Alibaba is restructuring, splitting into 25 divisions

Creating smaller divisions allows the Chinese e-commerce company more flexibility to change

(Updated to reflect comment from Alibaba)

Chinese e-commerce giant Alibaba Group is planning on restructuring itself by splitting the business into 25 different divisions, it was reported by 36Kr on Thursday.

Alibaba CEO Jack Ma sent out a company-wide email, where he explained that the reason the company is taking this step to help its brands more quickly respond to competitive threats, as well as ensure that Alibaba Group takes advantage of rapid changes and developments in the e-commerce space.

In his message, Ma said that, though change will be painful, it is something that it ulimatelty neccessary for the company to thrive. If it did not make this change now, he noted, things would be even worse for the company in the future. By dividing into 25 smaller groups, it gives each one more flexability to adapt to the changing market,

“This is the most difficult reorganization in Alibaba’s 13 years. It’s a culture shift,” Ma said in the e-mail.

Ma added that, even though each unit will have its own responsibilities, he does not want each one to be limited to its own interests, but to instead focus on how it can help the company’s overall performance.

Alibaba previously underwent a similar restructuring in July 2012, when it announced that it was going to be splitting into seven major business groups, in order to improve efficiency and share resources within the company.

“Consistent with our stated goal of promoting an e-commerce ecosystem, we’re organizing the company into smaller business units that will be better prepared to pursue their business with focus while also encouraging collaboration when required in order to build up that ecosystem. In addition, it allows Alibaba’s young leadership to further grow and develop as well,"  VP John Spelich told VatorNews.

Alibaba and Yahoo

It will be interesting to see how much of this move is a way for Alibaba to redefine itself as it becomes less reliant on Yahoo.

Yahoo decided to sell back half of its 40% stake in the Chinese e-commerce company this past September, for a total of $7.6 billion.

When Yahoo first announced that it would be selling its Alibaba shares in May, it was reported that the company would be returning the money to its shareholders. Those plans were eventually put on hold, however, as Mayer ordered a review of the company’s business strategy, starting with what to do with the money made from selling the Alibaba shares.

The speculation at the time was that, if Yahoo did decide to keep the money, it would possibly use it to refocus on investments in search and communications, or share repurchase and restructuring.

Since then, Mayer has since made clear her intentions to reinvest in Yahoo's main products: search, mobile, content, and advertising, with particular emphasis on mobile, which she has called, "A platform shift we have to ride and participate in order to be relevant.”

Yahoo still owns a sizable amount of the company’s stock, around 23%, and with that kind of investment, you can be sure that Yahoo still wants some control over the direction that Alibaba takes.

Jacqueline Reses, executive vice president of people and development at Yahoo, is joining the board at Alibaba, it was announced in December. She joined Alibaba executives Ma and Joe Tsai, along with  SoftBank CEO Masayoshi Son, as one of the four members of the board.

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