Oligopoly: Alibaba vs. Amazon

free essayAccording to monopoly, both companies are aimed at expanding to global market, while according to oligopoly, the companies have the opportunity to control the industry. With the help of oligopoly term, considering economic forecast, companies’ current market condition, government regulations, industry and history overview of companies, opportunities and issues the companies face, entry impact, productivity, cost structure, and competitors are identified. Comparing the business situation of two companies, the paper defines assimilation in companies’ regulations and dissimilarities in current market condition. Taking into consideration companies’ value and gross sales, Amazon Company is one of the largest retailers online in North America, while Alibaba nowadays is the largest e-commerce company all over the world. Proper service that the companies provide to their users is a key to their success. Prices that the companies offer to content partners and suppliers define their prospects among the competitors in market condition. Differences in aims of Amazon and Alibaba make the companies unique. Moreover, both firms achieved higher positions in business, guided by a simple rule to meet the needs of every customer. The priorities the companies face bring them profit and facilitate e-commerce with other countries. Defining profitability of the companies, the main attention is paid to fee revenues and annual profits of selling during past few years. According to statistics, “software vs. warehouses” provides main dissimilarities between Amazon and Alibaba Company.

Alibaba and Amazon have a great influence on suppliers and users. They are considered to be one of the best e-commerce companies all over the world. Both companies provide various services to online users, achieving global records. Nevertheless, they remain unique in regard to each other. Considering Alibaba and Amazon’s significant share of the market in terms of oligopoly, it is necessary to identify the companies’ condition of the market that is dominated by a few larger firms.

Oligopoly is a market structure that is dominated by a few producers. With the help of oligopoly, it is easy to identify the business the companies conduct, as well as the actions of the other firms within the market structure. The market is highly concentrated when it is shared by few firms. Consequently, the operating of such firms gives an opportunity for the small companies to operate in the market. Market structure helps identify interdependence between the firms, as all of them, in term of oligopoly, cooperate closely with each other (Bomhoff, 1995). The decision of one firm has a great influence on the decisions of the others. Therefore, if the company faces collapse, the others firms, conducting the business in the same way, will also face the decline. At the same time, the companies that avoided collapse receive a great opportunity to take higher position in market structure. The great attention is paid to the potential impact of the closest competitors. For example, while some firms can increase the prices for consumers, the other ones may reduce them to gain popularity among users of their products.

In term of oligopoly, Alibaba and Amazon cannot act independently from one another. They should follow the strategy of oligopoly. According to the strategy, they provide the plans of each other actions and the action of their competitors. Knowing everything beforehand gives them an opportunity to rival and cooperate with the competitors, to make proper decisions regarding lowering, raising or keeping the prices constant and receive advantages in undermining their rivals. Alibaba, being one of the biggest commerce companies online, leads three websites: Alibaba.com, Taobao and Tmall. The websites are popular among millions of users, business people, and merchants. Providing various services for users gives the company a great opportunity to be one of the best e-commerce firms. To achieve higher popularity among its consumers, the company should be aware of the services its competitors provide. Despite the business that Amazon Company leads, Alibaba Company is one of the world’s most valuable tech corporations. In its turn, Amazon Company is an American cloud-computing and electronic commerce company with staffs in Washington and Seattle. Being one of the largest Internet-based retailers in the United States, Amazon becomes a big competitor to China’s Alibaba Company. It sells audiobooks, jewelry, toys, furniture, software, video games, and electronic devices. Being aware of the business Alibaba Company conducts, Amazon Company offers the programs that do not allow the sellers to sell their products. Nevertheless, the Company allows the filmmakers, application developers, musicians, authors, and others to market and publish the content. In term of oligopoly, both companies are aware of the market structure each company leads. With the growth of sales, as well as establishing banking relationships and financial services, both companies highly control e-commerce market in order to remain one of the best enterprises and retailers in the world. The service, that Alibaba Company provides, meets the needs of the consumers, ensuring that every seller is genuine, while Amazon Company except the consumers, offers its services to Lacoste, bebe Stores, Sears Canada, Mothercare and Marks & Spencer (Youderian, 2014). Amazon Company is controlled by small firms or groups. To achieve top position among the competitors, it should be aware of the businesses the other firms lead, control the market’s situation, and offer its services all over the world. Alibaba Company, in its turn, provides valuable products for consumers and users. Its service depends upon the structure of the offered services of other small firms. The service the company provides, such as shopping search engine, electronic payment services, and data-centric cloud-computing services make it to be one of the best web-portals (Koprince , 2012). Explaining the activities of both competed companies in term of oligopoly, there is a difference identified between them in terms of history of the companies, current market condition, role of government regulations, issues and opportunities that both companies face. Moreover, the difference also refers to such factors as pricing, impact of new companies’ entry, competitors, productivity, cost structure, and economic forecast.

History of Amazon and Alibaba Company

Amazon Company, which is American Electronic Commerce Company, was founded on May 28th, 1996 by Jeff Bezos. Its main aim is to focus on selling books and retail shopping services online. Providing promotional and marketing services, the company is concentrated on convenience, selection, and price for content creators, consumers, enterprises, and sellers. The uniqueness of the company is in enabling the others to sell their products. Nowadays, gaining a great popularity of its service, it is the largest online retailer in North America (Stone, 2013). Through its website, the company offers various products, including digital music, instant video, as well as payment, and credit products (Stone, 2013).

Alibaba Company is a Chinese e-commerce company. It was founded in 1999, by Jack Ma. Being not familiar with Bezos’s business background and technology, Jack Ma created a B2B portal for connecting Chinese manufacturers and Western businesses. According to the innovation of his portal, the company became one the largest e-commerce companies in the world (including company value and gross sales). Nowadays, the company operates Internet-based businesses, retail online marketplace, and leads in wholesale (History and Milestones, 1999).

Current Market Condition of Amazon and Alibaba Company

Alibaba Company receives profit by facilitating e-commerce in China. B2B portal gives the opportunity to connect the company with Chinese businesses and factories. The current market condition the company experiences, gives it an opportunity for a rapid growth. Operating mobile and online marketplaces in wholesale trade, Akamai Company approves business model of Alibaba Company. According to its business model, a company receives a great profit from Taobao’s division (the biggest shopping site of Alibaba Company) that consists of Taobao Mall and the Marketplace of Taobao. In term of oligopoly, Taobao Marketplace allows small businesses and consumers to list products for sale, and Taobao Mall allows larger businesses and firms to sell the merchandise of Alibaba Company directly to the users. Facilitating the transactions, more than eighty percent of purchases are accounted by Alibaba Company. With the help of Alibaba.com website, Chinese merchants have a great opportunity to cooperate closely with international buyers. Nowadays, current market condition makes the company one of the leading e-commerce companies among its competitors. Alibaba Company can benefit from Akamai, as Akamai Company has one of the biggest customers – the Department of Defense of the United States. With the help of Akamai, Alibaba Company can improve user’s experience in the marketplace. According to the improvements, its gross retail volume will be rapidly increased. The future of Alibaba Company is perspective, as it has grown from the Internet market of China and continues growing nowadays. Nevertheless, Alibaba Company has invested the mapping service companies, such as Autonavi and Sina Weibo. The company significantly has expanded its operations in Taiwan and Hong Kong (Mariotti, 2008). Having a solid fundamental base, current market conditions allow Alibaba Company to grow. They consider customers as their first priorities. The business they conduct remains to be inspiring to other businesses all over the world.

Despite, the current market condition of Alibaba Company, its competitor Amazon Company sells the products directly to its users. Providing advertising services, selling and manufacturing electronic devices, the company is concentrated on convenience and price in current market condition. Being aware of the business the other competing companies lead, Amazon attracts the users by offering the lowest prices and free shipping delivery (McNeal, 2013). For an extra fee, the company provides order fulfillment and warehousing. It slightly improves operating efficiencies that allows the company to provide timely support service, as well as reliable and fast fulfillment. Current market condition allows the company to provide its service to content creators, consumers, enterprises, and sellers. In terms of oligopoly, the company is concentrated on retail sales of the users’ products, including export sales from such users to Canada or the United States customers. The Company’s MP3 service is distributed to subsidiary websites. Through CreateSpace Company, Amazon publishes its own services. To adapt to current market condition, the company should always meet the needs of the consumers by offering affordable prices, providing discounts, and discovering new inventions in technology and service improvement.

Government Regulations of Amazon and Alibaba Company

Nowadays, services online gain a great popularity among the consumers, users, enterprises, and sellers. Both companies differ from each other, offer their services to the consumers who concentrate their attention on price, quality, and convenience. Leading the services in a smooth way, government regulations focus on economic growth, service safety, and efficiency of the companies. Despite that, regulations and laws govern e-commerce and the Internet. Significant influence of government regulations can impede the growth of online services and the Internet (Parvey & Alston, 2010).

According to Amazon Company, its main aim is to deliver the products to their consumers via drone. The advantage of such faster delivery, that may allow users receive the orders in half an hour, should be covered by government regulations. According to drone regulations, the current rules will limit the flights to low altitudes in daylight hours. The government regulation needs data protection of the offered service, taxation, electronic contracts, copyrights, operation and design of the website, as well as the information about the quality of the offered products. With government regulations, the cost of the products offered by the company can be increased. Amazon Company is subjected to foreign jurisdictions and income taxes in the United States. Tax laws can be exposed to a change according to political and economic conditions. Rates of tax affect the profit of the company and results in losses. Amazon Company does not collect the taxes on most of its products from most states in the United States. According to government regulations, the company should collect the tax from the sales of the seller company. Nevertheless, in order to avoid other tax obligations, the company acts due to the additional agreements that require similar obligations of tax collection. It allows the company cooperate with the sellers and enterprises tightly, avoiding additional payments of taxes (McNeal, 2013). The strength of Amazon Company is the ability to adapt quickly to online commerce changes. The company should contact Legal Department regarding any issues it has (Koprince, 2012).

Government takes severe actions in strict regulations of e-commerce and poor customer service of Alibaba Company. New regulations of government focus its attention on key responsibilities of the company’s consumers, as a great variety of sales is provided through the website. All the efforts that Alibaba Company made to improve its customer service, are being banned by government regulations. Chinese Central bank blocks Alibaba Company’s released virtual credit cards. New regulations provided by the government lead to business’s threat of the company. Unpredictable regulations cause a great risk to the company’s management. Nowadays, the company should be aware of all economic situations within the country to avoid any declines and find resolutions in increasing its business among the competitors. Highly controlling e-commerce market of China, Alibaba Company offers more services than Amazon. The issues, concerning government regulations that Alibaba Company faces, result in the risks to the business processes of the company (Li, 2014). If government regulations allow the business of the company to grow freely, e-commerce activities of the company will slightly increase. Alibaba Company should act according to government regulations, taking into consideration political and economic situation of the country (Powell, 2014).

Economic Forecast of Amazon and Alibaba Company

Alibaba Company, being more profitable than Amazon, has succumbed to China’s economic situation. For more than three years, it has the slowest growth in transactions. In 2015, official growth of the company was reduced. Providing stock markets, the interest rate of the company is increased. Despite slow growth, the impact on sales has remained the same. Nowadays, Alibaba Company expects “mid-single digits lower” GMV (gross merchandise volume). Lowering average amount of order values, GMV helps engage the sellers. Great improvement in market has been identified lastly. The economy process of the company’s business is stabilizing. Increasing sales lead to growth. Regardless of the economic condition within the country, lower prices offered by the company online and high savings rates will be possible according to e-commerce (Li, 2014).

In 2015, its competitor Amazon Company outperformed the market. The losses, the company had faced previous years, slightly decreased. Moreover, the earnings of the company grew at an average annual rate. The increasing in market structure is predicted in the current year. According to the statistics, if the increasing in growth remains the same next year, the economic situation of the company will bring it a great profit (Bomhoff, 1995). Despite the losses that the company has had the previous year, its operating expenses rates raise and it gives an opportunity to improve the business situation. According to the statistics, developing new devices and streaming its service, the sales of the company can be increased. Amazon Company expands its service mostly outside home market compared to Alibaba Company. Nevertheless, Alibaba Company, concentrating on its own market, has had more revenues from products than its competitor. In fact, offering its products within the country and internationally, Alibaba has an opportunity to enter the market of the United States. It identifies Alibaba Company’s high product sales. Due to fee and service revenue, Alibaba Company does not receive commission is sales and fees in contrast to Amazon Company. Based on profitability, more products are sold by Alibaba Company. It identifies annual profit of Alibaba that has grown in a few past years and nowadays is higher than annual profit of Amazon Company. Free cash flow helps define the business situation of the companies (Youderian, 2014).

According to statistics, both companies have generated approximately equal profit in free cash flow. Warehouses and software define the great difference between them. In comparison to Amazon Company, Alibaba Company does not sell the products itself. It offers the products that facilitate the consumers. On contrary, Amazon Company sells the products to the users directly. The company is engaged in warehouse network (Parvey & Alston, 2010). Attracting attention of the consumers with the help of offered goods, Alibaba Company remains more profitable than Amazon Company and, consequently, grows more quickly.

In conclusion, it should be stated that with the help of oligopoly, it is easy to define the business situation of Alibaba Company and Amazon Company. The slight difference between them is identified in market structure, profitability, free cash flow, and their annual profits. According to the provided statistics between the companies, Alibaba Company acts in Chinese market and Amazon Company concentrate its business in the United States market. The great opportunity for Alibaba is to help Western sellers to reach consumers in China. By reaching such aim, Alibaba Company will expand its business and offer its products all over the world. Amazon Company, in its turn, should meet the needs of the consumers and offer moderate prices to them, improving its uniqueness among the competitors.