Alibaba Group, China’s largest e-commerce company, has begun revamping its operating system. Alibaba, whose growth has been sluggish due to increased regulation and fierce competition in China, hopes to grow again through organizational restructuring. The aim seems to be to increase the centripetal force of the group by having the founding members at the helm of the operation.
In the future, Alibaba’s functions will shift from business operations to asset and capital operations—— Zhang Yong, Chairman and CEO, stated at a briefing held in late March after announcing the news of organizational restructuring.
The organizational restructuring announced on March 28 shows that the business will be split into six companies, each with a CEO and a board of directors.
Zhang Yong stated at the time about the management system after the organizational structure adjustment, he will continue to serve as chairman and CEO of Alibaba, as well as chairman and CEO of the cloud business. However, it changed its policy less than three months later.
On September 10th, Zhang Yong will step down from his position as Chairman and CEO of Alibaba, which is also an important day for him to take over the chairman position from founder Jack Ma for four years in 2019.
Zhang Yong said that after stepping down, he will concentrate on the work of the head of Alibaba Cloud business. This business is a focus area and has proposed an initial public offering (IPO). In explaining the reason for stepping down, Zhang Yong said that it is now in the most critical period, and he is not suitable to hold the position of Alibaba’s head.
Alibaba was originally founded by 18 members including Jack Ma, a former English teacher. In Buddhism, high monks who have attained the highest enlightenment are revered as Arhats, so the founding members of Alibaba are known as “18 Arhats.”
Zhang Yong , who joined Alibaba after working at an American accounting firm and a big Chinese gaming company, was not a founding member, but Cai Chongxin, who will be the new chairman, and Wu Yongming, who will be the CEO, are among the 18.
Cai Chongxin is qualified as a lawyer in New York State and is believed to have extensive contacts in the United States and elsewhere. He served as the chief financial officer of Alibaba from 1999 to 2013, and is known for helping the fledgling company grow into a big company.
Cai Chongxin, who had been in charge of investment after Alibaba went public in 2014, was chosen to take over the group’s operations. He is also known for buying the Brooklyn Nets of the National Basketball Association (NBA).
Wu Yongming took the technical route, and served as the technical director of Alibaba’s settlement service “Alipay”. Because the domestic online shopping business, of which he is now chairman, was retained as a direct part of Alibaba after the restructuring, Mr Wu was chosen as chief executive.
Alibaba, which has continued to experience high growth as China’s economy grows, will turn a corner in the fall of 2020. The IPO of its financial arm, Ant Financial, failed.
Since then, Ma has reduced his public appearances and has been seen visiting overseas, including Japan. During this period, Zhang Yong has been in charge of the operation, but due to China’s strengthened regulation and increasingly fierce competition in the online shopping industry, Alibaba’s growth has slowed down, and April to June 2022, there was the first reduction in revenue after going public.
Alibaba’s revenue structure is heavily dependent on domestic retail businesses such as online shopping. About 70% of sales and more than half of profits come from this business. The purpose of the restructuring is to promote the independence of the businesses and improve profitability.
But how to improve the group product effect under the new system is facing the test. Some people believe that the purpose of managing a start-up partner is to maintain the cohesion of the group.
There is also Ma Yun’s role behind the entrepreneurial partners serving as leaders. Mr. Ma’s public appearances have increased since the spring. The company’s research and development (R&D) department said in a post on wechat that Ma appeared at an event held by Alibaba on June 17.
In addition, according to Chinese media reports, Ma met with executives of the domestic online shopping business in late May, saying that the previous successful model is not working. Although Ma Yun has withdrawn from the business line of Alibaba, he is still one of the “partners” who actually masters the business.
On the Hong Kong stock exchange on June 20, Alibaba shares closed down 1.5 percent from the previous trading day. The market remains cautious about Zhang Yong’s change of tack and the prospect of Alibaba using a start-up partner.