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Organizational Structure of Vipshop Holdings Limited

In general, the organizational structure of a company specifies its strategies, authority, formal reporting relationships, controls, procedures, and decision-making processes. Organizational structure helps to formulate specific strategies that may be required for the improvement of the firm’s performance and competitive advantages (Hitt, et al., 2017). Being one of the largest online retailers in China, Vipshop Holdings Limited may be defined as a holding company that performs offering of goods and product distribution on its e-commerce platform (Reuters, n.d.). In accordance with its divisional structure, the company conducts its business through its consolidated affiliated entities and subsidiaries in China (Reuters, n.d.). In general, the divisional structure is highly suitable for companies that operate with independent business units that offer distinct and recognizable products. In relation to Vipshop Holdings Limited, the company has a main office in China that execute control over warehouses both in China and abroad and establish contacts with independent buyers. At the same time, the performance in the main office is provided by several departments (financial, logistics, technical, marketing, and human resource).

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The organizational structure of Vipshop Holdings Limited corresponds to the strategy of its development that aims to enter the international market. After the collaboration with Guangzhou Customs in 2014, the company established more than one thousand buyers’ teams in ten countries across the globe (“Welcome to Vip.com, n.d.”). This cross-border business strategy implies local self-support and direct purchasing of certified products without postages and taxes.

The company’s management is represented by:

  • Eric Ya Shen, a co-founder, the Chairman of the Board of Directors, and Chief Executive Officer;
  • Arthur Xiaobo Hong, a co-founder as well, the Vice Chairman of the Board of Directors and Chief Operating Officer;
  • Donghao Yang, Chief Financial Officer;
  • Daniel Kao, Chief Technology Officer;
  • Yizhi Tang, the Senior Vice President of Logistics (“Management,” n.d.).

The Board of Directors of Vipshop Holdings Limited consists of CEO, Vice Chairman, two directors, and five independent directors. Independent directors of Vipshop Holdings Limited are the company’s former executive directors who may help to improve the standards of its governance and corporate credibility.

Concerning the company’s business structure, Vipshop Holdings Limited uses the Variable Interest Entity (VIE). According to Guo (2014), this structure “is comprised of a series of contractual arrangements that enable relevant parties to obtain a degree of control over, as well as a substantial economic interest in, certain companies without having to directly own their shares” (p. 569). As a matter of fact, the VIE is typical for the majority of Chinese companies in cross-border settings that are listed on the stock exchanges of the United States (Guo, 2014). This model is historically determined by the limitations or restrictions on foreign investment and direct ownership in particular Chinese industries. In the present day, the establishment of the VIE allows domestic firms to “gain access to foreign capital markets through offshore listings” (Guo, 2014, p. 575). The structure is highly attractive for investors in the sphere of information technologies and online retail. At the same time, there are substantial concerns related to the efficiency of the VIE structure. Nevertheless, China is subsequently moving from a regulatory country to a more market-oriented state where direct ownership will be accessible in all spheres.

References

Guo, L. (2014). Chinese style VIEs: Continuing to sneak under smog? Cornell International Law Journal, 47(3), 569-606.

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2017). Strategic management: Competitiveness & globalization (12th ed.). Cengage Learning.

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Management. (n.d.). Vip.com. Web.

Reuters. (n.d.). Vipshop Holdings Ltd – ADR. Web.

Welcome to Vip.com. (n.d.). Vip.com. Web.

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