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Baidu Enters African Mobile Browser Essay

Executive Summary

Baidu Inc. will benefit from partnering with France Telecoms’ Orange to enter in Africa’s mobile searching market which has large potential opportunities and revenues.

Africa, the Next Major Mobile Market

Africa with the second large population in the world and emerging purchasing power from new middle class requires telecommunication to be popularized. The sudden growth and high density of mobile connection in Africa across countries generate large demand of smartphones and mobile webs or other mobile services. The fast speed of growth rate and potential opportunities in this market attract large mobile operators and search engines, and then Africa will become the major mobile market and transform the global economic landscape. Baidu should enter this market earlier to develop its international business

Benefits and Limits of Partnering with Orange Exclusively
Benefits:Enjoys Orange’s mass customer base
Orange has health growth rate

Orange has invested 3G networking in order to expand its market share Orange has more than 800 million customers and spreads its operation across 20 countries. Risk: The exclusive agreement limits Baidu’s expand from cooperating with others

Evaluation: Despite the limits of the exclusive contract, the benefits of partnering with Orange are great. Baidu, which has less international business experiences, is good to start cooperating with large mobile operators like Orange to step into the large mobile competition in Africa, which has large potential market, opportunities, and revenues.

Introduction

Baidu Inc. signs its first global agreement with Orange, on an exclusive basis. The Baidu-Orange browser will provide more affordable and richer browsing experience for customers across Africa by enhancing data compression capabilities up to 90% of compression. The browser is one-click access to web-search like apps.

About Baidu:

Baidu is the largest searching engine in China, taking more than 70% of the market share. It beat Google out of the Chinese market in 2010 because it was familiar with Chinese web culture in which allows free downloads and develops general searching However, Baidu lose its ability to be business internationalized, since Baidu satisfied its large market share in the region; at the same time it also lose its good timing to establish and develop its mobile searching while the popularizing and development in smartphones has changed the rules of the game from web networking to telecommunication networking. The need of Baidu expanding its global market and mobile web services is important and urgent. Baidu now is targeting in African as an emerging mobile market in the partnership with Orange, a France’s telecom

Africa, the Next Major Mobile Market

According to the observation from GSMA, African mobile market has dramatically grown and reaches the highest growth rate worldwide due to the governments have liberalized the telecommunication, and competitions between private telecoms have increased service affordability.

Africa has large mobile connection penetration and has speedily gown From 2000 to 2011, mobile penetration has rapidly increased in Africa, from just 2% in 2000 to 63% in 2011, representing a compound annual growth rate of over 46%. It is expected to reach 85% mobile connection penetration in 2015 (GSMA, Africa Mobile Observatory Report, September. 2011) (See Figure 1)

Figure 1: Mobile connections and penetration in Africa since 2000. Data sources: Wireless Intelligence.

The number of cennections in North Africa has grown by 41% while Sub-Saharan Africa has the highest growth rate with 44% worldwidely, compared to an average of 34% for developing countries and 10% for developed
countries.(Deloitte;GSMA, Sub-Saharan Africa Mobile Observatory Report, November 13, 2012). (See Figure 2)

Figure 2: Growth in the number of mobile connections world wide, 200-2012. Data source: wireless intelligence

The rapid growth of mobile communication in Africa generates high demand of mobile telephony and mobile service and increases revenues According to Wireless Intelligence and International Monetary Fund (IMF), mobile operators reported over $35 billion revenues in 2011, growing by an average of 18% each year from $8.2 billion in 20000 in Africa. According to GSMA Africa Observatory 2011 Report, over the past 5 years, the number of subscribers across Africa had grown by almost 20% per year and was set to reach more than 735 million by the end of 2012. The mobile ecosystem in Africa currently generated approximately $56 billion or 3.5% of total GDP, with mobile operators alone contributing $49 billion.

Africa is transforming the global economic landscapes.

African economies are among the fastest-growing in the world while emerging economies in Asia have been slowed down due to their increasing capital and labor costs and markets saturated. Economists predicted that Africa would be poised to transform the global economic landscapes (John J.; Wild Wild, International Business: the challenge of globalization, January 16, 2013). Annual GDP growth averaged 5.7% between 2000 and 2010 in Sub-Saharan Africa. (IBM, “Is mobile Africa’s future?,” 2011) Expected annual growth averaged 7% over the next 20 years. (IBM, “Is mobile Africa’s future?,” 2011) 14% of the world’s population, the second large population in the world, provides large consumption base. (IBM, “Is mobile Africa’s future?,” 2011) New middle class has been emerging in Africa

The purchasing powers from large population and middle class must stimulate the sales of mobile products and co-related mobile services.

Africa’s mobile market is a good start for firms like Baidu, which seeking opportunities to expand its international business and mobile operation with less experiences. Demands from large consumption’s requests and purchasing from new class created substantial profits.

Benefits and Limits of Partnering with Orange Exclusively

The Chinese Web services giant Baidu will bring its mobile browser to Africa in signing an exclusive contract with France Telecom’s Orange network, the third-biggest mobile operator in Africa.

Benefits of partnering with Orange

Orange, which has a mobile customer base of more than 80 million subscribers and covers 20 countries in Africa, has continued to see its smartphone user base in Arica and Middle East increasing, for example the demand for Android devices in Egypt has doubled in the second half of 2012 by Marc Rennard, senior executive vice president for Orange. (Deloitte;GSMA, Sub-Saharan Africa Mobile Observatory Report, November 13, 2012) Orange has recently been deploying 3G networks in countries where it has operations and makes more low-cost smartphones available; customers have been steadily moving from basic feature phone towards more low-cost Android smartphones. (Deloitte;GSMA, Sub-Saharan Africa Mobile Observatory Report, November 13, 2012)

The mass user base, the wide geographical operations and the increased growth of smartphone users from Orange help Baidu expand its mobile services and data collecting in the new emerging market. This not only makes Baidu get a slice of Africa’s lucrative mobile and data market but also helps Baidu gain experience of transforming itself to be business internationalized and searching mobilized under the pressure of globalization and development in smartphones.

Limits of Partnering with Orange

Emeka Obiodu, Principal Analyst for Telecom Strategy, Ovum Research, pointed out that there is a limitation for Baidu by dealing with Orange exclusively. Baidu’s deal with Orange may limit the firm’s maneuverability in the market. If Baidu sticks to Orange exclusively, it will depend on Orange’s expansion of its geographical footprint.

Obiodu later added his concern for Baidu that

Over time, this lack of maneuverability will influence, and maybe undermine, Baidu’s ability to exploit emerging opportunities in the market.

While Baidu is tie-up with Orange, its largest competitor Google has already entered in the Africa’s mobile browsing market. Google not only has a deal with South Africa’s giant telecom operator Telkom’s cellphone network unit 8ta but also rolls out a new services in Sub-Saharan Africa though operator Zambia Telecommunication Company, a government-owned telecom. (IDG Reporter, “Africa is the newest telecoms battleground,” January 27, 2013)

The spread of Baidu browser is limited because it is depended on Orange’s geographical footprints due to exclusive agreement, compared with Google, which has multiple partnerships with large government-owned and private-owned operators. Despite the limitation, the benefits from cooperating with Orange for Baidu are greater. Baidu as an inexperienced international investor could decrease its risk to fail the first entry into an emerging market with the helps from sharing Orange’s wide geographical footprints and mass customer base. (TitaniumMedia, Baidu’s Radical Internationalization, 2013)

Evaluation of Baidu’s Entry into Africa’s Mobile Bowering Market though Exclusive Partnership with France Telecom’s Orange.

Africa’s mobile market

Mobile market in Africa is potential and profitable (Deloitte;GSMA, Sub-Saharan Africa Mobile Observatory Report, November13, 2012): 85% mobile connection penetration in 2015 (forecast) 44% mobile connection growth (the highest growth rate worldwide) $49 billion revenues (mobile operator alone) The fast and wide dissemination of mobile connection and communication in Africa makes the demand for smartphones and mobile web be on the rise remarkably, creating potential mobile market and providing healthy grown profits for Baidu, which is seeking opportunity to internationalize and mobilize its operation.

Partnership with France Telecom’s Orange

Despite the limitation of just cooperating with one company, Orange is still a good partner which already has mass customer base and keeps growing users doubly though its investment in 3G networking. Baidu, a Chinese searching engine which has less international business’ experiences, takes advantage of cooperating with Orange in order to lower the risk of first entry into a unknown market by sharing Orange’s mass customer base and wide geographical operation . Entry into Africa and cooperation with Orange are a good start for Baidu turning itself internationalized and mobilized.

References

Wild, J. J., & Wild, K. L. (2013). International business: the challenges of globalization
(Seventh ed.). : Pearson College Div.

Sub-Saharan Africa Mobile Observatory 2012. Sub-Saharan Africa Mobile Observatory
Report. Retrieved May 4, 2014, from
www.gsma.com/…/SSA_FullReport_v6.1_clean.pdf

Arican Mobile Observatory 2011 Driving Economic and Social Development through
Mobile Services. African Mobile Observatory Report. Retrieved , from
www.gsma.com/…/2011/…/Africa-Mobile-Observatory

Afica is the newest telecoms battleground. (2013, January 27). . Retrieved May 2, 2014,
from http://www.cnmeonline.com/analysis/africa-is-the-newest-telecoms-
battleground/

Is mobile Africa’s future?. (2011, January 1). . Retrieved May 15, 2014, fromhttp://www.ibm.com/smarterplanet/global/share/19jan2012/mobile_africa/

Baidu’s Radical Internationalization. (2013, March 31). . Retrieved May 11, 2014, from
http://tech.163.com/13/0331/09/8R9JOH9O000915BF.html

Appendix A
Important notice about GSMA and Deloitt

Frequent uses of data, facts, and statistics are from “Sub-Saharan Africa Mobile Observatory 2012”, a report is prepared by Drloitte for GSM Association with contract.

The “Sub-Saharan Africa Mobile Observatory 2012” is provided exclusively for the GSMA’s use under the terms of contract. No party other than GSMA could be entitled on the report for any purpose whatever Deloitte accepts or not.

Appendix B
Figure 1 and 2
Figure 1 is from GSMA’s “Africa Mobile Observatory 2011 Driveng Economic and Social Development through Mobile Services.”

Figure 2 from GSMA’s “Sub-Saharan Africa Mobile Observatory 2012.”

Both figures of the charts are collected data from Wireless Intelligence


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