Alibaba needs think big on world stage

The Pak Banker - - OPINION - Mike Bastin

IF it is to emerge as a gen­uine global com­pany it is es­sen­tial that large over­seas tar­get­sare ac­quired Once again Alibaba, never far away from front page news, is the sub­ject of in­tens­espec­u­la­tion. Right now it is the re­cent takeover of South China Morn­ing Post, the Hong Kongnews­pa­per, that has set tongues wag­ging again. The talk ap­pears to cen­ter on the lat­est ac­qui­si­tion and how this fits with Alibaba's over­alldirec­tion 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 anover­sight which misses the real is­sues and chal­lenges fac­ing Alibaba? If Alibaba is to emerge as a gen­uine global com­pany ca­pa­ble of deal­ing with com­pet­i­tivethreats from any­where in the world, it is es­sen­tial that larger tar­gets are ac­quired but the­se­tar­gets have to be over­seas com­pa­nies, prefer­ably large, es­tab­lished Euro­pean and/or US­cor­po­rate global gi­ants.

Such an au­da­cious strike is the only path to sus­tain­able, global ex­pan­sion and se­ri­ous­in­ter­na­tional mar­ket cred­i­bil­ity. In so do­ing Alibaba will join a grow­ing list of Chi­nese com­pa­nies in their quest toin­t­er­na­tion­al­ize and mod­ern­ize. It is only re­cently that China's house­hold ap­pli­ance gi­ant Haier an­nounced a $5.4 bil­lion­takeover of Gen­eral Elec­tric's ap­pli­ance busi­ness. It is dif­fi­cult to see how Haier's pen­e­tra­tionof the lu­cra­tive US mar­ket could have fol­lowed any other strat­egy than growth via over­seasac­qui­si­tions. Alibaba's SCMP takeover, which ap­pears to make sense in this dig­i­tal me­dia era, does­rep­re­sent ad­vance­ment and should strengthen the com­pany's rep­u­ta­tion but it also begs theques­tion: When is this in­ter­na­tion­ally-as­pir­ing gi­ant go­ing to make an an­nounce­ment sim­i­larto Haier's GE takeover? Haier's an­nounce­ment is not an iso­lated case and should Alibaba fi­nally land a ma­jor US orEuro­pean cor­po­rate catch it will join a size­able list of Chi­nese com­pa­nies that have leapt toin­t­er­na­tional 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 au­toin­dus­try player Geely bought out the Volvo brand. More re­cently world-fa­mous over­seas brands such as Lon­don's toy store Ham­leys and UKbreak­fast 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 aglobal brand. Cer­tainly, list­ing on the US stock ex­change not that long ago rep­re­sents a ma­jor step in theright di­rec­tion for Alibaba. But the in­vest­ment com­mu­nity need to wit­ness an au­da­ciouso­ver­seas takeover in or­der to be con­vinced of Alibaba's in­tent.

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