(TIỂU LUẬN) TOPIC ALIBABAS ACQUISITION OF LAZADA AND ITS IMPACT ON THE SOUTHEAST ASIAN CONSUMER GOODS MARKET

VAN LANG UNIVERSITY
FACULTY OF COMMERCIAL
—o0o—

FINAL EXAM
TOPIC: ALIBABA'S ACQUISITION OF
LAZADA AND ITS IMPACT ON THE
SOUTHEAST ASIAN CONSUMER GOODS
MARKET

Name

: Nguyen Hung Cuong

Student ID : 207TM63753
Course code

: 212_DCO0530_E02

Subject
business

: Contemporary issues in international

Lecturer

: PhD. Truong Hong Ngoc

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Ho Chi Minh City, April 29, 2022

LIST OF TAB
Figure 1.1 1 Transaction slace and growth of china's online
retail market, China E-Retail Market Report 2016, 2017.................5
Figure 1.1 2 Alibaba's gross merchandise volume growth, "Will
Alibaba's Fiscal 1Q17 Earnings Top Analysts' Esstimate"................6
Y
Figure 2.1.1 1 Internet users per ASEAN Memb= State. IWS
2010 est......................................................................................................................10
Figure 2.1.1 2 Internet Users per Country and % of total. IWS
2010 est......................................................................................................................10
Figure 2.1.1 3 Size of Southeast Asia's E-Commerce Market,
Temasek Holdings, 2016....................................................................................11
Figure 2.1.1 4 ASEAN Consumer Expenditure, Euromoitor...........12
Figure 2.1.1 5 Usage of E-commerce before, during and after
Covid-19, Temasek and Bain & Company.................................................12
Figure 2.1.1 6 The Top 10 Most Visited E-commerce Websites in
Southeast Asia 2020............................................................................................13
Figure 2.1.1 7 How household incomes will change across
developed and emerging asean (2019-2030)........................................14

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Contents
LIST OF TABLE............................................................................................................... 1
INTRODUCTION............................................................................................................4
CHAPTER 1: OVERVIEW OF THE ALIBABA’S DEAL TO ACQUIRE LAZADA.5
1.1 The situation leading up to the event.....................................................................5
1.2 The cause of the event.............................................................................................6
1.2.1 Looking for new markets...................................................................................6
1.2.2 Acquiring an established platform was a more appropriate option.....................7
1.2.3 M&A is easier than building new logistics systems...........................................8
1.3 Timeline of this event..............................................................................................9
CHAPTER 2: THE IMPACT OF THIS EVENT ON THE ASEAN REGION..........10
2.1 The effects of this event on the consumer goods market....................................10
2.1.1 The positive effects..........................................................................................10
2.1.2 The negative effects.........................................................................................14
2.2 The effects of this event on small and medium distributors..............................16
2.2.1 The positive effects..........................................................................................16
2.2.2 The negative effects.........................................................................................19
CHAPTER 3: PROBLEMS THAT ALIBABA IS FACING THROUGH THIS
EVENT............................................................................................................................20
3.1 The environment inside the business...................................................................20
3.1.1 Human resource management problems...........................................................20
3.1.2 The mistake of operation stage: Lazada is not Taobao.....................................21
3.1.3 The influence of competitors............................................................................22
3.2 The environment outside the business.................................................................24
3.2.1 The risk of losing market share........................................................................24
3.2.2 Fake and poor-quality goods will become mass...............................................25

CHAPTER 4: RECOMMENDATIONS.......................................................................26
4.1 Solutions that Alibaba can take to overcome the obstacles mentioned.............26
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4.1.1 Strengthen distribution network........................................................26
4.1.2. Develop unique marketing tactics...................................................26
4.1.3. Adapt to di昀昀erent cultural aspects of di昀昀erent markets..........26
4.1.4. Expand into new regions.....................................................................27
4.1.5. Strengthen value network..................................................................27
4.2 Solutions for small and medium-sized goods distribution businesses in the
region...........................................................................................................................28
4.2.1 Increasing people productivity:........................................................................28
4.2.2 Integrating seamlessly:.....................................................................................28
4.2.3 Providing access:..............................................................................................28
4.2.4 Keeping flexible:..............................................................................................28
4.2.5 Controlling cost to serve:.................................................................................29
4.2.6 Use third-party of fourth-party logistic providers:...........................................29
CONCLUSION...............................................................................................................30
ACKNOWLEDGEMENTS............................................................................................31
REFERENCES...............................................................................................................32

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INTRODUCTION
China's e-commerce market is easily seen as the most
developed in the world - it's bigger than Western markets like the US
and Europe. China's e-commerce market has exploded in recent times
and there doesn't seem to be enough space to increase market share.
Against such a backdrop, China's e-commerce giant Alibaba, of course,
won't let the game end like that. Alibaba, the company owned by
billionaire Jack Ma is aiming for the next e-commerce gold rush, a new
lucrative market: Southeast Asia.
Following Alibaba's $1 billion investment in April 2016 at a
valuation of $1.5 billion, a second deal that later raised that valuation
to $3.15 billion represented exactly that Jack Ma said about business
strategy to investors in 2016, Alibaba planned to reach at least 1.2
billion people outside of China in order to achieve its goal - 2 billion
customers. This statement shows the Chinese giant's ambition to
dominate the international market, and Southeast Asia is a focus of
Alibaba's plans. This group started to buy back a large number of
shares of Lazada in 2016. After that, Alibaba continued to increase the
stake by 1 billion USD in 2017 and then invested 2 billion USD in
Lazada in 2018.
This essay builds on the above events and deals with issues
about Alibaba and Lazada themselves and their impacts on the
consumer goods market and SME distributors.
In terms of structure, this essay consists of four chapter:

Chapter 1: Overview of the Alibaba’s deal to acquire
Lazada.
Chapter 2: The impact of this event on the ASEAN
region.
Chapter 3: Problems that Alibaba is facing through this
event.
Chapter 4: Proposal solutions for Alibaba.

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CHAPTER 1: OVERVIEW OF THE
ALIBABA’S DEAL TO ACQUIRE LAZADA
1.1 The situation leading up to the event
After Jack Ma founded an online directory website for Chinese
companies looking for international visitors, he came up with a new
vision to develop an online platform that allows consumers,
manufacturers, and distributors can cooperate, buy and sell directly
with each other.
By 2013, his Alibaba was starting to get strong enough, and as
evidenced by the fact that Alibaba’s online transactions had 昀椀nally
surpassed the combined transactions of eBay Inc. (eBay) and Amazon.
In 2014, Alibaba was listed on the New York Stock Exchange and was
valued at $160 billion. Through Alibaba, he not only created millions of

jobs, but also changed the economic and social landscape of the
country, making China the largest Internet market in the world.
The e-commerce market had grown substantially, and the
online retail market was at peak in 2013, with a nearly 60 per cent
annual growth rate. However, this growth was expected to decline to
20 per cent in 2018 due to the economic downturn in the Chinese
economy (see 1.1.1). In 2016, China’s economy grew at only 6.7 per
cent—its worst performance in 26 years—and growth was expected to
weaken further, to 6.2 per cent in 2018 Growth of gross merchandise
volume (GMV) was the most important performance metric in the ecommerce industry. Alibaba’s GMV was at 40 per cent in the fourth
quarter of 2015 but was reduced to less than 25 per cent in the same
quarter of 2016 (see Exhibit 1.1.2). Although Alibaba still managed to
increase its revenue during this downturn, the company could not
ignore the fact that competition among e-commerce players would
become sti昀昀er and would potentially jeopardize its leading position.

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Figure 1.1 1 Transaction slace and growth of china's online retail market, China E-Retail
Market Report 2016, 2017

Figure 1.1 2 Alibaba's gross merchandise volume growth, "Will Alibaba's Fiscal 1Q17
Earnings Top Analysts' Esstimate"

In 2017, The slowdown in the Chinese economy, domestic
competition, and expectations from capital markets all motivated the
company to accelerate its globalization. In fact, Alibaba had derived
only 7 per cent of its total revenue from international retail and
wholesale markets in 2016. However, it aimed to generate over 50 per
cent of its revenues outside China in the next 20 years, while serving 2
billion customers around the world, empowering 10 million businesses,
and creating 100 million jobs. Regardless of the China’s economic
situation, Alibaba was optimistic about China’s e-commerce market,
because only 50 per cent of China’s population had Internet access at
that point. However, it would take time for Alibaba to grow further by
昀椀lling this gap.
Jack Ma saw a promising opportunity about the markets in
Southeast Asia are having grown rapidly but was without dominant
players, probably due to the region’s diverse cultures, languages,
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geographical conditions, and consumer habits. That is why Alibaba
seeks to conquer Southeast Asia, takes $1 billion stake in Rocket
Internet’s Lazada in 2016 and then the company doubles down on
Lazada with fresh $2 billion investment in the next two years.

1.2 The cause of the event

1.2.1 Looking for new markets
As its home economy slowed and the competition continued to
rise, Alibaba had to look for a new source of revenue to sustain its
growth. Southeast Asia was a fast-growing region with an increasing
middle-class population that could potentially drive the e-commerce
market.
Alibaba bought Lazada because the leading e-commerce
company in the region has great appeal, with six di昀昀erent websites in
each country. Lazada shoppers spent $433 million on purchases in the
昀椀rst six months of 2015, a fourfold increase from the same period last
year. The result of Alibaba’s deal to acquire Lazada is Alibaba gained
access to a huge and growing consumer base outside China.

1.2.2 Acquiring an established platform was a more
appropriate option.
As I have mentioned above, Southeast Asia is having a grown
rapidly. Despite its attractiveness, the region was challenged by its
fragmented market, infrastructure, logistics, connectivity, and payment
gateways. Due to the diversity culture, languages, and The Personal
Data Protection Act, Southeast Asian countries have been conducting
many measures to protect the right to personal data, not only
improving national law but also establishing and strengthening
protection mechanisms, which will be hard for Lazada to collect and
keep consumers’ information. Given these challenges, entering the
region early through a green昀椀eld investment might have been costly
and risky. Thus, acquiring an established platform was a more
appropriate option.
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Despite the impressive growth of e-commerce in the region,
Southeast Asia was lacking a uni昀椀ed logistics infrastructure.
Inconsistent cross-border customs and taxes as well as corruption in
emerging markets continued to be barriers to online retail
development. In order to deliver an e昀昀ortless shopping experience,
Lazada need to focus on building its own logistical supports while
deepening its partnerships with third-party vendors. Lazada had
conducted a few rounds of fundraising and had managed to raise about
$700 million. However, this cash ran out quickly due to the challenges
of serving six di昀昀erent emerging markets. Raising additional capital
was di昀฀cult due to the size of the investment and the fact that the
company was not a usual start-up in the 昀椀rst place. Lazada had 昀椀gured
out how challenging it was to operate a successful e-commerce
business in Southeast Asia.
However, they can’t give up on Southeast Asia, which is
considered as a big piece of cake with numerous of potential
customers. “The total value of goods from e-commerce is forecast to
reach about 174 billion USD by the end of 2021, will increase to 360
billion USD by 2025”- Google, Singapore's Temasek Group and US
consulting 昀椀rm Bain. Lazada with the slogan “To make it easy to do
business anywhere” has cooperated with third-party contractors called
Lazada eLogistics (LeL) launched in 2012, to develop its own logistics
service by built centers for logistics, ful昀椀lment, includes hundreds of
vans and motorcycle instead of buy or ship its own inventory. This
strategy is the key to help Lazada “completely beat” Shopee – one of

their biggest industry competitors, in the delivery time. Moreover, it is
the solution for the diverse and fast-growing market like Southeast
Asia.

1.2.3 M&A is easier than building new logistics
systems.
Instead of spending money to build logistics systems, Alibaba
can take advantage of them by acquiring Lazada while the company is
short of capital. In addition, Lazada itself is already a well-known and
suitable platform to conquer the Southeast Asian market, taking
advantage of these advantages helps Alibaba access to a huge and
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growing consumer base outside China and save a large amount of
money instead of building new logistics systems or establish a similar
subsidiary. It would have cost Alibaba years and billions of dollars to
build such strategic assets to operate in the region if it had chosen
green昀椀eld investments.
All those issues are very unfamiliar to Alibaba, which has
things so much easier in China. Although the country has an array of
ethnic groups, most speak Mandarin Chinese. Alibaba has to build only
one site or app to cover a billion people.
Another boon is that China’s vast rail network and a profusion
of new highways speed up shipping. And lively competition in the

logistics industry reduces costs.
Lazada’s position across its six markets would cost billions
upon billions to replicate, with no guarantee of being able to beat it at
its own game. Put simply, M&A is cheaper for Alibaba than building.
1.2.4 Political factors
Of course, it wouldn't be without a political element - a
sensitive one. Alibaba was to establish the logistics, payment, customs
and digital integrated eWTP test complex in 2017. Alibaba has been
promoting eWTP as ‘digital Silk Road’ to complement the BRI and has
been the face of private-sector support for digital BRI. Alibaba’s eWTP
is an online marketplace platform to link vendors and customers in
China and partner countries. It is supported by Alibaba’s technology
and infrastructure in ecommerce, logistics, cloud computing and
昀椀nancial payment. Although the prospects of the Malaysia-based eWTP
are now uncertain after the Mahatir government took power in May
2018, subsequent eWTP projects are under way in Thailand, Pakistan,
Rwanda and Russia.
Alibaba’s eWTP aligns with the Chinese government’s ‘online
Silk Road’ policy, an extension of the BRI into cyberspace. The State
Council’s ‘13th Five-Year Plan for National Informatization,’ released in
2016, o昀฀cially recognized the progress in digital economic cooperation
between China and BRI countries and called for more active
participation of Chinese internet 昀椀rms.

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It is hard to 昀椀nd any evidence suggesting that the state
provided any direct policy initiative or critical funding for Alibaba’s
overseas expansion, including the Lazada deal. Rather, it was a
transaction initiated and executed by the private sector. For China’s
internet companies, business opportunities that the BRI projects o昀昀er
obviously draws them to support thepolicy, as exempli昀椀ed by the
expansion of Alibaba’s overseas data centers in BRI countries.
Nonetheless, the need to reduce the risks of alienating the state may
also motivate private 昀椀rms to support the state’s geopolitical strategy.

1.3 Timeline of this event
Alibaba's acquisition of Lazada took place in 2 years. This is
Alibaba's largest cross-border deal.
With the following reasons I have mentioned above, in 2015,
Lazada faced to the challenge for growth were the preference for brickand-mortar shopping among customers, with just about 1% of people
buying online compared to 10% of international shoppers. In addition,
Lazada has to solve the problem of lack of credit cards, arrange a
reliable cash on delivery and delivery system in rural areas. It seems
that this has consumed a lot of Lazada's resources and entered a
di昀฀cult situation of being threatened by Alibaba and Amazon.
In April 2016, Alibaba Group announced that it intended to
acquire a controlling interest in Lazada by paying $500 million for new
shares and buying $500M worth of shares from existing investors. The
British supermarket company Tesco con昀椀rmed the sale of 8.6% of its
holding in Lazada to Alibaba for $129 million. Alibaba gave the
following reasons for its investment: the market in South-East Asia has
growing middle-class income populations, estimated at that time to be
around 190 million people in the region with a disposable income of

$16 - $100 a day, and this was expected to grow to 400 million people
in 2020.
In June 2017, Alibaba Group increased its investment in Lazada
by an additional $1 billion, raising its stake from 51% to 83%. Alibaba
invested another $2 billion into Lazada in March 2018, and founder Max
Bittner was replaced as CEO by Alibaba executive Lucy Peng.
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CHAPTER 2: THE IMPACT OF THIS EVENT
ON THE ASEAN REGION
2.1 The e昀昀ects of this event on the consumer
goods market
2.1.1 The positive e昀昀ects
First, this cross-border investment event has another side

advertising for Lazada. This makes the customer base participating
the Lazada platform to become wider due to the convenience of
commerce. Consumers can shop for everything, and this has led
signi昀椀cant consumer growth.

Figure 2.1.1 1 Internet users per ASEAN Memb. State. IWS 2010 est.

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Figure 2.1.1 2 Internet Users per Country and % of total. IWS 2010 est.

As we can see in Figure 2.1.1 1, the number of Internet users
in the ASEAN region, namely Indonesia, Malaysia, Philippines,
Singapore, Thailand, and Vietnam are very impressive. Through the
huge transaction volume of this cross-border trade event of Alibaba, it
has had a signi昀椀cant impact on Lazada and Alibaba brands in the eyes
of ASEAN consumers, which makes them curious and aware of the
convenience of e-commerce. Certainly, Alibaba as well as Lazada will
increase the number of users impressively, which will lead to a good

growth in the consumer goods market due to the good purchasing
power of this emerging market.

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Figure 2.1.1 3 Size of Southeast Asia's E-Commerce Market, Temasek Holdings, 2016

Second, the market is getting bigger and bigger (Figure
2.1.1.3), so the market for the consumer goods industry is expanding:
With a much smaller investment cost than Traditional Commerce,
companies participating in Lazada have an opportunity to access a
market Consumption is larger than before, easy to 昀椀nd, to reach both
suppliers and customers this allows organizations to buy at lower prices
and sell more products. In addition, the sale of more products will
stimulate more products to be produced. All of the above factors
increase the market for the national consumer industry, and even
ASEAN.

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Figure 2.1.1 4 ASEAN Consumer Expenditure, Euromoitor

In the period 2018-2020, Southeast Asian countries are
developing, and the concept of E-Commerce is more known.
Speci昀椀cally, when this event takes place and is accompanied by the
impact of Covid-19. Customers who often tend to use traditional
commerce have now switched to using E-commerce platforms, the
leading of which is Lazada. Statistics show that during this period, the
consumer goods industry grew strongly despite the damage of the
Covid-19 epidemic.

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Figure 2.1.1 5 Usage of E-commerce before, during and after Covid-19, Temasek and Bain &
Company

Figure 2.1.1 6 The Top 10 Most Visited E-commerce Websites in Southeast Asia 2020

Third, Alibaba's acquisition of Lazada along with the

development of technology makes consumers more inclined to use
these online platforms. Just with a phone, customers can buy goods at
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any time of the day and at any location within the coverage of Lazada
and Alibaba. This seems to have freed the consumer as well as the
manufacturer from the constraints of traditional commerce.
With this new experience of online shopping, customers tend
to spend more their free time shopping what they need or easily access
the products they are looking for and related products that these online
platforms suggest. This a昀昀ects their purchasing behavior and of course
the consumer goods industry will continue to grow because of this new
consumption habit.
Next, any investment of any size e昀昀ects the wave of
investment shifts. The takeover serves as a guarantee that the region
is extremely attractive to investors and will spark more companies to
delve deeper into the Southeast Asian market.
This obviously helps countries in the ASEAN region also
bene昀椀t. And so, this can be considered a great place to start a
business, opening many promising career opportunities. This
sustainable development makes businesses have a stable pro昀椀t source.
Currently, the income of workers' increases (Figure 2.1.1.7), leading to
an increase in paying for the needs around daily life. The fact that they
will spend more leads to an impressive growth in the consumer

industry (Figure 2.1.1.4).

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Figure 2.1.1 7 How household incomes will change across developed and emerging asean
(2019-2030)

Finally, the strategic of Alibaba is to put customers at the
center, they are willing to sell at cheaper prices. This helps customers
become more sympathetic to use Lazada, which leads to products
being bought, sold, and exchanged continuously, which leads to the
stimulation of production and growth of the consumer industry.

2.1.2 The negative e昀昀ects
First, the expansion of the market size will lead to 昀椀erce
competition of enterprises in the same industry. Because of
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competition, substitute products are born and threaten the in昀氀uence of
existing products. The replacement products are now improved in many
ways, in addition to providing customers with the same bene昀椀ts and
features as the current product. This competition is evident in the lowcost switching. Low switching costs are developed because competition
is often created at lower costs. As a result, the consumer will pay a
lower cost to use the substitute product. In addition, low switching
costs lead to lower overall product prices for consumers, which in turn
leads to businesses in the same industry starting to compete on price.
Second, one of the di昀฀culties that the consumer industry
faced in the event that Alibaba acquired Lazada and began to expand
the market was the risk for new entrants because of the high barrier to
entry. Of course, here we are not talking about whether the entry of
new people takes place and reduces pro昀椀tability, but above all, the
dangers of entry.
At a certain point, barriers to entry becomes strong and new
entrants need to have solid resources and 昀椀nances for operations to
take o昀昀 and sustain. In addition, existing companies in the industry
operate with high economies of scale, which new entrants will take a
long time to keep up with. It can be seen that these problems make it
very easy for new entrants to be eliminated if they do not meet the
requirements of consumers as well as the industry market. This
happens, leading to a change in the structure of the consumer industry,
speci昀椀cally, the total output of 昀椀nished products to consumers will
decrease, leading to a decrease in the industry's market share.
Moreover, there is an issue that is quite contradictory to the
positive side mentioned above. Although GDP per capita in the
Southeast Asian region is rising, it is still low compared to developed
markets. Manufacturers are therefore constrained by the spending
power of consumers, and this leads to the dependence of production

activities on consumer industry customers.
In another aspect, when Lazada as well as e-commerce
activities become popular, the appearance of many fake and poorquality goods will become common. Sometimes consumers tend to
choose cheap products that forget about the quality of the products
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they are using. This will a昀昀ect genuine manufacturers in the long run.
In other words, the invasion of counterfeits is fragmenting and
destroying the e-commerce platform itself and the future consumer
industry.
Finally, with the huge volume of transactions from Alibaba's
acquisition of Lazada, this event has almost spurred the process of ecommerce. This seems to separate consumers somewhat from
traditional commerce. The tendency to consume from traditional
commerce in the future will decrease signi昀椀cantly, and this will leave
some consumer good products unsold. Leads to a change in the market
share and growth of the consumer industry.

2.2 The e昀昀ects of this event on small and medium
distributors.
Every economic system has segments that produce products
and consumers who need them. Between these segments is the
distribution system. Sometimes the distribution system is itself made
up of several segments and sometimes it controls production as well. In
some industries the producers have taken over the distribution of their

products. No matter how it functions, the role of the distribution system
is to e昀฀ciently 昀椀nd consumers who need particular products and to
ensure that they have access and the ability to buy them if they want.
The distribution system of an economy is never static; new
technologies are causing fundamental changes in how distribution
works. On the surface, such changes might mean one thing, yet when
the actual mechanics play out, the results can sometimes be
unexpected. Producers, distributors, and retailers compete for market
share and a bigger slice of the overall pie with unpredictable outcomes.
Using innovative approaches, some companies attempt to cover the
entire market segment, from production to retail. Others specialize in
becoming an all-purpose intermediary. Still, others try to excel in a
particular niche.

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2.2.1 The positive e昀昀ects
Lazada is currently a sales catalyst for many distributors.
Although Lazada is not a business strategy, it plays a large role in the
distribution of products to the end consumer.
In simple markets of old, producers of goods or services dealt
directly with the consumers of those o昀昀erings. In some modern
business-to-business markets, suppliers also interact on a face-to-face

basis with their customers. However, in most contemporary markets,
mass production and mass consumption have caused intermediaries to
enter the junction between buyer and seller. These intermediaries have
either taken title to the goods or services in their 昀氀ow from producer to
customer, or have, in some way, facilitated this by their specialization
in one or more of the functions that have to occur for such movement
to occur.
Apparently, distribution businesses in the region will have
more opportunities to 昀椀nd more potential partners from China or other
countries in ASEAN. For example, China is a lucrative market with the
total population accounting for the 昀椀rst place worldwide. The large
population makes China have a lot of potential manufacturing
enterprises. In China, Alibaba is present in every corner of life:
shopping, 昀椀nance, online gossip, entertainment, news, health.... As
Alibaba, China's largest e-commerce group with millions of transactions
a day, decides to enter the Southeast Asian market, small and mediumsized goods distributors in the region will have more opportunities to
cooperate with potential manufacturing enterprises and be able to
bring their distribution businesses to their hands. So, The Chinese
market is fertile. Correspondingly, ASEAN countries are still developing,
the market is getting bigger and bigger, helping many distribution
businesses to connect and cooperate with each other in the trend of
integration and globalization. At the same time, the plan will accelerate
the goal of giving customers the opportunity to access a diverse and
unique product portfolio from around the world, not just from China to
the Lazada exchange.
Second, Alibaba, whose customers are not only individuals but
also businesses, manufacturers, and distribution channels with quite a
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large in昀氀uence. When Alibaba decides to enter the Southeast Asian
market, this will help small and medium-sized distributors in the region
to cooperate with as many potential partners and expand their
distribution channels to the international level. As an example, a
manufacturer cannot distribute its products directly to the 昀椀nal
consumers in each locality. Therefore, a third party and more is
required to handle these stages. This helps manufacturers save
considerable time and costs.
Third, Alibaba can't mention the technology it applies to its ecommerce model is very advanced and modern and almost leading the
way in safety and reliability. Alibaba's acquisition of Lazada's stake will
make Southeast Asia's e-commerce business more reliable as Lazada
will have access to as many modern, advanced, and highly reliable
technologies. This has given distributors in Southeast Asia more peace
of mind when participating in this online business model and payments
via e-wallets will be more secure. "This investment will give the
company the opportunity to learn from Alibaba, the world's leading ecommerce site, which will help Lazada provide better service to both
customers and partners in ASEAN countries. In addition, these
distributions can also use Alibaba’s Customer sets, which increases the
business's ability to reach customers leading to increased pro昀椀t
margins and reduced input costs to reach customers.
Next, intermediaries became stronger, and manufacturers had
to reduce costs because new distributors-controlled market access. At a
result, new and existing companies operating in the distribution space
took over a wider range of functions and increased their power. Instead
of producers gaining power in the new distribution 昀椀eld dominated by

technology, new and powerful intermediaries have sprung up to control
markets and dictate pricing and conditions to producers. Approaching
distribution from the retail side has made some companies extremely
pro昀椀table. Businesses that control a market segment and a large client
base can achieve savings on the supply side from manufacturers and
charge above market prices to consumers. Margins can be substantial
because these businesses have taken control not only of the
distribution mechanisms but also of the pro昀椀ts that were formerly
associated with them.
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Next, Alibaba is the largest e-commerce group in China. When
Alibaba enters the Southeast Asian market, it will be defective for the
distribution structure to gradually increase sharply in the style of ecommercial distribution, which will lead to the distribution businesses
will sharply increase their operations through e-commerce channels
and this makes it possible for distribution businesses to cut some of the
costs of operating online as online activities such as e-commerce
channels. Stores will be cut and there is no need to hire many
employees to work at the store, ... At the same time, the e-commerce
industry in Southeast Asia will also follow the momentum of
development but improve its own quality, improve delivery speed as
well as to professionalize services.
Moreover, expanding the market is great for distributors. Many
small businesses, including in rural areas, can enter a larger, more

lucrative market. This help businesses to participate in the value chain
continuously and bring great pro昀椀ts for businesses. Enable the
development phase and build better logistics to improve product
delivery e昀฀ciency. In addition, with the increasingly larger and broader
market size, distributors must have plans and strategies to improve the
quality of operations of individual businesses. This not only makes the
business look good, but also helps to improve the logistics system in
which the distributor participates, the network is diversi昀椀ed, and the
structure is stronger. In order to adapt and respond to the requirements
of this large market, many new distributor models have been born to
solve problems that previous distributors have not been able to do.
Furthermore, as I have mentioned above, the mergers and
acquisitions as a guarantee that the region is extremely attractive to
investors and will spark more companies to delve deeper into the
Southeast Asian market. This is a good opportunity to improve the
logistics system. Due to working capital, distributors can improve their
distribution systems to solve the problems of reducing inventory and
delivery delays. The store system introduces products that are replaced
or supported by online showrooms. Save on storage costs.
Finally, intermediaries may enter channels facilitated
electronically. Where this occurs, it will be because they perform one of
the three fundamental channel functions of reassortment and sorting,
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routinization, or searching more e昀昀ectively than anyone else can.
Therefore, this helps small and medium-sized distributors increase the
speed of product delivery to consumers, easily adjust customers and
partner relationships, and reduce communication costs.
Currently, the goods distribution system in ASEAN has
developed relatively strongly in both quantity and scale, initially
satisfying the diverse needs of people. In that process, Lazada as well
as e-commerce support very e昀昀ectively for the processes of managing
the goods distribution system, therefore, in order to develop modern
goods distribution systems, it is necessary to promote accelerate the
application of e-commerce in the distribution of goods in the ASEAN
region today.

2.2.2 The negative e昀昀ects
Besides the above positive e昀昀ects. An economic event always
has a two-way e昀昀ect.
First, Alibaba's entry into the Southeast Asian market will lead
to some disadvantages for distributors in the region. Alibaba is China's
largest e-commerce group, Alibaba’s entry into Southeast Asia will lead
to 昀椀erce competition between domestic and Chinese products.
According to the market, Chinese products are often very cheap, which
leads to competition in the prices of Chinese products and products of
businesses in the region. According to the buying psychology of
customers, they always prioritize cheaper products, and the Southeast
Asian market has such purchasing tastes. Alibaba, on the other hand,
will tend to prioritize Chinese businesses, which would be detrimental
to distribution businesses in the Southeast Asian market. In addition,
consumers will tend to choose products of reputable and well-known
distributors in the market, so if those small and spontaneous
distributors participate in the competitive trend not keep up will be

eliminated. Consequently, they will be swallowed up when they are
unable to compete with Alibaba's Chinese distributors.
Second, Information Technology develops, and it also re昀氀ects
the competitiveness of distributors. Distributors that do not yet have
strengths in technology, speci昀椀cally: technology to support the sales
force, reach customers, measure operational e昀฀ciency, and manage
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