The Chinese government’s actions affected the activity of many companies, which prompted the Alibaba Group to make radical structural changes, which led to observers and investors welcoming the new entity of one of the largest Chinese companies in its field, as it was broken up into 6 divisions. Observers point out that the new division of Alibaba may coincide with the company’s restructuring, especially with the approaching end of Beijing’s crackdown on the private companies sector, which has seen the authorities take strict measures in recent years against technology companies, which led to a noticeable decline in the activity of these companies, according to what The QZ website mentioned, in the topic that I translated today, the most prominent of what was stated in it. The question now is: What will Ali Baba’s empire look like after fragmenting it into 6 sections?
decentralized decisions
After Alibaba announced that it plans to divide into six units and explore fund-raising operations or include most of them, in the largest restructuring of the technology conglomerate in its 24-year history, Alibaba CEO Daniel Chang announced that he would continue to lead the company, but he would transfer decision-making. operations, including hiring and firing, research, and profits and losses, to the leaders of each business unit, so that most decisions are decentralized.
Enhancing flexibility in the decision-making process
This will help the company become more flexible, enhance decision-making, and enable faster response to market changes, Zhang wrote in a letter to employees.
Alibaba said the move aims to unleash shareholder value and enhance market competitiveness.
She added that the change is in line with China’s anti-monopoly vision for the technology sector.
The group’s Hong Kong-listed shares jumped as much as 16.3%, following a 14.3% rise in its US-listed shares the previous day, which lifted the benchmark Hang Sang Index and broader markets in the region..
The end of the government crackdown
On that, said John Withar, supervisor and caseworker at Pictet Asset Management: We think this is probably a sign that we are nearing the end of government hardening with Alibaba.
Alibaba stated that it will be divided into six units: Cloud Intelligence Group, Taobao Tmall for e-commerce merchants, Sainao Smart Logistics Group, Local Service, Global Digital Business and Digital Media and Entertainment..
Analysts at Bank of America described Alibaba’s restructuring as testing whether China’s largest companies are able to meet Beijing’s demand to contribute to society..
Analysts believe that the split of Alibaba may pave the way for other Chinese technology giants to undergo a similar restructuring, which would help break the monopoly power of the companies..
A look at the six new divisions in Alibaba:
Cloud Intelligence Group: The cloud and AI business will be led by Daniel Zhang, CEO of Alibaba Group, who has been CEO of Alibaba since 2019. .
– Domestic Services Group: Yu Yongfu, who took over as the newly appointed CEO of Alibaba’s Domestic Services Department, will supervise in November 2021..
– Global Digital Commerce Group: Jiang Fan will serve as CEO, which includes Alibaba’s international e-commerce companies including retail platform Ali Express, and Southeast Asian e-commerce platform Lazada, which he oversaw.
Taobao Tmo Group: The company’s own online shopping platform, to be overseen by longtime CEO Trudy Day .
Cainiao Intelligent Logistics Group: Wan Lin will continue as CEO of the business focused on intelligent logistics in Alibaba.
– Digital Media & Entertainment Group: Fan Luyuan will be CEO of the unit that includes Alibaba’s broadcast and film business.
In April 2021, the Chinese authorities fined the Alibaba Group about $2.8 billion for abusing its dominant position in the market for years..
In conclusion, while switching to a holding company structure is rare for major Chinese technology companies that keep most operations under one roof, it is not so rare, as many players do so to obtain tax advantages, mitigate risks, or prepare for a sale or succession. A new generation of management, especially in family businesses.