Alibaba is not a retailer in the traditional sense. It doesn't source or keep stock, and logistics services are carried out by third-party providers. Instead, Alibaba is what you get if you take all the functions associated with retail and coordinate them online into a sprawling, data-driven network of sellers, marketers, service providers, logistics companies, and manufacturers. Indeed, Alibaba does what Amazon, eBay, PayPal, Google, FedEx, all of the wholesalers, and a good portion of manufacturers in the U.S. do, with a healthy helping of financial services for garnish. Alibaba achieves this by leveraging the new technologies of network coordination and data intelligence. It harnesses the efforts of thousands of Chinese businesses to create an ecosystem that is faster, smarter, and more efficient than traditional business infrastructures. This is an emerging business model that Ming Zeng, the chair of Alibaba's Academic Council, calls smart business. Players in the ecosystem share data and apply machine-learning technology to identify and better fulfill consumer needs. This article provides a framework for transforming a company into a smart business.

Wouldn't it be great if there were an algorithm that could tell you when to develop a new business model or enter an emerging market? Unfortunately, one doesn't exist. However, it is possible to use the principles behind algorithms to continually retune your strategy and your organization. In online enterprises, algorithms constantly readjust the products and content shown to customers. They do this by operating three learning loops: experimentation, modulation, and shaping. Algorithms keep generating new options and testing reactions to them. But over time the algorithms modulate the rate of experimentation, scaling it back as they learn more about people's likes and dislikes. Algorithms shape preferences too, by introducing customers to products they might not have otherwise discovered. Critically, they do this all in a self-directed manner, without any human intervention. Now some internet companies have begun to regularly readjust their business models, allocation processes, and structures using the same self-directed learning loops. This approach works especially well in rapidly changing markets, like China. In this article, the authors look at how China's Alibaba grew from an 18-person start-up to an $8 billion empire by regularly resetting its vision, testing out new models, shaping opportunities, and building adaptive structures.

In tough economic times, some companies have outmaneuvered rivals to become market leaders through value-for-money strategies. That is, they have enabled recession-hit consumers to economize (do less and spend less), become more efficient (do the same for less), or become more effective (do more but spend no more). To implement such a strategy, argue this British professor and Chinese academic, companies must go beyond refining cost-cutting capabilities to develop expertise in cost innovation. That may not be good news for many U.S., European, and Japanese corporations, because multinationals from emerging markets, which have long experience with value-conscious customers, have already built cost-innovation capabilities that are unlocking mass markets in both developing - and developed - countries. Some, like battery maker BYD, have learned to sell high-tech products profitably at mass-market prices through a combination of lower labor costs and manufacturing innovations. Others, like drinks purveyor United Spirits, have dominated industries by blanketing sizable niches in their home markets with a full range of products or customized options. And still others, like appliance manufacturer Haier, have used low-price offerings to turn small, unguarded niches into mass markets in developed countries. In response, the authors argue, Western companies should turn to developing countries for vital lessons in lowering the cost of building brands and developing and manufacturing products. They should enter into alliances with emerging giants to gain cost-innovation capabilities. And they should use their superior financial strength to beat emerging giants at their own game of growing mass markets in developing countries. Multinationals that fail to learn from emerging rivals are unlikely to weather the recession well - or stay competitive for very long.

It's a competitor's notion of the perfect storm - low-cost and value-added provider. These authors have valuable advice to help managers weather the storm.

This is an MIT Sloan Management Review article. As China prepared to enter the World Trade Organization in 2001, many multinationals planned to invest new billions in operations there. But their ambitious growth plans must be viewed with caution. Experienced multinationals have long been aware of the challenges, summed up by the adage that in China "everything is possible, but nothing is easy." But few predicted the most formidable obstacle to success: the emergence of tough competition from local Chinese players. The authors' research over the past five years reveals that although market dominance by local champions is not universal, it's becoming more frequent. Multinationals must face the fact that the competitive edge that is potentially available to them from superior technologies, products, and systems will be blunted unless they build stronger local competencies. Specifically, multinationals must show a new determination to master the complexities of distribution, sales, and service in China's secondary cities and rural heartland and to learn how to adapt products, processes, and marketing messages more sensitively to the peculiarities of the Chinese market.

Most multinational corporations are fascinated with China. Carried away by the number of potential customers and the relatively cheap labor, firms seeking a presence in China have traditionally focused on selling products, setting up manufacturing facilities, or both. But they've ignored an important development: the emergence of Chinese firms as powerful rivals--in China and also in the global market. In this article, Ming Zeng and Peter Williamson describe how Chinese companies like Haier, Legend, and Pearl River Piano have quietly managed to grab market share from older, bigger, and financially stronger rivals in Asia, Europe, and the United States. As the government's policies about the private ownership of companies changed from forbidding the practice to encouraging it, a new breed of Chinese companies evolved. The authors outline the four types of hybrid Chinese companies that are simultaneously tackling the global market. China's national champions are using their advantages as domestic leaders to build global brands. The dedicated exporters are entering foreign markets on the strength of their economies of scale. The competitive networks have taken on world markets by bringing together small, specialized companies that operate in close proximity. And the technology upstarts are using innovations developed by China's government-owned research institutes to enter emerging sectors such as biotechnology. Zeng and Williamson identify these budding multinationals, analyze their strategies, and evaluate their weaknesses.

The case describes the development of Alibaba.com, an Internet start-up originated from China that had become the world's largest online business-to-business (B2B) marketplace for small and medium-sized enterprises (SMEs) conducting international trade. In particular, it highlights the changing business environments in China, and the dynamic interaction of Chinese culture, Internet culture and Western management practices.

This case deals with the integration of a recently acquired state-owned enterprise by Haier, a rapidly expanding, collectively owned company in China. It highlights the challenges of managing post acquisition integration in China, especially that of state owned enterprises and also provides useful information to understand the characteristics of emerging Chinese companies.