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Ma Letter on Taobao Reorg

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					Fellow Aliren:

After months of consideration and preparation, Alibaba Group has decided to reorganize
Taobao into three companies as of June 16th. The three companies are: eTao
(www.etao.com), Taobao Marketplace (www.taobao.com) and Taobao Mall (www.tmall.com).
This decision has significant impact, so I will share the key rationales and implications in this
letter.

1.     The Internet and e-commerce landscape has changed dramatically and this calls for
       an elevation of our “Big Taobao” strategy to “Big Ali” strategy. Over the past two
       years, search, social networking and e-commerce have witnessed disruptive changes
       catalyzed by the development of open platform and social trends, while countless
       new companies have popped up. The “Big Taobao” strategy launched in 2009 has
       achieved solid progress and has created a powerful online consumer retail
       ecosystem. In order to better address the rapidly changing environment, we have
       decided to elevate our “Big Taobao” strategy to a “Big Ali” strategy. “Big Ali” means
       the integration of all of Alibaba Group‟s resources that can be shared with all e-
       commerce participants – this includes our consumer users, merchants, and positions
       in the manufacturing supply chain; and leveraging our capabilities in integrating
       information flow, logistics, payment, mobile, as well as our data-centric cloud
       computing services – with the aim of offering better and more comprehensive
       infrastructure services that will contribute to the development of Chinese e-
       commerce. “Big Ali” strategy‟s core mission remains the building of an open,
       collaborative and prosperous e-commerce ecosystem that will usher in a New
       Business Paradigm.

2.     Significant change has taken place in customer demand. On one hand, online
       shopping has gone from a supplement to people‟s lives to a necessity due to the
       leadership and good work of Taobao. We need to offer consumers more
       sophisticated and customized services. On the other hand, driven by domestic
       consumption and transformation of the traditional manufacturing sector, increasingly
       more businesses will use the Internet to serve their customers. The support and
       services that they require will be dramatically different from before. Accordingly, we
       must transform Taobao into an omnipresent consumption platform, connecting supply
       and demand that results in win-win for consumers, merchants, manufacturers and
       service providers alike. This platform approach will incorporate the services of
       Alibaba.com B2B and the three “Tao” companies, each of which will cater to its
       respective customer segment but work closely together. We hope the shopping
       search of eTao, the social networking innovations of Taobao Marketplace, and the
       quality and sophistication of Taobao Mall will give consumers a variety of brand-new
       experiences. At the same time, our approach will bring expert assistance in e-
       commerce and marketing services to many more businesses and entrepreneurs.

3.     The building of a New Business Paradigm necessitates a fundamental change in how
       we manage our business. We must be proactive in bringing about innovation. We
       have developed into a big company so rapidly in a short period a time, but
       competitive advantage is not about size. We must continually test new organizational
       structures in order to discover new approaches and models that fit the development
       of Internet businesses. That‟s how we stay innovative and stay on the cutting edge. It
       has been an Alibaba tradition to run big companies like start-ups. This is the only way
       to foster innovation. It also encourages more young people and new colleagues to
       step up and take on the challenge, as in a “small” organization everyone will be given
       a chance to demonstrate their talent and ability.

4.     We believe that reorganizing Taobao into smaller companies will create more value
       for the whole industry, and therefore more value to our company and shareholders.
       Today a break-up may seem like a disadvantage on the scale front, as though
       Taobao has gone from „somewhere‟ to „nowhere‟. However, through the „Tao‟
       companies Taobao will be „nowhere but everywhere‟. They will be omnipresent. By
       integrating Taobao into the core of “Big Ali” strategy, we will create tremendous value
       for the entire industry and Alibaba Group, as well as bring about opportunities for
       countless e-commerce businesses to compete fairly and grow. We won‟t take credit
       for the development of the Chinese e-commerce sector, but if Chinese e-commerce
       does not take off, it‟s our fault. Our interests are completely aligned with the interests
       and growing scale of the entire e-commerce industry. Hence we won‟t rule out the
       possibility of taking Alibaba Group public in the future, as a way to reward our
       employees and shareholders who support and continue to believe in us.

This reorganization is tactical in nature and the execution of our plan requires a strong
management team. Alibaba.com B2B plays an important role in the “Big Ali” strategy, so we
have asked our best leadership team to manage the B2B business. Effective immediately,
Jonathan Lu will fully dedicate his executive duties to the role of CEO of Alibaba.com. The
team supporting Jonathan includes CFO Maggie Wu; general manager of ICBU Sabrina
Peng; general manager of CBU Peng Ye; HR VP Kangming Deng; VP of Technology Andy Li;
and VP of Supplier Services Sophie Wu.

The three “Tao” companies will be run by their respective leadership teams each led by a
president and a non-executive chairman. Eddie Wu (Taobao nickname „Dongxie‟) will lead
eTao as president and report to eTao chairman Lucy Peng. Leo Jiang (Taobao nickname
„Sanfeng‟) will lead Taobao Marketplace as president and report to Taobao Marketplace
chairman Jonathan Lu. Daniel Zhang (Taobao nickname „Xiaoyaozi‟) will lead Taobao Mall
as president and report to Taobao Mall chairman Ming Zeng. The technology and shared
services platform will be under the leadership of Trudy Dai (Taobao nickname „Suquan‟), who
will directly report to the Group CEO Jack Ma.

Aliren, we should be very proud of ourselves! I say this because it is unheard of for a
company to look beyond its frontrunner advantages and refuse to be complacent with a
rapidly growing business. No other company possesses the determination and power to
disrupt and re-invent itself by volunteering a reorganization of this magnitude. Through this, I
believe we will blaze new trails, achieve an even higher level of efficiency and excellence!

Aliren, change is painful and undergoing change is hardly ever a smooth process. However,
we must change and we must change before change is imposed on us. Needless to say we
do not pursue change for the sake of change, but rather the sustainable growth that change
will bring about. E-commerce has only just begun. Our journey is more than about the pursuit
of the best business model, we are exploring the Way of a New Business Paradigm!

Jack Ma

2011.6.16

				
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