Alibaba reshuffle a precursor to global expansion

Alibaba Group’s management shake-up involving four top executives taking sabbatical study leave, will pave the way for international expansion, industry watchers say.

29 January 2008
Published by South China Morning Post

At the end of last year, the parent of Alibaba.com, the country’s largest business-to-business internet marketplace, revealed a series of changes in its senior management. Chief operating officer Li Qi, chief technology officer John Wu Jiong, senior vice-president Lu Xuhui and president of its online auction site Taobao, Toto Sun, would leave the group at some point this year.
 
The move fuelled a wave of speculation in the market - including talk of a potential spin-off of Alibaba Group’s subsidiaries.

However, analysts said this could be part of Alibaba’s plan to go global.

“Alibaba wants to build its international operations. They need someone who can develop business in the US and Europe,” said Jacky Huang, senior analyst at IDC China, a digital marketplace research firm.

“As hiring someone with overseas experience can be very expensive, they decided to train their own staff. The group on sabbatical leave will be the future management team for Alibaba’s international business.

“Although [the training] could take a few years, [founder] Jack Ma has that kind of patience. Also, the local team has been with Jack for a long time; they are loyal to him.”

In Alibaba’s earlier announcement, the four executives will further their studies in overseas business schools. Other Alibaba executives are scheduled to follow them.

Just before Alibaba.com was listed on the Hong Kong stock exchange, it had attempted to recruit talent to develop its international operations.

A source said he was approached by a head hunter for the position of regional marketing director for international business at Alibaba.com, but turned it down on remuneration grounds.

“For a position of such responsibility, the average pay would be about HK$1.5 million to HK$2 million a year. But Alibaba was only offering about HK$1 million to HK$1.25 million. That is not attractive for an expatriate,” the source said.

Although the offer came with share options, they were priced at “300 times earnings, and were basically useless”, he added. Other people contacted for the same position also turned down the offer, he said.

Alibaba does not believe a low remuneration package is behind the company’s failure to attract foreign executives.

“Since day one, we have been a global company and have attracted senior managers from around the world,” said Porter Erisman, the company’s vice-president for corporate affairs.

“Our compensation is globally competitive and is a combination of base salary plus year-end bonus plus stock options. Throughout the years, our overall compensation has well exceeded the market rates when performance rewards are factored in and we’re confident this trend will continue,” he said.

“We’ve never looked for people who simply want to ‘cash in’. We want people who are truly committed to the company with a long-term view and prefer to have their compensation based on performance and results,” he said.