BUSINESS

The Chinese e-commerce company Alibaba will go public this month in what could be the largest initial public offering in U.S. history—Alibaba has more active users than Amazon and eBay combined. (Christian Science Monitor)

Use our resources to understand how geo-education contributes to a better understanding of 21st-century business.

Discussion Ideas

• The giant Chinese company Alibaba will have its initial public offering (IPO) this month. What is an IPO? How might an IPO change how Alibaba does business?
  • With its initial public offering, Alibaba will begin to sell shares of itself to the general public. (Companies that sell stock in themselves are known as “public” companies.) Shares of Alibaba will be available for about $60-$66. Investors will be able to track the value of their purchase on the New York Stock Exchange, with Alibaba listed under the ticker symbol BABA.
  • Right now, Alibaba is a private company. This means that it is owned by individuals (specifically, the Alibaba Group, including Alibaba’s founder and powerful chief executive, Jack Ma. Yahoo also owns a healthy percentage.) With the release of the IPO, Alibaba will become primarily responsible to shareholders, not the Alibaba Group.

• Here is a list of some of the biggest companies in the world. Can you tell if they are public or private? Use Bloomberg to see the ticker symbols for the public companies.
  • Bloomberg itself (privately owned)
  • National Geographic Society (privately owned)
  • Amazon (AMZN)
  • eBay (EBAY)
  • Hearst Corporation (privately owned)
  • Wal-Mart (WMT)
  • Exxon-Mobil (XOM)
  • Saudi Aramco (state-owned, owned by Saudi Arabia)
  • Toyota (TM)
  • General Electric (GE)
  • Cargill (privately owned—the largest private company in the U.S.)
  • AT&T (T)

• Why do you think Alibaba has more active users than eBay and Amazon combined?
  • Alibaba is narrowly focused on the Chinese market, and there are a lot of Chinese consumers—1.4 billion of them, and 618 million online.
  • Chinese consumers are more likely to shop online. “According to a study published by Focus Money magazine, Chinese consumers shop online 8.4 times each month, compared to 5.2 times in the United States; 4.3 times in Great Britain; 2.9 times in Germany; 2.8 times in the Netherlands; 2.6 times in France; and 2.3 times in Switzerland.”
  • The “world’s biggest online shopping mall,” Alibaba offers a package of services that are not combined by Western e-commerce companies.
    • Alibaba started off as a business-to-business (B2B) service, connecting small retailers with manufacturers.
    • Alibaba also offers consumer-to-consumer service, similar to Amazon Marketplace or eBay.
    • Alibaba consumers can also find products from Chinese and international corporations, similar to Amazon.
    • Alibaba is also pursuing a banking service.
  • China remains a relatively closed society compared to markets such as the U.S., Canada, Europe, and even Japan. (Read this article for a quick run-down on why it’s difficult for Western companies to do business in China.) This means:
    • China has a unique economic system, sometimes called a socialist market economy, that combines elements of a command economy and an open-market economy. China retains a command economy sector, in that the state owns many corporations and makes decisions about investment and production. China also has a thriving open-market sector, where production and prices are largely determined by supply-and-demand. Chinese businesses, such as Alibaba, are much more familiar negotiating and working within the socialist market economy than are foreign firms or multinational corporations.
  • Chinese online culture remains relatively isolated. The biggest search engine in China is not Google, for instance—it’s a Chinese company called Baidu. The most popular microblogging site is not Twitter or Facebook—it’s the Chinese website Sina Weibo.

• Read through these pros and cons about taking a company public. If you were “Crazy Jack” Ma, the founder of Alibaba, would you have taken the company public or kept it private? Would you invest (buy stock) in Alibaba? Why or why not?