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Q1-4 How Can You Use the Five-Component Model?

So Biggest IPO Ever: Alibaba 51
What?

Have you ever thought about starting your own business? It’s
not easy to turn a new idea into a profitable company. But the
Information Age has created an environment in which anyone
can grow a small business with minimal investment and marginal
risk. Sometimes even technical requirements can be outsourced.
For example, companies like Squarespace.com allow
entrepreneurs lacking Web development skills to create
dynamic, visually appealing platforms to sell their goods or
services. And if you don’t want to sit around packing and
shipping your products to customers, let Fulfillment by Amazon
(FBA) do it for you!
But fledgling entrepreneurs aren’t the only ones benefiting from
the resources provided by a growing digital economy; companies Source: Yeong-Ung Yang/Corbis
of all sizes dealing in business-to-business (B2B), business-to-
consumer (B2C), and consumer-to-consumer (C2C) commerce are supplier. But this may not be the case. The site has been mired
also profiting from new opportunities to find cheaper raw materials, with suppliers selling counterfeit products despite roughly $16M
higher-quality trading goods, and, most importantly, customers.
invested annually to combat the sale of fraudulent goods. 13
Alibaba.com has sought to combat counterfeit goods by
What Is Alibaba.com? allowing suppliers to obtain “Gold Supplier” status, a vetting
Founded by Jack Ma in 1999, Alibaba.com started out as an process including site visits by verification services. However,
e-commerce portal for buying and selling goods and has since you can imagine the logistical complexities associated with
grown to include a variety of financial, auction, and commerce vetting global suppliers and responding to fraud claims by
services. Alibaba’s mission is to connect suppliers and buyers global buyers.
around the globe. 11
Alibaba boasts millions of products, dozens of product What Can Alibaba.com Do for You?
categories, and thousands of messages exchanged daily between If you are thinking of importing wholesale goods and selling
buyers and sellers. While this may be the first time you have heard them on your own e-commerce site or in your flagship brick-and-
of Alibaba.com, it has become a major product and information mortar location, then Alibaba.com might end up being a great
interchange for buying and selling wholesale goods. supplier for you. Even if you don’t end up buying products from
The influence Alibaba.com has on global commerce is even Alibaba, lessons can be learned from Alibaba’s success.
more evident when you consider the size of its IPO in the fall of First, Alibaba.com is a perfect example of how managing
2014 (NYSE: BABA). BABA broke the record for biggest-ever IPO information can be as profitable as selling a high-quality product.
12
by roughly $3B with an IPO of $25B. By comparison, Facebook Consider the fact that Alibaba may be the largest retailer in the
raised $16B in its 2012 IPO, and General Motors’ IPO raised world, but it has little or no inventory at all.
$15.7B after emerging from bankruptcy in 2010. Interestingly, Ma Second, Alibaba.com demonstrates the complexities
started Alibaba.com with less than $70,000 in 1999 and is now associated with operating in a global economy. Managing customer
the richest man in China.
relationships can be more difficult when buyers and sellers are
located around the world.
Growing Pains Finally, the story of Alibaba.com illustrates what can be
Alibaba rapidly evolved from a “new idea” to a leading global accomplished in a relatively short period of time with a laptop,
retailer and supplier with the biggest IPO of all time. Given the a good idea, and a lot of hard work. So stop checking your friends’
company’s meteoric rise, it might be tempting to assume that status updates and get to work on your idea for the next great tech
Alibaba.com is going to be the dominant worldwide retailer and company!