Alibaba makes its big bang by splitting into six entities

by time news

Alibaba’s headquarters in Hangzhou. STR/AFP

One day after the reappearance of its founder, Jack Ma, the Chinese e-commerce giant announces a major reorganization of its activities, officially to regain “agility”.

Hard to believe in a simple coincidence. The day after the remarkable visit of its founder and ex-CEO, Jack Ma, to the city of Hangzhou, Alibaba began a global overhaul of its model. Exit the ship of 240,000 employees, the juggernaut of Chinese tech is preparing to restructure into six independently managed entities.

It was Daniel Zhang, current boss of the company, who clarified the project on Tuesday in a letter to employees. This is a major shift for the group founded by Jack Ma and of which he was CEO between 1999 and 2019. Known in the West for its e-commerce platform and its logistics, the Chinese group has gradually extended its activities across the tech industry, including cloud and artificial intelligence, digital services, media and entertainment.

The red lights

In the future, each of its six divisions will have its managing director, and the ability to raise funds through a stock market listing (with the exception of Taobao-Tmall, the e-commerce platform in China which will remain 100% owned by Alibaba). “The market is the best test, and each entity will be able to proceed with independent fundraising and an IPO when it is ready to do so”, explains Daniel Zhang in his missive. The markets are generally applauding the news. “This type of organization is more efficient, and allows more value to be generated by empowering the different entities”deciphers Benoit Flamant, action manager at Corraterie Gestion.

The previous organization had however allowed the Chinese giant to touch the summits. In the space of ten years, the group’s turnover has increased from 3 billion to 134.5 billion dollars for the year ended in March 2022.

But, for two years now, the lights have changed to red. Alibaba’s market capitalization shrunk from 840 billion to 230 billion between October 2020 and today. A consequence of the global slowdown in tech as well as health restrictions in China, which have largely penalized e-commerce activity, which weighs 70% of revenues. The latest quarterly published by the group are down. As a result, nearly 10,000 employees have been laid off in recent months. Daniel Zhang wants to believe that the new organization will be able to meet the challenges. “The fundamental objective of this reform is to make our organization more agile, to shorten decision-making times”, he explains. The latter will remain at the head of the holding company, without ensuring a decision-making role, as well as at the head of the artificial intelligence pole.

Dismantling

This big bang is also a new manifestation of Beijing’s takeover of the tech giants. For several years, the communist government has done everything to avoid capital concentration in the hands of a few actors. Jack Ma knows something about it. Having drawn the wrath of the regime, the founder of Alibaba was successively refused the listing of his payments subsidiary, Ant Financial, before having to let go of all control of the company. The sudden reappearance of the billionaire on Monday after long months of exile has certainly been perceived by some as a signal of appeasement for the private sector. But the reorganization announced by Alibaba on Tuesday leaves little room for doubt: Beijing is holding the helm more than ever.

“The question of the dismantling of the tech giants is on the political agenda here too, in Europe, and in the United States. The difference is the speed with which the Chinese are advancing., notes Benoit Flamant. According to the expert, this movement could find an echo at Baidu or Tencent.

You may also like

Leave a Comment