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Alibaba faces growth challenges amid tighter regulation of China’s domestic tech sector and a slowdown in the world’s second-largest economy. However, analysts believe the e-commerce giant’s growth could pick up throughout the rest of his 2022.
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Alibaba announced on Tuesday that it will split the company into six business groups, each of which can raise external funding and go public.
Each business group is managed by its own CEO and Board of Directors.
Alibaba said in a statement that the move “aims to unlock shareholder value and promote market competitiveness.”
Alibaba shares rose more than 7% in pre-market trading in the United States.
The move comes after a tough few years for Alibaba, which faced slowing domestic economic growth and tight regulation from Beijing, resulting in billions of dollars being wiped from its share price. Alibaba has struggled with growth over the past few quarters.
Alibaba is now looking to reinvigorate growth through restructuring.
Business groups revolve around their strategic priorities. These are groups:
- Cloud Intelligence Group: Alibaba CEO Daniel Zhang will head the business that houses the company’s cloud and artificial intelligence activities.
- Taobao Tmall Commerce Group: This covers the company’s online shopping platforms such as Taobao and Tmall.
- Local service group: Yu Yongfu will become CEO, responsible for Alibaba’s food delivery service Ele.me and its mapping.
- Cainiao Smart Logistics: Wan Lin will continue as CEO of the business that houses Alibaba’s logistics services.
- Global Digital Commerce Group: Jiang Huang takes over as CEO. This unit includes Alibaba’s international e-commerce businesses, including AliExpress and Lazada.
- Digital Media and Entertainment Group: Fan Luyuan will become the CEO of the division that includes Alibaba’s streaming and film businesses.
Each of these units can aim for independent funding and listing when ready, Zhang said.
The exception is Taobao Tmall Commerce Group, which remains wholly owned by Alibaba.
$600 billion wipeout
About $600 billion in value has been lost since Alibaba’s share price peaked in October 2020. Since then, the Chinese government has cracked down on private tech companies, introduced numerous regulations, and increased scrutiny of the practices of domestic giants.
Alibaba’s fintech affiliate Ant Group was forced by regulators. Alibaba delisted from the mega listing in November 2020. And in 2021, Alibaba fined him $2.6 billion as part of an antitrust investigation.
Alibaba is now looking to revitalize its growth. The company has grown into a behemoth with businesses ranging from e-commerce to cloud computing to streaming to logistics.
The company sees the creation of six businesses as a way to become agile.
“This transformation will enable all businesses to become more agile, make better decisions, and respond more quickly to market changes,” Zhang said in a statement.
The restructuring also comes at a time when there are signs Beijing is returning to the tech business as the government seeks to revive economic growth in the world’s second-largest economy.
Jack Ma, the outspoken and charismatic founder of Alibaba, who has been out of the public eye and has been traveling abroad for months, has returned to China in a move seen as an olive branch from Beijing.