Building the Baidu Brand Worldwide. Célia LE CORRE
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G o o g l e ' s m o b i l e b u s i n e s s Towards new horizons: i s building the Baidu brand o n worldwide. a n $ 8 b Célia LE CORRE i l l i Mémoire de 4e année o n r Séminaire : Métiers de l'Expertise Stratégique et de l'Audit e v e n Sous la direction de : Bruno TILLY u e r 2012 - 2013 u n r a t e , Acknowledgements For my academic search, I would like to thank all the people who have accepted to deliver their precious testimonies : Zhifan, Tangying, Wanlu Zhou and Mrs. Mengchao Yang. I would also like to thank M. Blaise Thierrée, director of the Institute Confucius in Rennes, together with his friend M. Yinping Chen, for having answered to my questions and giving me key contacts. I thank also M. Kaiser Kuo, Director of International Communications and spokesman of Baidu, for having accepted to give me an interview. Thank you for my workmates, Simon Guillorit and Augustin Robert, for having helped me all along my search. Finally, I thank M. Bruno Tilly, my academic search advisor, for having guided me from the birth of this work till its end. Towards new horizons: building the Baidu brand worldwide. Célia LE CORRE Table of contents List of acronyms and abbrevations.........................................................................................5 Executive summary................................................................................................................6 Introduction............................................................................................................................7 I.Baidu, national genuine growth engine of the conquering China Inc................................13 A.The rise of Baidu (that's Chinese for Google): the birth of a giant of the Internet......13 1.The «Baidu project»: a Chinese success story........................................................14 2.Success and flaws of the business model of Baidu..................................................15 a.A success owned to the comprehension of the Chinese language and needs......16 b.Strong weaknesses: bribes, opacity, and mistrust...............................................17 B.The influence of culture on management: Baidu, a Silicon Valley product with Chinese origins................................................................................................................19 1.Links between management and culture..................................................................20 2.A reminder of basis of the Chinese culture: Confucianism and Sun Tzu................21 3.Impact of the Chinese's and Silicon Valley's minds on Baidu management............22 II.A look turns towards the world: internationalization, the crucial bet of Baidu for its future....................................................................................................................................25 A. Becoming a global brand: the choice of localization in the emerging countries........26 1.The specifities of the Internet market .....................................................................26 2.Baidu and the choice of localization........................................................................27 a.What and why?....................................................................................................28 b.Where and why?..................................................................................................29 c.How?...................................................................................................................30 d.Failures................................................................................................................32 B. Google VS Baidu: a merciless and global battle for the Internet market...................34 1. The «googlization» of the world.............................................................................34 2. Google VS Baidu: the confrontation of two giants.................................................36 a.From the beginning, a deep mistrust between the two firms...............................36 b.Similarities and differences between the two business models...........................36 c.Mobiles: the next (and decisive) battleground....................................................37 III. Diagnostic.......................................................................................................................40 Conclusion: has Baidu won its bet?.....................................................................................41 A. Short-term scenarii: an internationalization very encouraging..............................41 1. Baidu would succeed in setting up in other emerging countries........................41 2. A difficult spread in English-spoken countries..................................................41 3. A fundamental transition from a products company to a platform provider......42 B. Future of Baidu from a global perspective: Baidu VS Google, who will win?.....42 Bibliography.........................................................................................................................43 Appendices...........................................................................................................................46 ........................................................................................................................................46 I. Appendix 1: understanding the Chinese culture...........................................................47 A. The interview sequence..........................................................................................47 B. Answers of Chinese students to the interview sequence........................................48 C.Interview of Mrs. Mengchao Yang..........................................................................50 II. Appendix 2: understanding the strategy of localization of Baidu...............................51 A. Letter to M. Kaiser Kuo for asking an interview...................................................51 B. Transcript of the telephone conversation with M. Kaiser Kuo..............................52 2013 4/52 Towards new horizons: building the Baidu brand worldwide. Célia LE CORRE List of acronyms and abbrevations • CCP: Chinese Communist Party • IPO: Initial Public Offering • USA: United States of America 2013 5/52 Towards new horizons: building the Baidu brand worldwide. Célia LE CORRE Executive summary In january 2013, Robin Li, Baidu CEO, emphasized four business focus of Baidu in the future: the traditional search, mobile cloud, LBS and international strategy. This is this last focus that I have chosen to study through my audit report. This work begins with a development on Baidu, the first search engine in China and the sixth more visited site in the world. Indeed, before talking about a strategy of a firm, I think that it is important to understand the firm, how it thinks, how it operates, why it acts in this way and not in an other way. The Eastern and the Western mindsets being highly different, and therefore their respective business strategy, I have chosen to explain the particularities of the Chinese culture. Then, I deal with the core of my audit report: the strategy of internationalization of Baidu, which is localization in the emerging countries. I explain this choice, the tools developed to put into practice this strategy, and discuss about its relevance. Finally, I study the bigger impediment of Baidu in its international strategy, that's the American giant Google. As it will be developed all along this audit report, this Baidu-Google battle for the Internet market is not only a fight between two search engines. Behind that, it is also a fierce competition between two countries, the United States of America and China, for the leadership of technology and innovation in the world. 2013 6/52 Towards new horizons: building the Baidu brand worldwide. Célia LE CORRE Introduction 1994, State University of New York, United States of America (USA). Robin Li, today the co-creator and CEO of Baidu and considered as one of the most influential people in the world by The Times in 2010, was then one of these students keen on computers. It had been almost three years that he had left China for the USA. His decision was prompted by the crackdown of the government on pro-democracy demonstrations in Tiananmen Square, in 1989. For Robin Li, China had then become a land without hope. In parallel with his computer studies, he became enamored of the technology boom which was taking shape in Silicon Valley. He developed especially a kind interest in the Internet, which was then in its beginnings. He spent much of his time in trying to solve one of the Internet industry’s earliest problems: putting information in order. Its work ended up really paying off: in 1996, Robin Li developed an Internet search method he called “RankDex”, shortly before a certain Larry Page created a different method that became … Google. Thus Robin Li considered, and still considers, that Larry Page had taken his inspiration directly from RankDex. It was the beginning of a long story of mistrust and fights, which it is still happening right now. Similarly, as he was attending a computer science class, Robin Li was stung by a remark from a professor: «Do they have computers in China?». He became determined to change the perception that China was technologically backward. These two factors, the war of authorship with Google’s founder, and the representation of China as an underdeveloped country, marked a breakthrough in Robin Li’s life. A few time