Case Study Description of Baidu.com, Inc.: Valuation at IPO
Since its official launch in January 2000, Baidu.com, Inc. (Baidu) quickly grew to become the leading Internet search engine in China. After three rounds of private funding, Baidu registered to go public on the NASDAQ Stock Market (Ticker Symbol: BIDU) on August 5, 2005. This case can be used for at least three types of courses: business valuation, entrepreneurship in emerging markets, or doing business in China. When used for a business valuation or corporate finance course, the case highlights issues involved in the valuation of early-stage companies in emerging growth industries and economies. When used for an entrepreneurship course, the case highlights the opportunities and challenges of starting and growing ventures in emerging markets; it also illustrates how a start-up company can take an existing entrepreneurial idea and proven business model from another country and successfully adapt it to the home market. Three steps in this successful adaptation are: (1) leveraging its local knowledge and expertise, (2) creating a unique competitive advantage for the venture, and (3) creating an entry barrier for its competitors. In a course on doing business in China, the case highlights the strategies for business success in China and the role of culture, government, economy, legal and financial systems, and consumer market in shaping these strategies.
Authors :: George Foster, Joseph Piotroski, Ning Jia, Martin Haemmig
Swot Analysis of "Baidu.com, Inc.: Valuation at IPO" written by George Foster, Joseph Piotroski, Ning Jia, Martin Haemmig includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Baidu.com Valuation facing as an external strategic factors. Some of the topics covered in Baidu.com, Inc.: Valuation at IPO case study are - Strategic Management Strategies, Emerging markets, Financial analysis, Financial management, Internet, IPO and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Baidu.com, Inc.: Valuation at IPO casestudy better are - – technology disruption, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, increasing transportation and logistics costs,
cloud computing is disrupting traditional business models, increasing energy prices, etc
Introduction to SWOT Analysis of Baidu.com, Inc.: Valuation at IPO
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Baidu.com, Inc.: Valuation at IPO case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Baidu.com Valuation, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Baidu.com Valuation operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Baidu.com, Inc.: Valuation at IPO can be done for the following purposes –
1. Strategic planning using facts provided in Baidu.com, Inc.: Valuation at IPO case study
2. Improving business portfolio management of Baidu.com Valuation
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Baidu.com Valuation
Strengths Baidu.com, Inc.: Valuation at IPO | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Baidu.com Valuation in Baidu.com, Inc.: Valuation at IPO Harvard Business Review case study are -
Diverse revenue streams
– Baidu.com Valuation is present in almost all the verticals within the industry. This has provided firm in Baidu.com, Inc.: Valuation at IPO case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Highly skilled collaborators
– Baidu.com Valuation has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Baidu.com, Inc.: Valuation at IPO HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy in the Baidu.com, Inc.: Valuation at IPO Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Successful track record of launching new products
– Baidu.com Valuation has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Baidu.com Valuation has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Superior customer experience
– The customer experience strategy of Baidu.com Valuation in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Baidu.com Valuation has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Baidu.com Valuation to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Baidu.com Valuation has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Baidu.com, Inc.: Valuation at IPO Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Low bargaining power of suppliers
– Suppliers of Baidu.com Valuation in the sector have low bargaining power. Baidu.com, Inc.: Valuation at IPO has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Baidu.com Valuation to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Baidu.com Valuation has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Baidu.com, Inc.: Valuation at IPO - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Baidu.com Valuation is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by George Foster, Joseph Piotroski, Ning Jia, Martin Haemmig can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Innovation driven organization
– Baidu.com Valuation is one of the most innovative firm in sector. Manager in Baidu.com, Inc.: Valuation at IPO Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Baidu.com, Inc.: Valuation at IPO firm has clearly differentiated products in the market place. This has enabled Baidu.com Valuation to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Baidu.com Valuation to invest into research and development (R&D) and innovation.
Weaknesses Baidu.com, Inc.: Valuation at IPO | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Baidu.com, Inc.: Valuation at IPO are -
Capital Spending Reduction
– Even during the low interest decade, Baidu.com Valuation has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Workers concerns about automation
– As automation is fast increasing in the segment, Baidu.com Valuation needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Baidu.com, Inc.: Valuation at IPO, it seems that the employees of Baidu.com Valuation don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Baidu.com Valuation supply chain. Even after few cautionary changes mentioned in the HBR case study - Baidu.com, Inc.: Valuation at IPO, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Baidu.com Valuation vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Baidu.com, Inc.: Valuation at IPO, in the dynamic environment Baidu.com Valuation has struggled to respond to the nimble upstart competition. Baidu.com Valuation has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Baidu.com Valuation is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Baidu.com, Inc.: Valuation at IPO can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Baidu.com Valuation has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Baidu.com, Inc.: Valuation at IPO should strive to include more intangible value offerings along with its core products and services.
Lack of clear differentiation of Baidu.com Valuation products
– To increase the profitability and margins on the products, Baidu.com Valuation needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Baidu.com, Inc.: Valuation at IPO HBR case study mentions - Baidu.com Valuation takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Low market penetration in new markets
– Outside its home market of Baidu.com Valuation, firm in the HBR case study Baidu.com, Inc.: Valuation at IPO needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Baidu.com Valuation has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Opportunities Baidu.com, Inc.: Valuation at IPO | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Baidu.com, Inc.: Valuation at IPO are -
Creating value in data economy
– The success of analytics program of Baidu.com Valuation has opened avenues for new revenue streams for the organization in the industry. This can help Baidu.com Valuation to build a more holistic ecosystem as suggested in the Baidu.com, Inc.: Valuation at IPO case study. Baidu.com Valuation can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Baidu.com Valuation can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Building a culture of innovation
– managers at Baidu.com Valuation can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Innovation & Entrepreneurship segment.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Baidu.com Valuation to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Baidu.com Valuation to hire the very best people irrespective of their geographical location.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Baidu.com Valuation in the consumer business. Now Baidu.com Valuation can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Baidu.com Valuation can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Baidu.com Valuation is facing challenges because of the dominance of functional experts in the organization. Baidu.com, Inc.: Valuation at IPO case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Baidu.com Valuation can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Baidu.com, Inc.: Valuation at IPO, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Baidu.com Valuation in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Baidu.com Valuation can use these opportunities to build new business models that can help the communities that Baidu.com Valuation operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Manufacturing automation
– Baidu.com Valuation can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Buying journey improvements
– Baidu.com Valuation can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Baidu.com, Inc.: Valuation at IPO suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Baidu.com Valuation can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Baidu.com, Inc.: Valuation at IPO External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Baidu.com, Inc.: Valuation at IPO are -
High dependence on third party suppliers
– Baidu.com Valuation high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Baidu.com, Inc.: Valuation at IPO, Baidu.com Valuation may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
Consumer confidence and its impact on Baidu.com Valuation demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Regulatory challenges
– Baidu.com Valuation needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Innovation & Entrepreneurship industry regulations.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Baidu.com Valuation in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Baidu.com Valuation can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Baidu.com Valuation in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Environmental challenges
– Baidu.com Valuation needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Baidu.com Valuation can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Baidu.com Valuation.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Baidu.com Valuation business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Baidu.com Valuation can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Shortening product life cycle
– it is one of the major threat that Baidu.com Valuation is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Baidu.com Valuation has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Baidu.com Valuation needs to keep up with the evolution of technology in the Innovation & Entrepreneurship sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Weighted SWOT Analysis of Baidu.com, Inc.: Valuation at IPO Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Baidu.com, Inc.: Valuation at IPO needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Baidu.com, Inc.: Valuation at IPO is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Baidu.com, Inc.: Valuation at IPO is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Baidu.com, Inc.: Valuation at IPO is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Baidu.com Valuation needs to make to build a sustainable competitive advantage.