To The Moon

Alibaba has undergone a sudden and significant reorganization of its management structure. Daniel Zhang, previously serving as Chairman and CEO of Alibaba Group, will now step down from both positions and assume the role of CEO of Alibaba Cloud unit. Eddie Wu, one of Alibaba's co-founders, will take over as the Group CEO, while Joe Tsai, another co-founder, will become the chairman.

Unlike Zhang, both Wu and Tsai have been with Alibaba since its inception. Wu initially served as a technology director in 1999 and possesses extensive experience in the company's core e-commerce business, monetization, and technology, making him a logical choic to oversee the entire group. Tsai previously held the position of the company's chief financial officer until 2013 and currently serves as executive vice chairman. Therefore, their promotions follow a natural progression, while Zhang's new role may be seen as a step down.

The decision for this change and its implementation is not coincidental. In late May, Jack Ma, the founder of Alibaba, held a small-scale internal meeting with top executives from Taobao and Tmall, Alibaba's core e-commerce group, to discuss the company's state. Subsequently, the management shakeup occurred weeks later.

In April, news circulated that Jack Ma had returned to Hangzhou, China after an extended period overseas due to a fallout with the Chinese government following a speech that angered authorities. Around the same time, Alibaba announced a significant reorganization into six independent businesses (Read more about the six units here: https://growthdragons.substack.com/p/alibaba-reorganized-into-6-businesses.) This suggests that Jack Ma, despite his retirement, continues to play an influential role behind the scenes, setting the strategic direction for Alibaba.

Displaying Jack Ma is Changing Al...

It appears that no one has been able to step into his shoes as the spiritual leader of the company, resulting in a loss of direction and inspiration. While the current management is competent, they may lack the visionary and spirited leadership that Ma provided.

Furthermore, Ma's presence in China and his influence indicate that Alibaba's regulatory threat has diminished and I shared that Alibaba's main concern has shifted from regulation to competition, as it faced declining market share in various areas such as China e-commerce, international e-commerce, and China Cloud. You can read more about that here: https://growthdragons.substack.com/p/alibaba-struggling-with-competition

LatePost, a China news publication, reported that Pinduoduo and Douyin surpassed 50% of Alibaba's e-commerce business in China in terms of combined sales total (GMV) in 2022. In terms of revenue, Pinduoduo's earnings in the first three months of 2023 already accounted for 62% of Alibaba's domestic e-commerce revenue. This poses a serious threat.

During the meeting, Ma emphasized that the group faces intense competition and needs to adopt new measures as previous success indicators may no longer be applicable. He suggested focusing more on Taobao, the consumer-to-consumer platform for small businesses and individuals, rather than Tmall, the business-to-consumer platform for established brands. Ma also recommended reducing management layers to enhance agility.

This message aligns with the idea of Alibaba splitting into smaller business units to increase nimbleness against competition, which is evident in the recent restructuring of the organization and leadership. It appears to be Jack Ma's vision.

Ma believes that Alibaba should remain an internet company and prioritize user experiences over merely pursuing sales performance at the expense of consumer satisfaction. Consequently, Alibaba will increasingly value indicators such as daily active users and user engagement.

In my opinion, I firmly believe that Jack Ma has the ability to create a positive impact and should take proactive steps to address and revive Alibaba. It is crucial for him to reinvigorate the spirit within the organization and play a more active role. The current trajectory indicates that efforts are being made in that direction, and only time will tell if Alibaba can overcome the competition and regain its former position of prominence.