Google vs Baidu in China free essay sample

Case Study Baidu vs Google The goal of this case is to broaden our knowledge of new business models and that of how local companies may struggle against foreign competition. You are asked to answer the following questions: 1 / What led to Baidus market dominance? Compare the two business models and their evolution 2 / How do you recommend Google to do in China? Compare Google position with the one of other companies in the internet-related industries. What can we learn from this comparison? / How do you recommend Baidu to do in the international market? Question 1 China witnessed the highest economic growth in the world since the adoption of its reform and openness to the outside policy. This growth has affected the Internet market in a very remarkable way, where the annual average in China’s Internet usage exceeded 39%. Many factors have led to Baidu’s dominancy in the Chinese market even over more experienced and global players as Google, Yahoo. We will write a custom essay sample on Google vs Baidu in China or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page . . etcLinguistic advantage: the Chinese Language is the dominant language in China which is read and spoken by the whole population. This gives a better advantage to local start up like Baidu to efficiently design an engine that is more relevant to the country culture. Social Cultural Advantage: Baidu as A local player knows the taste and preferences of the Chinese Internet users’ way more than its Competition does, there for solutions Were designed to better fit the requirements of the locals For example, typing replaced by a click on a menu list.Introduction of customer oriented technologies based on the Chinese internet habits ( for example Baidu MP3 music, Post bar, Baidu Zhidao, Baidu space featuring Blog + Space) New online advertising spaces and payment techniques were perceived more cost efficient for the advertisers as they better monitor the return on investment. More over Baidu launched â€Å"Baidu Alliance† which made it one of the strongest advertising al liance in China. The well designed Advertising techniques (pay per click, pay per erformance) helps them to generate money for the company). Governmental restrictions: The Chinese government placed restriction on outsiders and is this case on Google which was shown in the case when they clearly stated that in September 2002 its site was down with an error in the page and users automatically redirect on a Chinese search engine it was impossible for users inside china to access Google’s search engine in addition to that Google site was recently inaccessible and very slow.This will make Google lose customers for his direct competitor Baidu (if the website is slow or not even accessible people will not postponed their researches until the website is fixed, what they will do is using other possible alternatives, and with time they get familiar with other search engine and never reconsider using Google again. China is a closed communist community which have a clear preference for local Companies, therefore, whatever Google do it will still not be accepted and adopted in he Chinese market as Baidu is (they will not acce pt that a capitalist company as Google to be dominant in their market over their local companies). Google acted to the Chinese market consider it as a simple part as its international market. Despite the huge cultural differences between this two countries, Google transferred products that they were successful in the US into the Chinese market. They didn’t take into consideration the Chinese internet users habits that differ for any other country of the world.Google actually ignored the fact that China is the biggest internet users market which could generate huge revenue to the market, more research and people from the Chinese origin should have been involved from the beginning so that the site will have a Chinese tailor-made â€Å"look and feel. Google had a lake of local presence, they used to be from the US , this is why at the beginning they were struggling with services, where google. com appears to be down 10% of the time. never to mention that it was always slow and some services they were never available, such as Google Image who were available only half of the time. Due to those reasons Google had to break company’s rules and to work in an un consistent way with their mission and values where they had to hide some of the information. Google was trying to have a name that is more relevant to the Chinese market and they changed the name to a Chinese name called â€Å"song of the valley†. This was a clever move to signalling the start to Google’s localisation plan.They gave local managers more authority. Once Google moved to China (a local company), they start designing products based on the Chinese needs. Baidu’s Business Model Baidu’s Tag Line * Their mission is to provide the best way for people to find information . To do this they listen carefully to their users’ need and wants. * Search-side strategy Baidu’s success was based on its focus and responsiveness to the Chinese internet users this gave a good advantage to Baidu to offer the best solutions to local people, so Baidu went on in launching their own Chinese ndependent website, this made them anticipated the urgency to improve its search technology within a short period of time which led to the creation of the light Plan, and that made Baidu surpass Google in terms of traffic in China. Their search engine gives more focus on matching-meaning that better fit the Chinese language. These continuous efforts by Baidu not only increase users’ experience but also help them sustain their leaders hip in the Chinese internet market. * Advertise-side strategy:Baidu’s advertisement model was option based such as paid for performance and paid search model other that they also made a model based on Bid for priority placement of the links in keyword search and this bid model was a tremendous success to Baidu as the competition for the keywords goes the higher the Bid goes leading to more revenue generation. Baidu’s advertisement model increased the ability to search the needs on the customers and show them the advertisement they need. Nevertheless the Paid for performance model helped in decreasing the advertising cost for the advertisers which helped in getting new and larger number of customers. Development strategy: Baidu’s development strategy was expending it’s market from domestic into International by introducing Baidu into the NASDAQ on August 2005 that is 5 years after the dot-com peak within which it has broken the record as the one of the biggest trade ever where it’s share saw tremendous increase from $27 to $122 representing 354% of its growth and that was a remarkable move which allowed Baidu to gain more revenue and made it valuable with $4 Billion company and customer recognition , boost users confidence, and attract more and more investors in the long term.Google’s Business Model While on the other Hand was based on their Tag li ne * We always distinguish ads from the search results or other content on a page we don’t sell placement in the search results themselves, or allow people to pay for a higher ranking there. * Development strategy Google has merely focused on few strategies in other to establish a well suited Business model for the Chinese internet market however the main sources of google’s revenue were advertising and Licensing after which they have designed Adwords for advertisers who want to reach qualified customers.Google thought diversification in product range will help them increase their market share so it stared introducing new services such as Gmail a combination of e-mail and instant messaging services, GTALK but no phone based where most people in china use mobile phone rather than PCs, Google news, Desktop search and other series of applications, all these were new online services that google launched as a way of expansion in the Chinese market.Still we can see that Goog le’s Business model couldn’t succeed in Chinese market as it has accepted the defeat by the domestic player Baidu by cooperation with Baidu’s biggest investor and invested $5million dollar for 4% of Baidu’s stock and tried to cooperate with Mr Li the CEO of Baidu who prefers Baidu’s independent growth. * Sales strategy: Google’s sales strategy in china was to club up with 3 local Chinese companies who will a medium to reach Google’s services to small medium enterprises while maintaining larger enterprises that have been reserved the right to direct sales.Question 2 How do you recommend Google to do in China? Compare Google position with the one of other companies in the internet-related industries. What can we learn from this comparison? a-) * First of all, Google should treat the Chinese market as a unique market with unique customer preferences and needs. Tailor made marketing strategies should be used to better fit the uniqueness of the market; therefore applying the same strategies used previously on other markets will not be effective in this case. Google should set up an independent unit in china that will operate independently from the international standard and procedure where all important decisions are made by Chinese managers and employees that are part o f this culture and know better what is perceived as valuable to the Chinese people. Adding to this, Google page should be redesigned into a more simplistic form because as per the case, Chinese prefer to click and choose from a list rather than typing, doing this will prevent its direct competitor in the market â€Å"Baidu† from having a major customer advantage over Google.Google should invest in intensive research to better understand the Chinese culture and its uniqueness, more over to understand the reasons behind their failure and behind the success and dominancy of Baidu. Knowing those facts will help them to find better solutions for them to start gaining market share in China. * Google should lose a bit of its pride and start investing more in advertising to increase the brand awareness so that the people will be more exposed to the brand which will makes it more familiar to them (As Baidu did with KFC) Google should definitely understand deeply the governmental rules and regulations before taking any step in the Chinese market so that they make sure that their strategy is 100% aligned with the government rules in order to avoid being punished with bad connection or limited information which will lead customers loss while switch directly to another competing search engine (People that are searching on the web will not stop their research aiting for Google to be reactivated again, they will choose from other alternatives, therefore they will switch to one of Googles competitors). * Google strategy should be based on research and should be tested be fore applying it in the market, because once in the market it is less likely to change it again, as for example for the name and web address of google which were changed several times, this inconsistency will lead to bad customer perception vis a vis the brand as they will feel that something is going wrong, this why the company is always changing things. Google should get involved in corporate social activities in order to show good intentions toward the country as this will help them gain positive image from the locals and they will start to perceive it more as part of the culture and not as an outsider who’s trying to invade their markets. b-) After doing the comparison between Baidu and Google in the Chinese market and knowing that Baidu is the dominant one, followed by Google and Yahoo is the 3rd player with a market share much lower than its competitors which pushes him out of the dominancy completion.In order to better understand the facts behind Baidu’s domin ancy, we thought that comparing Google to Yendex (A Russian search engine and market leadert in Russia), will help us see the similarities in both cases (China and Russia) therefore we will be able to have a better understanding of the situation and of what is playing against Google in the countries with high level of pride and attachment to local products. elow is a study comparing Google and Yendex in the Russian market: The estimated Global market share of Google is the highest with 86% of market share, but looking in a micro sens, Google, have been facing regional competitors apart from Baidu in china such as Soshu, ZhongSou, and Yandex in Russia. * A good example will be Yandex an internet technologies company that operates in Russia and Turkey. It is the largest Russian and fifth-largest world internet search engine. As of December 2011, this company had 59. 6% of the Russian search market and their ‘’mission is to give the answer to the user anytime and anywhere.Company, similar to Google provides its services for desktop and mobile users and develops embedded solutions as well’’. The company specializes on highly-targeted sophisticated web search and information retrieval services. Yandex provides localized services for its users, as well as enables them to search for websites in other languagesOther tan that they provide many free online services, granting access to extensive local, national and international information. The services include maps; traffic jams information; photo hosting; news service; blog search; spam-free email and so on * Yandex a well advanced technology after Google , got their stock risen as much as 68 % since it was listed on Nasdaq in 2011. According to financial times, Yandex has earnings multiple of about 85 times net income, higher that Google`s, at 19 times earnings, and almost matching that of Baidu, China’s top search site, at 87 times earnings. According to Nasdaq, Yandex generated 64 per cent of Russian national search traffic. In other to understand a more recent market one need to rewind as on why Yandex made its way to the top in Russia in the first place. One of the main reasons is Yandex’s focus on the Russian language. Western search engines and algorithms are generally built from English language structures which are then adapted. This was not the same as Yandex which is descended from a Russian-language indexing project built developed w ithin a company called CompTek the success of the project led to the formation of the search engine. Russian is a slavic language which has a particular shape and structure which makes it very different than English — it is definitely not the alphabet itself which causes the issues. Russian verbs also come in pairs and the regularly used ones often don’t even look very much alike — so a search engine would need to understand that â€Å"I buy† could be interpreted with different verbs and the meaning behind the phrases would be different but potentially still relevant to the searcher. In the early days, Google did not do a good job of handling these language differences whilst Yandex did leading it to grab the preeminent position.