Google’s Expansion into China: Competition with Baidu

3639 words (15 pages) Essay in International Business

23/09/19 International Business Reference this

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Can Baidu beats Google again when Google return to China?

Abstract: Recently, news and rumors are stating that Google, the Internet giant company, will return to the Chinese market with a censored search engine. In Eight years of Google’s absence in Chinese search engine environment, Baidu has become a monopoly in Chinese market. It has more than 60% market share. The guess of Google’s return leads to a research question that can Baidu beat Google again like the first time in 2010? This paper wants to answer this paper. Based on existing literature, this paper will analyze the early stage of Google versus Baidu before 2010; how Baidu won Google in the first place? Then the paper will analyze the technology aspect of two companies. Finally, the paper compares the social impact of two companies; how two companies change society and how people react to them? The article will draw a conclusion based on the analysis. Findings: 1. Google suffered from institution pressure from the Chinese government and chose to exit the Chinese market. 2. Google did not have an excellent strategy to increase users’ intention to use the system leading their customer churn. 3. Google’s precision of search results takes precedence over Baidu’s. 4. More and more Chinese people start to accept Google because Baidu did not handle the relationship between technology and society. The findings indicate that in the short term, Baidu may not lose too many customers because of users’ habits and intention, but it may lose more and more customers in the long term.

       Introduction

The search engine is a software system that let users search and retrieve information from the internet. Baidu is one of the Internet giants in China. It is the largest search engine company in China. According to the StatCounter, Baidu gets 69.54% of search engine market share in China. Like google.com, people in China use baidu.com to look for information such as image, scholar research, encyclopedia, medical information, etc. Recently, news or rumors are stating that Google will come back to the Chinese market. This news burst into Chinese society. According to Bloomberg News (2018), Robin Li, the CEO of Baidu immediately posted a long article on social media claiming that Baidu will win second time competing with Google if it comes back to China. The goal of this paper is to find which IT company will win in Chinese market if Google returns to China. If the rumor is true, no matter which company succeeds in the Chinese search engine market, the winner will bring a significant social, culture and technical impact on Chinese society. Two company gives similar services but in very different ways. The rest of the paper will focus on why Baidu wined Google in the first place in 2010. Then, the article will compare the two companies in Sociotechnical and cultural aspects. The paper concludes that the Baidu may win Google again in short-term but may lose their large market share in China in the long term.

               Literature Review

 If we want to simulate and analyze the result of “Google versus Baidu” condition in 2018, then it is important to know how Baidu won google and had a dominant position in Chinese search engine market in 2010. Several scholars believe that the main reason Baidu beat Google in 2010 is the institutional pressure by the Chinese government. Lu (2013), a business professor in Shandong University, proposed that two firms adopted similar technology pressure but their responses to institutional pressure such as censorship and regulations from Chinese government are dramatically different: Google eventually selected a voice and exit strategy while Baidu adopted a loyalty strategy through closer collaboration with local institutional constituents (p. 419). So Google’s exit strategy was the reason Baidu won. Some researchers agreed with this argument and stated that in any market, companies are subject to both technical and institutional demands which increase the complexity of decisions the firm has to make, and negotiating these demands effectively can go a considerable way in determining whether organizations ultimately succeed or fail (“Meeting institutional”, p. 23). However, one scholar pointed out that the institutional pressure is not the only reason Google failed. According to Meng (2008), from 2005 to 2006, the Baidu’s market share rose from 51.5% to 64.5%, while Google’s market share had shrunk from 32.9% to 20.6% indicating that before 2010 Google had already lost its market share. She also used a conceptual model to analyzed that Baidu did better on Perceived Usefulness, User Participation, Perceived Enjoyment, Image and Habit, which is positively associated with users’ intention to use the system (p. 192).

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    Then, it is essential to know the precision of the two search engine. The term “precision” attracts so many scholars’ attention because it reveals so many social factors such as education, health, academic, and business. To test the precision and effectiveness of Google and Baidu, Zhang (2013) investigated the effectiveness of common search feature (title search, basic search, exact phrase search, pdf search, and URL search) on Both English and Chinese search engines. The author used one-way ANOVA and regression analysis to show that Google had the best performance of all five search features (p. 217). According to Jiang (2012), there is low overlap between Baidu’s and Google’s result, and Baidu rarely links to its competitor while their presence in Google’s result raising the results bias concerns of Baidu (p. 213). These two authors spent most of their time on the precision and effectiveness of the search result. However, Guo (2015) focused on ranking service that will affect the search result; he started a Baidu case study on Ranking services and advertisement. She described the pros and cons of the Ranking services, and she also explored the legal problems and potential legal risk arising from website ranking services (p. 3). The article concerns the ranking service in Baidu will cause business fraud and competition which leads to many social and ethical problems. Moreover, in Jiang’s paper, the author also compared the ranking services of Baidu and Google.

    Nowadays, the performance of search engines brings social and cultural impact to the society. For instance, the search engine is now having a very close relationship to education and academic. Salehi (2018) surveyed one hundred and twenty university students and had the result that for over 80% of higher education students, the general-purpose Google search engine is the most critical, relied-on and frequently-used source of academic information. Also, Öğrenci (2013) claimed that the students know to prefer search engines than an academic database for their academic study and he also wishes student use academic database more frequently because of the potential threat of search engines. The precision of the result is now closely related to educational use. Not only search engines are relevant to academic and education, but they are also related to public health. Spink (2004) found out that the increasing use of the general web search engines when seeking medical/health information.

    Most of the existing literature I mentioned in the previous paragraph have the relationship among them. Some papers agree with each other; some papers emphasized the importance of the idea other papers post.  In the rest of my paper, I will build upon the work of all these literatures and have a deeper study of each perspective articles gave.

      Description and Analysis: The early stage of the competition

 In this section, the paper focuses on the competition between Google and Baidu before 2010. To find out why Google fail in the first place is essential to know the result of their “ongoing” competition. First, one factor that made Google lose the Chinese market was the Institution Pressure from the Chinese government. In Chinese network environment, the organizations such as internet police or so-called “related department” from government play an authoritative role. They used censorship and regulation to central political stability. The restriction in search engine include image, words, phrase, video, and website. The censored search engine would not search the political scandal, porn website, violence, and sensitive news. Google, under this censorship and regulation, choose the exit strategy because its social ideology did not comply with Chinese regulations. The extremely high control of the internet also does not satisfy the Chinese citizen. Wang (2015) stated that people in China with higher income, who live in bigger cities, who adopt the internet earlier, and who use it more often are less likely to support internet censorship. However, Baidu obeyed to Chinese regulations, and it flourishes in the market. Wu (2011) said in the Chinese context, the government plays both a regulatory and a protective role, and sometimes the protective role takes precedence over the regulatory role (p. 235).  Therefore, the company which sticks to government policy would be more likely to do easier because of the government’s support. If Google complies with the institution pressure, Baidu will lose one big advantage in the Chinese market.

    Except for the institution and political pressure, Baidu did better at user’s intention than Google. Google’s Chinese search engine at first did not have a proper interpretation of the Chinese search keywords because of lacking knowledge of Chinese culture, so their result did not satisfy Chinese users. Baidu, on the other hand, did quite well on the search keywords. Also, in Meng’s paper, the author mentioned the user participation. Baidu did not only focus on the search result of the website, image, and video, etc. It also launched several additional products such as Baidu Tieba, Baidu Zhidao, and Baidu Wenku. These three products brought high-level user’s participation and led users’ intention to use Baidu. Tieba is a communication and discussion platform. It is like American Reddit; users can establish a theme section in the Tieba, where any other users who are interested in this topic can post their response. Also, Tieba provided a level-up mechanism; every user in a Tieba section start from level 1 and they can level-up as long as they post enough discussion. Tieba now had over 300 million users until 2016, and all of them are also the users of Baidu search engine. Not only these products attract user’s intention, but they also bring users’ continuance intention to use the system to reduce the churn rate. Google, on the other hand, did not have their derivative products on its Chinese server, caused continuous lost of market share.

          The Precision, Effectiveness and Social Factor

 In this section, the paper focuses on the Precision, Effectiveness and Social Factor of two search engine company. First, the precision of the search result based on the search term had been studied by many scholars. Zhang (2013)’s paper had already concluded that the effectiveness rate from Google outperformed Baidu’s in five search feature (p.225). This paper takes another research on the accuracy of the results based on the search keywords. I used 50 Chinese keywords from 5 different fields. Table 1. shows that Google has better performance of search result from every search field. In the public health field, Google’s accuracy is nearly 30% higher than Baidu’s which is surprisingly large. When searching in Baidu, I found out despite the strict regulation of porn news; some common keyword would have sexual inductive results. For example, the first word in Chines “pleura” has the meaning of bosom, and the results of Chinese “pleura” were all pictures of women showing their bosom instead of real pleura pictures. This kind of result reveals the improper technique used in the search engine in Baidu.

Field

Google Accuracy

Baidu Accuracy

Sports

98%

91.5%

Public Health

95%

67.5%

Music

100%

98%

Food

100%

100%

Politics

98.5%

83%

          Table 1

 Except for the technology factor, the Ranking Service is another factor that reduces the accuracy of the search engine. According to Guo (2015), the Ranking Service is a kind of pay-per-click (PPC) advertising, which is an efficient method for e-marketing in the network economy era (p. 3). Both Google and Baidu offered Ranking Services for websites. Studies and reports show the unrestrained Ranking Services in Baidu which cause unfair competition, fraud information, legal and ethical misconduct. Baidu implements this service to important fields such as Public Health, Law and Embassy, etc. The following figure shows the result of Chinese keyword “Shanghai American Consulate” from Google and Baidu. As we can see, in Google, the first two results are all official website of the Shanghai American Consulate. However, the first two results are websites from two agent company helping the customer to apply for American Visa. Also, the third result is the information of Consulate in Baike (an encyclopedia website, similar to Wikipedia). Baidu implements the Ranking Service to Visa applying company; when users search any term that can be relevant to Visa Baidu will show the company who pays money to Baidu on the top of the page. Same conditions apply to some other search terms and fields. Although the Ranking Service dramatically increases Baidu’s annual revenue, this excessive use of advertisement irritates many users.

                 

          credit to LiuLiu from Weibo

 The Ranking Services not only affects the accuracy rate of the result; it also causes many social problems. Zexi Wei, a 21-year old student, died after taking the medical treatment for synovial sarcoma, a rare form of cancer, from a hospital that came top Baidu’s search result. The search result showed that this hospital had the best treatment for synovial sarcoma in the nation, and Zexi believed its claim. After he found out this scam, it was too late to take medication in the regular hospital. The search engine would have a dramatically negative impact on the society if the developer falsely uses the technology.  Unfortunately, Baidu does not become aware of the importance of the relationship between itself and society.

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    The analysis shows that in the technology aspect, Google wins Baidu because its precision of results is higher than Baidu’s. In the social issue, more people in China now are increasing faith to Google and losing faith to Baidu. According to a survey from Worldcrunch (2018), with 17500 votes cast from Chinese people, 72.8% of respondents had opted for Google versus just 21.7% for Baidu. All of the aspects indicate that Google will win if it comes back to China with a censored search engine. However, due to the user intention aspect, Google may not grab plenty of users from Baidu in the short term.

      Discussion

 Studying this particular case of Baidu versus Google, I found several things that were surprising. First, Google had overcome the culture problem, and its high accuracy of the search result from Chinese keywords showed that it can handle the vague Chinese words. Then, one surprising thing is that the sexual inductive results from Baidu. Baidu is the biggest search engine company, and it has built many high-performance algorithms that implement in many fields such as the driverless car. However, it cannot distinguish the word “pleura” is a medical word. This phenomenon interests me and makes me want to have a further study to find out the reason.

By having this research, I found that to build a more successful sociotechnical system, only focusing on the technology is not enough. Google, for instance, it had better technology, but it did not focus on the user participation part leading to customer churn. Another vital way to build a better system is focusing on the relationship between technology and society. Falsely use of technology hurt the community, and the society will give the negative payback to the technology. Like I said in the previous section, more and more people appear to lose faith in Baidu and they would welcome its old competitor if Google returns.

    The paper builds upon the work from the literature earlier in the chapter. The analysis of this paper supports the view that Google had a better search accuracy in the existing literature. The articles I reviewed did not have a detailed analysis of the institution pressure and censorship. It also did not reveal the importance of the business-political relationship that drove Baidu to obey the censorship. 

                Conclusion

 By the end of the paper, we can conclude that if Google returns to China, it will hurt Baidu’s profit. Baidu may not lose more than half of its users since it has plenty of faithful users who are bound to its derivative products. However, the negative impact on Baidu would probably increase after passing a long time.

     The paper also has limitations. The focus points of this paper are still not enough to have a comprehensive analysis and study, which may lead to bias or wrong answer. Also, the analysis methods I used are not as professional as previous papers’ due to the lack of technology, knowledge, and data. The data and search terms I used to check the accuracy are not enough. So, the limitation of this paper can raise many further studies. I can study the security and privacy issues of both companies. Also, how are these factor related to society and people? The reason why Google did not build derivative products like Tieba to increase users’ intention to use their system also interests me. Furthermore, the question that why Baidu cannot have a nice algorithm to not show the sexual inductive information when users search a medical word is also an interest research topic.

       References

  • Google Or Baidu? Chinese Have Their Say In Short-Lived Survey (2018). Worldcruch Retrieved from https://www.worldcrunch.com/tech-science/google-or-baidu-chinese-have-their-say-in-short-lived-survey
  • Guo, Y., Yan, D., & Zhang, W. (2014). Baidu.Com’s Case Study—Pros and Cons of Web Site Ranking Service Under Chinese Anti-monopoly Mechanism. Research on Selected Chinas Legal Issues of E-Business.
  • Jiang, M. (2014). The business and politics of search engines: A comparative study of Baidu and Google’s search results of Internet events in China. New Media & Society16(2), 212–233. https://doi.org/10.1177/1461444813481196
  • Lu, Y., Hu, S., Liang, Q., Lin, D., & Peng, C. (2013). Exit, voice and loyalty as firm strategic responses to institutional pressures: A comparative case study of Google and Baidu in mainland China. Chinese Management Sudies, 7(3), 419-446.

 

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