Alibaba Plans to be a Capital Operator, Rather Than a Business Operator

Image Source : China Visual

BEIJING, March 30 (TMTPOST) —— Alibaba will be more of a capital operator than a commercial operator in the future, according to a speech made by Zhang Yong, Chairman and Chief Executive Officer of Alibaba Group, during a conference call on Thursday.

Zhang sent a letter to all staff on Tuesday, announcing the start of the “1+6+N” organizational reform, which means that six business groups and several business companies such as Ali Cloud, Taobao and Tmall business, Cainiao, and international digital businesses will be independent of but still be controlled by Alibaba Group. The management of each business group and business company will be under the leadership of the board of directors of each business group and business company, which takes full responsibility for the results of their respective operations. People close to Alibaba point out that the reorganization is not just a financial separation, but a complete change in management authority, and is the biggest organizational change in 24 years since the founding of Alibaba, with complete support from the founders.

“Alibaba today has grown into a larger and more complex organization with a wide range of businesses of different natures and at different stages of development, competing in different market environments and serving different customers, and this new organizational transformation will enable all of our businesses to become more agile, have more decision-making capabilities and be able to respond more quickly to market changes,” said Zhang on a conference call.

At the same time, Zhang also said that the organizational change will also create greater ownership and provide incentive programs for the management team and employees of the business group, which will drive entrepreneurial innovation and thus stimulate the growth of the businesses.

Zhang explained that Alibaba has laid the foundation for this transformation over the past few years. The announcement was made in March because April is the start of the new fiscal year.

The restructuring will change the relationship between the parent group and its business groups and companies. Alibaba’s board of directors, as controlling shareholders, will continue to control the boards of the new companies.

In a letter to all staff dated Tuesday, Zhang said that qualified business groups and companies in the future might be able to conduct independent financing and listing. During the conference call, Ali CFO Xu Hong further said that except for the current Taobao and Tmall business group, all other business groups and companies will be able to conduct independent financing, spin-off, and independent listing.

Currently, as the businesses of Alibaba’s various groups are fully intertwined, the market is concerned with whether the restructuring will affect the synergies between different business segments in data, consumer, technology, and other key areas over the years. Zhang also mentioned that such synergies would not change as a result of the restructuring, as synergies “do not depend on administrative directives at the group level, but on a strong value-driven culture that can be created through synergies”. He believed that the new organizational structure will be a better market test of the ability of different businesses to work together, serve each other and create value together.

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