Wednesday, April 5, 2017

How can Ali Pay success under the IT-enabled business trends

Nowadays, the e-business becomes a hot topic of discussion. According to the article Ten IT-enabled business trends for the decade ahead from The McKinsey Global Institute, the IT-enabled business trends provide fresh opportunities for companies to create new sources of value—new products, new ways of touching customers, and new tools for improving operating efficiency. I recall an online payment tool from a Chinese company called Ali Pay which just matches all the prediction and analysis of the article.

This is payment tool is just like the China version of PayPal. The main function of this payment tool is similar to PayPal. But they have many differences based on the market environment and strategy chosen by Ali Pay.

First of all, more than 12 billion devices around the world, including computers and smartphones, are connected to the Internet. So the creation of this payment tool perfectly satisfies the demand of consumers. As the e-commerce developing, people increasingly need a handy too to pay online. So the positioning of Ali Pay is good enough to give them a decent start.

Differed from other payment tools, Ali Pay belongs to Alibaba Group, which is a Chinese e-commerce company that provides consumer-to-consumer, business-to-consumer and business-to-business sales services via web portals. Alibaba Group has a most famous business in online shopping called Tmall which take up nearly 80% of B2C e-commercial market in China. Developing with Tmall, Ali Pay was bundled with this online shopping website. It is obvious that Ali Pay is the first choice when people shopping online. To some extents, Ali Pay won’t operate under the power of suppliers because its supplier is itself. This can make Ali Pay more profitable that its competitors.

Ali Pay is not only bundled with Tmall, but also develops many convenience businesses, like pay the utility bills with it and some investment service. Due to this strategy, Ali Pay strengthened the link between consumers’ life with their product which can effectively increase the switch cost when the consumers change the payment tool. This can reduce the threat of the substitutes.

During the development of Ali Pay, the management team decided to spend lots of capital resource into research and development. Ali Pay keeps updating their product and innovates many new functions like networking function and some attractive financial service. By elevate the fixed cost for competing, the barriers to entry are high. A start-up company cannot survive with that much amount capital invest into research. If they don’t focus on the research and don’t improve the quality of their product, they are not competitive to fight with their relentless rivalry, Ali Pay.

Above all, Ali Pay has set a series of clever strategies to full fill their goal. They gain comprehensive advantages in recognizing the weakness and strength of industry, positioning itself, controlling the suppliers' power, deterring the new entrant into the industry and minimizing the impact of substitutes. In my opinion, these are the rule of thumb for a successful company.

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