recognizes and dissects five serious powers that shape each industry and decides an industry's shortcomings and qualities. Five Forces examination is often used to distinguish an industry's structure to decide corporate system.
Research methodology
In order to analyze Chinese e-commerce market, research has been conducted to ascertain the efficiency of the market and evaluate its success, Qing and Xue (2009). To conduct the research, observation method, rather participant’s observation method was used or implemented to reach the findings.
In this, it is clear to see the impact and wide success of the e-commerce market in China. From observation, readers are meant to understand that the Chinese e-commerce market is growing rapidly day by day. Findings from observation reveal that, the industry generates the highest revenues in the country than any other industry. Facilitated by the availability of good technology and smart phone networks, it is clear to understand why the Chinese e-commerce market is breaking its way through the world’s commercial market, Zhao, Wang and Chen (2019). It was observed that close to 70% of the Chinese population are computer literate, it proves why e-commerce has found a soft spot in the country compared to brick and mortar retail. This explains why the government of China has heavily invested on technology and training of skillful well oriented personnel for online retail.
Analysis
Current situation of Chinese e-commerce
China has dominated the e-commerce business compared to other nations such as the United Kingdom and the United States of America. The western countries have tried to mimic Chinese success in e-commerce. China's population has the most user of smartphones in the world. This means that it has more e-commerce activities than any other country in the world. In 2018 alone, China registered more than $820 billion e-commerce participants- this is more than the US and UK combined. In July 2019, China's retail e-commerce increased by 28.4%, which is $1.986 trillion. This research is according to the marketer Research Company (Jingqiao, 2017). The forecast for Chinese e-Commerce is projected to grow steadily until 2024.
Alibaba's founder, Jack Ma, posits that the company offers trading and lifestyle services. Mr. Yeming Wang, Alibaba's president, further states that its current vector accounts for 56.9 % of e-commerce growth in China in 2019. Synchronizing China's cultural events in line with e-commerce in the Alibaba portal has increased their income. For instance, in 2016, Alibaba hosted the' ' See Now Buy Now'' fashion initiative, which enabled customers to shop with just a click of their mobile phones (Jingqiao, 2017). The shopping venture was a 360-degree virtual panorama that made the company realize more than 10 billion dollars within 24 hours.
Other companies such as JD.com, Tmall, Taobao, and Pinduoduo control the other half of the online payment scheme. To strengthen e-commerce beyond Chinese borders, some companies such as Jingdong (JD.com) have partnered with foreign companies such as an Italian fashion house that authorized its store's flagship in its supply chain platform. It also creates artificial intelligence solutions. JD.com general manager Chenkai Ling reveals a retail week to enhance health technology and divert potential clients from their competitors' portals. JD.com believes in creating retailers to consumer relations after each purchase (Jingqiao, 2017). This is aimed at making the customers have a return culture hence avoiding poaching of such potentials.
The future of e-commerce in China
The annual increase in the Chinese population means that smartphone users also increase. When smartphone users grow, the future of e-commerce in China is also getting more significant. The global recognition from Chinese e-commerce personalizes the retail market when compared to the western countries. China has evolved to establishing online retailers as compared to most western countries that show standalone sites. This has enabled them to divert most customers into engaging in e-commerce (Tan et al., 2007). The ultimate venture means that clients in China have a customized one-stop-shop where they can get everything. The adverts and suggested products in their portals make it easier for them to purchase a given product or service with just a click.
Chinese e-commerce has introduced Black Friday and Cyber Monday. These marketing strategies aim to give its aggressive population discounts that have a tech cocktail at their core regarding embracing the internet age. China has managed to incorporate their suppliers into having a hand in incurring the shipping cost to relieve their customers from the extensive logistics. The shipping cost aims at humbling down the total product or service cost so that shopping at the comfort of your home notion is practical (Tan et al., 2007). China has implemented consumer confidence initiatives such as inflight tools to monitor its shipping progress. The UK has replicated such an initiative since the customer feels in control of their order. When the business ends up with a win-win situation for both the customer and the retailer, it means that the venture is profitable and satisfactory. It also brings the logic of demand and supply chain to realism.
Porter's Five Forces Model Analysis on the future of development in China's e-commerce
Competition in the industry
To serve and meet the enormous numbers of online shoppers' needs, intense enthusiasm, and flexibility in tackling the competition are needed. Research proves that competition in China's e-commerce market helps the future development of China's e-commerce system. The competition can be termed as healthy and productive. The more the online retailers, the more the supply and demand in the market since most of the population is online oriented.
Threats of new entrants
New entrants in the e-commerce industry bring along new capacity and some aggressiveness, which stirs economic growth in the market. However, the Chinese financial market limits the excessiveness of competition in the e-commerce industry. The Chinese government has set up barriers to restrict new entries into the market, for example, heavy taxation and licensing of new e-commerce businesses (JOYBUY.com 2020). This way, the threat of congestion of new entries in the market will be minimized in the future of China's e-commerce.
Suppliers' bargaining power
The increased e-commerce business in China calls for an increase in suppliers. However, increased pressure from suppliers may inconvenience the online retailers; therefore, the need to establish measures on balancing the suppliers' bargaining power is necessary.
However, according to JOYBUY.com (2020), e-commerce businesses thrive where there are multiple suppliers due to various choices and the ability to negotiate prices.
Buyers' bargaining power
The buyer's bargaining power increases where there is a variety of choices to choose from. This means, increased online companies increase the buyers' choices and the harder it will get for the online businesses to access market dominion. Therefore, the superior e-commerce giants discussed in this paper should ensure they put measures which will reduce the buyers' power. For example, by differentiating their services and having unique ways of running their online services, buyers will have limited control over the online giants.
The threat of substitutes
Proven beyond doubts is that the Chinese e-commerce business faces immense competition from substitutes and advanced competitors from the United States, for example, Amazon. To minimize the threat, China should implement regulations that limit the increase of local substitutes. Local substitutes provide a cheaper alternative for buyers to shop from them, reducing the sales of the industry's major e-commerce giants. Therefore, to gather all forces and make buyers focus on the major suppliers, the Chinese government needs to enforce measures to regulate and increase in substitutes.
Ansoff Matrix Analysis (ALIBABA)
Market penetration
Strength in various companies differs in terms of penetrating the market. Alibaba is a well know company that penetrates the market using the third-party platform. So, the company does not take inventories (JIANG, 2019). The company also operates the WeChat post to gain more clients by posting products and listing some properties to join the WeChat team to influence the price. However, Alibaba does not take inventories to fulfill market orders.
Product development
Developing a product to sell to the existing market is the fundamental motive of product development. Product development has forced many companies that rely on e-commerce to shift during this time of the pandemic negatively. Many people have strict preferences, and moving into new products has proved a challenging initiative (JIANG, 2019). People in China are picky, so Alibaba attaches new products to certain goods and get the latest product free of charge within a specified time spectrum. This is done to get people into liking the new product.
Market development
The central ideology of making a product for most companies is profitability. For profitability to thrive, there must be many users willing to buy a company product. Alibaba maintains the structure and reputation of its culture by dictating the rate of public participation towards a given product (JIANG, 2019). Alibaba conquers the domestic market has always thrived at being the giant in the Chinese market before invading the overseas market. Alibaba also tries their best to ensure that they have the best price and a faster logistics department to compete. This is the only way to attract new customers through market development.
Diversification
Diversification is the modal development of the new product to sell into new markets. It is among the risky initiatives in e-commerce. Developing a new product means a need for new beginnings, from advertising it to the marketing strategies needed to see it through. If it succeeds in the market structure, new customers are diverted to the company hence a new direction for the company (JIANG, 2019). It also means that the competition is stiffer among its competitors. Alibaba has always relied on diversification to revert the traffic of potential customers from their competitor.
Ansoff matrix Analysis (JD.com)
The Ansoff Matrix, additionally called the Product/Market Expansion Grid, is an instrument utilized by firms to investigate and design their techniques for development. Frequently alluded to as G, the supportable development rate can be determined by duplicating an organization's income consistency standard by its profit for value.
Market penetration
The main target of any business is primarily to increase sales of its products in the market. The secret has always been hidden in their prowess in claiming their attention in the market as for JD.com. Sources reveal that JD.com achieves this by decreasing its prices to attract new customers and retain the old ones (JIANG 2019).
Product development
In e-commerce, the introduction n of new products into the market is a challenge to reckon with. As for JD.com, the online retail platform enables them to make their new products known to the public easier compared to physical retail. The organization achieves this by benchmarking from other competitors and gathering enough resources to make better products than its competitors. This way, their products gain market faster in the e-commerce business.
Market development
Nothing is as satisfying as gaining leverage in new markets using existing products. This shows the level of acceptance and allows an entrepreneur to venture into diverse marketing. JD.com has an added advantage whereby it uses its private technology to gain leverage and widen its market. This is because potential consumers in new markets are considered to be more profitable.
Diversification
This is considered as penetration into a new market by introducing new products. For example, JD.com seems to be applying both related and unrelated diversification, whereby it sells various products, some of which are not related at any point. It is the riskiest strategy to employ, but JD.com beats the odds (JIANG 2019).
Ansoff matrix Analysis (Pinduoduo)
The Ansoff Matrix, additionally called the Product/Market Expansion Grid, is an instrument utilized by firms to investigate and design their techniques for development. Frequently alluded to as G, the supportable development rate can be determined by duplicating an organization's income consistency standard by its profit for value.
Market penetration
The Chinese market needs flexibility in marketing, therefore pushing away reluctant of rigid e-commerce retailers to the edge. Pinduoduo is one of the most outgoing online retailers. This is due to its heavy promotion, advertising, and promotion of its online services and retail business (Staff 2020). This way, Pinduoduo increases its sales on the existing products.
Product development
One way of staying relevant in the Chinese e-commerce market is when the retailer stays ahead of the game. This involves having a sound networking system and reliable channels to broaden one's market. In this case, Pinduoduo gathers and combines its strength with the growing online retailers. By creating these alliances, Pinduoduo shares its channels and benefits by gaining more stamina in the market and gaining access to the competitor's distribution and marketing channels (Staff 2020).
Market development
Entering a fresh market by using prevailing products requires the retailer to be ready for any eventuality, mostly when one has not done enough background check on the new market. Pinduoduo has succeeded in outmatching the odds where it has penetrated foreign markets and widened its market internationally. This bold move has been a significant step and achievement in the organization where it has enabled Pinduoduo to gain international recognition and consumers.
Diversification
Though risky, the diversification strategy gathers immense retailer revenues by distributing and introducing new products to a new market. Using the WeChat, QQ, and QR models of marketing, the platform offers users an opportunity to be unofficial employees (Staff 2020). This way, users use the referee system to help the company market its new products in a new market, as the company gains more customers and widens its market.
Value chain analysis (support Literature Review)
The value chain analysis is the primary system a firm engages in transforming inputs to final outputs. The process involves five main strategies or techniques: inbound logistics, operations, outbound logistics, marketing, and sales and services.
For enterprises, the main components of value chain consist of internal logistics, external logistics, marketing promotion and services; auxiliary activities include enterprise infrastructure (the general name of various assurance measures in enterprise operation), human resource management, technology development and procurement. Each component has three parts: direct value creation, indirect value creation and quality assurance. Whether a certain activity within an enterprise creates value depends on whether it provides the things needed by the follow-up activities, whether it reduces the cost of the follow-up activities, and whether it improves the quality of the follow-up activities.
The implication of value chain can be concluded as follows: first, there are many links between different components of a company, such as planning, timeliness and coordination of techonology supply; second, each component can make tangible or intangible values to the company, such as after sale services. If the company pays more attention to the customers’ needs or did a good job in after sale service, the company will obtain such tangible and intangible value.
Inbound logistics
These include the receiving, inventory control, warehousing, and raw materials that a firm requires to generate its products. For example, the e-commerce business would apply this logistics to receive and store products from the leading manufacturer.
Operations
This involves all the activities involved in processing the raw materials/inputs to develop the final products. In the e-commerce business, this can be applied in branding, packaging, and labeling of finished goods.
Outbound logistics
These are considered all the activities involved in the distribution and making sure the final goods reach the final consumer.
Marketing and sales
This strategy is considered to be the focal point of any business. This is because it determines the company's success and securing a spot for a particular company in the market. This involves advertisements, promotions, and marketing in general. In e-commerce, this strategy would be employed to ensure buyers know the goods available in the online stores.
Services
This strategy ensures a follow up on the goods sold by offering customers with discounts, delivery services, maintenance and warranty, repair, refund, and faulty products. （more）
Conclusion
The landscape has seen various e-commerce companies build up and penetrate the vast population within its territories—the best competitors in e-commerce include; Alibaba, Taobao, JD.com, and Pinduoduo ("E-commerce in China: A present and future market overview," 2020). Being a wide matric with some companies such as JD.com battling critically against Alibaba with its self-acclaimed quality assurance and the high efficiency of well-reserved logistics structure, the existence of the four companies (Alibaba, Taobao, JD.com, and Pinduoduo) will be analyzed using Ansoff Matrix Analysis and Porters Five Forces Model Analysis. The market is currently stable in China though it faces significant competition from other equivalent markets.
References
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