Alibaba to Split into 6 Units and Explore IPOs

Alibaba to Split into 6 Units and Explore IPOs
Photo: Tech in Asia 28.03.2023 723

Chinese Alibaba Group will reorganise its businesses into six independently run entities, reported South China Morning Post (SCMP), citing the company's letter to employees on Tuesday.

The company will reorganise its businesses into six independently run entities: 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.

The group had 1.77 trillion yuan (US$256.9 billion) in total assets at the end of 2022, according to its latest accounts.

Each unit will have its own board of directors and independent budgets. In addition, they will be able to make decisions on initial public offerings, Alibaba said in a statement. Alibaba is the owner of SCMP.

Daniel Zhang will personally head the new Cloud Intelligence unit, in charge of cloud computing and big data. Trudy Dai will head the Taobao-Tmall unit as CEO. Fan Jiang, Director of International Digital Commerce, will head the Global Digital business group, and Fan Luyuan will lead the Digital Media group.

Nearly 70 per cent of Alibaba’s 170 billion yuan (US$24.7 billion) in third-quarter revenue came from the world’s largest e-commerce platforms, comprising mostly Taobao and Tmall Marketplace.

The purpose of the reorganization, according to Daniel Zhang, is to make Alibaba Group more flexible, shortening decision-making and response times.

According to Maria Belyaeva, an expert at the BRICS Competition Centre, Alibaba's restructuring is related to the requirement of the antimonopoly regulator. 

"The regulator considers all digital platforms in terms of risks, each type of business has its own risks. In 2021, SAMR issued Guidelines for Internet Platform Categorization and Grading (Draft), which divide platforms into 6 types: online sales platforms, consumer services, social and entertainment networks, information, financial and computing. By restructuring, Alibaba is trying to diversify risks. The company's past fines were related to its e-commerce platforms, Taobao and Tmall, but this was affecting the entire company and its stock price. Now each entity of Alibaba will bear its own risks, and the consequences will not fall on the entire corporation."

In addition, China has a separate regulation for algorithms. So far it concerns only recommendation algorithms, but the regulator will gradually introduce new rules for other types of algorithms as well. Restructuring will make it easier for Alibaba to comply with regulatory requirements, in this sphere as well, the expert points out.

Source: SCMP

digital markets  China 

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