Analysis of taobaos business strategies

Analysis of taobaos business strategiesTaobao is the virtually famous online shop website in China. It was launched in 2003 and within two years it became the leader of Chinas online shop market. In coiffe to keep the leadership position in more than and more intense competition and sustain its development, Taobao needs to modify and better its strategies for early development. Furthermore, its marketing strategies base also provide a good lesson for new(prenominal) online obtain companies. This essay is going to make an overall digest on Taobaos business strategies by devise.Key words Taobao marketing strategies nerd analysisTaobao operates a website, Taobao.com which is the largest network retail website in China. According to its website the achievement volume on Taobao (gross merchandise volume or GMV) exceeded RMB200 billion (US$29 billion) in 2009. Taobao launched in 2003, is owned by Alibaba Group, which is a family of Internet-based businesses. (Taobao, n.d.) T aobao provides not completely online platforms but also three approximately-party online payment service (Alipay) and instant messaging services (Aliwangwang)Platforms within Taobao include Alimama (alimama.com), an online advertising exchange and affiliate network for publishers in China. In addition, there is also a classified listing website Koubei.com. (ibid.)SWOT analysis, according to Philip Kolter, is an overall evaluation of a companys strengths, weaknesses, opportunities and threats. (Kolter, 2003)As the competition in the online obtain market is becoming growthly fierce, Taobao faces more or less problems as well. The drive of this SWOT analysis is to provide a critical review of nominate factors that may slow down Taobaos future development.2. Strengths2.1 Leading position in Chinas online obtain marketTaobao is an acknowledged leader in both B2C (business to consumer) and C2C (consumer to consumer) online obtain market in China. Taobao has (should be had) more t han 190 million registered users by (could use at) the end of April, 2010. (Taobao, n.d.) It has built a blotto brand and is accepted by more Netizen (which is defined as the Chinese population who go by means of accessed the Internet in the past 6 months by China Internet Network Information Centre) (CNNIC. 2008, January 15th). The company is well-thought-of by customers which gives Taobao more advantages in competition.2.2 Effective combination of diversified offeringsTaobao combines its three segment businesses upshotively to refine its customer base. Take Alipay as an example, it is a third-party online payment platform, provides a simpler, efficient and safe payment service for both customers and venders. This service not entirely ensure (should be ensures) the consummation security but also reduces the transaction risk for online consumers, as it enables buyers to confirm the quality of goods before releasing bullion to sellers. For example, if goods be found (to b e) broken or fake, customers can request Alipay to lengthen the release of funds to sellers. (Taobao, n.d.) This service help (should be helps) Taobao (to) attract more customers.In addition, an instant message (could use messaging) service called Aliwangwang make (should be makes) the communication between (the) buyer and seller easier. Moreover, this service enables (the) buyer and seller (to) have a directly private bargain during the transactions, which is the preference of Chinese customers.2.3 Precise market positioningTaobao analyzed Chinas online obtain market at the beginning of its business. Different from other online shopping websites which prefer older white-collar worker(s) with higher salaries or people who like collecting and sharing, Taobao chose fashionable young females as the target customer. This market positioning proved more desirable for Chinas market compared to other websites (apostrophe not needed) . This is one of the reasons that the growth rate of T aobao is untold higher than other competitors.3. Weaknesses3.1 Limiting itself to local anesthetic marketThe design of Taobao website and other supporting services were based on Chinas local market. This localisation strategy made Taobao grew (should be grow) fast at the beginning. However, with the development of the website, this strategy limits Taobao to the Chinese market and (, therefore resulting in a) lack of presence in (the) worldwide market.3.2 Insufficient screen process to control counterfeit productsAlthough Taobao has taken some measures to control the sales agreement of fake goods, such as rating the sellers by credit value, the result was not as expected. Because of the free strategy that Taobao used, individuals can establish an online shop easily without charge and requirement. This makes it even hard to reminder and select sellers that commit fraud. Lack of effective screening processes to control the sale of counterfeit products has had a negative influence on customers confidence in Taobao. It could also affect Taobaos brand image and sales.4. Opportunities4.1 Growing engage for online shopping in ChinaAccording to CNNIC, the number of online buyers reached 87.9 million by June 2009, increasing from 74 million in 2008 and 46 million in 2007. The online shopping penetration rate achieved 24.8% by June 2009. (CNNIC. 2010, January 15th 2010, July 15th) As the data in a higher place shows, more people in China prefer to buy products online. devisal and various choices could be two main reasons. This increasingly growing demand for online shopping contributed to the growth of Taobao.4.2 Government supportAfter the global fiscal crisis, (the) Chinese government provided a RMB 4 trillion stimulus piece of ground in order to boost the domestic economic growth through 2010. (the) IT industry received around 0.5% to 1% of the cash injection. (Xinhua, 2008). This gave online shopping companies strong support for future developments.4.3 Safer payment schemas for online transactionsThe improved online payment systems prank an important role in the growth of Chinese online shopping markets. thither are more flexible payment systems for customers to choose. For example, a third-party online payment system ensures the security of transaction(s) and enables customers to get their refunds easily. A simpler and safer payment for online transaction(s) attracts (should be attract) more customers.5. Threats5.1 suffering entry prohibition leads to fierce competitionBecause of the low entry barrier and fast growing market, Taobao meets many challenges, in particular in the face of change magnitude competition from new market entrants. In addition, without many technical difficulties, it is patrician for other competitors to copy Taobaos business pattern. Therefore, Taobao impart be forced to increase investments on advertising or technological innovation.5.2 Strict policy for third parties payment licenseRecently, Peoples B ank of China issued an Administrative Measures for the Payment work Provided by Non-financial Institutions which has raised the entry standard for third payment party. In order to get (could use obtain) and keep the license, Taobao has to increase its expenditure on online payment.5.3 Higher logistics costsTaobao will give customers suggestions about the logistic companies which are mostly local third party logistics providers and customers usually take the suggestions because of the dismount delivery prices these companies offered, compared to other international express companies, such as DHL and UPS. However, local third party logistics recently announced that they would raise the price. As most online customers are highly prices sensitive, this will have a negative effect on Taobaos sale.6 ConclusionsAccording to the SWOT analysis, although there are some drawbacks which have negative effects on Taobaos future development, the advantages still outbalance the disadvantages. In addition, there are many opportunities for Taobaos further growth. This conclusion will give some suggestions for Taobaos future business expansion.First of all, in order to keep the leadership position, technological innovation is crucial for Taobao. Taobao may localise on continuous improvement of its online payment system, which is also one of its strengths, particularly in the aspect of transactions (should be transactions, without apostrophe) reliability and security. Moreover, website functions, Internet constancy and high-speed access to websites are also important in providing a better user experience, which may help to attract more customers.Secondly, as Taobao has the advantage of large scale consumers and sellers, Taobao may segment its market to provide more specialized services based on different demands so that it can meet customers requirements more effectively.To sum up, it is undeniable that the future of (the) online shopping market in China is promising. Based on the statistics by CNNIC, It is in a steadily (should be steady) development stage. In this attractive online shopping market, more complete logistics providers and payment systems will appear. These will provide Taobao more opportunities to develop in the future.