(Yicai Global) Oct. 11 -- Jack Ma, founder of Chinese e-commerce giant Alibaba Group Holding Ltd. [NYSE:BABA] has dubbed himself a “staunch believer in globalization” in a number of interviews. In January, he became the first Chinese businessman to publicly meet with US President Donald Trump, and has also met state leaders from Argentina, Australia, Israel and Malaysia.
Alibaba has unveiled a range of international expansion plans, but how does it plan to make a foothold overseas, and what advantages does it pose in foreign markets? Yicai Global held an exclusive interview with Annie Jie Xu, Senior HR Director of Alibaba US, at the Alibaba Technology Forum at Carnegie Mellon University in Pennsylvania.
Yicai Global: Are you based mostly near Silicon Valley?
Xu: Yes. I joined Alibaba in Silicon Valley in 2000. We have six offices in the United States now.
Yicai Global: What kind of business does Alibaba have in the United States?
Xu: We have many different businesses here. The technology team is the largest, with nearly 200 people.
Yicai Global: Why is Alibaba's technology team based in Silicon Valley??
Xu: We have a technical team in Silicon Valley that studies some of the cutting edge technologies. Silicon Valley can be said to be a great fusion of technology. After all, many big internet firms are located there, so it’s very important for us to be there. [Alibaba] needs a sophisticated team which has a cooperative relationship with its home country. Most of the team members there are still relatively young. They grew up with Alibaba. However, they haven’t worked in companies as large as those in Silicon Valley, so their experience and qualifications are still slightly different.
Yicai Global: As well as the technical team, what other departments do Alibaba have in the United States?
Xu: We have nearly 300 people in the US. In addition to the technical team, there are more than 100 people doing business for different channels, including our trading platform alibaba.com, which is responsible for contacting American buyers, marketing and brand promotion. We don’t do what our domestic team can do.
Yicai Global: What is Alibaba's market orientation in the United States?
Xu: Our domestic business has made a very good foundation. As I mentioned in my speech, the purpose of Alibaba is “making it easy to do business anywhere.” It is not just in China, so internationalization is a very important goal. Chairman of Alibaba's Board of Directors Jack Ma said that in 2020, we will make our business footprint in the world's five largest economies, serving two billion consumers. China's population is less than two billion, so we will look to go global, that is, to extend our domestic business abroad.
Yicai Global: What is your overseas business model now, business to business, or business to consumer??
Xu: We have many businesses. I just talked about B2B, making transactions between merchants around the globe. We also have a team for Tmall, to help American companies sell goods to China. The ultimate goal of internationalization is to have local businesses like eBay and Amazon in the United States, which can survive without Chinese consumers. But that's not our focus. You have to compete with local businesses, and any competition needs to generate profit, not just be for the sake of competition.
For cloud services and B2B, without our Chinese business, we wouldn’t have that core competitiveness. The same is true for Tmall. Now that Chinese consumers have a large demand for foreign products, it is natural for us to think about how to help small and medium-sized enterprises in the US introduce their products to China. It is similar in Europe and Southeast Asia, not just the United States. "Going to China" is a trend. We also have a cloud business in America, Ali Cloud, which competes with Amazon Web Services (AWS).
Yicai Global: What is cloud business?
Xu: They help companies conduct their business on the cloud, and [companies] themselves need to buy servers, data storage, and so on. This is Amazon’s most profitable business, but will also be one of Alibaba’s core businesses in future. At home, we rank in the cloud business. We also want to introduce our cloud services to firms in the US and other overseas markets. AWS has been very dominant in this market, and holds a leading position. Our strategy is not to grab its [market] share. We are value driven and we will not carry out any business if it doesn’t have value. Our idea is to look for overseas companies that want to do cross-border transactions with Chinese businesses, giving us an advantage. Overseas businesses want to go to China, and our domestic market can help their business development.
We also have a special business development team in the States, specifically looking for companies that seek cross-border cooperation. Our strategy is different, whether it's a competitive relationship with Amazon or not. Someday, we may become a mainstream American cloud provider, like AWS, but at the moment we don't have any such plans because the market in China is big enough. There are many other [firms], such as AliExpress, which is in Chinese, to help Taobao businesses sell products to overseas Chinese.
Yicai Global: What is Tmall's profit model?
Xu: There are many, such as the cost of opening a shop. We will also take a percentage of the cost of each transaction, including fees in the payment process, from advertising, etc. We have some businesses in each of our operations overseas, but they are still in their infancy. In fact, domestic competition is very fierce. Alibaba's competitors are not the biggest companies, like Google or Amazon, but those smaller companies that aren’t well known. These companies are particularly innovative. Perhaps one day, this will change.
Yicai Global: Did you think of buying these small companies?
Xu: We can buy them, or invest in them. But the most important thing is that we can't stop innovating ourselves.
Yicai Global: Alibaba invested in Jet.com and later sold it to Wal-Mart…
Xu: Yes, there are some financial considerations, but for us, it’s more important to support small companies that are not necessarily a threat to us. We have always been a very open platform and support small companies, but only if they’re good for our information systems. Our internal innovation is also very important. We can’t act slowly. We beat eBay in the past just because we had nothing to lose. Today, our biggest challenge is ourselves. (The company has grown) too big.
Yicai Global: In the process of internationalization, has Jack Ma's popularity helped?
Xu: He may be very famous, but the biggest helper is his mission and purpose. Outside the company, his popularity brings about a lot of opportunities, like meeting heads of states.
Yicai Global: Definitely, at the very least for American businesses and consumers, knowing Alibaba and Jack Ma can help make it a very influential brand.
Xu: But at the same time, Ma also hopes to one day retire, or to something else. Alibaba can’t stop developing, even without him.