could chinese philosophy guide jack ma and alibaba …

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LO W H AILIE K Y TANG CHAN WING WAH

COULD CHINESE PHILOSOPHY GUIDE JACK MA AND ALIBABA TO GLOBAL EXPANSION?

Without the philosophy of Buddhism, you cannot do well when your business grows to a certain extent. If you do not know the philosophy of Daoism, you have no chance of winning during competitions. If you do not understand Confucian philosophy on the construction of organizational system, you have no chance to be sustainable when your company grows to a certain size.

- Jack Ma, Founder and Executive Chairman of Alibaba Group1

It would not be an understatement to say that Jack Ma was a legend in China. At the age of 53, he was the wealthiest person, not only in China, but in Asia. Forbes latest ranking put him at world’s number 18.2 He had co-founded the Alibaba Group (“Alibaba”), the world’s biggest e-commerce group and a conglomerate that owned a diverse portfolio of online and offline businesses.3 Apart from being a successful businessman, he was determined to live life to the fullest. He self-financed himself to paint, sang, and act in movies with famous artists. But perhaps most importantly, he was one of the few elite Chinese that was truly influential outside the political system of the world’s second largest economic entity. When U.S. officials criticized China in a conference in New York in July 2017, Jack Ma stood up for the country, boldly stated that “Chinese culture is based on the philosophies of Confucianism, Buddhism, and Daoism (儒釋道 “the Three Teachings”). When every one of you criticizes China, has anyone, amongst the twenty-something attendees today, read a chapter of Laozi’s Dao De Jing ( 道德經) or that of Confucius’s Analects (論語)? If you do not understand another country’s culture, you do not have the right to criticize it.” Under the direction of Jack Ma, Alibaba grew from a minuscule operation in Jack Ma’s apartment in 1999 to a global conglomerate with revenue of US$23 billion.4 Along the way, Jack Ma propelled Alibaba to overcome infinite number of technical and financial challenges, 1 Translated from Jack Ma’s speech when addressing EMBA students of Tsinghua University School of Economics and Management on 21 October 2016, www.ce.cn/xwzx/gnsz/gdxw/201610/21/t20161021_17012709.shtml (accessed 11 December 2017). 2 Flannery, R. (20 August 2017) “Alibaba’s Jack Ma Is Back on Top as Asia’s Richest Man”, Forbes, https://www.forbes.com/sites/russellflannery/2017/08/20/alibabas-jack-ma-is-back-on-top-as-asias-richest-man/#40e6054b4e75 (accessed 11 December 2017). 3 Topics (2017) “Alibaba”, South China Morning Post, http://www.scmp.com/topics/alibaba (accessed 11 December 2017). 4 History and Milestones (n.d.) “1999”, Alibaba Group, http://www.alibabagroup.com/en/about/history?year=1999 (accessed 11 Dec 2017); Press Release (18 May 2017) “Alibaba Group Announces March Quarter 2017 and Full Fiscal Year 2017 Results”, Alibaba Group, http://www.alibabagroup.com/en/news/press_pdf/p170518.pdf (accessed 11 December 2017).

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COULD CHINESE PHILOSOPHIES GUIDE JACK MA AND ALIBABA TO GLOBAL EXPANSION? (Ref.: 18/003)

and to win the battle against eBay.com to become the world’s largest e-commerce conglomerate. In recent years, Alibaba fought several heated battles with its major competitor, the Tencent Group, in its home country. Both companies were observed to have scrambled for the market share of different lines of businesses in China: from online retail to online payments, from ride-sharing to bike-sharing. With a growing and vibrant Chinese home market, the competition was just part of the business as usual of Alibaba that did not take up too much of Jack Ma’s attention. His major focus was to take Alibaba to the global stage and grow. To guide him through the challenges facing this Herculean task, Jack Ma resorted to the Three Teachings, which gave him insights and backed him in his sound decision making. What was the key wisdom that Jack Ma took from the Three Teachings? How did these insights guide him and Alibaba to success? To win on the global stage, Jack Ma had to replicate the acceptance of the Chinese community of Alibaba among the global community. In what ways could the Three Teachings help Jack Ma and his conglomerate? With the United States accusing Alibaba as one of “the world’s most notorious markets for counterfeit goods”,5 could the philosophies of the Three Teachings help?

The Alibaba Group

Birth In 1999, Jack Ma invited sixteen friends to his flat and persuaded them to invest in Alibaba, or in essence, invest in him.6 Alibaba, a website aimed at facilitating global business for small and medium enterprises in China was thus born. The site allowed Chinese exporters to post their product offerings and overseas buyers could register as members so as to conveniently browse the site to locate potential suppliers. The site quickly attracted members from around the globe. By October 1999, its rapid growth in membership enabled Jack Ma to raise $5 million from Goldman Sachs and $20 million from SoftBank.7

Winning EBay in China With its early success, Alibaba expanded aggressively overseas, however, it was hit hard when the internet bubble burst at the turn of the century. Alibaba had to close many of its overseas offices in order to re-align its operations to focus on the China market. 8 The refocused Alibaba met its major international challenge when eBay acquired EachNet and aimed to conquer the Chinese consumer-to-consumer online business. Alibaba, though by then was a business-to-business platform, saw eBay’s move as a major threat in the long run. It answered eBay’s entrance to the China market by launching its own consumer-to-consumer platform — Taobao (淘寶網), which literally meant “digging for treasure”. By offering Taobao as a free service, as well as ensuring good customer experience, Alibaba drove eBay out of the China market in 2006 (see Exhibit 1 for more information on the eBay versus Alibaba fight).9

5 Li, C. (22 December 2016) “Alibaba Faces Growing Pressure over Counterfeit Goods”, https://www.nytimes.com/2016/12/22/business/alibaba-ustr-taobao-counterfeit.html (accessed 11 December 2017). 6 Jalloh, M. (n.d.) “Jack Ma: Success Story”, Investopedia, https://www.investopedia.com/university/jack-ma-biography/jack-ma-success-story.asp (accessed 11 December 2017). A total of 17 people invested in Alibaba (on top of Jack Ma himself), the 17th person is his wife. 7 Jillian D.O. (14 September 2014) “How Jack Ma Went From Being a Poor School Teacher to Turning Alibaba into A $160 Billion Behemoth”, Business Insider, http://www.businessinsider.com/the-story-of-jack-ma-founder-of-alibaba-2014-9 (accessed 11 December 2017). 8 Jalloh, M. (n.d.) “Jack Ma: Success Story”, Investopedia, https://www.investopedia.com/university/jack-ma-biography/jack-ma-success-story.asp (accessed 11 December 2017). 9 Wang, H.H. (12 September 2010) “How eBay Failed in China”, Forbes, https://www.forbes.com/sites/china/2010/09/12/how-ebay-failed-in-china/#d1bc1f55d57a (accessed 11 December 2017).


Alipay In the course of developing Taobao, Alibaba faced another challenge, but managed to turn this into a success. Unlike most parts of the world, Chinese consumers did not often use credit cards and the country lacked the financial infrastructure of online payment gateways. This prompted the launch of Alipay, which was backed by Yahoo’s US$1 billion investment in Alibaba in 2005 in exchange for around 40 percent share of the company with the transfer of control of Yahoo China to Alibaba.10 What started as an infrastructure to facilitate online payments between buyers and sellers, evolved to become China’s biggest mobile payment and online payment platform, claiming 54 percent of the former and 30.7 percent of the latter.11 However, it should be noted that in order to comply with the Chinese Government’s regulatory requirement that all non-bank financial institutes had to be owned by a company without foreign ownership, Alibaba transferred Alipay to a private company owned by Jack Ma in 2010. This prompted a controversy between Alibaba and Yahoo, though both parties settled in 2011 (see Exhibit 2 for more information). 12 However, the relationship between the two companies severely soured and eventually led to Alibaba buying back its shares from Yahoo before it went public.13

IPO On 14 September 2014, Alibaba debuted on the New York Stock Exchange with an initial estimated valuation of around US$143 billion. Fuelled by the fact that the Chinese ecommerce conglomerate was selling more merchandise than Amazon and eBay combined, the official valuation of Alibaba at the end of the first trading day at the U.S. stock exchange surged further by 38 percent, reaching US$231 billion.14 This made Alibaba the largest IPO in the history of the U.S. stock market, with a valuation higher than Facebook. 15 This high valuation turned out to be a humble number when compared to the present-day valuation of the company. By end 2017, its value had grown to US$442 billion.16

Core Businesses From a small operation in 1999 in Jack Ma’s one-room apartment that aspired to represent small and medium enterprises in China online, Alibaba had expanded exponentially into a conglomerate that owned and operated an array of online businesses including a full spectrum of online and mobile platforms serving consumers, retailers and wholesalers, with a dedicated platform for specific customer segments such as farmers and parents. Besides this core business that made up around 85 percent of the group’s revenue for the 2016-17 fiscal year, Alibaba also operated a range of digital entertainment and media operations and a cloud computing service operation. It had also made major investments in a logistics service. In addition, under a profit-sharing arrangement with Alipay, Alibaba also made a profit from the

10 China Daily (11 August 2005) “Yahoo Buys US$1 Billion Stake in Alibaba”, http://www.chinadaily.com.cn/english/doc/2005-08/11/content_468252.htm (accessed 11 December 2017). 11 Aldama, Z. (9 September 2017) “Going Cash Free: Why China is Light Years Ahead in the Online Payment Revolution”, Post Magazine, http://www.scmp.com/magazines/post-magazine/long-reads/article/2110118/going-cash-free-why-china-light-years-ahead (accessed 11 December 2017). 12 Hille, K. and Mann, J (29 July 2011) “Alibaba Settles Alipay Dispute with Yahoo”, Financial Times, https://www.ft.com/content/40a66dd2-b9ec-11e0-8171-00144feabdc0 (accessed 11 December 2017). 13 Sterling, G. (21 May 2012) “Yahoo And Alibaba Finally Agree To Divorce, Chinese Company Will Buy Shares Back For Billions”, Marketing Land, https://marketingland.com/yahoo-finally-agrees-to-divorce-alibaba-to-buy-shares-back-for-7-1-billion-12528 (accessed 11 December 2017). 14 Barreto, E. (24 September 2014) “Alibaba IPO Ranks as World’s Biggest after Additional Shares Sold”, Reuters, https://www.reuters.com/article/us-alibaba-ipo-value/alibaba-ipo-ranks-as-worlds-biggest-after-additional-shares-sold-idUSKCN0HH0A620140922 (accessed 11 December 2017). 15 Rushe, D. (20 September 2014) “Internet Giant Alibaba Valued at $231bn After Frenzied Debut as Public Company”, The Guardian, https://www.theguardian.com/business/2014/sep/19/alibaba-shares-price-americas-biggest-ipo (accessed 11 December 2017). 16 YCharts (n.d.) “Alibaba Group Holding Market Cap”, https://ycharts.com/companies/BABA/market_cap (accessed 18 February 2018).

https://ycharts.com/companies/BABA/market_cap


financial services platform (see Exhibit 3 for an overview of Alibaba’s business and the performance of different business segments of the group in 2017).17

Jack Ma

We will make it because we are young and we never ever give up! - Jack Ma, Founder and Executive Chairman of Alibaba Group18

“Never give up” was one of Jack Ma’s mottos, and surely he had walked his talk. Before he became the richest person in Asia, he had ample experiences of failure or being rejected, and he never gave up. When he was a child and teenager, he was not good at academic subjects. He had to re-sit school entrance examinations, twice for high school and four times for college. When he tried to find jobs after graduation, he was repeatedly rejected. He used to recount his experiences of job-seeking failures in good humour during his lectures and speeches at universities so as to illustrate the importance of never giving up — it was through rejections and failures that one learnt and grew. 19

From Rags to Riches Born in 1964 in Hangzhou, Jack Ma grew up during the Cultural Revolution, that is, when China was isolated from the rest of the world. A couple of incidents before his adulthood showed vividly his strong determined character, defiance, and opportunity-seizing. As a child, he used to take on schoolmates, even if they were physically stronger. “I was never afraid of opponents who were bigger than I,” he recalled in an interview.20 When Hangzhou became a popular tourist destination after Nixon’s visit to China, Jack Ma grasped the opportunity to learn English by waiting at hotels early mornings, which meant he had to get up early morning and cycle for 70 minutes every day, so as to offer his services as a free guide to English-speaking tourists in exchange for learning the language from them. Jack Ma’s good people and leadership skills were well shown in college. He was elected and appointed as the head of his college’s student union and later became the head of all student unions of his city, representing tens of thousands of college and university students in Hangzhou.21 After graduation and numerous job rejections, he finally landed a teaching post at a university, where he taught for six years and was elected best teacher for three years. His first experience as an entrepreneur was in a translation service company. The most valuable takeaway from this venture was his first encounter with the internet when he worked in a service job in the United States. Despite being told that he could find everything on the internet, Jack Ma could not find anything to buy from China when he searched for “beer”. This prompt him to start “Chinapage”, a listing of Chinese businesses and products, when he went back to China. The venture enjoyed good momentum until he made a mistake by partnering with a state-owned organization, hoping to get better resources. Jack Ma soon left the company as he was frustrated by the bureaucracy involved. That was when and where he learnt to “be in love with the government, but not marry them”.22

17 Alibaba Group (n.d.) “FY 2017 Annual Report”, http://www.alibabagroup.com/en/ir/pdf/form20F_170615.pdf (accessed 11 December 2017). 18 Jalloh, M. (n.d.) “Jack Ma: Most Influential Quotes”, Investopedia, https://www.investopedia.com/university/jack-ma-biography/jack-ma-most-influential-quotes.asp (accessed 11 December 2017). This was a recollection of Jack Ma on how Alibaba had beaten eBay in China. 19 NTV Kenya (20 July 2017) “Jack Ma's Full Public Lecture at the University of Nairobi”, Facebook, https://www.youtube.com/watch?v=IEkT-YatPnM (accessed 11 December 2017). 20 Liu, S.Y. and Avery, M. (2009) Alibaba: The Inside Story Behind Jack Ma and the Creation of the World's Biggest Online Marketplace, Harper Collins: New York. 21 Ibid. 22 Jalloh, M. (n.d.) “Jack Ma: Most Influential Quotes”, Investopedia, https://www.investopedia.com/university/jack-ma-biography/jack-ma-most-influential-quotes.asp (accessed 11 December 2017).


Despite this setback, Jack Ma had never given up his vision to bring Chinese small and medium enterprises to the rest of the world. At a time when China had no internet, no logistics, and no online payment infrastructure, Jack Ma conducted an inspirational and visionary pitch to his sixteen friends. Gathering them at his apartment, the motivational speaker painted a vivid picture of the way forward on how Alibaba could take on Silicon Valley, and make a difference to the country and to the world.23 These sixteen friends joint Jack Ma and his wife to start Alibaba, and the rest was history.

The Influence of Chinese Philosophy It is crucial for Alibaba to find the foundation from Chinese culture.

- Jack Ma, Founder and Executive Chairman of Alibaba Group24 The massive operation of Alibaba touched the lives of millions. In 2017, it engaged over 56,000 employees. This number was miniscule compared to the number of active sellers and buyers. In 2015, Alibaba reported an impressive 10 million active sellers and in 2017, its number of active buyers reached a whopping 446 million. 25 Without Alibaba’s platform, millions of small enterprises or individuals would not have been able to find a way to sell their products to millions of buyers. According to Jack Ma, Alibaba had helped create 33 million jobs in China.26 In fact, Jack Ma regarded Alibaba’s virtual business network as an economic system, “Last year, we sold US$550 billion (worth of products), that is, ranking (Alibaba as number) 21st country, GDP-wise, in the world. We are just a little bit bigger than Argentina”. Jack Ma was obviously aware of the fact that this was a huge responsibility. He had once said “I believe when you have $1 million, that’s your money – when you have $20 million, you start to have a problem. When you have $1 billion, that’s not your money, that’s the trust society gave you. They believe you can manage the money better than the government and others.”27 To help him shoulder this huge responsibility, Jack Ma resorted to the richness of Chinese culture and philosophy.

Tai Chi (太極) 28

Tai Chi helped Jack Ma found stability and peace when he faced tremendous pressure, “when I am calm, Alibaba would also be calm”. Among the wisdom of Tai Chi, Jack Ma appreciated the percipience of “focus”, “follow”, and “letting go” (定、隨、捨) most. In the context of corporate development, “focus” meant understanding oneself and the future. No matter what had happened, one should remain calm. “Follow” alluded to one’s ability; only those with ability knew what to follow. Letting go allowed one to see oneself inside out — only by understanding what one really wanted would one knew what to let go of.

23 YouTube (7 December 2016) “Jack Ma Trying to Convince His Friends to Join Alibaba in 1999”, https://www.youtube.com/watch?v=RQuh1vPu6QI (accessed 11 December 2017). 24 Jalloh, M. (n.d.) “Jack Ma: Most Influential Quotes”, Investopedia, https://www.investopedia.com/university/jack-ma-biography/jack-ma-most-influential-quotes.asp (accessed 11 December 2017). This was a recollection of Jack Ma on how Alibaba had beaten eBay in China. 25 Wieczner, J. (23 September 2015) “Alibaba: Here’s Why Our Mind-blowing Numbers are Real”, Fortune, http://fortune.com/2015/09/23/alibaba-says-numbers-real-not-fake/ (accessed 11 December 2017); Smith, C. (4 December 2017) “By the Numbers, 90+ Amazing Alibaba Statistics”, DMR, https://expandedramblings.com/index.php/alibaba-statistics/ (accessed 11 December 2017). 26 NTV Kenya (20 July 2017) “Jack Ma’s Full Public Lecture at the University of Nairobi”, Facebook, https://www.youtube.com/watch?v=IEkT-YatPnM (accessed 11 December 2017). This was a video recording. 27 Jalloh, M. (n.d.) “Jack Ma: Most Influential Quotes”, Investopedia, https://www.investopedia.com/university/jack-ma-biography/jack-ma-most-influential-quotes.asp (accessed 11 December 2017). 28 Zàn, M.X. (16 September 2017) “Jack Ma’s Tai Chi and Alibaba’s Philosophy”, kknews.cc, https://kknews.cc/zh-hk/sports/zn59vyq.html (accessed 11 December 2017). This was a Chinese website, the quotes and contents of this section was translated from this source.


Confucianism, Buddhism and Daoism (儒釋道)29

From Tai Chi, I realized the culture of Confucianism, Buddhism, and Daoism. - Jack Ma, Founder and Executive Chairman of Alibaba Group30

Jack Ma’s understanding of the Three Teachings guided him in managing Alibaba. To him, leadership of an enterprise should follow a key concept of Daoism— Wu Wei (無為). His take on Wu Wei was to strive hard even though he knew there might not be any results. Confucianism emphasized rules and how to manage the different classes of the society. That was why Jack Ma suggested that managing large corporations should follow the tenets of Confucianism. Jack Ma was also of the view that when an enterprise grew to a certain size, one had to understand Buddhism’s concept of “all the four elements are void” in order to do well.31 An example of the influence of the Three Teachings on Jack Ma’s business practice was that in making several key decisions, Jack Ma held meetings with the senior executive team of Alibaba in a temple. In the context of a temple and under the eyes of Buddha, it would be hard for the team to focus on how to eliminate competitors, or on how to make profits. The focus would naturally be how to help others, to help more and more people. In this way, the company could achieve better results. This had helped Jack Ma to form his priorities: that is always put customers and his employees in the first and second places over other parties.32 Another example was how Jack Ma decided to invest in cloud computing back in 2008, defying the opposition of his management team and the board. It was reported that Jack Ma faced much opposition from his management team not to invest in cloud computing. To clear up his mind about what he had to do, he lived in a Daoist temple for three days, without speaking a word. His major activities of the day were reading Laozi’s Dao De Jing and contemplating on its contents. As an eloquent speaker, Jack Ma used to do the talking in any group of people. The-three-day “no speech, no words” period while he was in the temple, not only helped Jack Ma clear his mind and focus on core and important matters, it also enabled him to become a good listener.33 The Three Teachings’ views on harmony also shaped Jack Ma’s views on competition. Daoism emphasized the harmony between humans and nature. Confucianism said humans should adapt to the demands of society. Buddhism stressed that one should change behaviour to conform to one’s inner development. In the domain of competition, the Western world emphasized knocking down competitors, yet the Chinese way was to let competitors learn the difficulties and quit, or to set barriers so that competitors would not know how to enter the market.

29 Staff Reporter (2 December 2016) “Alibaba Founder Jack Ma Delivers Keynote Speech at China Conference”, South China Morning Post, http://www.scmp.com/news/china/article/2051115/jack-ma-live-alibaba-founder-delivers-keynote-speech-china-conference (accessed 11 December 2017). This was a video recording of a speech by Jack Ma, unless otherwise stated, the contents of this section was translated from this source. 30 Zàn, M.X. (16 September 2017) “Jack Ma’s Tai Chi and Alibaba’s Philosophy”, kknews.cc, https://kknews.cc/zh-hk/sports/zn59vyq.html (accessed 11 December 2017). This 31 “All the four elements are void” was a translation of “四大皆空”, a key concept in Buddhism. The four elements were earth, water, fire, and air. These four elements made up the world, so be void of these elements meant be void of vanities and be indifferent to worldly temptations. 32 Jalloh, M. (n.d.) “Jack Ma: Most Influential Quotes”, Investopedia, https://www.investopedia.com/university/jack-ma-biography/jack-ma-most-influential-quotes.asp (accessed 11 December 2017). 33 The Story Teller (8 September 2016) “The Mysterious Power of Daoism, Buddhism and Confucianism Enabled Jack Ma to Claim Top Position in the Commercial World”, kknews.cc, https://kknews.cc/zh-hk/news/3bpngg.html (accessed 11 December 2017).


EQ, IQ, and LQ34 Jack Ma suggested that the spirit of leadership of a large corporation should have three key factors — emotional, intelligence, and love quotients. While high intelligence enabled a person to win, high emotional quotient would enable a person to be successful. Leaders had to have high emotional quotient in order to manage a team of highly intelligent people. Yet for any leader to be successful, Jack Ma suggested that a high love quotient or an embracing heart was indispensable. He proposed that any person without a responsible and loving heart for the future, for society and for people would never gain the respect of others. As a result, no one would willingly work and follow that person.

Roles Post-CEO

Green Mission Our challenge is to help more people to make healthy money, “sustainable money,” money that is not only good for themselves but also good for the society.

- Jack Ma, Emeritus Chair, China Global Conservation Fund 35 In 2013, Jack Ma resigned from the position of Alibaba’s CEO. Instead of retiring, as some people had speculated, his resignation from the executive role of Alibaba’s huge operations allowed him to actively assume many other roles. Apart from the obvious role of providing strategic leadership to Alibaba, since he was the executive chairman of the company, Jack Ma’s influence had transcended business and crossed over into environmental causes. He allocated 0.3 percent of Alibaba’s revenue to an environmental protection fund, which meant that every year, Alibaba donated millions to green missions.36 He was active in the fight against shark fishing by banning the trading of shark fins and shark-based products on Alibaba’s platform, and by pledging to end the consumption of shark fin dishes. As a board member of The Nature Conservancy in China, Jack Ma had been vocal in commenting on the country’s serious pollution problem, and he advocated the concept and practice of making sustainable and responsible profits.

Ambassador of Globalization In addition to his green missions, Jack Ma had been flying around the globe sharing his experience and views of being a responsible entrepreneur by giving speeches to universities and conferences. He attended conferences and meetings, where he exchanged views with world leaders and influential businessmen. In the course of so doing, he acted as an ambassador of Alibaba and of China trade. He was a keen supporter of globalization. He emphasized that trading was not just buying and selling, but the exchange of cultures and values embedded in the traded products and services. Many people saw the negative effects of, and therefore were opposed to, globalization. Jack Ma, however, suggested that people should work hard to better the existing framework, which obviously had rooms for improvement. He believed that a better framework of globalization would enable small enterprises, young individuals, and developing countries to benefit from international trade, thus enabling the exchange of culture and communications between countries. He saw the internet as offering better opportunities for the globalization framework.37 34 Hu, X. (21 October 2016) “Jack Ma’s Speech at Tsinghua: EQ Enabled Success, IQ Enabled Victory”, Huxiu.com, https://m.huxiu.com/article/167907.html (accessed 11 December 2017). 35 Diggelen, A.V. (26 September 2014) “BBC Conversation: Alibaba’s Jack Ma has a Green Mission”, Fresh Dialogues, http://www.freshdialogues.com/2014/09/26/bbc-conversation-alibabas-jack-ma-has-a-green-mission/ (accessed 11 December 2017). 36 Yan, A. (10 July 2016) “Alibaba Donates US$47m to Environmental Fund”, South China Morning Post, http://www.scmp.com/news/china/article/1987751/alibaba-donates-us47m-environmental-fund (accessed 11 December 2017). 37 Staff Reporter (2 December 2016) “Alibaba Founder Jack Ma Delivers Keynote Speech at China Conference”, South China Morning Post, http://www.scmp.com/news/china/article/2051115/jack-ma-live-alibaba-founder-delivers-keynote-speech-china-conference (accessed 11 December 2017).


Alibaba's Global Economy

…our true purpose lies in harnessing the power of technology and innovation to make the world economy more inclusive and more healthy toward sustainable development

- Jack Ma, Founder and Executive Chairman of Alibaba Group38

The Fifth Global Economy of the World In October 2017, Jack Ma, in the capacity of executive chairman of Alibaba, sent a public letter to the company’s shareholders. In this letter, Jack Ma outlined his vision of how to take Alibaba to the next level. That is, from a platform with China-centric active buyers and sellers, to a group that would do global business. Continuing the mission of making it easy for people to do business, Jack Ma envisioned Alibaba as providing a platform that would support small businesses anywhere. “By 2036 … Alibaba’s infrastructure will support commerce activity with a combined transaction value that will rank as the world’s fifth-largest economy. … A platform that will enable the creation of 100 million jobs, serve two billion consumers and support 10 million profitable small businesses.” This was in line with Jack Ma’s views on globalization. The focus was to deploy technological advancements to better the current world trade frameworks. The aim was to enable small businesses and young people from developing countries, as well as the “tens of millions of impoverished citizens” in rural areas of China, to reap the benefits of globalization and free trade.

Five Strategic Areas to Grow To realise this vision, Alibaba would invest and grow in five strategic areas of “New Retail, New Finance, New Manufacturing, New Technology, and New Energy”. In the letter to shareholders, Jack Ma elaborated on four of these five areas: • New Retail: As ecommerce evolved into new retail, Alibaba’s trading platforms would

be the key to restructuring the global trade scene, enabling small businesses to trade with customers anywhere, something only big companies with sufficient resources could enjoy in the past.

• New Finance: The fact that approximately five billion people without access to financial services presented a great opportunity for Alibaba. Big data and technological advancements had enabled better credit and risk management, and Alibaba was well positioned to provide a next generation financial system that would allow the neglected — small businesses, young people, and women — to have equal access to financial services.

• New Manufacturing: True globalization demanded a super-efficient logistics system. Alibaba had invested and would continue to invest in building an infrastructure that could deliver goods across China in 24 hours and anywhere of the world in 72 hours. This super-efficient logistics system meant that small businesses would be able to reduce inventory risk, and to harness new business opportunities. Manufacturing would therefore be data-driven.

• New Technology: Alibaba had over 25,000 developers and researchers that focused on developing a highly efficient and inclusive globalization trading platform. The company would continue to invest in this direction.

38 Alizila Staff (17 October 2017) “2017 Letter To Shareholders from Executive Chairman Jack Ma”, Alizila, http://www.alizila.com/2017-letter-shareholders-executive-chairman-jack-ma/ (accessed 11 December 2017). This quote, as well as the quotes in the sections on “The Fifth Global Economy of the World” and “Five Strategic Areas to Grow”, were from this letter.


The Challenge of Fighting Counterfeits

Taobao is an important concern due to the large volume of allegedly counterfeit and pirated goods available and the challenges right holders experience in removing and preventing illicit sales and offers of such goods.

- The Office of the United States Trade Representative39 The impressive growth of Alibaba was partly fuelled by fake products. On 23 November 2015, an article published in Forbes magazine estimated that up to 80 percent of Taobao’s offers, anything from handbags to auto parts, sportswear to jewellery, were counterfeit.40 The article represented a fresh round of pressure on the platform’s counterfeit problem. The company had in the past worked and lobbied hard to have its name delisted from the Office of United States Trade Representatives’ Review of Notorious Markets. The company succeeded in 2012, paving its way for its public listing in 2014 in New York. The delisting was the result of serious efforts by Alibaba to fight counterfeits. It was reported that Alibaba spent a combined US$160 million in 2013 and 2014 for this purpose. A team of 2,000 staff, and advanced antifraud software, were deployed to remove counterfeit products from Alibaba’s platform.41 Yet one year after its celebrated record-setting public listing, in December 2015, Alibaba’s Taobao was again, and embarrassingly, being listed by the Trade Office as one of “the world’s most notorious markets for counterfeit goods”.42

Could Alibaba Find Answers in Chinese Philosophy?

The robust picture of Alibaba becoming the world’s global economy in 20 years’ time meant that people around the world would need to trust its trading platforms. Buyers would need to respect the company, while sellers would need to develop confidence in the system. The ability to fight counterfeits was just one of the many challenges that Jack Ma and Alibaba faced. Alibaba was perhaps the best known Chinese company in the Western world and developing countries. With some in the world sceptical on China as a global power-state, others not so sure about what China as a new superpower would mean to the world, Alibaba’s strong Chinese identity might hinder the company when it strove to gain trust and earn respect from the global market. Jack Ma had in the past found answers in Chinese philosophy in leading the growth of the company to where it was today. Would Chinese philosophy continue to provide answers to Alibaba to face these challenges? .

39 Li, C. (22 December 2016) “Alibaba Faces Growing Pressure over Counterfeit Goods”, https://www.nytimes.com/2016/12/22/business/alibaba-ustr-taobao-counterfeit.html (accessed 11 December 2017). 40 Schuman, M. (23 November 2015) “Why Alibaba’s Massive Counterfeit Problem Will Never Be Solved”, Forbes, https://www.forbes.com/sites/michaelschuman/2015/11/04/alibaba-and-the-40000-thieves/#553e7fd429dc (accessed 11 December 2017). 41 Ibid. 42 Li, C. (22 December 2016) “Alibaba Faces Growing Pressure over Counterfeit Goods”, https://www.nytimes.com/2016/12/22/business/alibaba-ustr-taobao-counterfeit.html (accessed 11 December 2017).


EXHIBIT 1: HOW EBAY FAILED IN CHINA In 2004, eBay had just entered China and was planning to dominate the China market. Alibaba was a local Chinese company that helped small- and medium-sized enterprises conducting business online. Most people in the West had barely heard about it. When eBay entered the China market, Jack Ma, founder and CEO of Alibaba, was alarmed that “someday, eBay would come in our direction.” He knew too well that there was no clear distinction between small businesses and individual consumers in China. As a defensive strategy, Ma decided to launch a competing consumer-to-consumer (C2C) auction site, not to make money, but to fend off eBay from taking away Alibaba’s customers. A new web site named Taobao—meaning “digging for treasure”—was launched free of charge for individuals buying and selling virtually any consumer goods, from cosmetics to electronic parts. In 2004, I visited Alibaba at its headquarters in Hangzhou. It is located on a campus of three ten-story buildings in the northeastern part of Hangzhou, about a ten-minute taxi drive from West Lake. In the lobby, a flat panel TV was streaming video clips of Jack Ma speaking at various public events where his admirers, most of them in their twenties, were cheering him like a rock star. While visiting Alibaba’s headquarters in Hangzhou, I felt the same “insanely great” energy of entrepreneurship as I felt in Silicon Valley. When I asked a senior manager at Alibaba whether the company was worried that it would be bought by eBay, I was blown away by the answer: “We will buy eBay!” EBay, on the other hand, began its most aggressive campaigns to dominate the market and thwart competitors. Soon after Taobao was launched, eBay signed exclusive advertising rights with major portals Sina, Sohu, and Netease with the intention of blocking advertisements from Taobao. In addition, eBay injected another $100 million to build its China operations, now renamed “eBay EachNet,” and was spreading its ads on buses, subway platforms, and everywhere else. Ma fought back cleverly. Knowing that most small business people would rather watch TV than log on to the Internet, Ma secured advertisements for Taobao on major TV channels. In 2004, one could easily feel the heat of fierce competition between eBay EachNet and Taobao. When I was taking a taxi in Shanghai, I noticed the ads of eBay EachNet on the back of the driver’s seat; when I checked into my hotel, I heard the ads for Taobao popping up on TV almost every half hour. Since its name means “digging for treasure” in Chinese, it attracted a lot of attention by a smart play on words. While most people in the West had never heard of Taobao, its name was heard loud and strong in China. Nevertheless, most industry observers were suspicious about Taobao’s future, particularly its sustainability. Unlike eBay EachNet, which charged its sellers for listing and transaction fees, Taobao was free to use. Neither Ma nor any members from the management team gave a definite timeline as to how long this “free period” was going to last. “Free is not a business model,” the doubters said. Some thought Ma was crazy and nicknamed him “Crazy Ma.” No doubt Crazy Ma was changing the game. Taobao got a quick start with its free listings and continued to gain momentum as more and more users switched from eBay EachNet to Taobao. According to a Morgan Stanley report, Taobao was more customer focused and user friendly than eBay EachNet. With most users not sophisticated about auctions, the majority of Taobao’s listings were for sales. Only 10 percent of its listings were for auctions, while eBay EachNet had about 40 percent of its listings for auctions. Taobao had also better terms for its


customers: it offered longer listing periods (fourteen days) and let customers extend for one more period automatically. EBay EachNet did not have this flexibility. Taobao’s listings appeared to be more customer-centric while eBay EachNet’s listings more product-centric. For example, Taobao’s listings were organized into several categories, such as “Men,” “Women,” and so on, while eBay EachNet stuck to its global platform, grouping users into “Buyers” and “Sellers.” At that time, China had about three hundred million cell phone users versus ninety million Internet users. Taobao offered instant messaging and voice mail to mobile phones for buyers and sellers because Chinese users were cell-phone savvy rather than computer savvy. It was clear that Taobao had an upper hand against its global counterpart because it really understood Chinese customers. As a result, Taobao had higher customer satisfaction than eBay EachNet. According to iResearch, a Beijing-based research firm, the user satisfaction level was 77 percent for Taobao versus 62 percent for eBay EachNet. The experience of competing with eBay gave Ma tremendous confidence. He was determined to win: “eBay may be a shark in the ocean, but I am a crocodile in the Yangtze River. If we fight in the ocean, we lose—but if we fight in the river, we win.” By March 2006, Taobao had outpaced eBay EachNet and became the leader in China’s consumer-to-consumer (C2C) market, with 67 percent market share in terms of users, while eBay EachNet had only 29 percent market share. “The competition is over,” Ma exclaimed. “It’s time to claim the battlefield.” On December 20, 2006, Meg Whitman, eBay's then CEO, flew to Shanghai to take part in a press conference to announce a new joint venture with Beijing-based Internet portal Tom Online, which provides wireless value-added multimedia services. It was, in reality, a formal announcement of eBay’s withdrawal from the online auction market in China. EBay shut down its China site, eBay EachNet, and took a back seat to a company with only $173 million in revenue and no experience in the online auction business. Jack Ma represents a new generation of savvy Chinese competitors who should not be underestimated. They study their markets and bring to bear their local knowledge. They learn from their competition and from their own mistakes as they move up the competitive landscape. The case of Alibaba provides an invaluable lesson for multinationals to succeed in China market: First, eBay failed to recognize that the Chinese market and the business environment are very different from that of the West. EBay sent a German manager to lead the China operation and brought in a chief technology officer from the United States. Neither one spoke Chinese or understood the local market. It was eBay’s biggest mistake. Second, because the top management team didn’t understand the local market, they spent a lot of money doing the wrong things, such as advertising on the Internet in a country where small businesses didn’t use the Internet. The fact that eBay had a strong brand in the United States didn’t mean it would be a strong brand in China. Third, rather than adapt products and services to local customers, eBay stuck to its “global platform,” which again did not fit local customers’ tastes and preferences.

Sources: Wang, H.H. (12 September 2010) “How EBay Failed in China”, Forbes, https://www.forbes.com/sites/china/2010/09/12/how-ebay-failed-in-china/#d1bc1f55d57a (accessed 11 December 2017). This exhibit is extracted from this article.

https://www.forbes.com/sites/china/2010/09/12/how-ebay-failed-in-china/#d1bc1f55d57a


EXHIBIT 2: JACK MA TAKES ALIPAY

In January 2009, Carol Bartz took the place of Jerry Yang as Yahoo’s CEO. Yang and Alibaba’s Ma were friends. They had been the ones that negotiated the 2005 deal where Yahoo invested $1 billion in Alibaba Group and sold it Yahoo China in exchange for a 39% stake (later increased to 43%) Yang continued to sit on Alibaba’s board, but Bartz was in control. On June 1, 2009, Ma made the first stake transfer of Alipay to Zhejiang Alibaba E-Commerce Co. He owned 80% of this company with trusted Alibaba co-founder Xie Shihuang owning the remaining 20%. Ma had used this structure previously. Before the 2007 Alibaba Limited (“Alibaba.com”) IPO, he restructured Alibaba Group to preserve his control. He owned 80% of Hangzhou Alibaba with Xie once again owning the remaining 20%. Hangzhou Alibaba held the Internet content provider (ICP) license that gave Alibaba Limited permission to operate in China. Ma could withhold the license if others tried to take control of Alibaba Limited. The Alipay transfer occurred ostensibly because the People’s Bank of China had begun drafting regulations effectively forbidding third party payment companies like Alipay from having foreign investors. Ma claimed he consulted the Alibaba Board before the move, but Yahoo said otherwise. By December 2009, Yahoo China was no longer ranked in the top ten of most visited websites in China unlike search rivals Baidu and Google.cn. 4 That same month Yahoo partnered with Microsoft in developing search technology to compete with U.S. search leader Google. Ma was angry that Yahoo had effectively lost its unique search technology. Bartz was increasingly frustrated with Ma’s inability to revive its struggling former property, Yahoo China. Boardroom relations frayed. Jack Ma completed the transfer of Alipay to his personal company on August 6, 2010. The two Alipay transfers to Ma were made for a total of 330 million Yuan based on the "group's internal asset transfer price" according to Alipay CFO Jing Xiandong. Analysts noted that this price severely undervalued Alipay. Alibaba Group still controlled Alipay’s equity through a variable interest entity (“VIE”) structure. The VIE structure contractually obligated Alipay to distribute its revenue to Alibaba. In 2000, China online portal Sina was the first to use the VIE structure to skirt Chinese regulations and go public on an overseas exchange. In early 2011, Jack Ma punctured the faith foreign investors had in VIEs by becoming the first Chinese entrepreneur to unilaterally unwind a VIE when he dismantled Alipay’s. The VIE may not have run afoul of Chinese regulators, but Ma claimed he needed to terminate the VIE in case they thought that it still gave foreign investors control over Alipay. Given Alipay’s high visibility, Ma said he felt that it would not escape scrutiny. Alipay CFO Jing claimed there was a lot of pressure on Alibaba to comply with the new third-party payment provider regulations. He said the central bank sent them instructions in the first quarter of 2011 requesting written confirmation that Alipay was a domestic firm with no foreign investors. If Alipay couldn’t comply, it would have to seek approval from the high-ranking, but slow-moving State Council. Such approval would take some time to obtain and was not certain given the lack of official endorsements of VIE structures. Alipay’s existence could be placed in jeopardy so Ma felt he had to unwind the VIE. This meant Yahoo, Softbank and other Alibaba Group shareholders including its executives no longer had any stake in Alipay. The need to terminate the VIE was questioned by a People’s Bank of China official who had helped write some third-party payment regulations.


“‘The central bank was unlikely to take the initiative to instruct a company to clarify whether it has a VIE arrangement or not,’ the official said. ‘The more likely scenario would be the company taking the initiative to consult central bank officials over the feasibility of the VIE.’ ‘The likely answer that Alipay would receive was: if the VIE arrangement leads to the foreign holdings in Alipay, Alipay’s application should be submitted to the State Council for approval,’ the official said. ‘But that does not mean Alipay has to suspend its business, pending the approval by State Council.’ Given its market size, Alipay would have stood a chance before the State Council, the official said, since nonVIE enterprises with foreign investors have gained approval in the past.”

Third-party payment providers like Alipay were not treated as "foreign investment restricted" or “foreign investment prohibited” companies. One of these companies’ general managers said that about half of the twenty-seven companies that received third-party licenses with Alipay in May had foreign investment. Alibaba’s Board was divided between Alibaba’s Ma with CFO Joseph Tsai and foreign investors Yang with Softbank president Masayoshi Son. Jack Ma claimed he had to make a quick decision because the Alibaba Board was too indecisive. He sent this message to the central bank, "Zhejiang Alibaba is Alipay’s sole and actual controller and no foreign investors have actual controlling rights over Alipay through stock holdings, agreements or other arrangements."11 CFO and major Alibaba shareholder Joseph Tsai explained that, “The Alipay matter is a very special case…but Taobao will not have this same kind of sensitive problem, so it’s not likely that VIE agreements will be terminated in the future.” Yahoo was shocked. When it invested in Alibaba in 2005, it signed an agreement with Alibaba that required Board approval for asset disposals that exceeded $10 million. Alipay far exceeded this threshold yet Yahoo had not agreed to dispose of it as it mentioned in its May 2011 press release. How could Yahoo have responded to this contract violation? Its investors demanded answers. Alibaba Group executives and employees held about 30% of Alibaba shares and wondered how they would be compensated, too. The pressure built on Jack Ma to explain himself. After announcing the loss of Alipay in May 2011, Yahoo’s stock priced declined 23.8% destroying $5.2 billion in shareholder value by the time Softbank and it agreed on some compensation for Alipay from Jack Ma on July 29, 2011. Ma kept control of Alipay, but guaranteed a minimum $500 million payment through an upfront promissory note with a seven year maturity. This was funded by shares from Alibaba management representing 2% of Alibaba Group’s float.15 Alibaba Limited shares were included.16 The upside consisted of 37.5% of Alipay’s equity value from an IPO or other liquidity event. This was guaranteed in the next ten years with a valuation floor of $2 billion and ceiling of $6 billion. It included the upfront $500 million note, but still meant Yahoo’s indirect stake had been diluted from 43% to 16%. Alipay was an immature company focused on expansion and not likely to go public anytime soon. In the meantime, Alipay agreed to contribute 49.9% of its pre-tax income to Alibaba plus royalties. The pre-tax contribution had a floor of 30% in case of dilution, but was not expected to be significant as Alipay was only “marginally” profitable. Taobao and other group businesses would still have preferential service terms for fifty years with automatic extensions. Sources: Li, W. and Bethune, B. (19 September 2011) “Alibaba-Yahoo! Case B: Jack Ma Takes Alipay”, Cheung Kong Graduate Business School, http://english.ckgsb.edu.cn/sites/default/files/case_downlaod_file/alibaba-yahoo_case_b.pdf (accessed 11 December 2017).

http://english.ckgsb.edu.cn/sites/default/files/case_downlaod_file/alibaba-yahoo_case_b.pdf


EXHIBIT 3A: ALIBABA'S COMPANY OVERVIEW EXTRACTED FROM THE GROUP'S 2017 FY ANNUAL REPORT

Our businesses are comprised of core commerce, cloud computing, digital media and entertainment, and innovation initiatives and others. Through investee affiliates, Cainiao Network and Koubei, respectively, we participate in the logistics and local services sectors. In addition, we have a profit sharing interest in Ant Financial Services, the financial services group that operates mainly through Alipay, the leading third-party online payment platform in China.

Core Commerce

Retail Commerce in China We are the largest retail commerce company in the world in terms of GMV in the twelve months ended March 31, 2017, on the basis of publicly available comparable transaction value data for the most recent fiscal year. We operate Taobao Marketplace, China’s largest mobile commerce destination, and Tmall, China’s largest third-party platform for brands and retailers, in each case in terms of GMV in 2016, according to iResearch. Taobao Marketplace and Tmall (including Juhuasuan), which comprise our China retail marketplaces, generated a combined GMV of RMB3,767 billion (US$547 billion) in the twelve months ended March 31, 2017. There were 454 million annual active buyers on these marketplaces in the twelve months ended March 31, 2017. In March 2017, the various mobile apps that consumers use to access our China retail marketplaces had 507 million mobile MAUs. In fiscal year 2017, we generated 72% of our revenue from our retail commerce business in China. The revenue on our China retail marketplaces is generated from merchants through online marketing services, commissions on transactions and fees for other online services. In fiscal year 2017, we generated 80% of this revenue through mobile devices.

Wholesale Commerce in China We operate a China wholesale marketplace, 1688.com, which matches wholesale buyers and sellers in categories such as general merchandise, apparels, electronics, raw materials, industrial components and agricultural and chemical products. A significant number of merchants on our China retail marketplaces source their inventory on 1688.com.

Retail Commerce — Cross-border and Global We operate AliExpress, our global retail marketplace with approximately 60 million annual active buyers from around the world in the twelve months ended March 31, 2017, buying directly from manufacturers and distributors in China. Tmall Global is our platform within Tmall for overseas brands and retailers to reach Chinese consumers without the need for physical operations in China. In April 2016, we acquired a controlling stake in Lazada, which operates e-commerce platforms in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. In the twelve months ended March 31, 2017, Lazada had approximately 23 million annual active buyers.

Wholesale Commerce — Cross-border and Global We operate Alibaba.com, China’s largest global online wholesale marketplace in 2016 by revenue, according to iResearch. As of March 31, 2017, buyers on Alibaba.com were located in over 200 countries and regions all over the world.


Cloud Computing We operate Alibaba Cloud Computing, or Alibaba Cloud, China’s largest provider of public cloud services in 2016 by revenue, according to IDC. The technologies that power Alibaba Cloud grew out of our own need to operate the massive scale and complexity of our core commerce business. In 2009, we founded Alibaba Cloud to make these technologies available to third-party customers. Alibaba Cloud offers a complete suite of cloud services, including elastic computing, database, storage and content delivery network (CDN), large scale computing, security, management and application services, big data analytics and a machine learning platform. As of March 31, 2017, Alibaba Cloud had approximately 874,000 paying customers.

Digital Media and Entertainment Based on the strength of our relationship with consumers and our capability in leveraging commerce data that can be applied to serving the broader interests of consumers, we have established our digital media and entertainment business, mainly through acquisitions. In 2014, we acquired UCWeb, which operates UC Browser, one of the top three mobile browsers in the world and the number one mobile browser in India and Indonesia by page view market share as of May 2017, according to StatCounter. UCWeb also provides mobile value-added services to users including news feeds, mobile web navigation and mobile search. Shenma ( ), its mobile search business, is the second largest mobile search engine in China as of May 2017, according to StatCounter. In April 2016, we acquired Youku Tudou, a leading multi-screen entertainment and media company in China, enabling users to search, view and share high-quality video content quickly and easily across multiple devices. Youku Tudou and UC Browser serve as the two key distribution platforms for our digital media and entertainment business. These businesses and our other media and entertainment-related businesses, including news feeds, mobile app distribution, music, sports, literature and games, provide a comprehensive digital media and entertainment ecosystem for users to discover and consume content and engage and interact with each other. In March 2017, our digital media and entertainment businesses had over 500 million mobile MAUs, including overseas users.

Innovation Initiatives and Others We continue to develop new service offerings to find new ways to meet the needs of our customers and expand the reach of our ecosystem. For example, YunOS is our cloud-based, data and service-oriented operating system that can be used on a wide range of smart devices, including automobiles, mobile phones, TVs and set-top boxes. AutoNavi provides digital map, navigation and real-time traffic information to users in China and serves as an open platform powering mobile apps and fundamental services in our ecosystem. DingTalk, our proprietary enterprise communication and collaboration platform, unifies the critical tasks of communication and collaboration in the work place, offering text, photo, voice and video communication, collaboration features and workflow management, such as convenient attendance recording and expense approval. An ecosystem has developed around our platforms and businesses that consists of consumers, merchants, brands, other businesses, third-party service providers and strategic alliance partners. At the nexus of this ecosystem are our technology platform, our marketplace rules and the role we play in connecting these participants to make it possible for them to discover, engage and transact with each other and manage their businesses anytime and anywhere. Much of our effort, time and energy is spent on initiatives that are for the greater good of the ecosystem and on balancing the interests of its participants. We feel a strong responsibility for the continued development of the ecosystem and we take ownership in this development. Accordingly, we refer to this as ‘‘our ecosystem.’’ Our ecosystem has strong self-reinforcing network effects benefitting its various participants, who are in turn invested in our ecosystem’s growth and success.


Sources: Alibaba Group (n.d.) “FY 2017 Annual Report”, http://www.alibabagroup.com/en/ir/pdf/form20F_170615.pdf (accessed 11 December 2017). The extract was from pp.58-60.


EXHIBIT 3B: FISCAL 2017 SEGMENT REPORTING, ALIBABA GROUP

Sources: Alibaba Group (18 May 2017) “March Quarter 2017 Results” http://www.alibabagroup.com/en/ir/presentations/pre170518.pdf (accessed 11 December 2017).

http://www.alibabagroup.com/en/ir/presentations/pre170518.pdf


EXHIBIT 4: 2017 LETTER TO SHAREHOLDERS FROM EXECUTIVE CHAIRMAN JACK MA, ALIBABA

Dear Alibaba Shareholders, Alibaba Group recently celebrated our 18th anniversary with an all-employee gathering. While we celebrated the past, this event was focused on the future. Compared to where we started, we are a grown-up today. But compared to the future, we have only just come of age. The future holds endless possibilities and imagination for Alibaba. We made it our mission to make it easy to do business anywhere when we founded the company 18 years ago. Going public three years ago reinforced our sense of mission, that while public shareholders expect us to be profitable, our raison d’être cannot be merely to make money. Over the past three years we delivered on short-term financial goals, but our true purpose lies in harnessing the power of technology and innovation to make the world economy more inclusive and more healthy toward sustainable development. The world as we know it will be dramatically changed by the advent of new technology in the coming 30 years. The internet will no longer be the sole domain of so-called internet companies; the internet will work for every company. We see transformation rapidly taking place in many industries, with internet technologies serving as the catalyst for revolutionary change. Eighteen years ago, we saw that changing of the business landscape in China could bring tremendous opportunities. Today, we see the endless possibilities that technology and innovation can bring to improving society and people’s lives. Alibaba’s development must take on a different path from most other companies. As one of the world’s largest technology companies with a mission focused on serving small business, we must contribute to the sustainable development of a healthy world economy. As I said at our 18th anniversary all-hands meeting, we aim to foster an economy in which small business, young people and women in developing and under-developed nations can participate in and benefit from globalization. To this end, the direction and areas in which we will pursue our business will not be the same as anyone else. We are fully committed to creating the infrastructure for commerce in an inclusive economy because Alibaba is led by our ideals and vision. Commerce as we know it is changing in front of our eyes. “E-commerce” is rapidly evolving into “New Retail.” The boundary between offline and online commerce disappears as we focus on fulfilling the personalized needs of each customer. In China, our New Retail initiatives are taking shape as the starting point to our “Five New” strategy – comprised of New Retail, New Finance, New Manufacturing, New Technology and New Energy. We have already geared our organizational structure toward the support of our “Five New” strategy for the coming decades. New Retail will bring about a restructuring of the global supply chain and change the complexion of globalization from the domain of big companies to small businesses. The Chinese government’s push for the “Belt and Road Initiative” presents a unique opportunity for Alibaba to grow our business internationally. Last year I spent a significant portion of my time traveling around the world to seek shared interests. Much to my delight, almost all countries recognize the need to incorporate small businesses into a more-globalized environment. Taking our ideas to concrete action, we successfully launched our first eWTP (Electronic World Trading Platform) hub outside China. This is but a very small step for us as we realize the need to include more young people with global perspectives to join us. In the future, we expect to invest significant energy and resources in businesses that further our vision of an inclusive globalization.


New Finance will improve the financial systems that have been built over the past 300 years. Approximately five billion people today still do not have access to financial services. Ant Financial will take on the responsibility of building a financial system for the 21st century. It will make financial institutions more transparent and more inclusive through technology and innovation. It will enable small businesses, young people and women which have been neglected to equally access financial services. New Finance will be enabled by a more-robust credit system and better risk management because of the availability of data. This is the direction in which we will pursue our financial services innovation. The development of logistics is crucial to the success of globalization. Over the past 10 years, the logistics industry in China has experienced miraculous growth. Last year, the industry processed 80 million packages each day, and we soon expect that figure to reach 100 million per day. Ten years from now, we may be faced with one billion packages per day. Cainiao, our logistics network company, must prepare for this future. We are taking part in the transformation of the logistics industry through integration of data and assets in the supply chain. Our goal is to realize delivery anywhere across China within 24 hours and anywhere in the world within 72 hours. More importantly, technology and innovation in demand-driven New Manufacturing and logistics will help small businesses reduce inventory risk and create new opportunities for profit growth. We believe this will bring hope to the physical economy and manufacturing sector. We see inclusive globalization, inclusive finance and data-driven manufacturing as part of our responsibility to foster a new economy, but this also brings opportunity to further our mission “to make it easy to do business anywhere.” By 2036, we envision that Alibaba’s infrastructure will support commerce activity with a combined transaction value that will rank as the world’s fifth-largest economy. We aim to be a platform that will enable the creation of 100 million jobs, serve two billion consumers and support 10 million profitable small businesses. While Alibaba will serve as an advocate, driver and platform, the economy supported by Alibaba’s commerce infrastructure will be far bigger than Alibaba the company. Through this “Alibaba economy,” we hope to enable consumers and businesses to buy globally, sell globally, pay globally, deliver globally and travel globally. We want to enable more developing countries, small businesses and young people to share the benefits of globalization and free trade, and to share the innovation and opportunities that accompany technological advancement. To achieve our goals, we will increase our investment in technology development and innovation. Successful companies of the future will derive profitability from technology rather than market scale; they will win the market through innovation rather than big marketing budgets. We believe the strength of our technology will be the competitive advantage for participants in the Alibaba economy. Right now, Alibaba has more than 25,000 developers and researchers, and we will establish research organizations around the world, with the aim of providing highly efficient and inclusive infrastructure for commerce. We want to leverage technology to create better job opportunities, and we do not believe technology will undermine people. Technology and innovation will be the source of vitality for the Alibaba economy, while sharing and inclusiveness will be its core value. We hope that Alibaba earns its respect not through our business profitability, but because we can create true lasting value and solve real problems for the world. We will leverage the power of technology to further the development of rural China. We cannot forget about the realities across the Chinese countryside and we cannot leave the tens of millions of impoverished citizens behind. If Alibaba can help rural villages and impoverished areas across China to improve their conditions through technology, then we will have a chance to make an impact in other places around the world. Technology does not have to be the culprit in widening the wealth gap around the world. I believe there is a massive opportunity to help alleviate poverty and catalyze economic development in China’s rural


countryside through technology and innovation. This is our opportunity to showcase what we are really capable of. I am proud to reiterate our core belief that Alibaba must do the things other people are unwilling or unable to do, but must be done. This is our place in society. We come from humble roots, but Alibaba today is far from being ordinary. We have responsibilities beyond delivering business results. When I started Alibaba 18 years ago, my partners and I asked ourselves not how to build a successful company, but why we want to build this company in the first place. We have conviction that the ultimate mission of a great company is to solve the problems of society. Only by contributing real value to society can a company build a sustainable business. We remain committed as ever to this belief today. Thank you for giving us your trust and support along our journey. Jack Ma Executive Chairman Alibaba Group Sources: Alizila Staff (17 October 2017) “2017 Letter To Shareholders From Executive Chairman Jack Ma”, Alizila, http://www.alizila.com/2017-letter-shareholders-executive-chairman-jack-ma/ (accessed 11 December 2017).

http://www.alizila.com/2017-letter-shareholders-executive-chairman-jack-ma/

http://www.alizila.com/2017-letter-shareholders-executive-chairman-jack-ma/

To order this teaching note, please contact Centennial College, c/o Case Research Centre, Centennial College, Wah Lam Path, Pokfulam, Hong Kong; website: http://cases.centennialcollege.hku.hk . © 2018 by Centennial College, an Independent College Established by HKU. No part of this copyrighted publication may be reproduced or transmitted, in whole or part, in any form or by any means, whether electronic, mechanical, photocopying, recording, web-based or otherwise, without the prior permission of Centennial College. This teaching note was prepared for class discussion purposes and is not intended to demonstrate how business decisions or other processes are to be handled. Ref. 18/001T

Page 1

LO W H AILIE K Y TANG CHAN WING WAH

COULD CHINESE PHILOSOPHY GUIDE JACK MA AND ALIBABA TO GLOBAL EXPANSION?

Teaching Note

Synopsis

It is not an understatement to say that Jack Ma is a legend in China. At the age of 53, he is the wealthiest person, not only in China, but in Asia. Forbes latest ranking put him at world’s number eighteen 1 He co-founded the Alibaba Group (“Alibaba”), the world’s biggest e-commerce group and a conglomerate that owns a diverse portfolio of online and offline businesses.2 Apart from being a successful businessman, he is determined to live life to the fullest. He self-financed himself to paint, to sing, and to act in movies with famous artists. But perhaps most importantly, he is one of the few elite Chinese that are truly influential outside the political system of the world’s second largest economic entity. When U.S. officials criticized China at a conference in New York in July 2017, Jack Ma stood up for the country, and boldly stated that “Chinese culture is based on the philosophies of Confucianism, Buddhism, and Daoism (儒釋道 “the Three Teachings”). 3 When every one of you criticizes China, has anyone, amongst the twenty-something attendees today, read a chapter of Laozi’s Dao De Jing ( 道德經) or that of Confucius’s Analects (論語)? If you do not understand another country’s culture, you do not have the right to criticize it.”

Under the direction of Jack Ma, Alibaba has grown from a minuscule operation in Jack Ma’s apartment in 1999 to a global conglomerate with a revenue of US$23 billion.4 Along the way, Jack Ma has propelled Alibaba to overcome infinite number of technical and financial 1 Flannery, R. (20 August 2017) Alibaba’s Jack Ma is Back on Top as Asia’s Richest Man, Forbes, https://www.forbes.com/sites/russellflannery/2017/08/20/alibabas-jack-ma-is-back-on-top-as-asias-richest-man/#40e6054b4e75 (accessed 11 December 2017). 2 Topics (2017) “Alibaba”, South China Morning Post, http://www.scmp.com/topics/alibaba (accessed 11 December 2017). 3 Daoism is also written as Taoism, but they are exactly the same term. 4 History and Milestones (n.d.) “1999”, Alibaba Group, http://www.alibabagroup.com/en/about/history?year=1999 (accessed 11 Dec 2017); Press Release (18 May 2017) “Alibaba Group Announces March Quarter 2017 and Full Fiscal Year 2017 Results”, Alibaba Group, http://www.alibabagroup.com/en/news/press_pdf/p170518.pdf (accessed 11 December 2017).

http://cases.centennialcollege.hku.hk/

COULD CHINESE PHILOSOPHIES GUIDE JACK MA AND ALIBABA TO GLOBAL EXPANSION? (Ref.: 18/003T)

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challenges, and to win a war against eBay.com to become the world’s largest e-commerce conglomerate. Recent years, Alibaba has fought several heated battles with its major competitor, the Tencent Group, in its home country. Both companies have scrambled for market share of different lines of businesses in China: from online retail to online payments, from ride-sharing to bike-sharing. With a growing and vibrant Chinese home market, the competition is just part of business as usual that does not take up too much of Jack Ma’s attention. His major focus is to take Alibaba to the global stage and grow. To guide him through the challenges facing this Herculean task, Jack Ma resorts to the Three Teachings, which gives him insights and backs him in his sound decision making.

What is the key wisdom that Jack Ma has taken from the Three Teachings? How does these insights guide him and Alibaba to success? To win on the global stage, Alibaba has to replicate the acceptance of the Chinese community among the global community. In what ways can the Three Teachings help Jack Ma and his conglomerate? With the United States accusing Alibaba as one of “the world's most notorious markets for counterfeit goods”,5 can the philosophies of the Three Teachings help?

Teaching Objectives

The Three Teachings and their relationship to business and management has become an area of academic discussion and research. 6 This interest may partly due to their “enduring significance” in Asian culture,7 and partly to the sizeable number of people, mostly in Asia, whose behaviour in the business and management contexts are influenced by their philosophies. For Masters’ students who are also seasoned practitioners, a case illustrating the positive impacts of the Three Teachings on Jack Ma and Alibaba — a well-known global figure and a highly profitable company with a solid growth trajectory — should provide a context for dynamic class discussions to help them internalize the pragmatic implications of the philosophy of the Teachings.

The objective is to help students develop their own strategic thinking and skills to help facilitate their business and management success. To achieve this objective, three themes are chosen to sharpen the focus of the class:

1. to enable students to appreciate the implications of the Three Teachings on leadership and people management;

2. to develop students’ ability to steer the company in the face of fierce competition,

3. and their ability to develop strategy to leapfrog the company on a scale unimaginable in the pre-internet-enabled era.

With the development of the internet-and-cloud-enabled business world, doing business on a global scale is no longer the privilege of international operations of scale. Through the illustration of Alibaba and Jack Ma, and how Jack Ma internalizes the essence of the Three

5 Li, C. (22 December 2016) “Alibaba Faces Growing Pressure over Counterfeit Goods”, https://www.nytimes.com/2016/12/22/business/alibaba-ustr-taobao-counterfeit.html (accessed 11 December 2017). 6 A keyword search of The Three Teachings and Business / Management, or any one of the Three Teachings and Business / Management on Google Scholar delivers tens of thousands to hundreds of thousands of search results. 7 Livaccari, C. (March, 2010) “The Three Teachings”, Asia Society, https://asiasociety.org/china-learning-initiatives/three-teachings (accessed 15 January 2017).


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Teachings and applies them to the business world, students are expected to form their own insights and to develop skills:

a) to lead organization development to exploit opportunities presented by internet-and-cloud-enabled business world; and

b) for effective management of business stakeholders and partners from different cultural and social background.

How to Use this Case

This case is primarily written for postgraduate students who are expected to be familiar with the basic teachings of Confucianism, Buddhism, and Daoism. Focus of class discussions should be on how to apply their understanding of the Three Teachings to four key areas: leadership, people management, competition, and organization development (see the Suggested Questions one to three below). Specifically, lecturers and tutors are expected to facilitate class and group deliberations so as to enable students, who are either aspiring or experienced executives or entrepreneurs, to benefit from the integration of the key philosophies of Confucianism, Buddhism, and Daoism to arrive at effective and lasting solutions for their real-life business scenarios (see Suggested Question 4 below).

However, the high profile figure of Jack Ma and the legendary success of Alibaba provides a testimony on the effectiveness of the pragmatic applications of the Three Teachings to students who are not familiar with the subject matter. In addition, lecturers and tutors may also want to refresh or align the class of their understanding of the concepts and advocates of the Three Teachings. In these instances, lecturers and tutors may choose to devote the first part of the class to go over selected basic teachings of Confucianism, Buddhism, and Daoism.

How the Class May be Organized

Lecturers and tutors may choose to circulate materials on the basic philosophies of the Three Teachings together with the case. Students must come prepared by studying the case and be familiar with the basic philosophies involved. Lecturers and tutors may consider briefing the class on expectations before class commencement and to have the class organized into four groups. Due to the workload of question one (see section below), it is suggested that the first question be answered by two groups, with one group working on Confucianism and the second on Buddhism. The third and fourth group should handle question two and three respectively. Each group is also required to come up with a real-life business problem or scenario that they or the company they work for is facing (for question four in the below section) and to work out a long-term solution by applying what they have learnt in the course.

If the class has four hours, it is suggested that the time be divided among the following tasks:

30 min. Setting the Scene: Q&A session on basic teachings of Confucianism, Buddhism and Daoism

Lecturers and tutors may choose to allow students to ask questions on specific concepts on any of the basic teachings or to ask students to recap what is meant by specific advocates of each Teaching. The baseline is to use this half hour to ensure every student comes to class prepared.


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20 min. Alignment on key facts of the case:

Lecturers and tutors may pre-assign a group of students to present the key facts of the case.

10 min Break and buffer time

100 min. Group presentations on Questions 1-3:

A 10-15 minutes presentation is expected from each group to be followed by a

10-15 minutes Q&A and discussions among class

10 min Break and buffer time

60 min 15 minutes for each group to present Q4 and for floor contributions and discussions of each group’s scenario

10 min Concluding remarks by lecturers and tutors

For class periods of three hours, lecturers and tutors may consider cutting the time for each task and to shorten the breaks and the time for concluding remarks. For classes of two hours or less, though not recommended for this case study, lecturers and tutors may also consider handing out questions one to three for groups to submit their answers, thus skipping the presentation sessions on the three questions, and shortening the time for the remaining tasks to fit the time limit.

Suggested Questions

1. “Without the philosophy of Buddhism, you cannot do well when your business grows to a certain extent… If you do not understand Confucian philosophy on the construction of organizational system, you have no chance to be sustainable when your company grows to a certain size.”8 Critically review the relevance of Buddhism and Confucianism on leadership and people management; comment on their influence on Jack Ma, and discuss their implications in resolving the counterfeit problems of Alibaba.

2. “If you do not know the philosophy of Daoism, you have no chance of winning during competition”. Illustrate your understanding of Daoism in relations to this statement by Jack Ma by discussing how the philosophy of Daoism may have helped Jack Ma in leading Alibaba to beat eBay.

3. Jack Ma has a mission to better the present world trade framework and he believes that by so doing, he can realise the vision of growing Alibaba to become the world’s fifth largest economy by 2036. Discuss to what extent this mission is inspired by the philosophies of the Three Teachings.

8 Translated from Jack Ma’s speech when addressing EMBA students of Tsinghua University School of Economics and Management on 21 October 2016, www.ce.cn/xwzx/gnsz/gdxw/201610/21/t20161021_17012709.shtml (accessed 11 December 2017).


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4. From the experience or observation of one or more of your group members, describe a real life business or management problematic scenario, discuss how the philosophies of the Three Teachings could be of help.

Analysis

1. “Without the philosophy of Buddhism, you cannot do well when your business grows to a certain extent… If you do not understand Confucian philosophy on the construction of organizational system, you have no chance to be sustainable when your company grows to a certain size.” Critically review the relevance of Buddhism and Confucianism on leadership and people management; comment on their influence on Jack Ma, and discuss their implications in resolving the counterfeit problems of Alibaba.

Buddhism and Confucianism on leadership and people management

Before discussing the implications of Buddhism and Confucianism on leadership and management, lecturers and tutors may choose to go over their key concepts and believes in class. An extract of relevant literatures are provided in Exhibit 1 and 2. Alternatively, lecturers and tutors may check students’ understanding on the basic concepts and believes of the two schools during class Q&A (see lists of tasks above). Note that it is expected that students should elaborate in their assignments on their understanding on Buddhism and Confucianism before analysing the concepts’ relevance to leadership and people management.

There is a lot of literature that discuss the subject matter of Confucianism and Buddhism on Leadership and People Management. Extracts from two different documents, one for the Confucianism’s and the other for the view and influence of Buddhism on the subject are provided for easy deployment and reference of lecturers and tutors in Exhibit 1 and 2. It is natural for students to produce reviews and discussions based on other sources, some of which are further provided in the reference section.

Analysis of the two Teachings Influence and Implications

The following two sections are views of the authors on the subject matter. It is expected that students may hold different views and make their own observations and analysis. So long as those views are original, well expressed, and supported, different views will make good answers too. (In fact, it is natural that lecturers and tutors may have their own views too on the subject matter. In such case, please feel free to insert your views instead of the following).

Confucianism and Buddhism’s Influence on Jack Ma

It is observed that Jack Ma aspires to be a benevolent leader commended by Confucianism. When he said “I believe when you have $1 million, that’s your money – when you have $20 million, you start to have a problem. When you have $1 billion, that’s not your money, that’s the trust society gave you. They believe you can manage the money better than the government and others”. Here, Jack Ma is alluding to the teachings of Confucius: “Never slack off in your position and fulfil your responsibility loyally”. In fact, he knows he is not only responsible for the 56,000 employees working for Alibaba, but also for the 10 million active sellers and the 446 million active buyers of the company. With a plethora of responsibilities on his shoulder, Jack Ma conscientiously seeks peace and harmony and to


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cultivate his virtues. He practices Tai Chi in order to find stability and peace. He brings his teams to temples to remind himself and every one of his senior managers that their key decisions must pass the test of the greater good, which he firmly believes is the only solid and sustainable foundation for the company to grow, that is, to grow through becoming better in serving customers, who are his first priority. The carrying out of important meetings and deliberations in temples whenever important decisions of the company are to be made also seems to echo the establishment of some “Rites and Rituals” in organizations as preached by Confucianism on controlling.

Jack Ma’s aspiration to be a benevolent manager is also indicated by putting his employees as his second priority, only after his customers and before investors and other stakeholders. This is consistent with the virtue of being benevolent in leading as advocated by Confucianism, which calls for directing employees with care and concern. It would seem that Jack Ma has cultivated some sort of brotherhood with his team. This also mirrors a teaching of Buddhism on people management, which calls for the development of personal bonds between leader and his teams. In addition, Buddhism takes a collectivist view on the functioning of a leader and his team, each is not an autonomous and independent entity, but rather a linked and interdependent unit. When they disagree with him, for example, on investment in cloud computing, instead of defying his team and exercising his absolute power as the most senior executive of Alibaba to make the call up front, Jack Ma goes on a three-day retreat at a temple. By so doing, he learns to become a better listener, and he clears his mind before making the call. Though he eventually decided against his team’s views, his three-day retreat shows his team how much weight their views carry with him. At the same time, this act echoes another advocacy of Buddhist leadership, which “emphasized the importance of maintaining one’s values, promoting self-management, and developing one’s abilities...” Under the tremendous pressure of his team, Jack Ma’s retreats allows him to clear his mind and realise he needs to maintain what he believes to be the way forward and to defy his “brothers and sisters” of senior managers. By so doing, he develops his abilities to be a better listener.

A more vivid indicator of Jack Ma trying to practice benevolence is his preach of the importance in developing and embracing a love quotient as a determining factor for success. He suggests that an embracing heart is important to be a responsible and loving leader for the future and for the society. This quality is also vital in helping a person to gain respect from others, without which, no one will willingly work and follow the person. Herein lies another trait of Jack Ma being heavily influenced by Confucianism in managing the expansion of Alibaba: “On staffing… the Confucian concepts and values of loyalty and talent management ought to be practiced.”

One can also observe traits of Buddhist leadership in Jack Ma. He has certain fundamentals that he does not change whether good days or bad. For instance, he never gives up and he always walks his talk. He was like this before he became a globally renowned businessman and before he established Alibaba. He has not changed even after he became successful. When he committed himself to green missions, he walks his talk in banning all shark products in all online stores of Alibaba, and he donates 0.3 percent of the company’s yearly revenue to green causes. When he says one should be a responsible entrepreneur, he walks his talk by taking up public service roles and spends time flying around the world to give talks to students and at conferences advocating the importance of making sustainable profits. For another instance, when people called him “crazy Ma” when he was competing with eBay, Jack Ma ignored the criticism and continued along the course that he had set out to fight the battle with eBay.


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Implications of Fighting Against Counterfeit Products

Before discussing how Confucianism and Buddhism teachings could help fight the counterfeit headaches of Jack Ma and Alibaba, perhaps we should take a step back and do a stocktake on whether they have done enough to resolve the issue. It is reported that Alibaba spent a combined US$160 million in 2013 and 2014 to try and combat the problem, including engagement of 2,000 staff. This means over 3 percent of Alibaba’s 56,000 staff were engaged. However, only slightly more than 0.1 percent of the company’s revenue for 2013 and 2014, respectively US$5.5 billion and US$8.3, was spent trying to solve the problem.9 We do not know whether this number is purely operation cost or it has also taken into consideration of the capital cost involved in developing “advanced antifraud software”. If the latter was the case, then the actual operation cost spent in combating the problem will only be a fraction of the reported US$160 million. Even though there may be exaggeration in the reported estimation of “up to 80 percent of Taobao’s offers” were fake, but the actual scenario is still bad even if substantial discounts of this number is taken. While there is no magic number on how much should be spent on the issue, yet if Jack Ma and Alibaba were serious in resolving this, many more resources, at least as much as 0.3 percent (same as the green mission donations), should have been assigned. While it is not the intention to second guess the un-proportionate provision of resources on the matter, a logical deduction is that: in those days, counterfeits did actually make up a substantial percentage of the blood line of Chinese suppliers. Uprooting that is not physically impossible, but doing so might cut too deep into Alibaba’s performance and on the survival of many Chinese suppliers.

A logical business decision for Jack Ma and Alibaba, one that is independent from any influence of any teachings from any philosophy, is to assign more resources to fight the issue of counterfeiting. With more resources and with the leapfrogged advancements in artificial intelligence (“AI”) in recent years, policing should be a lot more effective. Identifying fake products, de-registering their suppliers’ selling accounts, and working with the Chinese authorities to eradicate counterfeit manufacturers may be effective in reducing the number of counterfeits, and in showing the rest of the world how serious Alibaba is in rectifying the situation. But this will hurt Alibaba and more importantly, hurt the small enterprises that offers counterfeits as their bread and butter income. Most importantly, this may hurt the feelings of the 10 million suppliers, who are mostly small entrepreneurs by instilling a feeling that Taobao and Alibaba may not be easy to work with anymore. Herein lies the relevance and applicability of Confucianism and Buddhism, as both put emphasis on harmony and peace, caring and building trust.

While policing is important and must be carried on, it is equally, or more, important to help those small entrepreneurs who sell fakes for a living. Obviously, the numbers are huge. With AI’s help and with resources provisioned, Alibaba should be in a position to identify the companies with the potential to convert to making non-fake goods. Proactive assistance should be offered to help them identify original or innovative, not copycat, offerings. Over time, this number will grow and reach critical mass for the population of small entrepreneurs to believe that there are alternative and sustainable ways to prosper than selling fakes.

With the core duty of the majority of Alibaba’s staff focusing on facilitating the buying and selling of products, including counterfeits, the 2,000 plus policing team must feel at odds with the rest and majority of the company. This is inconsistent with the Confucian advocates of building brother/sisterhoods among colleagues and staff. Alibaba may consider using AI to

9 Statista (n.d.) “Annual revenue of Alibaba Group from 2010 to 2017 (in millions of yuan)”, https://www.statista.com/statistics/225614/net-revenue-of-alibaba/ (accessed 15 January 2018).


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shoulder most of the policing work and free most of the 2,000 plus staff to focus on the proactive assistance work mentioned above.

In addition, Confucianism advises that rites and rituals should have their place in an organization. To instil a culture of fighting against counterfeiting as a matter that should concern everyone in the organization, Alibaba may consider institutionalizing fighting against fake products into the quarterly event calendar of Alibaba or Taobao. This may take the form of holding a party celebrating major wins of their fighting counterfeit efforts, or in the form of publicising stories of how counterfeit suppliers have “converted”. Rites and rituals like this will also have the benefits of bridging the possible alienation between the 2,000 or more counterfeit-fighting staff with the majority of Alibaba’s staff.

2. “If you do not know the philosophy of Daoism, you have no chance of winning during competition”. Illustrate your understanding of Daoism in relation to this statement of Jack Ma by discussing how the philosophy of Daoism may have helped Jack Ma in leading Alibaba to beat eBay.

Any discussion of Daoism on Jack Ma and Alibaba’s war with eBay should be preceded with a brief review of Daoism and its influence on business. For the reference of lecturers and tutors, Exhibit 3 is an extract of an article on the subject of Daoism and business. Note that students should elaborate more on their understanding of this subject matter as part of their answer to this question.

The Influence of Dao on Jack Ma in Beating EBay

Again, the following is the view of the authors on the subject matter. Lecturers and tutors / students may hold a difference in opinion. There is no model answer and all original views and supported observations with facts from the information presented in the case should be accepted with an open-mind.10

Daoism is perhaps the most important influence on why Jack Ma could beat eBay. Knowing the market means being aware of the natural way, the environment. It is the understanding that “there is no difference between small businesses and individual consumers” that Jack Ma felt the need to take early action against eBay before it was too late. The realisation and the ability to stay focused in prioritizing what is important to Alibaba in the long run enabled Jack Ma to take the difficult and courageous decision to wage war against the international, resourceful eBay. It is a deliberate choice of words — difficult and courageous — to describe Jack Ma’s decision. Students should recall two well-known events at the turn of the century: the internet bubble that burst in 2000 and the SARS crisis from late 2002 to early 2003. The former hit Alibaba hard, while the latter seriously affected everyone in Asia, particularly China, where the crisis originated. EBay entered China in 2002 and Jack Ma had to be prepared to go to war with eBay in the latter part of 2002.

This was at a time when Alibaba had just recovered from the bursting of the internet bubble, and the nation and the company was embroiled in the SARS crisis. For Jack Ma to divert so much attention and more importantly so many resources to fight a war that many people deemed unnecessary at the time (as many people viewed Alibaba as operating in the business domain while eBay was operating on the consumer side), his decision was indeed a difficult and courageous one that reflected a deep rooted understanding of the Dao that “does not know

10 All quotes in this section come from the case.


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any telos”. Had Jack Ma not realised this and took action, and if eBay was allowed to learn and grow in the China consumer market, Alibaba might never have been able to beat eBay. It therefore can be said that the Dao’s influence on why Jack Ma won can be traced back to when Jack Ma decided to launch Taobao to fend off eBay.

Throughout the battles with eBay, the Dao gave Jack Ma the upper hand. The advertising battle between the two companies is an illustration. With more resources and influence, eBay “signed exclusive advertising rights with major portals Sina, Sohu, and Netease”, barring Taobao from the major internet channels to reach customers. “Knowing that most small business people would rather watch TV than log on to the internet”, Jack Ma used the right leverage to lift the world, (a Chinese “dao” described as lifting tens of thousands catties with four taels, 四兩撥千斤) and used TV advertisements instead.

He stays focused by making listings on Taobao a customer-centric process for consumers. This is a reflection of a strategy to serve his customers the natural way as reflected in designing the process and procedures according to how the market behaves. The Morgan Stanley report recapped in the article of Exhibit 2 testifies to this point: “Taobao was more customer focused and user friendly than eBay EachNet. With most users not sophisticated about auctions, the majority of Taobao’s listings were for sales. Only 10 percent of its listings were for auctions, while eBay EachNet had about 40 percent of its listings as auctions. Taobao had also better terms for its customers: it offered longer listing periods (fourteen days) and let customers extend for one more period automatically. EBay EachNet did not have this flexibility.”

Jack Ma’s moves must be the result of meticulous planning, which means he had seriously studied his competitors. In fact, he describes eBay as a shark in the ocean, indicating that he has not underestimated the ability of his competitor. This reflects less egoism on Ma’s part as obtained from his understanding of the Dao. He has said “eBay may be a shark in the ocean, but I am a crocodile in the Yangtze River. If we fight in the ocean, we lose—but if we fight in the river, we win.” His studies of eBay must have revealed the weaknesses of his competitor, so that he could always make the most appropriate move against eBay. Not only did he recognize the product-centric focus of eBay as a weakness, he also knew the small charges that eBay imposed on its customers would be a source of discontent. That’s why against critics and skeptics’ “suspicious about Taobao’s future, particularly its sustainability”, Jack Ma removed all charges for sellers’ offer-listings. The Dao has also helped Jack Ma maintain focus. Despite heavy criticism to the extent of calling him “crazy ma” (which in Chinese literally means “a horse gone crazy”), Jack Ma stayed focus and eventually claimed victory over eBay.

3. Jack Ma has a mission to better the present world trade framework and he believes that by so doing, he can realise the vision of growing Alibaba to become the world’s fifth largest economy by 2036. Discuss to what extent this mission is inspired by the philosophy of the Three Teachings.

Once again, it must be emphasized that the following are the views of the authors and is not a de facto answer to the question. Yet, a de facto first step is expected from students, that is, they should step back to examine the context and the backdrop of Jack Ma’s design of his vision and mission before carrying out any discussion and analysis of the influence of the Three Teachings on Jack Ma’s formulation.


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Of all the factors that bears implications for Alibaba’s future, four in particular are highlighted here due to their close relevance to Alibaba’s position in 2017. Students should take time in their class presentation to elaborate on the implications of the background factors that they have chosen to discuss before moving onto the influence of the Three Teachings on Jack Ma’s vision and mission. A brief discussion of the relevance of each factor is listed below:

1) The incorporation of internet-and-cloud enabled devices and transactions in people’s everyday life;

Relevance: this is the foundation of Alibaba’s future. It is banking on the fact that technology will touch more facets of everyone’s life in the future. This means ample room for global expansion.

2) The dominance of Alibaba in the China market;

Relevance: the huge domestic consumption market potential of China is the major advantage the company has in being a dominant player. Alibaba and Jack Ma must strive to defend its turf when technology transcends traditional trade boundaries.

3) The general negative sentiments of the U.S. towards China, especially regarding the huge trade deficits, as well as scepticism about the fairness of world trade;

Relevance: there is tremendous pressure for China to further open its market to foreign companies, which if not managed well, may threaten Alibaba’s turf.

4) The general negative perception of the quality of China’s output in the Western world;

Relevance: the majority of Alibaba’s sellers are Chinese entrepreneurs, Alibaba carries the Chinese label; this means hurdles for the company to become the preferred platform for global trade (as opposed to using the platform as a means to only reach the Chinese market).

Influence of the Three Teachings11

While most companies’ long-term outlook refers to five to ten years, Jack Ma’s vision spans two decades. When one understands that all the Three Teachings takes on a very long-term focus — studies have indicated that Confucianism values long-term orientation;12 Buddhism’s belief in reincarnation also supports a long-term orientation; 13 and Daoism also looks at things from a long-term perspective, emphasizing the impact of reversion and circularity — Jack Ma’s super-long term view should then come as a no surprise.

11 Unless otherwise stated, all quotes in this section comes from the letter to shareholders by Jack Ma 17 October 2017: Alizila Staff (17 October 2017) “2017 Letter To Shareholders from Executive Chairman Jack Ma”, Alizila, http://www.alizila.com/2017-letter-shareholders-executive-chairman-jack-ma/ (accessed 11 December 2017). 12 Hofstede, G. (2001) Culture’s Consequences: Comparing Values, Behaviors, Institutions and Organizations Across Nations, Sage Publications, California: Thousand Oaks 13 Rarick, C.A. (2007) “Enlightened Management: An Analysis of Buddhist Precepts Applied to Managerial Activity”, Journal of Global Business Management, October 2007, https://ssrn.com/abstract=1021546 (accessed 15 January 2018).


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The war with eBay tells us that Jack Ma seeks to design his moves according to the Dao, the natural way of how things happen and how things will develop:

The world as we know it will be dramatically changed by the advent of new technology in the coming 30 years. The internet will no longer be the sole domain of so-called internet companies; the internet will work for every company. We see transformation rapidly taking place in many industries, with internet technologies serving as the catalyst for revolutionary change...Today, we see the endless possibilities that technology and innovation can bring to improving society and people’s lives.

This is the Dao that Jack Ma sees as the future. Everything he plans for the development of Alibaba is to ensure that the company will remain highly relevant in this technology-transformed world. To achieve this, Jack Ma resorts to the key virtues of the Three Teachings (the following is a summary of the key points supported by quotes from Jack Ma in his letter to shareholders detailing how he sees Alibaba in 20 years’ time. Lecturers and tutors may choose to elaborate in class if required.)

1. The virtue of benevolence

“Our true purpose lies in harnessing the power of technology and innovation to make the world economy more inclusive and more healthy toward sustainable development.”

2. The cultivation of brother/sisterhood amongst small entrepreneurs around the world

“We aim to foster an economy in which small business, young people and women in developing and under-developed nations can participate in and benefit from globalization.”

3. By 1) and 2), it is hopeful that trust on Alibaba can be cultivated

“We are fully committed to creating the infrastructure for commerce in an inclusive economy… this … brings opportunity to further our mission “to make it easy to do business anywhere.” By 2036, we envision that Alibaba’s infrastructure will support commerce activity with a combined transaction value that will rank as the world’s fifth-largest economy. We aim to be a platform that will enable the creation of 100 million jobs, serve two billion consumers and support 10 million profitable small businesses. While Alibaba will serve as an advocate, driver and platform, the economy supported by Alibaba’s commerce infrastructure will be far bigger than Alibaba the company.”

4. An all-encompassing harmonious approach in face of scepticism of world trade

“Through this “Alibaba economy,” we hope to enable consumers and businesses to buy globally, sell globally, pay globally, deliver globally and travel globally…We want to enable more developing countries, small businesses and young people to


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share the benefits of globalization and free trade, and to share the innovation and opportunities that accompany technological advancement.”

5. The eightfold path: 1) right understanding; 2) right thought; 3) right speech; 4) right action; 5) right livelihood; 6) right effort; 7) right mindfulness; and 8) right concentration.

It can be argued that the whole letter to shareholders is a vivid applications of these eight tenets. For instance, it must be the product of the “right understanding” of Dao in Jack Ma’s view. For another instance, the whole letter is a speech, Jack Ma’s “right speech” not only to shareholders but to the world. For a third instance, all the strategic moves details in the letters must be “right efforts”.

4. From the experience or observation of one or more of your group members, describe a real life business or management problematic scenario, discuss how the philosophies of the Three Teachings could be of help.

Questions one to three are designed to enable students to understand and internalize the relevant concepts of the Three Teachings through applying them to examine Jack Ma and Alibaba. Their understanding should be showcased by their answers to this question.

Synthesis

Oriental philosophies is perceived by many students as a difficult subject to digest. One of the reasons its abstract nature. Jack Ma and his Alibaba story should give students a pragmatic setting in which they observe how, what, and why the philosophies of the Three Teachings are put into practice. The high profile of Jack Ma and Alibaba should boost interest of students in digesting, understanding, and internalizing the concepts. This should enable them to develop the ability to apply them to resolve real-life business and management problems.


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EXHIBIT 1: KEY CONCEPTS AND BELIEVES OF CONFUCIANISM ON LEADERSHIP AND PEOPLE MANAGEMENT

Except for the first paragraph, which borrows concepts from the sources listed in footnote 15, the rest of this Exhibit comes from the source quoted at the end of Exhibit. The teachings of Confucius (孔子) and Mencius (孟子) focus on maintaining harmonious human relationships, and emphasize guiding virtues that promote human behavioural excellence. The former examines how harmony is achieved in five types of relationships: loyalty between rulers and ministers (忠孝, loyalty and filial piety); relationships between fathers and sons (孝 , filial piety); and that between husbands and wives (和 harmony); respects and obedience of the young to their elders (親悌 affection and brotherhood); and trust between friends xin (信 trust). The latter alludes to ren (仁) or benevolence; yi (義) or righteousness; li (禮) or proper rites; zhi (智) or knowledge; and xin (信), or integrity.14 Out of these five virtues, benevolence is “the virtue of all virtues”.15

On Leadership Confucius said, “Never slack off in your position and fulfil your responsibility loyally.” (Analects of Confucius XII: 14). This builds respect and trust amongst the members of the organization. One can then extend this practice to all levels of the organizations… organizations benefit from… goals set and targets being met… the company would then be in good working order. Failing (to do so) …would only lead to much discussions, meetings, and empty talks with no results… this brings to the organization the following attendant benefits and outcomes:

i) Attending to Peace and Harmony (和平 , hé píng) with Others in the Organization …According to Confucius, a good and responsible leader/manager can resolve social (organizational) conflict by concentrating on three kinds of favourable relationships through the practice of filial piety (孝). Firstly, he or she searches for peace and harmony … by… cultivating one’s virtues conscientiously… Secondly, he or she seeks to harmonize … colleagues’ relationships through cultivating the sense of mutual responsibilities among them. Thirdly, he or she… establish… a humane organization in which virtues overwhelm selfish contention. By these three methods, … a comprehensive organizational structure (is built) in which no or little conflict goes unnoticed and no opposition is allowed to exceed certain limits…a … platform for… staff to work efficiently and effectively…

ii) Being Just or Having Moral Courage (義, yì)

… when a person holding a certain position must take certain action(s) and if he or she has to do it, then he or she just does it… with courage and with justice in mind…When there is a feeling of brotherhood and moral courage among the people within organizations, these people would build trust and confidence; and they do not feel separated or alienated from each other; warmth and even love or compassion may prevail among them… in managing people or talents, to motivate and retain them, they need to feel as part and parcel of the organisation with unity; they should feel part of the in-group and team spirit.

14 Awan, K.S. (6 April, 2016) “What are the Five Relationships in Confucianism, and How are They Related?”, Quora.com, https://www.quora.com/What-are-the-five-relationships-in-Confucianism-and-how-are-they-related (accessed 15 January 2018); Wikipedia (n.d.) “Confucianism”, https://en.wikipedia.org/wiki/Confucianism (accessed 15 January 2018); Rarick, C.A. (2007) “Confucius on Management: Understanding Chinese Cultural Values and Managerial Practices”, Journal of International Management Studies, August 2007, pp22-28, http://www.jimsjournal.org/3%20Charles.pdf (accessed 15 January 2018). 15 Chen, C.C. and Lee, Y.T. (2008) Leadership and Management in China: Philosophies, Theories, and Practices, Cambridge University Press, NY. The quote is from p.35.


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iii) Practicing Integrity (廉, lian)

.. (Persons) have integrity … act according to the core values, key beliefs and principles they claim to hold… it regards internal consistency as a virtue, and suggests that parties holding apparently conflicting values should account for the discrepancy or alter their beliefs… a leader/manager… would be … playing the role model for employees to emulate.., When … these values (are) held by all within the Company, the organization is strongly anchored in value consistency and it can, in most ways, be said to be protected against corporate fraud; a fraud prevention corporate culture may then even prevail… less energy and time is … spent on the auditing and controlling processes; and more energy can … be diverted to business growth...

iv) Being Aware of Honor While Being Cautious of Humiliation and Shamefulness (恥, chǐ)

… A manager will set good example for his or people to follow and emulate; staying upright with high integrity in their roles and responsibility; and their business dealings… If an act should cause a dent on one’s integrity, one should then avoid it. As such, before one embarks on a particular project, one has to think of the outcome(s) or results. If the latter leads to shamefulness then one would choose to avoid doing the project or venture… The Confucian manager always prepares or plans to avoid indulging in shameful actions that may jeopardize his or her department and organization.

On Leading and Directing Directing would encompass these Confucian concepts and values:

i) Being Benevolent (仁爱, rén ài)

Managers need to direct their employees with care and concern… A benevolent manager would be respected and liked by his/her subordinates for (s)he is personable, approachable and friendly to talk with… his/her staff would very much open up to him/her on any problems (big or small)... nothing would be swept away under the carpet… Confucius explained (how to be a benevolent manager), “Firstly, you should self-cultivate… and become a person of integrity and … people … will respect (恭) you; Secondly, you have to widen your capacity of tolerance (寬) in dealing with people… people will support you; Thirdly, if you are always sincere in your doings and are a trustworthy person (信) you would win the trust of others; Fourthly, if you are committed and diligent (敏) in your work, this will pave the way to success and finally, if you are generous to others, other would obliged to help you in return for your kindness. (Analects of Confucius, XVII: 6).

ii) Practicing Filial Piety (孝, xiào)

… In attaining good leadership and management, one embraces and practices the value of filial piety to direct and guide people to achieve the shared visions and goals… In management terms, it is about be loyal to one’s superior by fulfilling one’s obligations. It is about fulfilling mutual contractual obligations, as much the employers care and provide for the employees, the employees need to work hard, be productive and ensure the growth of the business. It is good that each employee respects his or her superior(s) and faithfully carries out the superior’s instructions accordingly. The tasks or work then gets done with minimal distractions, disagreements and/or arguments; little time is also wasted in getting the results.

iii) Fostering the Feeling of Brother(Sister)hood (悌, tì)

In Confucian philosophy, the value of brother(sister)hood can also refer to peer-ship ... if one is kind and respectful to people, then one is not alone when one is in need of help… within


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the company, employees as peers should respect each other and work together… then teamwork and spirit is fostered. Working in team settings often gets one motivated. This is because one becomes an important person holding a position that share the mutual responsibility and accountability of the team’s success; and here, team development, training and learning also take place...

On Staffing Confucius said, if the nation (organization) is well-run, others from afar will hear of it and come and live there… the internal people would be contented to stay within the nation (organization). In this connection, the Confucian concepts and values of loyalty (忠 zhōng) and talent management ought to be practiced…, trust and brotherhood would be built among the employees and employer working together in a team… When employer and employees share the same vision and values in the organization, loyalty of the employees prevails… an employer being loyal to the employees or vice versa, then one’s efforts can be positively channelled to doing good for the entire company… within the organization, there would be less strife, bickering and politicking… it helps the company to reduce the training costs as well as to lower the turnover of employees. Employee loyalty and retention also brings… (staff) maturity in their experience, contacts and business networking which can boost the company’s business growth or expansion.

On Controlling …In the Confucian way, good direction brings good control and there is trust within the team with good camaraderie feeling among the team members. Rituals and ceremonies including standard practices, effective work instructions and procedures can be employed to control; harmonize and monitor workforce behaviour and performance to enable them work as teams. Rituals and ceremonies may also be linked to company events … Dealing with events systematically sends strong signals to employees about what is important and expected of them, and employees learn... Leaders and managers must know or learn how to frame events or rituals to their advantage…

i) Growing Trust (信, xìn)

… in managing people, it is important to gain the trust of the followers/subordinates when one gives orders to them ... When a junior or employee is entrusted by a senior officer or a superior to do a task, (s)he is to carry it out well. The same too goes for the superior; the superior, in return, is obligated to take care of the junior’s welfare and overall well-being… in talent management, the superior should be very careful in identifying his candidates in order to train them to perform well in the coming future. Trust must exist so that each can perform their duties smoothly without much interference of micromanagement. And in a sense, some level of empowerment prevails. And this is good and motivating for the employees…

ii) Observing Rites and Social Rituals (禮, lǐ) and Ensuring Its Place in the Organization …the concepts of rituals, procedures, or organizational structures should have their places in management in terms of ensuring order and stability within the organization or nation. In a country, the election ritual is a necessary process to ensure peace, justice, and change of government and leaders as well as the exercise of power by the people or masses in an orderly fashion and at regular intervals. A good understanding of the Confucian concept of rituals or Li will lead one to empathetically link or connect the former term to the core value(s) held by the Confucian manager… (In an organization) each has a role to play, each is also involved in doing a focused goals and role, and when these roles are fulfilled and played well, better human relationships ensue, and peace and harmony exists.


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Source: Extracted from Low, K.C. and Ang, S.K. (2013) “Management, the Confucian Way”, Educational Research, 4(2) pp. 82-90, http://www.interesjournals.org/full-articles/management-the-confucian-way.pdf?view=inline (accessed 15 January 2018).

http://www.interesjournals.org/full-articles/management-the-confucian-way.pdf?view=inline

http://www.interesjournals.org/full-articles/management-the-confucian-way.pdf?view=inline


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EXHIBIT 2: KEY CONCEPTS AND BELIEVES OF BUDDHISM ON LEADERSHIP AND PEOPLE MANAGEMENT

Buddhism: The Buddha explained that there was no permanence in the self, just the illusion. People are simply temporary beings consisting of form, feelings, perception, conception formulations and consciousness… These dimensions of being are referred to as the Five Aggregates and represent the concept of no-self…

The Four Noble Truths The path to enlightenment begins with the understanding and internalization of the Four Noble Truths…: 1) all life is suffering; 2) suffering is caused by desire; 3) suffering can be ended; 4) the end of suffering is nirvana. Life involves suffering, regardless of one’s position or status in life. The constant attachment to things, or even people, will produce suffering in one’s life. The only true way to end this suffering is to extinguish it, or to reach nirvana. Nirvana is achieved through the Eightfold Path.

The Eightfold Path …The Eightfold Path consists of: 1) right understanding; 2) right thought; 3) right speech; 4) right action; 5) right livelihood; 6) right effort; 7) right mindfulness; and 8) right concentration. The Eightfold Path is sometimes represented as a wheel in which all the spokes of the wheel must be present for the wheel to function effectively. The path to nirvana involves proper thinking, causing no harm to others, not overindulging, not having improper thoughts or intentions, being mindful of each moment and what we do, and practicing mental concentration or meditation.

The Five Precepts of Buddhism The Five Precepts of Buddhism are: 1) abstain from destroying life; 2) abstain from stealing; 3) abstain from sexual misconduct; 4) abstain from false speech; 5) abstain from intoxicants. While broad-based and not entirely followed by all Buddhists, the Five Precepts provide the foundation for the path to enlightenment.

Buddhism on Leadership and People Management

Buddhist Leadership If one were to describe the leadership style of the Buddha himself it would be a very passive style. The Buddha sought to enrich all of humankind through personal development; however, his approach was passive and broad-based. The Buddha lead his followers by way of a more reflective and introspective approach…Concerning leadership, the Buddha emphasized the importance of maintaining one’s values, promoting self-management, and developing one’s abilities, and the abilities of others. The Buddha said, “As a solid rock is indifferent to the wind and rain, so the wise are indifferent to criticism and praise.” The ideal Buddhist leader does not easily sway his or her position in the face of challenges and social pressure. It is important to maintain one’s true self and values. This is not to say that the leadership style is fixed one, in fact it is just the opposite. Leadership style may change, and in most cases should change to fit changing situations, but the leader’s values remain as constant as a rock… Buddhist leaders blend the material with the spiritual and set high moral examples for followers. They are open to change, as they themselves are in a constant state of personal change… The Buddhist belief that nothing is permanent, referred to as impermanence, recognizes that change is constant in the environment, and in us and others. Effective leadership requires adapting to this change while remaining steadfast in one’s principles.


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Personal Development An important aspect of Buddhism is personal development. In order to escape the cycle of birth and rebirth, one must continuously make improvements. The Buddha said, “If a man should conquer in battle a thousand and thousand more, and another should conquer himself, his would be the greater victory, because the greatest of victories is the victory over oneself.” The Buddhist leader places the burden of development on himself or herself, not only one’s own development, but the development of others. Much can be found in Buddhist teaching concerning self-improvement and bringing out the best in others. Inherent in Buddhism is a very positive orientation towards human nature and a mastery of one’s destiny. The Buddhist Law of Causality states that nothing exists in its own right, but rather everything has a cause. A mastery of one’s self, and the management of others, require understanding this causality and acting upon it. Mindfulness and self-discipline are important aspects of personal development, especially as found in the Zen school of Buddhism. At the same time, a Buddhist approach to the development of others has a strong orientation towards self-determination. As the Buddha said: “Only a man himself can be master of himself: who else outside could be his master? When the Master and servant are one, then there is true help and self-possession.” The development of others should have the goal of producing an individual who needs no supervision, a person who has internalized the mission and goals of the organization, and who is capable of self-management, or being his own master. The ideal Buddhist organization is one in which less emphasis is placed on command and control, and greater emphasis is placed on developing the abilities of individuals to manage themselves.

Team Building Most Buddhist countries are collectivist in nature, and this orientation towards the importance of the group over the individual has positive implications for team building and functioning. Buddhist philosophy is consistent with a collectivist view. The concept of no-self implies that we are not individuals... We are not autonomous and independent entities. Our identity is linked to our associations with others. As the Buddha said: “All the great rivers on reaching the great ocean lose their former names and identities and are reckoned simply as the great ocean.” Our ability to view ourselves as part of a larger social system, and to make the necessary sacrifices for effective team functioning require us to transcend the “I” component of our existence. Buddhist philosophy helps individuals to see that they have interconnections to a larger social system and that this connection will require individual sacrifice in order that all may achieve more…

Importance of Harmony Similar to collectivist tendencies, the importance placed on group harmony is a central feature of Buddhist philosophy…: “Many do not know that we are here in this world to live in harmony. Those who know this do not fight against each other.” … Harmony inside the organization is preferred to competition among organizational members in a Buddhist society. Harmony is produced when organizational members share common values and work towards a common goal. Harmony begins with trust and a positive view of human nature. Harmony is enhanced by practicing a non-judgmental attitude towards others. As the Buddha said: “The wise one does not judge others, not their words or deeds or what they have or have not done. The wise only contemplate their own words and deeds.” In order to create a harmonious organization, it is important that the leaders first seek excellence in themselves. Proper role modelling and the assumption that people prefer to cooperate predispose the Buddhist manager to action which enhances group harmony. An essential element of Buddhist belief and practice is to live in harmony with others. The Buddhist leader creates a shared purpose, models good behaviour, and encourages kindness inside the organization.


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People Management A Buddhist approach to the management of people involves establishing a personal bond with others based upon our true selves… Personal feelings and emotions are given greater attention. According to the Buddha: “Never speak harsh words, for once spoken they may return to you. Angry words are painful and there may be blows for blows.” Buddhist managers tend to be more mindful of their interactions with others and tend to avoid direct confrontation. Angry or harsh words are not seen as being helpful in building a harmonious organization. Source: Extracted from Rarick, C.A. (2007) “Enlightened Management: An Analysis of Buddhist Precepts Applied to Managerial Activity”, Journal of Global Business Management, October 2007, https://ssrn.com/abstract=1021546 (accessed 15 January 2018).

https://ssrn.com/abstract=1021546


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EXHIBIT 3: DAOISM AND BUSINESS Daoism (also Taoism) is an ancient Chinese philosophy, which emerged between 6th and 3rd BC and is often associated with the philosophers Laozi (老子 also Lao Tzu) and Zhuangzi (莊子 also Chuang Tzu)… Daoism… provides reasons for being virtuous from a completely new angle. Additionally, it presents us with virtues that are quite relevant and inspiring today: the philosophy of the dao 道, the “way”, implying the natural way of things. It is based on two fundamental notions: a dualism based on the two complementary forces of yin陰 and yang 陽, which are in constant flux, and the idea of a cyclically and relationally organised world, which does not know any telos (final purpose). Dao cannot be changed nor conquered by human wisdom. Hence, since we cannot conquer dao, we are advised to model our behaviour in line with this natural way – being virtuous in a Daoist sense. Yet, the virtues to be followed were not explicitly proposed in order to create a better society like for example in Confucianism. Instead Daoist virtues are concerned with bringing the individual back to “nature”, to our natural course, so to speak. Daoism is a philosophy concentrating on the good human life, which in that sense is a long life. But, for a long life we must maintain physical and mental health, which implies that we should not waste our energy. A harmonious and peaceful state of mind is therefore crucial for mental health, while moderate consumption of food and regular exercise is important to maintain physical strength. Only by being in a good state ourselves, we can also take care of others. Accordingly, Daoism conveys a very important message: Take care of yourself and then you are capable – physically and mentally – of taking care of others. This idea of saving our energy requires self-cultivation in various ways and a profound understanding of the underlying notions in Daoism. First, we need to curb our appetite (body) and desires (mind), and focus on what is really essential to our life. Here, a generally modest attitude is key. Also, meditation is crucial to calm the mind, to make us able to focus and to eliminate negative thoughts and emotions, which eventually just lower our energy level. Second, with this long-term perspective in mind we need to be serious about what we are doing and the potential consequences thereof. Understanding the impact of reversion and circularity on our life is vital here: things and situations are only temporary since our environment is in constant change and whatever is there can turn into its opposite. Consequentially, realising that our level of energy is essential to lead a good life makes us try to maintain it through self-cultivation. This in turn leads to a more peaceful and harmonious life, where we can take care of others by being kind, generous and supportive. Now, how can Daoist self-cultivation make a difference in business? … 1. More balance – better focus … Realising that circumstances are only temporary gives us a different outlook and perception. Instead of being too concerned about present circumstances and getting lost in too many details, we can better concentrate on essential things, the bigger picture. 2. More awareness – better self-organisation Understanding the “logic” of reversion and circularity makes us more aware of the consequences and interrelatedness of our actions and fosters a more serious attitude. This increased awareness promotes a better self-organisation and makes us realise the importance and relevance of even small tasks, since everything is interrelated.


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3. More kindness – better cooperation A cooperative and supportive attitude, like being kind and more caring towards our colleagues helps to promote their success too, creates a better working atmosphere and hence increases overall well-being. 4. More modesty – less egoism Certain modesty prevents us from putting ourselves first or boasting too much with our achievements. It further prevents us from egoistically pursuing our own interests and yields less unethical behaviour, since we are no longer too concerned about potential financial and material gains. Daoist virtues can be also used to develop more holistic and sustainable business models and a progressive and more inspiring way of leadership. Source: Extracted from Henning, A. (2017) “How Daoism Can Make a Difference in Business”, LSE Business Review, http://blogs.lse.ac.uk/businessreview/2017/04/27/how-daoism-can-make-a-difference-in-business/ (accessed 15 January 2018).


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References

Alizila Staff (17 October 2017) “2017 Letter To Shareholders from Executive Chairman Jack Ma”, Alizila, http://www.alizila.com/2017-letter-shareholders-executive-chairman-jack-ma/ (accessed 11 December 2017). Awan, K.S. (6 April, 2016) “What are the Five Relationships in Confucianism, and How are They Related?” Quora.com, https://www.quora.com/What-are-the-five-relationships-in-Confucianism-and-how-are-they-related (accessed 15 January 2018). Chen, C.C. and Lee, Y.T. (2008) Leadership and Management in China: Philosophies, Theories and Practices, Cambridge University Press, NY. The quote is from p.35. Flannery, R. (20 August 2017) “Alibaba’s Jack Ma Is Back On Top As Asia’s Richest Man”, Forbes, https://www.forbes.com/sites/russellflannery/2017/08/20/alibabas-jack-ma-is-back-on-top-as-asias-richest-man/#40e6054b4e75 (accessed 11 December 2017). Henning, A. (2017) “How Daoism Can Make a Difference in Business”, LSE Business Review, http://blogs.lse.ac.uk/businessreview/2017/04/27/how-daoism-can-make-a-difference-in-business/ (accessed 15 January 2018). History and Milestones (n.d.) “1999”, Alibaba Group, http://www.alibabagroup.com/en/about/history?year=1999 (accessed 11 Dec 2017). Hofstede, G. (2001) Culture’s Consequences: Comparing Values, Behaviors, Institutions and Organizations Acrossacross Nations, Sage Publications, California: Thousand Oaks. Li, C. (22 December 2016) “Alibaba Faces Growing Pressure Over Counterfeit Goods”, New York Times, https://www.nytimes.com/2016/12/22/business/alibaba-ustr-taobao-counterfeit.html (accessed 11 December 2017). Livaccari, C. (March, 2010) “The Three Teachings”, Asia Society, https://asiasociety.org/china-learning-initiatives/three-teachings (accessed 15 January 2017). Low, K.C. and Ang, S.K. (2013) “Management, the Confucian Way”, Educational Research, 4 (2) pp. 82-90, http://www.interesjournals.org/full-articles/management-the-confucian-way.pdf?view=inline (accessed 15 January 2018). Press Release (18 May 2017) “Alibaba Group Announces March Quarter 2017 and Full Fiscal Year 2017 Results”, Alibaba Group, http://www.alibabagroup.com/en/news/press_pdf/p170518.pdf (accessed 11 December 2017). Rarick, C.A. (2007) “Confucius on Management: Understanding Chinese Cultural Values and Managerial Practices”, Journal of International Management Studies, August 2007, pp. 22-28, http://www.jimsjournal.org/3%20Charles.pdf (accessed 15 January 2018). Rarick, C.A. (2007) “Enlightened Management: An Analysis of Buddhist Precepts Applied to Managerial Activity”, Journal of Global Business Management, October 2007, https://ssrn.com/abstract=1021546 (accessed 15 January 2018).


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Statista (n.d.) “Annual Revenue of Alibaba Group from 2010 to 2017 (in millions of yuan)”, https://www.statista.com/statistics/225614/net-revenue-of-alibaba/ (accessed 15 January 2018). Topics (2017) “Alibaba”, South China Morning Post, http://www.scmp.com/topics/alibaba (accessed 11 December 2017). Wikipedia (n.d.) “Confucianism”, https://en.wikipedia.org/wiki/Confucianism (accessed 15 January 2018).

could chinese philosophy guide jack ma and alibaba …

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