Alibaba vs. Amazon: A business model comparison

As two strong technology companies with large stakes in the e-commerce sector, Alibaba and Amazon have often been compared head-to-head in the business sphere. Given that the business model approach represents a helpful mean to get the big picture of a company and understand how value is created and captured, this paper brings a methodical analysis of Amazon and Alibaba by contrasting their business models based on a coherent framework. In this paper, the framework initially selected has been adapted so as to incorporate both the online functionalities and the offline activities of the companies. Three dimensions have been assessed (namely matching, assembling and knowledge management) in order to highlight the value creation potential involved. The analysis therefore looks into the mechanisms put in place by Alibaba and Amazon to reduce transaction costs in the task of matching the transaction parties, the assembling and integration of the various businesses and functionalities, and the tools implemented to manage user-generated content. Furthermore, the trade-offs faced by both companies regarding each of these dimensions have also been discussed. This paper adds to the literature by offering a first formalized comparison of Alibaba and Amazon and an evaluation of their overall performance.