Alibaba Group Holding Ltd (NYSE:BABA) has risen the ranks to become a juggernaut thanks to its focus and increased investment in China and South East Asia. To sustain the current growth levels, it might have to expand its operations to other markets as saturation bells start to ring in current markets.
Alibaba key Markets
The tech giant has become a force to reckon with on e-commerce and cloud thanks to the backing of more than 750 million users in China. While most of the growth has come from the biggest cities in China and Southeast Asia, focusing on lower tiers cities in the region might not cut it.
Alibaba generates a good chunk of its revenues from the China retail market made up of Taobao and Tmall. In southeast Asia, the company has made its presence through Lazada, an e-commerce platform that owns a majority stake.
While the company is increasing its investment in the cloud as a critical component for future growth, it still has to expand its footprint. Gil Luria, a director at D.A Davidson, believes it is high time the Chinese tech heavyweight expanded to other markets if it is to compete with the Amazon, Google, and the Apples of this world.
Target Markets
Some of the markets that would provide fertile ground for growth include Latin America and Africa, where other multinationals' penetration is minimal. The markets offer the greatest opportunities given the limited competition.
Expansion into Europe could come at a hefty price due to policy restrictions and perception towards data. On the other hand, the U.S is a no go zone for Chinese companies, given the deteriorating relations between the Washington and Beijing fueled by concerns over data security.
The U.S has already stepped up efforts to limit Chinese tech companies' presence in the U.S markets as a tech war between the two superpowers gets out of hand. While Alibaba is yet to be targeted by U.S Authorities as has been the case with Tencent and Huawei, it's only a matter of time as tensions between Beijing and Washington get out of hand.
