Baidu.com Inc is a Chinese based search engine that was cofounded by Chinese nationals, Robin Yanhong Li and EricYong Xu. This company was incorporated on January 18, 2000 in the Cayman Islands. Baidu is arguably China’s most popular search engine having far above half the market share of the Chinese market with its main competitor being Google Inc. By 2007, Baidu- commonly referred as China’s Google- dominated the Chinese market with a 60.4% market share which was more than the market share of Google having entered the Chinese market in 2005 (Chao,2008).
The following is a STEEP analysis of Baidu.com Inc which will look into the social, technological, economic, environmental and political factors that in one way or another affects or influences the running of a company. The social-cultural factors are: it provides information in local Chinese languages, it provides multimedia services such as mp3 music and movies, being a Chinese company, it was well received by a majority of internet users. The technological factors are offering products and services with its offerings being categorized into three: search, community and other enhancements. While Google is working on other markets experimenting on radio and print publications, Baidu focused on consumer to consumer-and-mobile search.
Economic factors include a new product dubbed “pay-for placement” that allows companies to bid for search-result placement based on relevant words. Baidu and Google expanded their search platforms to include a network of a third-party websites enabling both companies to enlarge their paid-search networks and generate user traffic. This has proved beneficial as 25% of Baidu’s revenue is attributed to its partner web sites according to BNP Paribas (Chao, 2008). Environmental factors include the first move at going international by launching Baidu.jp8- its Japanese version in January 24 2008. This was aimed at serving Chinese SMEs doing business in Japan. Political factors are that Baidu enjoys preferential tax benefits as well as much lower effective tax rate.
Here we will look at Baidu’s online advertising industry in China with respect to Potter’s Five Forces Model. The first force is supplier power. China being one of the world’s most populated countries has many internet users and for Baidu to originally be tailor made for the locals, it had much content and user traffic which results in a lot of revenue. The second force is threat of substitutes. Google is the main competitor of Baidu in the Chinese market (Chao, 2008). However in the same market Baidu was the pioneer and is more versatile since its founders and target market are Chinese hence it better understands the wants and needs of the people better than anyone else. Thus it is the leading search engine in China. The third force is the degree of rivalry. Well the rivalry is much heightened because Google had to come up with a Chinese name “Gu Ge” meaning “song of the grain” or “song of the valley” a record first time that Google was using a non- English name. It also had to create a new website in China.
The fourth force is buyer power. As Baidu is a local company which better understood the local market and its potential, the company made tailor made products and services that were unique and highly effective to the Chinese market. As a result more and more people were attracted to this company because of its innovation and versatility. Baidu had earlier engaged a sales force of more than 3000 people across major cities to educate the locals and particularly SMEs on how to effectively work with the internet and conduct business via e-commerce (Chao, 2008). The fifth force is threats of new entrants. Currently Baidu is doing very well and for new entrants it would be difficult to shake of Baidu from the helm of being the leading search engine in China as the entrants will have a hard time adjusting to the Chinese market, and the terms and conditions that the government has placed which often discourage new entrants especially if they are from outside the country.
The following is a SWOT analysis of Baidu.com Inc. Its strengths include government support, large market share, versatility and uniqueness to their target market. Weaknesses are having similar features such as Google for example its homepage that is almost identical to the one for Google apart from the language used. Also Google is a global company and it has better understanding and experience of a much wider scope as compared to Baidu’s understanding of only one market. Opportunities that Baidu has are venturing into countries where Chinese are largely present as they have in Japan. They should spread their tentacles to other nations and similarly offering unique and specific products and services tailored for those markets. The threat that Baidu is currently facing is that of competitor Google which has tightened its act and is slowly growing and expanding in the Chinese market (Chao, 2008). The only competitive advantage Baidu has is that of understanding the Chinese market since its founders and target market are all Chinese. This has also led to a lot of government support to ensure its growth and sustainability.
The business-level strategy of Baidu.com Inc. evolves around developing and maintaining competitive advantage through the business process and coordination of resources which allow for the execution of these strategies. Here research and development as well as customer feedback play a very crucial role in deciding the way forward although the general direction that the business should take is gotten in a nut shell from the corporate level strategy. Right now Baidu’s business level strategy is geared towards customer value, satisfaction and loyalty which will all in turn give rise to customer retention even in the face of growing competition (Chao, 2008).
Chao L. & Smith E. (2008) New Tune; Google seeks to crack China with music push. America:
Wall Street Journal