Alibaba And The Forced Restructuring

Alibaba’s planned restructuring might assuage the Chinese government's concerns about its size and influence. But the move does not seem likely to alleviate antitrust concerns in any meaningful way, and there is no strong business justification for the company's chosen approach

Markets are welcoming Chinese tech giant Alibaba’s plan to split into six independent entities. The reason might seem obvious. Because smaller autonomous units appear likely to be nimbler and more adaptable, one might expect the restructuring to help to revitalise the massive company and boost productivity.

One might also assume that dividing the company will alleviate the monopoly concerns that have made Alibaba a primary target of regulators in recent years. But, as compelling as this logic seems, it is deeply flawed.

Breaking up a firm can help to stimulate internal competition if the firm has a genuine monopoly that prevents others from exposing it to competitive pressure. But Alibaba operates in cutthroat sectors – e-commerce, entertainment, cloud computing, and logistics – where competition is fierce. As large as Alibaba is, its operations are subject to strong external pressure.

In any case, Alibaba will most likely retain significant control over the new “units” it is creating, even if some go public. So, from an antitrust standpoint, Alibaba will still be regarded as a single entity, with the same market power it already possessed.

Expectations that the company will become more agile – a vision that Alibaba’s CEO, Daniel Zhang, repeatedly touted during a recent call with investors – are similarly misleading. Yes, smaller entities with greater autonomy can adapt to changing conditions more quickly than a single sprawling entity. But Alibaba’s planned restructuring is neither the least costly nor the least disruptive way to boost agility.

If a firm is split into independent units, resources are likely to be replicated across those units, especially in areas like computing, risk management, legal affairs, and government relations. Compliance costs will probably rise, owing to increased oversight from the board, investors, and financial regulators. Moreover, each unit will seek to advance its own interests, without accounting for the interests of the company as a whole. This may lead to incentives mismatches, causing one unit to act in ways that hurt another – or the business as a whole.

By contrast, a multi-divisional – or M-form – structure would prevent both resource duplication and the misalignment of incentives. First adopted by DuPont a century ago, and embraced by countless companies since, the M-form structure empowers division heads to make their own personnel, budgeting, and operating decisions, while corporate headquarters offer strategic direction, support, and oversight.

With full access to internal information about the operation of the divisions, the company’s headquarters can use tools like bonuses to align incentives across divisions and optimise resource allocation. A holding company is unlikely to have the same access to information about independent units as a company headquarters has about the divisions it oversees, let alone the same ability to leverage such information to optimize resource allocation.

An M-form structure offers another advantage: the headquarters can adjust the degree of different divisions’ autonomy as business needs change. A well-functioning company should constantly adjust the extent of centralisation in response to evolving market conditions.

Alibaba’s restructuring plans would not allow for such fine-tuning. In the future, it may well become desirable for Alibaba to revert to a more centralised structure. But after it is split into independent units – and especially after some of its subsidiaries go public – responding to this need could restructuring for Alibaba’s relationship with the Chinese government.

For any business operating in China, a good relationship with the state is hugely important. By pursuing what is effectively a “soft break-up,” Alibaba appears to be addressing government concerns about its size and influence. This, coupled with Alibaba co-founder Jack Ma’s return to China after a year overseas, sent a strong signal to the market that the firm has

Breaking up a firm can help to stimulate internal competition if the firm has a genuine monopoly that prevents others from exposing it to competitive pressure. But Alibaba operates in cutthroat sectors –e-commerce, entertainment, cloud computing, and logistics – where competition is fierce be very costly. Alibaba’s organisational structure could thus become more rigid over time, even as its operational decision-making becomes nimbler.

If Alibaba’s restructuring does not seem likely to alleviate antitrust concerns, and there is no strong business justification for the approach it has chosen, why did the market react so favorably to the news? The answer lies in the implications of the mended fences with the government, removing what is arguably the biggest obstacle to the firm’s continued success.

Alibaba’s restructuring might serve as a template for other Chinese Big Tech firms seeking to appease a government that fears their growth and influence. But, as with Alibaba, it could carry significant costs while failing to address fundamental antitrust concerns in any meaningful way.

Let Science Work For Us

Not so long ago it seemed that we were far behind the developed world in terms of technology, telecommunications, electronic commerce and online shopping, and especially in the application of artificial intelligence, but today these sectors can be considered the flagships of our country’s economic development, attracting foreign investment and European integration.

The development of science and technology has brought the world into the digital age with enormous changes in our way of doing business, and especially in the lives of those who today wonder how they got by before they could shop from their armchairs, pay bills without going to the post office or bank before high-speed internet and modern telecommunications were available. Indeed... How did we live without all that?

WHY IT’S HARD TO RESIST ARMCHAIR SHOPPING

Asked about the main reasons for shopping online, customers all over the world mention time-saving, security, speed, saving money, practicality, a broader selection and the fact that they can rapidly find and compare various offers. More than two-thirds say that free shipping would encourage them to buy more online in future. Clothes and shoes are the items that are most often bought online, bought by 65% of people, whereas 31% purchase small household appliances, and cosmetics and beauty care products.

More than 42 million cashless online transactions worth 1.2 billion euros were made in Serbia last year, and according to the National Bank of Serbia, electronic commerce continues to post excellent results. The average value of dinar transactions made via the Internet was 2,675.24 dinars, while the average transaction value in euros was 54.71 euros.

Americans Are The Biggest Shopaholics And Consumers

The total value of sales to end users via the Internet is estimated at 1,471 billion dollars. Almost half of these sales, $703 billion, are made in the US as 191 million Americans shop online. Most is spent on Cyber Monday, followed by Black Friday and Thanksgiving. The market is dominated by Amazon, followed by eBay, then Walmart, Apple, Target and Best Buy.

American customers spend an average of 2,000 dollars a year, Germans spend a few tenths less. The French spend about 1,400, the Dutch about 1,000, Swedes about 900 and the Italians and Spanish about 800. An interesting trend that is accelerating, especially around the holidays, is click-and-collect: ordering online where the customer picks up the product from the shop.

Finticipate Gathers Local And Foreign Experts In June

On 15th June this year, the second Finticipate will be held at the Zemun Madlenianum. This is a unique FinTech event, a place for discussion and a centre for the exchange of ideas for FinTech, banks, neobanks, financial experts, public sector investment funds, private equity investors, VC, consultants and lawyers, futurists, technologists and innovators who want to contribute and help shape the future of finance.

The main panelists will be Jorgovanka Tabaković, Governor of the National Bank of Serbia, Dragana Stanić, Deputy Governor of the National Bank of Serbia, Piotr Jan Pietrzak, Director of International Development for Non-European Markets at BLIK, Tanja Dimitrijević, Head of the Legal Red Acre Group...

The panels will discuss FinTech trends and challenges that need our attention, the impact of the latest financial crisis on financial markets and FinTech, regulations that will define the functioning of FinTech in the future, security threats and many other current issues in the field.

Five Trends That Will Define Fintech In 2023

According to expert predictions, but also according to this year’s first results, it is estimated that the FinTech industry will see accelerated development and improvement and jump to 174 billion dollars in 2023. For this reason, they singled out five trends that will define the future of the FinTech industry and that will make our lives simpler, and less stressful.

AI and ML: The first trend that will undoubtedly shape the future of FinTech is artificial intelligence (AI) and machine learning (ML) as they improve banking, payments, investment, risk management and a lot more. FinTech companies can use both technologies to automate loan approval or fraud protection while providing more accurate insights into customer behaviour. By using these tools, businesses can reduce costs while increasing accuracy and efficiency.

Built-in finance: This term describes a broad category of financial services and products that can be used in a specific framework or platform. Users can better manage their finances without switching between several apps or websites when these services are built into an existing app or platform. The best example of this is the “Buy Now Pay Later” service, the fastest growing embedded financial model in the world.

SaaS: With SaaS services, companies can access and pay for software applications hosted in the cloud without having to install them on their own servers or computers. This eliminates many of the associated overhead costs and allows organizations

EUROPE IS CHASING SOUTH KOREA, SERBIA IS STUCK IN THE PAST

In the 2022 European Mobile Economy Report, GSMA pointed out that 34 markets in Europe had 5G, with 108 operators offering commercial services and a user share of about 6% of the total number of mobile service users. Average 5G penetration is estimated to reach 44% by 2025, with the UK and Germany expected to lead the way with 61% and 59% respectively, although they lag behind global competitor South Korea, which is estimated to have a penetration of 73%, with the U.S. and Japan at approximately 68%.

Although the commercial introduction of the 5G network in Serbia was planned for 2022, our country is still one of the few European countries that will not have it this year either.

In our country, 5G frequencies have not yet been allocated, and some domestic operators have stated that they are keenly awaiting the state’s decision. However, although there is active talk about the benefits of 5G and its impact on the economy, accelerating the digital transformation and improving life, there is no clear indication at the moment that full-scale 5G will reach us in the near future.

to focus their resources on developing the user experience. In addition, using SaaS provides access to powerful tools with enhanced security protocols for data storage and management that would be difficult or expensive for individual firms to implement.

Open Banking: Open banking is a financial technology that allows customers to securely share their financial information with third parties, offering them greater control and flexibility over their finances. It offers benefits for customers and opportunities for businesses to access new markets, create innovative products and services, and increase efficiency through data sharing.

Blockchain: Blockchain is a digital ledger that records and verifies various types of transaction. It enables individuals, organizations and machines to securely transfer digital assets without relying on any central authority or third-party intermediary. This decentralisation means that blockchain technology can be used for a variety of financial applications, such as payments, transfers and trading.

The Grey Economy Is Also Moving To The Internet

Electronic commerce in Serbia is experiencing double-digit growth, so it is assumed that by 2027, around 4.5 million citizens will use these services. The authorities are expected to take all necessary steps to mitigate risks and find suitable answers to the many challenges. From the state and its bodies, shoppers expect protection against fraud, fair market operations, protection against the growing illegal trade on the Internet, improvement of the legal framework and development of the market based on principles of fair competition.

The number of unregistered merchants offering goods over the Internet is increasing, so consumers are advised to inform themselves about the seller before ordering and paying for goods by checking the company registration number, tax number, email, and contact phone number of the seller. Advertising on the Internet is also a serious problem, because natural persons who do not have the status of a trader offer and sell goods. Experts advise that it’s best not to buy anything from natural persons, among other things because they don’t pay taxes, contributions and other fees, they hurt legal traders because they create unfair competition and they can endanger customers because fraudsters are difficult to find and punish.

ALL SCHOOLS IN SERBIA WILL HAVE HIGH-SPEED INTERNET

The Broadband Communication Infrastructure Development Project is introducing high-speed internet in 700 rural settlements and villages in Serbia. Almost 120,000 households and 700 schools will be involved and 4,700 kilometres of fibre-optic routes will be built. By June of this year, all schools in Serbia will be connected to high-speed Internet, and by the end of 2023, the Connected Schools project is expected to be completed.

Thanks to fast internet, everyone in Serbia will be able to use electronic administration services, including eAgrar, digital teaching, the Internet in rural schools, the possibility of starting their own business in villages and multimedia content such as television and landline telephony.

The development of broadband infrastructure in rural areas of Serbia is one of the largest capital projects of the Ministry of Information and Telecommunications, which will cover more than 99 percent of households with new generation networks by the end of 2025.