It took 24 years to ‘raise’, Jack Ma was forced to ‘cut up’ his Alibaba empire to survive

Grow up

Since it was founded by Jack Ma 24 years ago, Alibaba has quickly grown into the largest empire in the e-commerce market. Indeed, the group has 240,000 employees, twice as many as its main rival Tencent, and spans a multitude of businesses from food to cloud computing.

At its peak, Jack Ma and Alibaba covered almost every aspect of Chinese life. The founder’s career of getting rich from an English teacher to a billionaire has become an example for many young people.

However, according to the Financial Times (FT), the Chinese government regretted letting Alibaba grow so much that Wall Street investors did not know how to properly value the empire’s influence. This.

In January 2018, Alibaba became the first Asian company with a market capitalization exceeding $500 billion after Tencent. By 2022, despite being tightly controlled, Alibaba is still the 9th most valuable brand globally and one of the largest e-commerce groups in the world.

However, when he became too big and too rich, founder Jack Ma had a “go underground” phase when he publicly criticized China’s banking and financial system in 2020. The consequences were the plan. An initial public offering (IPO) of a subsidiary of Ant Group, worth $37 billion, fell through.

The FT reported that this is a move by the Beijing government to try to limit the influence of the country’s largest technology company. Since then, Jack Ma has been forced to live a reclusive life and cedes control to his successor, CEO Daniel Zhang.

With Alibaba falling out of favor, countless competitors jumped in to eat away at market share, and CEO Zhang also began to worry that they were gradually losing their position in the market.

“ We need to find a way to simplify the organization to work faster. I think everything should start from the top level. With these changes, everyone can create their own plan to suit the market situation ,” CEO Zhang said.

Immediately after Alibaba’s decision to “cut the meat” of the company into 6 parts, the share price of this business on the New York Stock Exchange increased 14% on March 28, 2023.

According to the plan, Jack Ma’s empire will be divided into domestic and foreign e-commerce, cloud computing, domestic services, online media and finally logistics. This group will retain control of the two largest assets, Tmall and Taobao, when the profits in 2022 of these two platforms are higher than all other segments combined.

It’s not too bad

” They’re not going to completely separate businesses, because leaders don’t want to give up complete control ,” said Jesse Fried of Harvard University.

Sharing the same view, the FT said that according to interviews with unnamed employees at Alibaba’s headquarters in Hangzhou, splitting into six parts could lead to drastic job cuts, especially in in areas that have not yet made a profit and are “fed” by money from e-commerce platforms.

“ This is not a good sign as many of Alibaba’s businesses will not be able to survive if completely separated from the Jack Ma family ecosystem. Some segments are still dependent on the money source of e-commerce. This plan is too big to be completed in a short time, not to mention the overlapping transactions between the parties that are difficult to remove ,” a senior Alibaba executive told the FT.

It is still unclear what CEO Zhang’s plan to split is, but according to the FT, founder Jack Ma appeared at Aliababa headquarters to show support for his successor because if he wants to survive, there is no way. any other.

In 2020, after Jack Ma’s abusive speech, the Chinese government carried out a campaign to sweep and review the technology sector, causing more than $ 1 trillion in total capitalization of businesses to evaporate.

Now, CNBC reports that China is moving to normalize the technology industry. In that context, Jack Ma and Alibaba, if they want to continue to develop, will have to follow the rules of the game.

“The ‘ wind’ of review by authorities in the past two years in China is showing signs of turning around ,” said George Efstathopoulos, director of Fidelity International.

According to CNBC, one of the most obvious signs is the appearance of Jack Ma at Alibaba headquarters after two years of living in seclusion.

“ Jack Ma didn’t simply show up in Hangzhou just because he was tired from traveling. I think this is a sign of a change in policy, about the possibility of loosening the private technology sector as well as inviting international investors, “said Stephen Roach of Yale University.

Help from America?

One important factor that could affect the possibility of easing the tech industry in China is economic growth, according to CNBC.

In fact, these signs of easing have been around for several months. For example, the video game segment (Game), which will be severely affected in 2021 when the authorities tighten management against the addiction of young people to games.

The Beijing government then stopped licensing the launch of some new game series for months. However, by April 2022, officials began to give the green light back to the domestic gaming industry. This March, a series of international game series were also approved by the authorities in China to be allowed to be released.

Similarly, Didi, one of the technology companies that has been tightened for the past two years, also recently announced plans to expand its business. This business went public in the US in June 2021 but was accused by Chinese authorities of a cybersecurity breach just a few days later. After that, Didi had to withdraw its listing from the New York Stock Exchange and planned to go public in Hong Kong.

In the past few days, the arrival of Apple CEO Tim Cook and Qualcomm CEO Cristiano Amon in China to meet government officials also shows good news for the technology industry.

“ China is currently facing the risk of slowing growth as well as the US-China technology conflict. This is a rather difficult situation so they will need support from all sides. Therefore, it is no longer reasonable to tighten regulations on the technology industry as before ,” said Linghao Bao, an analyst at Trivium China.

*Source: FT, CNBC