Chinese e-commerce giant Alibaba Group is embarking on a major reorganization of its business structure that will divide the company into 25 different units, each led by a general manager, said CEO Jack Ma in a company-wide email published by Sina News (link via Google Translate, h/t 36Kr). The move is the latest in several the company has made to grab greater control over its future after an often tense partnership with Yahoo. Back in July Ma announced a prior restructuring that split the company into seven groups, amid concerns that Alibaba had prioritized growth over scrutinizing the quality of its online vendors and suffered from poor communication between its divisions.
According to Ma’s message, the reasoning behind this latest re-organization is to ensure that Alibaba Group has the flexibility to take advantage of rapid changes and developments in the e-commerce landscape, while keeping its current management team intact.
John Spelich, vice president of Alibaba Group, told us that: ”Consistent with our stated goal of promoting an e-commerce ecosystem, we’ve organized the company into smaller business units that will be better prepared to pursue their business with focus while also encouraging collaboration when required in order to build up that ecosystem. In addition, it allows Alibaba’s young leadership to further grow and develop as well.”
Ma wrote in his note that splitting the company up into 25 units with clear-cut responsibilities will give it a strategic and operational advantage and ensure the sustainability of its growth. (Alipay, Alibaba Group’s online payment platform, and microlending arm Aliloan are not included in the restructuring). According to Ma, “This is the most difficult reorganization in Alibaba’s 13 years. It’s a culture shift!” In his message, Ma added that though each unit has its own responsibilities, he wants them to focus beyond their key performance indicators and look toward the company’s overall performance as a barometer of success.
Last September, Alibaba Group bought back half of Yahoo’s 40% stake in the company. The Silicon Valley company’s agreement with Yahoo incentivized Alibaba Group to launch its IPO before December 2015 by promising to sell an additional 10% of Alibaba after it goes public. Despite its sell-off, Yahoo still owns about 23% of Alibaba Group common stock on a fully dilated basis and the value of the shares has risen significantly since Yahoo first paid $1 billion for its stake in 2005.
This is the latest in several major strategic realignments for Alibaba as it moves to define its future apart from Yahoo. Back in May 2012, minority shareholders of Alibaba.com voted in favor of a proposal by Alibaba Group to take the online trading platform private. At that time, Ma said the move was to take pressure of Alibaba.com, which saw its revenue drop in 2011 after announcing that it would focus on improving the quality of its platforms instead of aggressively building its paying user base in a move to improve the trustworthiness of suppliers on the site. Analysts saw the move, however, as a way to consolidate control over Alibaba Group in preparation for an IPO. The company is also currently integrating Alibaba.com and Taobao Marketplace, its consumer-to-consumer retail platform, which will make it easier to conduct business.
Alibaba.com is a B2B e-commerce company. Alibaba’s primary business is to serve as a directory of Chinese manufacturers connecting them to other companies around the world looking for suppliers. According to iResearch, it was the largest online B2B company in China in 2006 based on the number of registered users and market share in China by revenue. Yahoo is currently a 40% share holder in the parent Alibaba Group. They operate two marketplaces; the first is an international marketplace based...