Juan Pablo Vázquez Sampere: China’s Alibaba is the First Real Test for Amazon’s Business Model

Juan Pablo Vázquez Sampere considers that China’s Alibaba is the first real test for Amazon’s business model.

Juan Pablo Vázquez Sampere

Alibaba will gain a foothold in the U.S. market, probably with some portion of that huge group of consumers who don’t shop that frequently but who browse a lot, from whom Alibaba will derive advertising revenue even if they don’t buy anything. If this scenario materializes, we should expect Alibaba to become a relevant player rather quickly while Amazon posts record sales and profits. Eventually, Alibaba will continue to grow as Amazon stagnates in those lines of business where Alibaba will be present, as Alibaba’s growing customer base attracts more and more of Amazon’s vendors. Considering that Amazon’s entire business model is based on economies of scale, a slower growth rate will be a very serious problem.

In the second scenario, Amazon creates an independent business unit using Alibaba’s revenue model — the strategic response to disruption that maximizes the odds of success. However Amazon would have to deal with two main problems in this scenario. First, it would need to find away to avoid cannibalization, which in online retail is a very difficult challenge. Second, there are no precedents in Amazon’s business model for creating independent business units, and because of Amazon’s recent investment spree, the request for funding for this business unit would come at a very sensitive time. Still, if Amazon succeeds in creating this independent business unit, while Alibaba might still gain a solid foothold in the U.S. market, it would be much more difficult for the company to achieve sustainable growth.

One of Jeff Bezos’s most famous quotes is: “Your margins are my opportunity.” This year we will see where the opportunity for Amazon’s business model is when the competitor has no margins at all. At a time when it seems that Amazon can do nothing wrong disruption theory is already telling us something: In a situation like that, doing nothing is also wrong.

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Juan Pablo Vázquez Sampere

Juan Pablo Vázquez Sampere is an expert on Disruptive Innovation. He is an Associate Professor for the Operations & Technology area at IE Business School, his research is focused on using innovation to increase the success rate of both entrepreneurs and corporate ventures. Juan Pablo is the founder of Stratemic, a boutique consulting firm focused on Disruptive Innovation. In 2006 he became a faculty member at IE Business School.  He has been selected for IMD’s “World Competitiveness Yearbook” panel.

Professor Vázquez holds an MBA with High Distinction from IE Business School. He has a MR title from Harvard University and is a PhD from Universidad Complutense. His professional experience includes several positions in management consulting firms and in a major media group. He has also worked for governments and NGOs. In strategy consulting he is working for the largest corporations in Europe. His particular interest is in removing the variability in the commercialization process using new technologies that eliminate the factors that introduce randomness.

In his presentations Juan Pablo analyses how to build and manage an enduring successful company and how to improve a manager’s professional career using innovation to his advantage.

Please contact us at [email protected] if you are interested in engaging Juan Pablo Vázquez Sampere to speak at your next event.