Group 1.2 Baidu final project

1. Baidu’s Business Model
Analysis
By: Group 1.2

2. Baidu Case Study Overview
❖ Analysis of company landscape
❖ External situation analysis
❖ Internal situation analysis
❖ SWOT analysis
❖ Strategy formulation
❖ Strategic alternative implementation

3. What is Baidu?
❖ Baidu is a chinese based internet company
➢ At its core, it's a search engine (I.E. google)
➢ Since its inception the company has branch into different products
■ Baidu Postbar
■ Baidu Encyclopedia
■ Baidu Knows

4. Baidu’s Change in Business Model
❖ Baidu is attempting to change their business model from a search oriented-model to one based on
artificial intelligence
➢ The reason for the change is slow growth in its core search business.
❖ The new business model will focus on deep learning and develop products in:
➢ Voice search
➢ Automated translation
➢ Driverless vehicles

5. External Situation Analysis
❖ Political
➢ U.S.-China trade war
➢ Chinese government censorship laws
■ Allegations made that Baidu was violating public safety laws
❖ Economic
➢ Slowdown of chinese economy
❖ Social
➢ Mobile internet gained in popularity

6. Analysis Continued
❖ Technological
➢ Rising use of artificial intelligence in china
❖ Legal
➢ Intellectual property infringement
➢ Data protection laws
➢ Chinese legal system
❖ Environmental
➢ Rising need to sustainable development

7. Value Added
❖ Previously, the company created revenue by advertising space
➢ One of the biggest sources was paying to be at the top of a search engine result page
➢ Paid click throughs
❖ The value added would now be the integration of previous technology into their new systems

8. Core Competencies
❖ A core competency for Baidu is the ease of integration between its previous services and new
business model
➢ Combined previous maps technology and connected car model to deliver a more user friendly autonomous car
❖ Being the gatekeeper
➢ Users had already been acclimated on how to use their technology

9. SWOT Analysis

10. Strengths
● Dominates Chinese Market
○ Consistently holds between 60-75% across all platforms
● Investments in new technology and expansions outside of search
○ Baidu Capital (2016)
○ Apollo Fund (2017)
○ Baidu Wallet
○ Baidu Brain (2016)
○ Melody (2016)

11. Weaknesses
● Controversies
○ April 2016, Wei Zexi died of cancer after receiving experimental treatment from hospital advertising on Baidu
■ Led to a new law prohibiting search engines from displaying banned info in various formats including
links, summaries, cached pages, associative words, related searches, and relevant recommendations
○ Accused of selling control of some of its hemophilia related Tieba forums to private hospitals, which used
platform for self-promotion and provided misleading info to forum users
● Global Market Share
○ Worldwide market share only .66% while Google holds 88.47% as of April 2019
● Dependant on online marketing for revenues
○ Accounted for 91.5% of revenue in 2016
○ Has been decreasing

12. Opportunities
● Expansion potential
○ Expanding towards areas where English is not dominant language
○ Strong potential in Africa
■ Only 40% population uses internet
○ The Middle East
○ Areas where Google does not have strong hold
● O2O services
○ Fastest growing segments in Chinese e-commerce market
○ Driven by increased number of internet users and shift towards smartphones from personal computers

13. Threats
● Cloud-Based service risks
○ Success totally reliant on adoption and heavily subject to compliance risks with Chinese
○ In 2016, Chinese government required internet users to register with network users using real names to check
the spread of online rumors and child pornography
● Third-party app or website interference
○ Apps that hurt user experience
○ Advertisements providing false information
● Declining mobile search share
○ Since 2016, share has fallen from 87% to 69%
○ Due to growth in Sogou, Haosou, and Shenma

14. Strategy Formulation

15. Strategic Alternatives
● Baidu shifted its strategic focus of being search-oriented to focusing on Artificial Intelligence in 2016
● Three alternatives to this decision are:
1. Focus on expanding popularity of search engine globally
2. Focus investment on O2O services

16. Global Expansion
● Already invested resources and research for expanding globally
● Focus on areas where English is not the dominant language and the internet has not successfully
penetrated
○ Africa and the Middle East
● Local services have already been established in Indonesia, Thailand, and Vietnam
● Challenges:
○ Google
○ Adapting to different languages

17. Focus on O2O services
● In 2016, advertising revenues accounted for 93% of total revenues
○ Too reliant
● Search engine faces competition from internal search engines:
○ WeChat, Toutiao, Alibaba’s Shenma, and Sogou’s voice search
● Continue investment focus in O2O
● Turning online actions to offline services
○ Baidu Waimei, Baidu Maps, Baidu Wallet, Nuomi, Edaixi
● Challenges:
○ Alibaba and Tencent huge players

18. Strategic Alternative Implementation
● Both alternatives face similar risk of incumbents
● Has prior experience in both
● Which is the best?
○ Pursuing O2O services
● Google has strong hold on global search
● O2O growing
● Maintain appeal of Chinese nationalism and heritage
● Major competitors Tencent and Alibaba
● Does not require many changes in structure
○ Already began investment in these services and potential for acquisitions

19. Conclusion
● To keep up with the changing environment, Baidu has adjusted its business model to focus on
Artificial Intelligence
● Successful results are yet to be seen, but this seems to be the best strategy for Baidu considering the
conditions present in its alternative options

20. Baidu’s Business Model
Analysis
By: Group 1.2

21. Sources
● https://www.searchenginewatch.com/2018/09/24/baidu-can-the-search-giant-hold-firm-in-chinas-
increasingly-competitive-mobile-market/
● https://www.fool.com/investing/2018/01/12/how-baidu-is-stacking-the-deck-against-the-
competi.aspx
● https://www.chinadaily.com.cn/business/2016-08/23/content_26563758.htm
● https://www.emarketer.com/Article/Understanding-Chinas-O2O-Commerce-Marketplace/1014374
● https://daxueconsulting.com/o2o-commerce-china/
● https://swotandpestle.com/baidu/
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