Baidu case study


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Baidu case study

  1. 1. Baidu Case StudyAs for the five aspects of STEEP analysis tool, we can see that firstly, forthe social factor, Baidu is mainly based on Chinese market and they usestrategies in Chinese waysto cater to masses’ need, being local, and ownlocal way of thinking. China has the largest population in the world, so inother words, Baidu has a very large market base in China. Secondly, forthe economic factor, China is the worlds second largest economiccountry. It is also the worlds fastest-growing and major economy withaverage growth rates of 10% for the past 30 years. Computers can saypopularization in most parts of China now. Furthermore, nowadayspeople would like to do more about online shopping. So, search enginelike Baidu would earn more profits from online shopping and advertising.Thirdly, for environment factor, although the process of globalizationtriggers some problems like competition and substitution ofthe keyforeign competitors like Googleand Yahoo, this really doesn’t affectBaidus market share in China. BecauseBaiduaims to attract Chinesecustomers more than foreigners, so it will still have a steady growth inChinese market. Last one is Political factor,the government controlseverything in China which is kind of special, includingwebsite. Baiduhasto berestrainedto those policies and Baidus entire business strategy istailored to Chinese governmental, legal, ethical and local culture.For Porter’s five forces model, we can come to the conclusion that
  2. 2. customers always deem Baiduas the best supplier in China and other 138countries for Baidus search requests. Now it is becoming more and moreinternational and more people in the world use Baidu to searchinformation. Substitute products also will show up in search engine oronline advertising industry. In China, people mainly use Baidu, butsometimes people may use some other products instead, such asSina,Netease,Sohu or Aibaba, or get foreign productslike Google, Bingyin andYahoo.One of Baidu’s competitive advantages is its Mp3 search engine,which is popularly used by many young people. Search engine industryhas high potential values but also with high risk and challenge, so it isquite hard for new entrants to survive and there is little intensity ofrivalry within this industry. According to all the external factors, thisindustry is attractive.There are several competitors of Baidu, Google which is the strongestcompetitor of Baidu; Tencent QQ which is the most popular free instantmessaging software in Asia,especially in China;Sina the largestChinese-language infotainment web portal service now;Alibabawho hasa strong B2B business model;Sohu which offers advertising and otherservices as a search engine. To combat with all of these rivals, Baiduneed to initiate some innovations, change their business models, andenhance its search engine technology. To be specific, Baidu couldimprove its MP3 music download system since Sina had turned out a
  3. 3. music library which may hit the one of Baidu as a competitive merit. Orit can provide users with massive multiplayer online games which willattract more people using its search engine.As for Baidu’s main capabilities, they can be divided into three ones,marketing, financial and R&D. Baidus net income is increasingdramatically by 40 percent year by year. Baidu owns a good way to doadverting which brings in most of the profit. And it does have corecompetence which leans on government support, large base ofChinese-language users, and their good knowledge of Chinese peopleand Chinese culture.Through SWOT analysis, the strengths of Baidu are the successfuloperation of the localizations based on the Chinese market, such as thebidding, it keeps up with the fashion and tries to meet the needs of theusers, also they have strong psychological sense of the identity amongthose competitors. They orient themselves always on the proper andright track. However, the shortage of technology compared to Googleand YahooandBaidu’s excess profits of the bidding make Baidu facinglots of questions are the problems that should trigger the manager’sattention in the future.As for Baidu’s sustainable advantages, localization of technology andmanagement; close to customers need, like the problems of themarketing budget shortage, marketing competition, especially with small
  4. 4. and medium sized firms; strong support of the value-added products,like bidding; and the excellence of the marketing system which achievesthe greater return on investment for Baidu; temporarily upgrading ofservice system, which can gain market efficiency and increase the valueof marketing, all of these good points can be considered to be weaponsfor Baidu to survive in this industry.The business-level strategies of Baidu are mainly focused ondifferentiation and cost leadership strategy.Baidu is adjusting to Chinesemarket realities and tailoring itself for Chinese needs. Customers can getcost low price to get good result. Cost leadership and differentiationstrategy, the two sources of competitive advantage of Baidu make itpossible to offset some negative factors in the external environment,likecompetition.To sum up, the world of search engine industry is in a constant evolutionprocess.Baidu should change the strategy to lead company to be moreinternational. To date, globalization makes world smaller, so people tendto long for the news or the knowledge from all around the world. Butmost of the websitesthat Baidu fund are Chinese ones, and theinformation is also limited. Moreover, Baidu must improve internetsearch filtration to reduce trash information and web pages that cannotbe opened, prohibit the connection which has any danger of having thecomputer virus.