BEIJING – Alibaba Group, one of the largest and most influential tech companies in China, announced today, that it will split into six business groups, each with its own CEO and board of directors. This is the most significant reorganization in the company’s 24-year history, and it has implications for its future growth, competitiveness and regulatory compliance.

The six business groups are:

– Cloud Intelligence Group: This group will focus on Alibaba’s cloud computing and artificial intelligence (AI) activities, which are seen as key drivers of innovation and digital transformation. Alibaba CEO Daniel Zhang will also head this group.
– Taobao Tmall Commerce Group: This group will cover Alibaba’s core e-commerce platforms, including Taobao and Tmall, which account for most of its revenue and profit. This group will remain wholly owned by Alibaba and will not seek external funding or listing.
– Local Services Group: This group will cover Alibaba’s local services businesses, such as food delivery platform Ele.me and mapping service AutoNavi. Yu Yongfu, a former CEO of Alibaba’s digital media and entertainment group, will lead this group.
– Cainiao Smart Logistics: This group will cover Alibaba’s logistics network and services, which enable fast and efficient delivery of goods across China and beyond. Wan Lin, who has been the CEO of Cainiao since 2018, will continue in this role.
– Global Digital Commerce Group: This group will cover Alibaba’s international e-commerce businesses, such as AliExpress and Lazada, which cater to consumers outside China. Jiang Fan, who has been the president of Taobao and Tmall since 2019, will serve as the CEO of this group.
– Digital Media and Entertainment Group: This group will cover Alibaba’s media and entertainment businesses, such as streaming platform Youku and movie studio Alibaba Pictures. Fan Luyuan, who has been the CEO of Youku since 2017, will lead this group.

According to Zhang’s letter to employees, the restructuring is designed to “unlock shareholder value and foster market competitiveness”. He said that each business group will have the autonomy and flexibility to pursue independent fundraising and public listing when they are ready, except for the Taobao Tmall Commerce Group. He also said that the restructuring will help Alibaba adapt to the changing market environment and regulatory landscape in China.

Alibaba has faced several challenges in the past two years, including slowing economic growth at home, intensifying competition from rivals such as Tencent and Pinduoduo, and increasing scrutiny from regulators over its market dominance, data security and social responsibility. In November 2020, Alibaba’s fintech affiliate Ant Group had its highly anticipated IPO suspended by regulators due to concerns over its financial risks and compliance issues. In April 2021, Alibaba was fined a record $2.8 billion by China’s antitrust watchdog for abusing its market position and restricting competition. In June 2021, Alibaba was ordered by regulators to divest its media assets due to fears over its influence on public opinion.

By splitting into six units, Alibaba may be able to mitigate some of these risks and pressures by diversifying its revenue sources, enhancing its innovation capabilities, improving its operational efficiency and satisfying different stakeholder demands. It may also be able to attract more investors and partners by offering them more choices and opportunities to participate in its various businesses. Moreover, it may be able to reduce its regulatory burden by lowering its profile as a single dominant entity and complying with different rules for different sectors.

However, the restructuring also poses some challenges and uncertainties for Alibaba. For instance, it may face coordination difficulties among its six units due to potential conflicts of interest or misalignment of goals. It may also lose some synergies or economies of scale that come from having a unified platform or ecosystem. Furthermore, it may encounter more competition or disruption from other players in each of its segments as it becomes more focused and specialized.

In conclusion, Alibaba’s decision to split into six units is a bold and strategic move that reflects its ambition to grow and compete in a complex and dynamic market. It is also a response to the changing regulatory environment that requires it to be more compliant and responsible. The success of this move will depend on how well Alibaba can balance the benefits and costs of decentralization while maintaining its core values and vision.