Alibaba

What are the success factors in the rise of the Chinese e-commerce industry?

Introduction:

China, with 564 million in 2012, has the largest population of Internet users worldwide. In this fast growing market a number of successful e-commerce companies emerged. One of them is Alibaba with handlings of 1.1 trillion yuan ($170 billion) in sales, more than eBay and Amazon combined and by some measures already the world’s largest e-commerce company. Alibaba is on track to become the world’s first e-commerce firm to handle $1 trillion a year in transaction (Economist 23.03.2013). Since Alibaba reflects the success factors in the rise of the Chinese e-commerce industry it will be taken as an example in the following analysis.

This paper will analyze the success factors of e-commerce in China within the theoretical framework of Porter`s diamond model. These determinants of industry competitiveness – factor conditions, demand conditions, related industries and business context - will in the following serve as the structure of this essay. Looking forward, these determinants will also be briefly applied to the question whether Chinese e-commerce companies will be able to repeat their home success on the global market. This paper argues that even though e-commerce companies have been a success story in China, their success on the global market is not granted.

Competitive advantage of Nations: Porter Diamond model

Different theoretical models as Porter`s diamond model and Nolan`s Big Business Revolution exist to analyze the competiveness of industry sectors in a nation. Porter`s Diamond Model is adopted in this context since it provides a solid framework of determinants that supports describing the competitive advantage of the Chinese e-commerce sector.

Porter criticized in the book “The Competitive Advantage of Nations” the inability of economic trade theories to explain current economic phenomena (Sardy 2009:2). This led him to introduce the concept of...