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The largest technology company in China, Alibaba Group Holding, will reorganize its expansive $257 billion empire as part of the largest corporate restructuring since its founding more than 20 years ago in Jack Ma's Hangzhou apartment.
According to a letter sent to staff members on Tuesday, the company will restructure its businesses into six independently operated entities: the Cloud Intelligence Group, e-commerce under Taobao-Tmall, Cainiao's smart logistics operations, Local Services group, Global Digital Business Group, and the Digital Media and Entertainment Group.
According to Alibaba, owner of the South China Morning Post, each of the business divisions will need to find their own way to compete and withstand the test of the market forces, which may include looking for their own sources of funding through initial public offerings (IPOs). Separate boards of directors will be established by the various business entities.
According to the letter, Alibaba will also establish corporate companies for other operations using the "1+6+N" structure, where "1" stands for the group, "6" stands for the six business units, and "N" stands for potential future business units.
Following the news of the proposal, Alibaba's stock price soared 10.5% to US$95.43 at the opening of trading in New York.
According to a letter he sent to the company's employees, Daniel Zhang Yong, the group CEO of Alibaba, will be in charge of the holding company but would delegate all operational decisions, such as hiring and firing, research, profit and loss, to the CEOs of each business unit.
According to Zhang, "empower all our businesses to become more agile, enhance decision-making, and enable faster responses to market changes. With this change, middle and back office functions at [Alibaba] will be slimmed down, while only functions required for listed company compliance will be retained."
According to the plan, the makeover will help rekindle the company's entrepreneurial spirit by streamlining management and speeding up the decision-making process. Ma stated in 2017 during a speech to commemorate International Women's Day that startups only appear promising to their founders, much like "newborn babies to their parents," but they may grow and develop with devotion, love, and hard work.
Alibaba claimed that a firm with 200,000 people had "severely restricted" agility, responsiveness, and innovativeness. The biggest technological advances of today have come from start-ups and small businesses with less than 100 employees, which, according to Alibaba, is evidence of the new trend in the field.
Alibaba is emulating world-renowned technology conglomerates like Alphabet, which was established as the holding company for Google's internet search, life sciences, Calogo, Google X, Google Ventures, and Google Capital, by outsourcing its centralized decision-making process.
According to Zhang Yi, CEO of research firm iiMedia, Alibaba's corporate restructuring will aid the company in expanding amid quickly evolving business conditions and technological advancements.
According to Zhang, "If the subsidiaries can focus on their own businesses, it will help them to be more professional in their services. The restructuring will also help them capture the wave of new technologies ... Technological updates and product iterations will be fast."
According to the group's most recent accounting records, its total assets at the end of 2022 were 1.77 trillion yuan (US$256.9 billion).
The sizes and business focuses of the six units would not be evenly distributed. About 70% of Alibaba's third-quarter revenue of 170 billion yuan (US$24.7 billion) came from the biggest e-commerce sites in the world, primarily Taobao and Tmall Marketplace.
Nonetheless, the cloud computing sector, whose sales increased 3% to 20.2 billion yuan in the three months ending in December, is Alibaba's fastest-growing and most promising commercial segment. China's largest cloud computing company is run by Alibaba.
Zhang will personally lead the brand-new Cloud Intelligence division, which is in charge of big data and cloud computing. According to Alibaba, Yu Yongfu will lead the Local Services Group while Trudy Dai will serve as CEO of the Taobao-Tmall division.
Wan Lin, the current CEO of Cainiao, will remain in charge of the smart logistics group, Jiang Fan will oversee global digital business, and Fan Luyuan will oversee digital media, according to Alibaba.
No matter which business group or firm a [Alibaba employee] is in, Zhang stated, "Every [Alibaba employee], no matter which business group or company he or she is in, must rediscover his or her entrepreneurial spirit and be baptised by the market through your passion and strength, and build a future that belongs to you."
By fLEXI tEAM