On March 28, Chinese eCommerce company Alibaba Group said it will reorganize into six business groups and other investments in what amounts to the company’s biggest operational shakeup in its 24-year history.
In a regulatory filing, the company said the six new groups will be made up of the Cloud Intelligence Group, Taobao Tmall Business Group, Local Services Group, Global Digital Business Group, Cainiao Smart Logistics and Digital Media and Entertainment Group. Alibaba Group said new each group will be able to raise outside capital and eventually seek its own initial public offering.
The company said the move is designed to unlock shareholder value and foster market competitiveness. Alibaba Group will continue to be led by Daniel Zhang, while each of the six business groups will be headed by its own CEO and board of directors.
Alibaba added that the change will position its businesses to “become more agile so as to capture market opportunities better and stimulate growth.”
“The market is the best litmus test, and each business group and company can pursue independent fundraising and IPOs when they are ready,” Zhang wrote in an email to employees.
Shares of Alibaba Group Holding Ltd. jumped 8% at the opening bell March 28, according to the Associated Press. The company said its US-listed shares soared over 10% higher in pre-market trading.
“Setting up individual BGs [business groups] will enable quicker market response amid intensifying competition,” analysts said in a note to investors.
Restructuring is part of a long-term effort to achieve a nimbler organizational structure, the company said. Alibaba introduced a middle-platform strategy in 2015, resulting in a “large middle platform, small front office” organizational model. The group implemented a diversified organizational governance structure in 2020, giving key businesses management responsibilities, Alibaba said.