Baidu Case Analysis

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Q1) What are the key determinants of value or value drivers for Baidu? Solution Some of the key determinants of value drivers for Baidu are as follows: Leading player in the fast growing market Over 1995-2005, Chinese advertising market grew at a CAGR of 17 percent. In 2005, the market stood at approximately $10 billion. The market was further expected to grow to $17 billion by 2008. At the same time, Chinese online advertising was poised for a rapid growth. It registered a phenomenal 48 percent y-o-y growth in 2005. In such a growing market Baidu had become the largest Internet Search provider in China. Since its launch, the company had grown very rapidly in terms of customer reach and revenues. It became successful in such a short duration because it focused on the Chinese customers, which helped it to compete with foreign competitors, and was able to work effectively even under the strict regulatory environment. Wide range of products Leveraging the local knowledge of its founders, Baidu developed a series of China specific products, which again differentiated it from other foreign and domestic players. Apart from the basic internet search services, Baidu has diversified its service portfolio into newer areas such as Online Advertising Services, Mp3 search, Post Bar, Branded Advertising etc. Focused Strategy The business model used by Baidu was able to deliver incremental value to the organization. The broad business strategy of Baidu was * Development of global standard technology with China relevant products in order to differentiate Baidu from both foreign and local competitors, and * Full penetration of the SME segment, with a flexible multi-tier distribution system. Billing System The P4P (pay for performance) billing system was very beneficial for the company as well as its customers. The fee was based on the price per click, click

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