Google vs Baidu in China

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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 Baidu's 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?

3 / 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...etc

Linguistic 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 “Baidu Alliance” which made it one of the strongest advertising
alliance in China. The well designed Advertising techniques (pay per click, pay per
performance) 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
the Chinese market as Baidu is (they will not accept 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 “look and...
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