E-commerce giant Alibaba is splitting into six parts, hoping this should give it more agility and a new impetus. Coincidence or not, founder Jack Ma is also making a reappearance.
Easier to react
The six business groups will each get its own board of directors and its own financing possibilities. It should even be possible to go public separately. All the major businesses of the group will become separate companies, with Alibaba as the holding company.
Group CEO Daniel Zhang will head the Cloud Intelligence Group, which will focus on cloud services and artificial intelligence. The streaming and movie business will be housed in the Digital Media and Entertainment Group. Meal delivery company Ele.me will revert to Local Services Group, while logistics business Cainiao will be kept separate.
In e-commerce, where it all began for the group, Alibaba is separating its Chinese and overseas operations. The overseas e-commerce platforms (including AliExpress and Lazada) will become the Global Digital Commerce Group, while the Chinese retail business will now belong to the Taobao Tmall Commerce Group. Interestingly, only the latter remains wholly owned by Alibaba.
Jack Ma resurfaces
Since its peak in October 2020, Alibaba has already lost 600 billion dollars in market capitalisation. At the time, the Chinese government decided to crack down on the country’s tech giants. This became even worse after Alibaba founder Jack Ma had criticised its policies. Shortly afterwards, Alibaba’s banking division Ant Financial was forced to cancel its IPO and accept government interference. The company was also fined 2.6 billion dollars in antitrust fines.
Since then, China’s once-booming tech giants have struggled to continue growing. By dismantling his behemoth, Zhang hopes to give it new strength. He hopes that the announced transformation will allow the six companies to become more agile, decision-making and respond more quickly to market changes.
The Chinese government also wants to rekindle its support for the tech companies. For some time now, the government has reportedly been trying to get Jack Ma to return to China, after the media entrepreneur suddenly disappeared from the scene at the end of 2020. And it has succeeded: it was no coincidence that Jack Ma reappeared in China the day before the restructuring announcement, after spending over a year abroad. This suggests that the government wants to reconcile, but also that Alibaba carefully orchestrated the announcement.