Country's Background Information
China is an ancient and mysterious land located in middle, and East Asia and its capital city are Beijing. Other important towns include Shanghai which is a major industrial city while Hong Kong leads in commercial activities. The country attracts tourist from around the world due to the presence of resources, minerals, and a rich history. The Han Chinese are the principal occupants of the country followed by other ethnic groups. As a result, several local dialects form a part of the Chinese population. The state is home to a number of religious affiliations including Islam, Catholicism, Buddhism, and Protestants. Evolution in China began in the historical period and is marked by political and social upheavals that did not inhibit it from flourishing both economically and culturally. This resilience signifies the current revolution trend the country experiences in various sectors of its economy.
Background Information on the Sector
China has experienced a significant technological growth affecting most sectors of its economy including E-Commerce which is a component of the tertiary industry. The E-commerce sector has significantly developed over the ages and is expected to continue growing in the future and on a global scale. The evolution of the E-commerce sector dates back to the agrarian revolution era through the manufacturing industries to the current online lab of innovations. China has the leading E-commerce sectorial size around the globe. As a result of the lead, the country sets a benchmark for other retail platforms across the world. The main competitive companies in China's E-commerce sector include Alibaba, Jingdong, and Tencent. Alibaba dominates the e-commerce space with a 58% market share while JD.com and Tencent are the significant challengers (Fannin, 2018). Other companies in the E-commerce sector include Baidu. All these companies face both local and international competition in the E-commerce space.
Initially, the E-commerce companies engaged in a zero-sum game where no partnerships were created, and each firm focused on building itself at the expense of its competitors. However, time made the E-commerce companies realize no benefits could be realized from the unhealthy competitions. As a result, most companies are partnering with each other and other sectors of the economy to form an ecosystem. Companies such as Tencent, Alibaba, and JD have partnered with entertainment through online and offline integrations. As a result, consumers are shared across the platforms which are an immense advantage for China as it reaches consumer saturation. Every individual across the country has been or has the potential to get enriched in terms of shopping. Additionally, Google partnered with JD.com with the intention to invest $550M in the company (Flannery, 2018). This partnership comes as an effort to explore new solutions for e-commerce such as providing customers with an opportunity to shop as they please.
Importance of the Sector
The E-commerce sector is a service industry that facilitates the operations of the secondary and primary sectors within the economy. The industry provides an online platform for retail and wholesale business activities. As a result, economic growth and development are generated through newly developed organizational strategies boosted by e-commerce. Additionally, the e-commerce sector encourages investment in a country resulting in further economic growth and development. This growth is facilitated through a process of transformation that initiates various structural changes to businesses. The structural changes add value to firms through mechanisms such as integration of services resulting in a positive ripple effect on the economy. Value addition occurs through increased productivity by use of an efficient business process. Additionally, costs are reduced significantly especially the administration, and stock management expenses. The e-commerce sector facilitates healthy competition through the provision of equal information to all businesses and consumers resulting in better market demand predictions.
Development of the Sector
The e-commerce sector in China continues to experience overwhelming growth as companies move from the use of data to logistic networks and warehousing. The growth of logistics and warehousing networks aims at streamlining business operations in the e-commerce sector. Precisely, warehouses secured in prime locations help to save on delivery time. China's anticipated warehouse occupation growth of 52m square meters by the end of 2018 depicts a significant milestone in the e-commerce sector.
In comparison to the US 900m square meter warehouse spacing achieved in fifteen years, China's development is vital. An investment of $25bn has been induced to the logistics sector in the past five years as a measure of consolidating logistics operation. In particular, companies such as Alibaba have invested $ 800m in the logistics platform (Feng, 2018). By a different token, the changing landscape of China's online retail market is characterized by three themes. Firstly, the new retail normal factors components of businesses which include increased use of data analytics and the creation of a seamless relationship between online and offline channels. The second theme is characterized by the experienced shift from a pure transactional environment to the incorporation of social engagement as a measure of improving customer's experience. The last theme entails the use of social and emerging technologies as new growth avenues crucial in fostering e-commerce services (PWC, 2017).
Definition of Strategies
The three strategies that have been used by Tencent, Alibaba, and JD.com include diversification, the use of e-commerce, and new promotion strategies. Diversification involves the enlargement of a business enterprise to either incorporate a variety of products or a vast field of operation. The main aims of diversification revolve around reduced risks, increase in profit and market share, efficient use of resources, and projected increased growth (Sindhu, Ul-Haq, & Ali, 2014). The new promotional strategy is the second strategy and entails the use of measures aimed at informing and influencing the decisions of existing and potential customers. On a different note, e-commerce strategies involve the use of digitalized transactions to buy and sell goods over the internet (Khan, 2016).
Alibaba's 2017 proposed strategy involved striking an equilibrium between online and offline activities through the elimination of the virtual line that separates the two (PWC 2017). On the other hand, Tencent utilizes a variety of e-commerce strategies including the use of a mobile shopping platform such as Pinduoduo (Fannin, 2018). The platform facilitates team-buying shopping posing a significant competition to companies such as Alibaba. Jingdong utilizes technological measures such as drone delivery as an e-commerce strategy to encourage the use of JD.com as an online shopping platform among customers.
Alibaba has utilized the concept of diversification as a measure aimed to establish a business in more countries. The partnership between JD.com and Google formed in less than two years ago facilitated diversification opportunities. The new partners target three important markets South-East Asia, the U.S., and Europe (Yang & Ju et al. 2018). On the other hand, Tencent has engaged in product diversification as a strategy aimed at addressing the rising concerns of the extent the youth participate in online games in Beijing (Sender, 2017). In this regard, diversification is aimed at diversifying losses and increasing the profits of the online business retail platforms.
By a different token, Alibaba recently promoted its business through sponsoring significant events such as the Australia-China Business Week, and Beijing Olympics. Additionally, discount offers and purchase cash-backs significantly promotes Alibaba's sales. JD.com utilizes sponsorship strategies, search engine optimization, and SMEs to increase its customer base. Lastly, Tencent has substantially utilized the WeChat platform to spread promotional information to potential and existing customers (Weinswig, 2017). The promotional strategies were used to increase the respective company's competitive advantage in the e-commerce space.
The three strategies have a direct relationship with various stakeholders affiliated with the respective online business retail platforms. The table below gives an overview of the relationships established.
Stakeholder Impact Analysis
(Impact on ) Diversification Strategy Promotion Strategies E-Commerce Strategy
Customers Diversified business location increases the customer base Promotions positively influence potential and existing customers to make purchases Provide effective technological solutions resulting in a user-friendly relationship between the customer and the online retail platform
Employees Diversification enlarges the business resulting in new employment opportunities Positive e-commerce business results further motivate employees to work harder towards achieving organizational success. Technological solutions streamline employee's responsibilities through the provision of efficient mechanisms.
Community Diversification positively impacts the community through increased CSR activities Promotions through sponsorship activities provide positive engagement platforms for the community. The community opinions should guide the e-commerce strategies initiated due to their major impact on a strategy's success.
Government Government policies and regulations of specific countries affect the success of a diversified e-commerce business. Government regulations also have a significant impact on the promotion strategies adopted by JD.com, Alibaba, and Tencent. Government support on research and development activities in the E-Commerce space plays a crucial role in shaping technological strategies
Alliances The diversification of e-commerce businesses is significantly supported through the formation of alliances. A partnership can increase the impacts of promotional strategies due to increased consumer trust linked to alliances. Alliances increase the rate of technological developments due to the availability of an array of innovative ideas.
Competitors Product and location diversification increases the competitive advantage of an e-commerce firm. E-commerce firms with the most efficient promotional strategies have an increased probability of leading the economic space. E-Commerce strategies play a key role in boosting competitive advantages.
Investors Investors' financial input into the three e-commerce firms plays a critical role in supporting business diversification. Additionally, the impact of promotional strategies on increased sales further attracts investors to the e-commerce firms. Investors contribute financially to the development of e-commerce strategies.
Significant Stakeholder Relationship
The customers and competitors are the major stakeholders whose actions directly impact the three e-commerce companies located in China. The customers at Tencent are expected to grow significantly through the product diversification initiative launched by the firm. The company's initiative to diversify was prompted by the anticipated reduced customer base effects of Beijing's concern over the youth's use of online video games (Sender, 2017). The unique promotional strategies initiated by firms such as Alibaba have contributed to the firm's market leadership. Alibaba engages in sponsorship events aimed at raising awareness of the company's existence to persons who get influenced to try out the firm's...
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