Home Entrepreneurship Jack Ma, Founder of Alibaba Group : Success Story

Jack Ma, Founder of Alibaba Group : Success Story

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Jack Ma intends to use the internet and Alibaba’s influence to facilitate more globalized trade across borders beyond China and to help SMEs (Small and Medium Enterprises) across the world. Ma vows that helping SMEs to succeed is much like a religious calling for him.

Frustrated with his lack solid employment opportunities after graduation in the early 1990s, Ma relied on his English to teach at the local university he had attended a few years prior and to start a translation service business. Upon his first visit to the United States in the 1995 as a translator, Ma got introduced to the Internet, and to his shock after looking up beer from various countries, he learned that there was none from China (a country of about a Billion people) on the World Wide Web. Ma immediately saw the potential business opportunities of the internet and how it could facilitate the way small and medium Chinese enterprises could do business with the rest of the world. Then, he and his friends decided to lunch a site about China and Chinese products online, known as “Chinapage”, that listed Chinese businesses and their products. Within the same day, he began to receive emails from people around the world requesting that they partner up. That experience taught Ma about the incredible power of connectivity, especially how the internet can greatly impact global trade, especially for SMEs.

Later, believing that “Chinapage” will get better funding, Ma partnered with a government entity that had majority control. Unfortunately, that entity brought along the rigid bureaucracy that stifled away many of Ma’s visionary projects and frustrated him; which led to Ma’s eventual departure. Thereafter, Ma took up a government job for a short period at the ministry of foreign trade and economic cooperation in the latter half of the 1990s. There, he also built important connections with influential people that would later impact Ma’s life and business venture; one of whom is the founding member of Yahoo, Jerry Yang. Jerry would eventually get yahoo to invest USD 1 Billion in Alibaba in 2005.

Thanks to his experience there and his failed partnership with the government entity, Ma learned much about government inefficiencies and why not to be in business with the government. As he addressed his relationship with the governments in interview Charlie Rose in Davos, found on YouTube, Ma said “Be in love with the governments, but do not marry them.” For example, when government officials approached Alibaba to help solve a habitual crash of its ticket vending system during the annual spring festival in China, Ma and his young team from Alibaba helped to fix the problem ‘Free of charge’ with the promise of being left alone by the government.

In 1999, after leaving the government job, Ma took a second bite at internet-based business ventures by grouping 18 people (including himself and his wife) at his home and sold them a dream to found Alibaba with the goal of facilitating international trade for small and medium ventures based in China. Alibaba was born out of Ma’s unfulfilled dream of using the internet to facilitate business activities for Chinese SMEs and frustration with the bureaucrats he worked with in the preceding joint venture (Chinapage), where his suggestions to use the internet to facilitate trade of Chinese made products in the international market were repeatedly rejected.

In the early stages of the Alibaba, Ma tried to raise funds in Silicon Valley, the tech hub in the United States and was met with denials, and his business model was criticized to be unprofitable and unsustainable by many at the time. Eventually, Ma succeeded in getting Goldman Sachs and Softbank to invest USD 5 Million and USD 20 Million in Alibaba, respectively.

In 2003, still unprofitable with Alibaba, Ma and his team lunched an online auction site named “Taobao.com”, charging zero commission, and took on a multinational e-commerce giant, eBay, which already had the lion share of the Chinese online auction market. Determined to win against eBay, Taobao remained a commission-free marketplace for millions of online traders, and that did put Alibaba under significant financial strain. To stay afloat while maintaining the platform’s commission-free policy, Ma and his team began offering peripheral value-added support services (e.g. custom webpages to online merchants) for small fees. Ma and his team won the Chinese market in less than five years, and eBay subsequently withdrew from China. Jack Mack reflected on this challenging period on a YouTube video of his interview with Charlie Rose, stating “If eBay are the sharks in the Ocean, We (Alibaba and Taobao) are the crocodiles in the Yangtze River.” Since then, Alibaba has created many subsidiaries through organic growth (such as Tmall and AliExpress) and acquisitions.

As the “dot com” boom period came to an end after 2000, Alibaba faced serious challenges due to its aggressive expansion into international markets (which Ma admitted to be a mistake). Jack Ma successfully reorganized the company’s operations, including closing many international branches and focusing on strengthening Alibaba’s position in the Chinese market. Thereafter, Ma expanded the services of Alibaba and reengaged its international expansion strategy.

After Ma and Alibaba reorganized their operations and made their Mark by driving eBay out of China after just few years in business, with the help of Jerry Young of Yahoo, Ma succeed in getting Yahoo to invest a sizable USD 1 Billion for a 40% stake in Alibaba in 2005. Besides getting crucial funds to help Alibaba to execute its international growth strategy, that Investment earned Alibaba (a six years old company) a valuation of USD 2.5 Billion.

In 2014, in what turned out to be the largest initial public offering to date, Ma and his team successfully raised in excess of USD 20 Billion for Alibaba by listing it in the NYSE stock exchange in the United States. That made Alibaba, a 15 years old e-commerce company that has its origins outside of the United States, one of world’s largest companies as measured by its market capitalization that was approximately USD 200 Billion. Ma and his team are turning Alibaba holding group into a massive conglomerate by acquiring many smaller companies from technology related to logistics and beyond.

Source: Investopedia

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