Alibaba plans to split into six companies
Alibaba's radical reform: A new chapter for China's online retail giant

Chinese online retail giant Alibaba is planning a major change: the company will be split into six independent companies that may go public separately. The group itself will operate as a holding company in the future. The goal of the reform is to make the organization more flexible and effective, and to shorten decision-making paths, group CEO Daniel Zhang said in an employee newsletter. The independent companies that will emerge from this reorganization are called Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics Group, Global Digital Commerce Group and Digital Media and Entertainment Group. Each of these groups will have its own chief executive officer and board of directors. Zhang will lead the Cloud Intelligence Group and also remain the chief executive of the holding company.
The announcement has already had a positive impact on the company. Shares of the Chinese online retailer rose more than six percent in premarket trading. According to Stuart Cole, chief economist at brokerage Equiti Capital, the split brings an element of flexibility and adaptability to a company that is currently something of a behemoth. However, it will certainly take a while to turn one company into six.
It is interesting to note that the restructuring of the company was announced just a day after the public sighting of Jack Ma, one of the co-founders of Alibaba. Ma had fallen out of favor in 2020 after criticizing regulation in his home country. The criticism had led to increased government pressure on the private sector. As a result, the planned IPO of Ant Financial, the financial services company that operates the Alipay payment service and is part of Alibaba, failed. Following this setback, Ma disappeared from the scene for several months, also losing his status as the richest Chinese and control of Ant. Now, Ma's sudden return and announcement of Alibaba's reorganization suggests that the company has been nurturing these plans for some time and waiting for a favorable opportunity.
The split of Alibaba into six separate companies is intended to allow the company to better focus on its various businesses and speed up decision-making. The thinning out of management should help make the company leaner and more efficient. Still, it will be a challenge to create six independent companies that work together effectively. It remains to be seen how investors will react to Alibaba's realignment and how well the company will be able to implement the announced changes.
