Baidu.com Advertising business --going to EU with V2Future By: Ning Liu Student Number: 10415238 Thesis Supervisor: Prof. Dr. John B Cullen Course: 2013-2014 MBA Fulltime Amsterdam Business School University of Amsterdam Index Executive Summary ..................................................................................................... 3 Internet marketing/E-commerce ..................................................................... 5 Introduction of Baidu and V2Future ........................................................... 7 Literature Review ............................................................................................................ 8 V2Future with Baidu：A Successful Step ........................................ 12 V2Future’s future growth after cooperating with Baidu ........ 18 Baidu’s Internationalization for EU .............................................................. 22 Study Summary ............................................................................................................. 31 List of References ........................................................................................................... 32 Executive Summary The paper analyzes Baidu.com SEM advertisement sales business out of China. Baidu.com is the giant in China Internet Market and is regarded as the “Chinese Google”. However the strongest business for Baidu is their Chinese language based search engine, which means they are very strong but only strong in Chinese market. The problem Baidu is facing is how to define their internationalization strategy. There are 2 approaches for Baidu to develop their international business. 1. Trying to attract foreign companies who wants to focus on Chinese consumers, to invest ads promotion in Baidu’s Chinese website 2. Trying to set up offices overseas and build local website in the local markets, so that Baidu has the capability to compete with their local competitors (Google or anyone else) At the moment Baidu is actually taking the both way. On one hand they start to expand their business to attract customers out of China through overseas agencies; on the other hand Baidu is also starting to be prepared to compete their competitors out of China. Through this paper, I will provide the background information introduction on the online marketing/e －commerce status in both European market and Chinese market, and the comparison of the similarity and difference in both of the markets. My company project studies outcome will help to analyze how Baidu should overcome the international investment barriers by providing framework through various strategy formulation principles, strategy theories, and strategy frameworks. The paper will also give an insight on which market Baidu should start to compete globally from the data that the company project provided and how V2Future should develop the internet related business Internet marketing/E-commerce Online Marketing was not as fancy as it is even back to 5 years ago. Now everywhere on internet you can find the signs of online marketing. A pre-roll before a YouTube video, a pop-up ads in your browser, an ads link in your mobile app, or, most commonly, a promotion link in Google when you try to search something. The fast development of online marketing is because of the fast development of E-commerce. At the moment, E-commerce in China is developing even faster than that in Europe, as well as the rest of the world. (Source: V2Future internal document—The Short Cut from Alps to Great Wall, quoted from McKinsey Global Institution) Because of this fast development speed, as well as the great market potential in China (see the picture below), more and more western companies are now trying to put their focus in the Chinese market. (Source: V2Future internal document—The Short Cut from Alps to Great Wall, quoted from McKinsey Global Institution) Baidu SEM product is a search engine very similar comparing with Google, but particularly strong in the Chinese language. After launching more than 10 years from the year of 2000, Baidu.com has become the No.1 choice to make investment for online marketing for any company who wants do business in China. That is the main reason why Baidu is in belief that now is the good time to sell their services to overseas customers. Introduction of Baidu and V2Future Baidu, Inc. , incorporated on January 18, 2000, is a Chinese web services company headquartered in the Baidu Campus in Haidian District in Beijing. Baidu offers many services, including a Chinese language-search engine for websites, audio files, and images. Baidu offers 57 search and community services including Baidu Baike (an online collaboratively built encyclopedia) and a searchable, keyword-based discussion forum. Baidu was established in 2000 by Robin Li and Eric Xu. Both of the co-founders are Chinese nationals who studied and worked overseas before returning to China. In May 2014, Baidu ranked 5th overall in the Alexa Internet rankings. During Q4 of 2013, it is estimated that there were 5 billion search queries in China per day of which Baidu had a market share of 65.6%. China's Internet-search revenue share in second quarter 2011 by Baidu is 76%. In December 2007, Baidu became the first Chinese company to be included in the NASDAQ-100 index. Baidu provides an index of over 740 million web pages, 80 million images, and 10 million multimedia files. Baidu offers multimedia content including MP3 music, and movies, and is the first in China to offer Wireless Application Protocol (WAP) and personal digital assistant (PDA)-based mobile search. V2Future B.V. The company project I’m doing is with a Dutch company called V2Future B.V. Founded by a group of Chinese experts with European business experiences. Beginning of the year 2014, V2Future signed an official partnership contract with Baidu.com, became the only official agency in European area. How to gain the trust from European customers and help them to understand/adapt to Chinese online marketing is the key to win the business. Literature Review In this paper, the analysis of business will be around 3 topics—International Business & Competitive Strategy International Business- Challenges of international business: CAGE (Source: Pankaj Ghemawat, (2001) Distance Still Matters, TOOL KIT September, pp.140) Distance between two countries can manifest itself along four basic dimensions: culture, administrative, geographic, and economic. The types of distance influence businesses in different ways. (Pankaj Ghemawat, Distance Still Matters, 2001) FDI, the OLI advantage— (Source: ABS MBA International Business 2013-2014 course material by Alan Muller) Competitive Strategy Business Portfolio—the BCG model (Source: Barry Hedley, (1977) Strategy and the “Business Portfolio”, Long Range Planning February, pp 193-195) Individual businesses can have very different financial characteristics and face different strategic options depending on how they are placed in terms of growth and relative competitive position. Business can basically fall into any one of the four broad strategic categories. (Barry Hedley, Strategy and the “Business Portfolio”, 1977 ) Porter’s “Five forces” (Source: Michael.E.Porter, (1979) The Five Competitive Forces That Shape Strategy, Harvard Business Review March-April) Porter five forces analysis is a framework to analyse level of competition within an industry and business strategydevelopment. X` (Michael.E.Porter, The Five Competitive Forces That Shape Strategy) Resouce-based view The history of strategic management research can be understood as an attempt to “fill in the blanks” created by the SWOT framework. However the SWOT framework tells us that environmental analysis—no matter how rigorous—is only half the story. A complete understanding of sources of competitive advantage requires the analysis of a firm’s internal strengths and weaknesses as well. In general, when a firm’s resources and capabilities are valuable, rare, and socially complex, those resources are likely to be sources of sustained competitive advantage. (Jay B.Barney, Look Inside for Competitive Advantage, 1995) V2Future with Baidu：A Successful Step When it was founded, V2Future positioned itself as a bridge/portal between China and Europe, providing business consultancy to companies, those who want to invest in EU market from China as well as those who want to invest in Chinese market from EU. From the analysis of competitive strategy, the result convinced me that V2Future would be successful in selling a Chinese search engine to Western world? Their competitive advantage will definitely help! From the RBV by Barney, V2Future has a lot of resources, which are the keys of their future success. The HR resources of V2Future is their most important advantage doing Baidu business, all the consultants of V2Future are Chinese experts who have been working in Europe for more than 5 years. They are with Chinese background and culture, and understand the way that European companies do business. While search engine is some product that with strong relation to the language and the culture, there are not too many competitors have a group of people like V2Future do. The company’s location. V2Future is selling Baidu services, however comparing most of it’s competitors, V2Future is the only one which is located in Europe. The customers will have less communication/time difference issue with V2Future than with other companies. At the mean time, located in EU means V2Future is also fitting with the European law instead