Alibaba Group Holding Ltd (BABA): Wharton’s Marshall Meyer’s Advice: Don’t Fight Amazon

The ball is in Alibaba Group Holding Ltd (NYSE:BABA)‘s court and all eyes are on Jack Ma, Alibaba’s Executive Chairman, waiting for him to make a hero call or a grave mistake, as it decides on an investment direction for the company’s $25 billion IPO money. One of these blunders, according to Marshall Meyer, Wharton emiritus professor of management, as quoted in an article by Wharton, would be if Alibaba decided to compete with Amazon.

Amazon has one philosophy one it comes to competitors  like  Alibaba Group Holding Ltd (NYSE:BABA), and it is well known in the business world. Drive them out of business. To this end it uses its extremely low margins or may even sell products at a loss. If Jack Ma lets his ambitions get in the way of intelligence, he could potentially run Alibaba Group Holding Ltd (NYSE:BABA) down.

Meyer’s advice to Jack Ma, according to the article, was to do what it is best at, that is, go deeper in the Chinese market or even target countries neighboring China. U.S. is a big no and Alibaba Group Holding Ltd (NYSE:BABA) should understand it.

However, there have been valid concerns that Alibaba Group Holding Ltd (NYSE:BABA) might be doing just that. According to the article, Katrik Hosanagar, Wharton professor of operations and information management, thinks that Alibaba’s recent small scale investments in U.S. based startups such as e-commerce site ShopRunner and also Alibaba’s own small venture in U.S. market with the launch of its small shopping site 11Main.com indicate a big such investment just around the corner.

Moreover, there have also been talks that eBay Inc (NASDAQ:EBAY) could be one possible acquisition candidate for Alibaba Group Holding Ltd (NYSE:BABA).

The article mentioned that currently less than one fourth of China’s 1.35 billion people shop online, even though half of the population has means to connect to the internet. Alibaba Group Holding Ltd (NYSE:BABA) knows this and if Jack Ma still decides to expand in U.S. instead of China, he wouldn’t prove to be even half the businessman that Alibaba’s investors think him to be.

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