Business / View

Alibaba needs to think big on world stage

By Mike Bastin (China Daily Europe) Updated: 2016-02-06 16:44

If it is to emerge as a genuine global company it is essential that large overseas targets are acquired

Once again Alibaba, never far away from front page news, is the subject of intense speculation. Right now it is the recent takeover of South China Morning Post, the Hong Kong newspaper, that has set tongues wagging again.

The talk appears to center on the latest acquisition and how this fits with Alibaba's overall direction and continued emergence as a potential global corporate brand.

But is this particular takeover that significant for Alibaba's future? Or is this focus actually an oversight which misses the real issues and challenges facing Alibaba?

If Alibaba is to emerge as a genuine global company capable of dealing with competitive threats from anywhere in the world, it is essential that larger targets are acquired but these targets have to be overseas companies, preferably large, established European and/or US corporate global giants.

Such an audacious strike is the only path to sustainable, global expansion and serious international market credibility.

In so doing Alibaba will join a growing list of Chinese companies in their quest to internationalize and modernize.

It is only recently that China's household appliance giant Haier announced a $5.4 billion takeover of General Electric's appliance business. It is difficult to see how Haier's penetration of the lucrative US market could have followed any other strategy than growth via overseas acquisitions.

Alibaba's SCMP takeover, which appears to make sense in this digital media era, does represent advancement and should strengthen the company's reputation but it also begs the question: When is this internationally-aspiring giant going to make an announcement similar to Haier's GE takeover?

Haier's announcement is not an isolated case and should Alibaba finally land a major US or European corporate catch it will join a sizeable list of Chinese companies that have leapt to international prominence using the same route.

In 2005, computer giant Lenovo announced an agreement to take over IBM's PC division, news that shook the global computer industry at the time. A few years later, Chinese auto industry player Geely bought out the Volvo brand.

More recently world-famous overseas brands such as London's toy store Hamleys and UK breakfast cereal brand Weetabix were also the subject of Chinese company takeovers.

A similar move by Alibaba will contribute considerably to establish a credible reputation as a global brand.

Certainly, listing on the US stock exchange not that long ago represents a major step in the right direction for Alibaba. But the investment community need to witness an audacious overseas takeover in order to be convinced of Alibaba's intent.

Should an overseas company takeover occur soon, it is also crucial that Alibaba follow up such an announcement with clear post-acquisition integration plans that involve a genuine mix of managerial talent at the top.

Global markets will not be conquered without a suitable mix of talented professionals at the helm from a range of different cultural backgrounds. This will not dilute Alibaba's Chinese identity, nor should it, but will lead to much-needed modernization of Alibaba's corporate culture and a more transparent approach to international business generally.

Alibaba's SCMP takeover is news but hardly big news. A multi-billion-dollar overseas company takeover represents the only way forward.

The author is a visiting professor at the University of International Business and Economics in Beijing and a senior lecturer at Southampton University. The views do not necessarily reflect those of China Daily.

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