Strategic Management: A Comparative Study of Google and Baidu in China

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Strategic Management
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Executive Summary
In the present study, the importance of strategic position has been discussed. The present study
is based on two companies such Google and Baidu. Initially, in the study, the aim and objectives
have been discussed so that the study can be carried in a right direction. Moreover, the profit
earned by the organisations has been discussed with the help of financial calculations such as
Ratio Analysis. In order to analyse the external environment of business, PESTLE analysis has
been designed Further, in order to understand the competitive position of the organisation in the
market, Porters 5 force has been discussed. On the contrary, in order to enhance the internal
strength SWOT analysis has been discussed. Lastly, Stakeholders analysis and Ansoff Matrix has
been critically analysed.
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Table of Contents
Introduction......................................................................................................................................4
Internal Analysis..............................................................................................................................7
External Analysis...........................................................................................................................15
Conclusion.....................................................................................................................................24
Recommendation...........................................................................................................................24
Reference List................................................................................................................................26
Appendix........................................................................................................................................29
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Introduction
Strategic management is the management of the organisations’ possessions to accomplish the
objectives and goals. It includes analysing the environment, making objectives, analysing the
micro organisation, assessing the strategies and making sure that the management strategies are
carried out in the organisation (KENTON, 2018). According to H.K.S. Hanasini Athapaththu, a
process, which includes the analysis of environmental organisation by the chief managers to
formulate strategy and implementation and control of the same, is strategic management
(Athapaththu, 2016). It is an assortment of the activities, which are in progress; the activities are
the creation of strategies, its analysis, monitoring and execution. It organises analytically the
resources in support with mission, strategy, and vision.
Google is an American company, which specialises in Internet-related products and services, like
a search engine, online advertising technologies, hardware, software, and cloud computing.
Sergey Brin and Larry Page founded it in 1998. Both of them theorised about a system that
analysed the connection among different websites. They named this technology as PageRank.
They named the search engine as BackRub, later it was named as Google. Andy Bechtolsheim,
one of the founders of the company Sun Microsystems, financed the company. Some other
investors were Jeff Bezos, the founder of Amazon Company, David Cheriton, the professor of
Stanford University, and Ram Shriram, the entrepreneur. The market capitalisation of Google
has grown to $397 billion by January 2014. It has designated a Chief Culture officer to maintain
the culture of the company. After the IPO, the shares increased because of the earning and sales
in the online advertising market. Google was managing around three billion searches every day
by 2011, and it has built eleven data centres all over the world. In the year 2012, the company
has generated $50 million as yearly earnings. It has also launched a company called Calico to be
run by Apple Company.
In 2012, it acquired the Motorola Company that helps it in selling products like mobile phones.
In 2013, it became a part of A4AI, which also includes Intel, Microsoft, and Facebook. It has
also acquired some other companies like Deja News, Applied Semantics, Keyhole, Urchin
Software, Global IP Solutions, and many more (McFadden, 2018). Later, Sundar Pichai replaced
Larry Page and became CEO of “Google”. The growth of the company triggered a series of
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products, partnerships, and achievements. It started offering services that planned for
productivity and work, for instance, Google Sheets, Google Studies, and Google Docs. It also
offers email services like Gmail, time management and scheduling service like Google Calendar,
the cloud storage service like Google Drive, the social networking site like Google+, messaging
and video chats services like Google Duo, Google Allo, Hangouts, and so on. It also offers
language translation service like Google Translate, navigation and mapping services like Google
Map, Google Earth, and some others.
It has a video sharing service like YouTube, notebook service like in Google Keep, photo editing
and organising service like Google Photos (Abraham, 2018). The company started also
developing in hardware since 2010. It has collaborated with many electronics company for the
production of Nexus devices and releases the hardware products that includes Google Pixel
smartphone, Google Wi-Fi wireless router, Google Daydream headset, and Google Home
speaker. It is also the most sited search engine in the world (Bellis, 2019).
Baidu is a Chinese technology company that was incorporated on 18 January 2000. It specialises
in Internet-related products, services, and AI. Robin Li and Eric Xu established the company
in 2000 (Williams, 2015). In 2003, the company launched a search engine for news and a search
engine for pictures; it has adopted a unique identification technology that identifies the articles
and can group it. In 2013, it launched the Personal Assistant app to help the CEO’s, workers, and
managers to administer business relationships. In the year 2014, it has also launched a search
engine version for Brazil. In 2017, it collaborated with the company Continental and Bosch, the
auto industry companies. In 2017, it manufactured portable translators for talking, which listens
and speaks in various languages (Costill, 2014). The company offers diverse services to locate
products, services, and information by using the native language “search terms”. The services
provided by this company are, Baidu Maps, Baidu Mangpan a cloud storage device, Baidu MP3
Search, Baidu Image Search, Baidu Video Search, Baidu Space, a social networking site, Baidu
Baike, an online encyclopaedia, Baidu Games, Baidu Dictionary, Baidu Anti-Virus, Baidu
Library, and many others (Collins, 2019).
Open access services of Google are helping the company to achieve its market position. Baidu is
providing reliable tech services to its target market of China. Before 2010, due to the presence of
Google in tech market it was difficult for the company to achieve its market position. However,
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Google existed from China market in 2010 and it has led to huge opportunity for Baidu.
Currently, the company is also offering artificial intelligence related services. On the other hand,
with the help of android operating system and search engines Google becomes able to achieve
success in the tech market and create huge revenue.
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Internal Analysis
1. Industry analysis of Google (China)
Valuable and Rare
The resources including financial and human resources of Google are valuable as they help the
company to achieve their target position in market by offering tech services. However, use of
new technology can be considered as rare.
Costly to Imitate and Organized
Google needs to prepare a well defined budget so that business expenditure can be controlled.
The management needs to organise its resources in an effective way otherwise, they cannot be
able to achieve their target (Wheelen et al., 2017).
2. Industry Analysis of Baidu (China)
Valuable and Rare
In case of Baidu, its employees are the most valuable resources who provide reliable tech
services to the customers. Adopting technology can be rare in this case, as the employees require
training for using those technologies.
Costly to Imitate and Organized
Expendeture of business process of Baidu has to be maintained by using proper budget.
However, they have to train all of their employees and organise financial resources in effective
way (Wheelen et al., 2017).
3. Include the global retail e-commerce data
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Figure 1: Retail e-commerce sales
(Source: statista.com, 2019)
It is seen here that in 2014 Retail e-commerce sales was 1336 billion and in 2015, it was 1548
billion. It is predicted that in 2021 the sales would be 4878 billion (statista.com, 2019). For this
reason, the tech giants like Google and Baidu have the opportunities for their business growth.
However, as the competition is increasing hence the organisations have to work on quality
improvement.
4. Business model for Google China
Pre-dominant business model is adopted by Google to maximise its business efficiency. It has
achieved rank one in search engine usage with the help of this business model (google.com,
2019). Moreover, the employees are provided with training sessions to enhance their skills so
that efficient tech services can be given.
5. Business model for Baidu China
Ashridge Mission Model indicates that every business needs to have a clear view of their
purpose and objectives (Wheelen et al., 2017). In case of Baidu, it has to help its employees to
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understand its business purpose. The main purpose of its business is to offer excellent tech
services to the customers. Besides that, Baidu is analysing its strategic position in China before
making policies and behavior patterns.
6. Value proposition for Google and Baidu
Google is providing services to all people and this company owns maximum search. It is
announced by Google that everybody of this planet are the target audiences of Google for
offering reliable tech services. On the other hand, people of China are the target audiences of
Baidu though the company is now providing effective internet products and services globally.
7. Revenue model for Google and Baidu
The revenue model of the Google includes the advertising, web search engine, different
technological products, calendar manager and other technological features, video rental store and
different technological services to the people. The company has hidden revenue model that is the
search engine of Google. The people do not pay for searching anything on Google but the money
is earned from the advertisements provided on the page of Google.
Figure 2: Revenue model of Google
(Source: Roma and Ragaglia, 2016)
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On the other hand, the revenue model of Baidu includes pay per advertisements, pay for
performance services, subscriptions, consultation services and advertisement.
Figure 3: Business model of Baidu China
(Source: Jia et al., 2018)
8. Market opportunity for Google and Baidu (China)
Strategic partnership with tech players is helping Baidu to make a good position in market. Its
dominant presence is also helping it to capture the target market. Due to the use of outsourcing
formula by all the tech companies, it is becoming difficult for the companies to achieve their
expected strategic position (Michael et al., 2017). Google is targeting the market by offering its
lasts mobile operating system.
9. a. Competitive analysis for Google and Baidu (China)
Google as a tech giant is ruling in IT industry with the help of its efficient search engine,
browsers as well as android operating system. Baidu is making profit by providing online
marketing services. From 2010, it got the opportunity to enhance its online services after Google
has exited from China (baidu.com, 2019).
9. b. Financial analysis of Google and Baidu (China)
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The financial analysis of the company will contain the ratio analysis and the analysis of the
balance sheet, income statement and the other financial information. The financial analysis
generally includes the analysis of financial ratio in the companies. The financial ratio of the
company can help to detect the financial situation of the company. The financial analysis of both
the companies will be provided in point no. (15).
10. a. Market strategy for Google and Baidu (China)
In case of Google, it is offering open access platform to everyone and it is its one of the
important marketing tactics. Besides that, a communicative environment is fostered by the
organisation. By providing quality of services, the company is maintaining its strategic position
in market. The products are segmented based on psychographic, demographics and
geographic variables. More than 70 corporate offices along with online channels of Google are
helping it to reach its target consumers (google.com, 2019). On the contrary, Baidu is applying
differentiated targeting strategy for enhancing its business. Its language search engine platform is
helping the company to offer expected services to around 650 million people (baidu.com, 2019).
10.b. Organisational development for Google and Baidu (China)
As per Egan’s organisational model, the organisations need to formulate specific strategies with
the help of proper human resource and financial resources (Engert et al., 2016). The
organisational structure of Google is emphasising on flatness and changes along with direct
social links within the working environment. As a result, the employees are able to directly
communicate with their management. On the other side, Baidu is also prioritising the needs of its
employees to maximise their involvement in business process.
11. Explain the management of Google and Baidu (China)
The management of Google are good coaches and they involve their employees in decision-
making process so that innovative idea can be achieved from them. In addition to this, the
management is result oriented and encouraging their employees by offering career development
programmes (google.com, 2019). On the other hand, in case of Baidu is focusing on generating
revenue by offering high quality of internet related products and services. For this reason, its
management offers innovative working environment to all of its employees. Moreover, they
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always try to maintain quality within their workplace so that none of their internal worker loses
motivation from work.
12. The strategy of Google and Baidu (China)
Google’s strategy in China involves the development of the application’s search and cloud
services while adhering to the regulations developed by the Chinese Government. The company
aims to provide information according to the analytics of individual users’ search history (Yang
et al., 2015). The primary issue that Google faced in China involves the censorship of data that
the government imposes on various search engines that operates in the country. Baidu operates in
the Chinese economy following the strict censorship agreement while maintaining its market
presence through paid promotions among internet cafe owners.
13. What are the alliance strategy of Google and Baidu (China)
Baidu and Google both plan to increase their market presence in China by engaging in strategic
alliances with other commercial applications available in the Chinese market economy. Google
plans to re-enter the Chinese market by forming strategic alliances with major internet and
telecom organisations in the country (Upadhyay, 2015). Baidu is planning to develop their
existing product and services in the country by forming international alliances with international
organisations struggling to enter the Chinese market economy.
14. Value chain analysis for Google and Baidu (China)
Value chain analysis provides information regarding the operational resources and strategies for
organisations operating in the market economy. Value chain analysis of Google provides the fact
that the organisation’s international popularity would be beneficial for the company while
conducting operations in China. Baidu’s value chain analysis provides information regarding the
high market share the organisation has in the business environment of China.
15. Do a ratio analysis for Google and Baidu (China)
2014 2015 2016 2017 2018
Profitability Ratio
Return on Net assets 63880.29 70804.29 88652.31 100125.2 101056.3
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