Alibaba (NYSE:BABA) has dominated headlines this week. On Monday, founder and executive chairman Jack Ma announced that he would step down in 2019. Then on Tuesday, the company announced that it is forming a joint venture with Russia's sovereign wealth fund (RDIF), telecom firm MegaFon, and internet company Mail.Ru.
These two latest big news reflects the futures of the Chinese e-commerce giant.
Global Expansion is Very Much a Priority
Alibaba already serves about 80% of the Chinese e-commerce market and has taken numerous steps to expand its foothold overseas. The company has charged into Southeast Asia, investing $1 billion for a 51% stake in Lazada in 2016. Alibaba has also either acquired or made a stake in Singapore-based Redmart, Singapore Post, and Indonesia-based Tokopedia, all of which are online marketplaces.
Moreover, BABA and its subsidiary Ant Financial have been very busy in the online payment sector, building stakes in Singapore’s M-Daq, Thai firms TrueMoney and Ascend Nano, Philippines-based Mynt, and Malaysia’s Touch n’ Go.
The new focus on Southeast Asia makes sense for Alibaba, ASEAN boast a population of 640 million people. With millions of new users coming online every month, the region is the world fastest e-commerce industry, a massive business opportunity for Alibaba.
Tuesday news highlights a new piece of the global expansion puzzle for Alibaba. AliExpress, which is the firm’s global marketplace, opened service in Russia a few years ago. But Tuesday’s deal will give it exposure to Mail.Ru’s 100 million registered users, to which it provides social media, email, and food delivery services. MegaFon and RDIF will also play a key role in maximizing BABA’s exposure in Russia.
The joint venture is valued at a cool $2 billion and this figure does not even include other investments in the venture, meaning that it could be even more lucrative.
Alibaba has also made moves in India and Europe, where it is expanding its cloud-based services and building brand recognition. Plus, Alipay is slowly gaining presence in the UK, Greece, and other nations in the region, although that process will still take time.
What Does This All Mean?
Ma stepping down and growing domestic and international competition is still notable concerns for Alibaba. A majority of the firm's exposure is in China, which is in the midst of an economic slowdown and a trade war with the US.
These risks are inevitable for any growing business. Alibaba's continued streak of solid earnings beats, coupled with strong strategic acquisitions and investments, leaves the firm well-positioned for long-term growth.
Regardless, Alibaba's latest move into Russia is a maneuver that US firms cannot even consider due to various tensions. This strategic advantage is one that Alibaba could continue to build on, giving it a competitive moat against industry peers. While the firm may still have turbulence ahead, it is very much worth keeping on the radar for years to come.