Alibaba has announced that is going to undertake a restructuring of the company, with the aim of better adapting to a constantly changing and evolving environment. The process will end with the division of the company into six different companies or business groupseach with its own structure, to adopt a holding company structure.
Each of the CEOs of the six spin-off entities will report their plans and progress to a board of directors, and will take full responsibility for the performance of the company they oversee. The decision, which the company has described as the largest restructuring of the company’s governance in its history, “will empower all divisions to become more agile, improve decision making and get faster responses to market changes“, according to him Alibaba CEO Daniel Zhang.
Furthermore, Zhang has also stressed that “the market is the best definitive test, and each business group and company will be able to independently seek financing, and go public when they are ready«. This means that the reorganization means doing away with the corporate structure that Alibaba has used for years, based on a “middle platform” in which different divisions share middle managers and administrative and management positions, which they reuse in different departments, what is done for data and business purposes.
From now on, these positions will occupy different positions in the different companies into which Alibaba will be divided, and the parent company will only retain the positions necessary to comply with the obligations of listed companies. As divisions become more independent, resources will become compartmentalized, almost certainly leading to redundancies. However, this need not lead to redundancies, as some departments will need to increase their staff as they evolve.
The new structure implies that the staff and managers of each independent subsidiary company will have a greater incentive with their respective stock option plans. In addition, it will offer flexibility to Alibaba companies to go public in different jurisdictions, whose approval processes can vary greatly between them.
The six subsidiary companies into which Alibaba will be divided are as follows: Cloud Intelligence Group (dedicated to cloud computing, its CEO will be Daniel Zhang himself), Taobao Tmall Commerce Group (local retail businesses), Local Services Group (on-demand businesses, such as food delivery), Cainiao Smart Logistics (Logistics), Global Digital Commerce Group (overseas retail businesses, including Lazada), and Digital Media and Entertainment Group (video streaming and the like).
