Baidu is China's largest search engine company with a large market share in China due to China's large population and fast growing economy. While Baidu faces competition from other Chinese companies like Sina and international companies like Google, it has maintained its position in China by localizing its products and strategies to cater to Chinese customers and comply with Chinese government policies. Baidu generates most of its profits from online advertising. To combat competitors and stay competitive, Baidu needs to continue innovating its products and business models.

1. Baidu Case Study
As for the five aspects of STEEP analysis tool, we can see that firstly, for
the social factor, Baidu is mainly based on Chinese market and they use
strategies in Chinese waysto cater to masses’ need, being local, and own
local way of thinking. China has the largest population in the world, so in
other words, Baidu has a very large market base in China. Secondly, for
the economic factor, China is the world's second largest economic
country. It is also the world's fastest-growing and major economy with
average growth rates of 10% for the past 30 years. Computers can say
popularization in most parts of China now. Furthermore, nowadays
people would like to do more about online shopping. So, search engine
like Baidu would earn more profits from online shopping and advertising.
Thirdly, for environment factor, although the process of globalization
triggers some problems like competition and substitution ofthe key
foreign competitors like Googleand Yahoo, this really doesn’t affect
Baidu's market share in China. BecauseBaiduaims to attract Chinese
customers more than foreigners, so it will still have a steady growth in
Chinese market. Last one is Political factor,the government controls
everything in China which is kind of special, includingwebsite. Baiduhas
to berestrainedto those policies and Baidu's entire business strategy is
tailored to Chinese governmental, legal, ethical and local culture.
For Porter’s five forces model, we can come to the conclusion that

2. customers always deem Baiduas the best supplier in China and other 138
countries for Baidu's search requests. Now it is becoming more and more
international and more people in the world use Baidu to search
information. Substitute products also will show up in search engine or
online advertising industry. In China, people mainly use Baidu, but
sometimes people may use some other products instead, such asSina,
Netease,Sohu or Aibaba, or get foreign productslike Google, Bingyin and
Yahoo.One of Baidu’s competitive advantages is its Mp3 search engine,
which is popularly used by many young people. Search engine industry
has high potential values but also with high risk and challenge, so it is
quite hard for new entrants to survive and there is little intensity of
rivalry within this industry. According to all the external factors, this
industry is attractive.
There are several competitors of Baidu, Google which is the strongest
competitor of Baidu; Tencent QQ which is the most popular free instant
messaging software in Asia,especially in China;Sina the largest
Chinese-language infotainment web portal service now;Alibabawho has
a strong B2B business model;Sohu which offers advertising and other
services as a search engine. To combat with all of these rivals, Baidu
need to initiate some innovations, change their business models, and
enhance its search engine technology. To be specific, Baidu could
improve its MP3 music download system since Sina had turned out a

3. music library which may hit the one of Baidu as a competitive merit. Or
it can provide users with massive multiplayer online games which will
attract more people using its search engine.
As for Baidu’s main capabilities, they can be divided into three ones,
marketing, financial and R&D. Baidu's net income is increasing
dramatically by 40 percent year by year. Baidu owns a good way to do
adverting which brings in most of the profit. And it does have core
competence which leans on government support, large base of
Chinese-language users, and their good knowledge of Chinese people
and Chinese culture.
Through SWOT analysis, the strengths of Baidu are the successful
operation of the localizations based on the Chinese market, such as the
bidding, it keeps up with the fashion and tries to meet the needs of the
users, also they have strong psychological sense of the identity among
those competitors. They orient themselves always on the proper and
right track. However, the shortage of technology compared to Google
and YahooandBaidu’s excess profits of the bidding make Baidu facing
lots of questions are the problems that should trigger the manager’s
attention in the future.
As for Baidu’s sustainable advantages, localization of technology and
management; close to customers need, like the problems of the
marketing budget shortage, marketing competition, especially with small

4. and medium sized firms; strong support of the value-added products,
like bidding; and the excellence of the marketing system which achieves
the greater return on investment for Baidu; temporarily upgrading of
service system, which can gain market efficiency and increase the value
of marketing, all of these good points can be considered to be weapons
for Baidu to survive in this industry.
The business-level strategies of Baidu are mainly focused on
differentiation and cost leadership strategy.Baidu is adjusting to Chinese
market realities and tailoring itself for Chinese needs. Customers can get
cost low price to get good result. Cost leadership and differentiation
strategy, the two sources of competitive advantage of Baidu make it
possible to offset some negative factors in the external environment,like
competition.
To sum up, the world of search engine industry is in a constant evolution
process.Baidu should change the strategy to lead company to be more
international. To date, globalization makes world smaller, so people tend
to long for the news or the knowledge from all around the world. But
most of the websitesthat Baidu fund are Chinese ones, and the
information is also limited. Moreover, Baidu must improve internet
search filtration to reduce trash information and web pages that cannot
be opened, prohibit the connection which has any danger of having the
computer virus.