Alibaba Announces Plans to Split Company Into Six Business Groups

The world’s biggest e-commerce company Alibaba has announced plans to split the company into six business groups, each with the ability to raise outside funding and go public.

The company disclosed via a statement that the move is designed to unlock shareholder value and foster market competitiveness.

Each business group which includes; Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics, Global Digital Commerce Group, and Digital Media and Entertainment Group, will be managed by its CEO and board of directors.

Alibaba’s strategic move is coming after it has faced a tough couple of years in China, which has slowed economic growth, resulting in billions being wiped off its share price. The company has faced a huge struggle that has stifled its growth and is now looking for ways to stimulate growth within the reorganization.

A Look at Alibaba’s Six Business Groups

1.) Cloud Intelligence Group: This unit will be headed by Alibaba CEO Daniel Zhang and will house the company’s cloud and artificial intelligence activities.

2.) Cainiao Smart Logistics: Wan Lin will continue as CEO of this business which houses Alibaba’s logistics service.

3.) Local Services Group: This business will cover Alibaba’s food delivery service Ele.me as well as its mapping.

4.) Digital Media and Entertainment Group: This unit will include Alibaba’s streaming and movie business.

5.) Taobao Tmall Commerce Group: This will cover the company’s online shopping platforms including Taobao and Tmall.

6.) Global Digital Commerce Group: This unit includes Alibaba’s international e-commerce businesses including AliExpress and Lazada.

Founded in 1999 by Billionaire entrepreneur Jack Ma and a group of friends, Alibaba last year reported a net profit of 46.8 billion yuan (US$6.8 billion), up 69% from the previous year, on revenue of 247.7 billion yuan ($35.9 billion)

When Ma criticized Chinese regulators in 2020 for impeding innovation, they abruptly canceled the IPO of the company’s Ant Group fintech business, the first move in a broader crackdown on the country’s powerful technology sector.

It would be recalled that in 2021, Alibaba was fined $2.8 billion by Chinese regulators for anti-competitive tactics, as it tightens control over fast-growing tech industries. Alibaba was reportedly fined for abusing its dominant position to limit competition by retailers that use its platforms, hindering the free circulation of goods.

Based on the evidence gathered, m China’s State Administration for Market Regulation (SAMR) concluded that Alibaba implemented a scheme coercing traders to sell exclusively on its platform, to the detriment of actual and potential competitors, sellers, consumers, and the economy as a whole.

The penalty imposed, equivalent to 4 percent of the company’s 2019 turnover in China, is the heftiest ever for a contravention of the Anti-Monopoly Law (AML).

Beijing was reportedly worried about the dominance of the country’s biggest internet companies including Alibaba at a time when the industry was expanding into finance, health services, and other sensitive areas. The Chinese government, therefore, disclosed the year as anti-monopoly enforcement, especially in tech industries.

Also, in the same year (2021), as part of a larger anti-monopoly crackdown,  China fined tech giants, including Alibaba Group and Tencent Holdings, for not reporting 43 acquisitions over the past eight years.

The State Administration for Market Regulation said the companies “failed to declare the illegal implementation of the operating concentration.” The acquisitions involved are assets in the areas of technology, medical technology, and mapping.