Given the slowdown in the Chinese economy and intensified domestic competition, the Chinese e-commerce giant Alibaba Group Holding Limited (Alibaba) decided to enter the Southeast Asia market in April 2016 by acquiring the cash-strapped leading incumbent, the German e-commerce company Lazada Group (Lazada). Lazada’s value proposition was that it offered an effortless shopping experience.

Given this promise and the rising competition in the region—particularly from the anticipated entry of the U.S. e-commerce giant Amazon.com, Inc. (Amazon) in the first quarter of 2017—Lazada had no choice but to continue investing to build its logistics infrastructure to strengthen its platform ecosystem. As a result, it became short of liquidity.

The acquisition by Alibaba would enable Lazada to continue to pursue its strategic imperatives and to leverage Alibaba’s successful experience and other resources in China.

It also raised important questions for Alibaba: Was Southeast Asia an appropriate destination for Alibaba’s globalization efforts? Should Alibaba have entered the region through joint ventures or greenfield investments? Should Alibaba integrate Lazada or use a partnering approach? Did a report that Amazon would delay its entry to the region to a later date mean that Alibaba and Lazada had successfully built a fortress that could pre-empt even the world’s largest e-commerce player?