Alibaba Organizational Structure changes for its IPO

Topics: Stock market, Stock, Alibaba Group Pages: 3 (824 words) Published: November 12, 2014
Organization Theory – Alibaba case: “Why organizational structure affected Alibaba’s IPO”

Introduction and Historical Overview

Over recent years the external environment and the marketplace have become increasingly dynamic and competitive, with progressive consolidation of the market leaders and continuing need of companies to adapt their structure towards our demanding society. This trend has led Alibaba Group Holding ltd. to conduct some organizational considerations before being listed on the New York Stock Exchange last September. Alibaba is a Chinese e-commerce company founded in 1999 by Jack Ma, who successfully created a B2B website and portal connecting Chinese manufacturers with thousands of overseas buyers. Ma eventually managed to attract foreigners to run the company since, during that time, people in China had very little management expertise. This decision, together with the significant Internet penetration in China, resulted in a vast growth of total export volume. Alibaba’s peculiar organizational design

Alibaba Group Holding Ltd.’s partnership governance structure completely differs from the dual-stock-class governance design some public companies prefer. Dual-class stock structures enable companies to keep control even after they become public with their IPO. Companies with this approach (including Facebook, Groupon and Zynga) issue shares to founders enabling them to have multiple votes per share. Alibaba isn’t doing a dual-class structure and the company is actually implementing a rather different concept. The Alibaba governance structure is probably inspired by the Chinese political structure. It is a 27-person partnership where partners have the right to nominate a majority of directors effectively controlling Alibaba’s board, even though they only own a minority stake in the company. David Webb said "The shareholders are equivalent to the People in China, who have no say in how their country is run” (www.webb-site.com) in his...
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