Dive Brief:
- Speaking in Davos, Switzerland, at the World Economic Foum, Alibaba founder Jack Ma described his company's ethos as about empowering others within their ecosystem in terms of sales and service, CSNBC reported last week.
- According to Ma, Alibaba seeks to be an ecosystem in which small sellers can compete with the largest corporations.
- In fact, Ma argues that third-party sellers are the foundation of Alibaba, which he contrasts to Amazon, which has incorporated third party sellers only over time while incorporating stringent policy rules to ensure they meet Amazon's quality of service standards.
Dive Insight:
The difference between vertical and horizontal supply chains is typified in the difference between Amazon and Alibaba, two of the largest companies in the world and transforming the way businesses think about e-commerce in the chain.
Amazon is a vertical supply chain company as a direct seller of goods. It grows through increased sales volume of its products as well as through the acquisition of companies such as Zappos, which sells women's shoes and apparel. Amazon's subsidiaries are quite numerous, ranging from books to fabric to beauty products, to name but a few. The more product lines that Amazon controls from beginning to end in the supply chain, the greater its hold on market share becomes.
Alibaba, on the other hand, operates as a horizontal supply chain. Its objective is to find buyers and sellers within its umbrella who want to work together for the exchange of goods. As Ma argues, it is attempting to raise up and bring together many 'mini-Amazons,' which by working together helps the entire Alibaba network grow.
