Final Scoring Guidelines

This exam assesses your ability to provide a thoughtful and holistic understanding of a historical business case. In order to achieve this, you must not only read the provided materials carefully and critically and show attention to its details; you should also demonstrate knowledge of historical context, connect the case to broader themes of our class where necessary, and develop your own line of reasoning clearly and succinctly.

What Happened in the Real Case?

In April 2014, Wei Zexi, a 20 year-old college student, was diagnosed with synovial sarcoma, a rare and aggressive form of soft tissue cancer with a very low survival rate and no known effective treatments worldwide. He found the Beijing Wujing Second Hospital, which ranked highly in Baidu searches, and underwent biological immunotherapy there four times. This treatment became a desperate hope for Wei Zexi and his parents. They exhausted their family’s savings and borrowed money from relatives and friends. After several months and spending over 200,000 yuan, however, the tumor metastasized to his lungs by the end of the previous year. Doctors informed them he wouldn’t survive more than a month or two.

Wei Zexi’s death sparked widespread criticism from Chinese media and netizens, who felt it exposed significant issues: Baidu’s paid medical search rankings, the practice of public hospitals contracting out hospital departments, and the general chaos in medical regulation. How should Baidu respond to this torrent of online criticism and an impending government enquiry?

In response to Wei’s death, Baidu issued the following statement on April 28th, 2016:

“Regarding the doubts raised by netizens about the treatment effectiveness and internal management issues at the Beijing Wujing Second Hospital chosen by Wei Zexi, we are actively submitting review application letters to the issuing authority and the relevant departments of the People’s Liberation Army Headquarters in charge of the hospital. We hope these departments will attach great importance to this matter and immediately launch an investigation. If the investigation results confirm any improper conduct by the Wujing Second Hospital, we will fully support Zexi’s family in pursuing legal recourse. Baidu will always stand with netizens, and protecting the legitimate rights and interests of netizens is our inherent responsibility. We will fully cooperate with law enforcement agencies in investigating and combating all illegal and irregular activities, and we strongly urge the relevant hospital authorities to strengthen hospital supervision and create a trustworthy medical environment for the vast number of patients.”

Baidu also stated the following: “Netizen Wei Zexi, after a two-year struggle with synovial sarcoma, unfortunately passed away, a matter that has garnered significant attention and mourning from many friends. Upon learning of this, we immediately contacted Zexi’s father to offer our condolences and sympathy, wishing Zexi peace. Regarding the Wujing Second Hospital in Beijing, which Zexi chose through television media reports and Baidu searches, we conducted an immediate search result review. This hospital is a public Class A tertiary hospital with complete qualifications. Healthy and effective online information is the responsibility of every internet participant. We are willing to continue our efforts, accept supervision, and leave no room for false information or illegal activities!”

However, in an interview with Fazhi Evening News on May 1, 2016, Zexi’s father stated that as of the evening of May 1st, when he was interviewed by reporters, the Beijing Wujing Second Hospital had not contacted him regarding the matter. He accused Baidu of lying.

On the morning of May 1st, Baidu internal sources reported that Wang Zhan, a vice president of Baidu and former general manager of Baidu Tieba (an online discussion forum), was dismissed for violating professional ethics and harming company interests. The final decision also involved a formal reprimand and the forfeiture of his entire annual bonus. Wang Zhan joined Baidu in 2000 and was promoted to vice president in January 2010. He had successively been in charge of Baidu’s sales system, forward-charging business groups, and user consumption business groups.

In May 2016, following an investigation by a joint investigation team from the National Cyberspace Administration of China, Baidu was ordered to rectify its practices. The directive stated that “creditworthiness should be used as the standard for paid rankings, not solely the amount of money paid.” Xiang Hailong, President of Baidu Search, pledged to implement these changes, clearly marking all commercial promotional information in search results and providing effective risk warnings.

Wei’s death took place amid new push to regulate online advertisements in China. On July 4, 2016, the “Interim Measures for the Administration of Internet Advertising” was reviewed and approved by the State Administration for Market Regulation and came into effect on September 1, 2016. These new measures stipulated that paid search fell under under China’s “Advertising Law” and explicitly required internet platforms to clearly distinguish and label paid ranking results as “advertising.”

Although Baidu’s advertising review became more stringent after the Wei Zexi incident in 2016, its severe reliance on paid search advertising for revenue made it difficult to escape similar criticisms. In the KA (Key Account) sector alone, Baidu imposes a tenfold penalty for any discovered violation: for example, if an advertiser invested 100,000 yuan during a period of non-compliance, Baidu would penalize both the corresponding official sales team and the agency company by 1 million yuan in performance, block the advertiser, and deduct the agency’s rebates. However, in April 2018, media outlets continued to report on the resurgence of Baidu’s medical paid advertising, drawing criticism that intensified. Some Baidu agents conceded: “No matter how strict Baidu’s audits are, the agents below will always find various ways to evade them. Their tactics are constantly evolving; many operate non-compliant activities under the guise of compliant qualifications, making regulation extremely difficult. Indeed, unless the advertising law prohibits the medical industry from advertising, paid medical advertising will always have violations.”

Bibliography

1. Bai Mo. “Observation: Who is to Blame for Wei Zexi’s Death?” (观察：魏则西之死 怪谁？) BBC Chinese, May 3, 2016. https://www.bbc.com/zhongwen/simp/china/2016/05/160503_ana_weizexi_responsibility.
2. “Baidu Responds to ‘Wei Zexi Death Incident’: Has Sent a Letter to the Armed Police Headquarters.” (百度回应“魏则西去世事件”：已向武警总部递函) Siyue.com, May 1, 2016. https://archive.ph/20160501134504/http://news.m4.cn/2016-05/1308417.shtml.
3. “Wei Zexi’s Father: Baidu Has Never Contacted Me.” (魏则西父亲：百度公司从未联系过自己) Fazhi Evening News (法制晚报), May 1, 2016. https://archive.ph/20160501134838/http://tech.sina.com.cn/i/2016-05-01/doc-ifxrtztc3117656.shtml.
4. “Baidu Vice President Wang Zhan Fired, Previously Punished for Baidu Tieba Incident.” (百度副总裁王湛被开除 此前因百度贴吧事件受罚) Sina Technology, May 1, 2016, 11:55 AM. https://archive.ph/20160502154302/http://tech.sina.com.cn/i/2016-05-01/doc-ifxrtztc3108656.shtml.
5. Li, Anthony H. F. “Whom to Trust When Sick?” China Perspectives 2016, no. 4 (2016): 4. https://doi.org/10.4000/chinaperspectives.7140.

Scoring Guidelines

How well did your answer match the actual turn of events? Don’t worry: Your answers are not assessed based on its fidelity to the real outcome, but how well you explain your reasoning using historically defensible content knowledge. Here are some basic guidelines:

• This is not a test of your business acumen or knowledge of economics. Instead, your task is to analyze key contexts and issues in the case.
• Given the timed nature of the exam, responses may contain errors that do not detract from their overall quality, as long as the historical content used to advance the argument is accurate.
• Exam responses should be considered first drafts and thus may contain grammatical errors.

The following section presents a rubric for scoring. It is not based upon your answering in a particular type of way. I will reward appropriate points to any type of response, based upon the criteria that you answer the question, use appropriate evidence to their interpretation, analyze the case intelligently, and speculate within effective bounds where necessary.

The examples given within each scoring band do not constitute necessary criteria, but are intended to reflect the sorts of insight which might be expected at this level.

Question 1: Context

You must relate the topic of the prompt to broader historical events, developments, or processes that occur before, during, or continue after the time frame of the case. While the immediate case is new, the geographical contexts, power relations, and institutional settings should be familiar to you from our previous readings and class discussion. You are rewarded for drawing connections to external knowledge decoded in any case.

Historical contexts in this case include, but are not limited to:

Privatization of Public Health

Before the sweeping fiscal and tax reforms of 1994, the relationship between Beijing and its local administrative units was a matter of direct negotiation, with the central government and provincial governments haggling over the precise share of locally collected taxes that would flow into the national coffers. In 1994, under the direction of Premier Zhu Rongji, a profound overhaul restructured the nation’s financial architecture. Crucially, the responsibility for funding public health services was definitively placed upon the shoulders of local governments. This devolution of financial burden, however, coincided with a period when many public hospitals found themselves chronically under-funded, yet tasked with serving an ever-expanding population. These institutions, including prominent facilities like Wujing Hospital, a Class A tertiary hospital, began to feel a financial squeeze and turned to platforms like Baidu to advertise fee-paying services in an attempt to shore up their profits. This also explains why Wei Zexi and his family had to pay a hefty price for a service not covered by medical insurance.

Censorship and Online Activism

On the Chinese Internet, a vibrant ecosystem of social media platforms flourishes, engaging hundreds of millions despite strict state control. These services – such as Baidu’s Tieba, Sina Weibo, and others – have evolved into dynamic arenas for entertainment, news dissemination, and the intricate exchange of knowledge. The recent outpouring of public sympathy for Wei Zexi serves as a potent testament not only to the internet’s pervasive reach in China but also to the influence of the country’s online public sphere.

In retrospect, Chinese netizens were angry at Baidu not just because it failed to check harmful medical advertisements; more importantly, Baidu has a very sensitive political censorship system – it clearly had the technology to do so. If it is too much to ask Baidu to check the authenticity of online medical information, some netizens suggest turning to the state. Beijing’s ruling elite – which relies on Baidu for censorship – must navigate the complex terrain of public opinion. The voices of citizens reveal their concerns, expose errors in state policy, and signal the potential for social unrest. While a formidable apparatus of censorship stands ready to scrub away critical content, it is merely one instrument in the party’s toolbox for social governance. Employing it too broadly in the middle of a PR crisis risks not only inflaming public sentiment further but also eroding the very popular support the Party seeks to cultivate.

Internet Platforms and their Market Power

Before Google’s eventual withdrawal from the Chinese market in 2010, its search engine found itself locked in a formidable contest against the local behemoth, Baidu.

While their advertising programs diverged in crucial ways — Google avoided ranking the results based on ad-bidding prices and distinguished its paid placements from search results — the underlying business model for both giants was remarkably similar. At its heart, it was a system where advertisers bid to display digital advertisements, product listings, service offerings, and video content. This revenue stream, fueled by the relentless competition for clicks, not only funded their ambitious expansion into a sprawling array of products and services but also cemented their near-monopolistic grip on their respective digital markets. It is a dominance that, in both China and the United States, has drawn significant criticism, with accusations leveled against Baidu and Google alike for leveraging their monopoly status to stifle nascent competition and innovation.

Scoring Rubric

0 points

• Does not identify relevant issues or contexts.
• Provides an incoherent or purely factual summary without analysis.
• Response may be off-topic or largely irrelevant.

1 point

• Identifies some relevant historical contexts or events but misses key background or fails to connect them meaningfully.
• Relies mainly on facts directly from the case without critical reflection.
• Contexts mentioned may be partially incorrect or not well explained.
• Treats issues as a disconnected list without assessing their importance or relationships.

Sample answers: A, B

2 points

• Accurately summarizes core events and identifies relevant historical issues and contexts.
• Provides straightforward analysis but limited depth or breadth.
• May lightly discuss impacts beyond the immediate PR crisis (e.g., public opinion, regulatory shifts).
• Lacks engagement with deeper structural factors (e.g., financial reforms affecting public health or complex internet governance dynamics).

Sample answers: A, B

3 points

• Demonstrates good understanding of both the immediate case and related historical contexts.
• Connects the PR crisis to broader trends such as privatization of healthcare, internet censorship, or market dominance of digital platforms.
• Shows insight into complexity and some nuance in interpreting Baidu’s corporate challenges and the government’s role (more than just Baidu listens to )
• Provides clear reasoning supported by evidence from class materials and readings.

Sample answers: A, B

4 points

• Offers an insightful, comprehensive analysis that integrates multiple layers of context: local, national, and even global dynamics.
• Skillfully connects multiple course themes (e.g., fiscal decentralization, under-funding of public health system, for-profit care as perverse incentives, online activism, internet monopolies, state–platform relations) to the Wei Zexi case.
• Explores why China’s sophisticated censorship apparatus nevertheless struggles to contain misinformation, linking this to public opinion management and political legitimacy.
• Considers tech giants such as Baidu and Google and difficulties of effective state regulation
• Addresses nuanced tensions between Baidu’s business model, state oversight, and social expectations.

Sample answers: A, B

Question 2: Issues

Cases are a jigsaw puzzle with the pieces arranged in a confusing pattern. The narrative portion of the text is written to provide only the most superficial factual information; it leaves out some critical contexts and expresses no conclusions about that information. In other words, the case is literally meaningless until you give them meaning.

Legal Compliance – or cost of non-compliance

While Baidu certainly reaped considerable benefits from Google’s strategic retreat from the Chinese search engine market in 2010, this market advantage has never quite placed the company beyond the reach of regulation, nor has it guaranteed state backing. The crux of the matter, particularly concerning its advertising practices, lies not in the ad-bidding program itself—which is not, in essence, illegal—but in its execution. The controversy begins with how to define “advertisement” in the search results provided by Internet search engines. Baidu claims that information provided by its rank bidding service is not the same as advertisement.

At the same time, such conspicuous promotion of medical advertisements, especially those touting dubious assurances regarding efficacy or safety, appears to directly violate Article 16 of China’s advertising law. Whatever the company’s subsequent decisions, they must now proceed with a clear-eyed acknowledgment of its legal responsibilities.

Outsourcing of state regulation

It was not until the death of Wei Zexi in August 2016, a tragedy that exposed the darker side of for-profit medicine, that China’s State Administration for Industry and Commerce (SAIC) finally issued clear guidelines on what constitutes an online advertisement. The case, involving Baidu, highlighted a profound moral hazard, yet its legal standing was, for a long time, remarkably ambiguous. For much of the digital era, online advertising in China operated in a regulatory vacuum. This lack of oversight was not accidental; it reflected a long-standing state practice that leaned towards a laissez-faire approach, often outsourcing crucial regulatory functions to the platforms themselves. Beijing’s inclination was to intervene, and indeed to formalize rules, primarily when controversies erupted or conflicts arose, meaning that regulation frequently emerged in the wake of crises.

Profit maximization by China’s public hospitals

Baidu has significantly collaborated with private medical companies affiliated with the “Putian Clan,” a group that comprises over 80% of China’s private healthcare sector and has organized itself into a chamber of commerce. These entities, alongside public hospitals, are implicated in relying on “exaggerated advertisements” on the internet to attract patients, demonstrating a shared focus on “branding and packaging” through various media platforms. The relentless pursuit of profit maximization undermines the very professionalism of their medical practitioners, who faced immense pressures from superiors demanding to meet financial targets. At the same time, the immoral practices of medical doctors are ultimately inseparable from China’s system of funding public hospitals, which leave them in constant budget shortfall due to uneven distribution of expenditure responsibilities.

Role of public opinion

Baidu is unusual in its market power: In addition to serving as internet gateway in China, it also offers Tieba, a popular online forum where many Chinese netizens would make posts critical of government policies. They could scrub these contents, but censorship also comes with serious costs, especially when these PR crises lead to offline protests and/or widespread social contentions.

Algorithm Justice and Corporate Responsibility

Before Google left the Chinese market in 2010, it positioned its search engine as a paragon of digital integrity, a stark contrast to its local rival, Baidu. Google’s public pronouncements championed a clean search experience. It even publicly called on its Chinese competitors, urging them to adopt transparent practices, to clearly label and distinguish sponsored content from genuine findings, thereby safeguarding users from potential deception. Yet, this seemingly principled stand, articulated in a blog post dated November 17, 2008, might also be read through a more cynical lens: as a calculated gambit, a piece of strategic messaging designed to enhance Google’s own market standing in the lead-up to its departure.

Google’s own self-representation as the industry leader of search fairness, however, is complicated by its own business practices. The company’s vaunted AdWords program, the very engine of its advertising revenue, had itself drawn fire for fostering what critics deemed unfair competition. Indeed, Google’s practices attracted the scrutiny of the Department of Justice, which investigated the company for allowing advertisements from Canadian pharmacies advertising prescription drugs. While this situation differed from the Chinese context — the content of those ads wasn’t inherently deceptive and was, crucially, marked as advertising — it still illuminates a pervasive dynamic in the digital realm. It demonstrates how even tech giants, driven by the relentless pursuit of profit, can discover and exploit loopholes, deftly sidestepping legal responsibilities in the quest for ever-higher earnings.

Scoring Rubric

0 points

• Fails to identify relevant issues or contexts.
• Provides only factual summary without problem identification or analysis.
• Response may be off-topic or unrelated to the question prompt.

1 point

• Recognizes some surface-level issues but misses critical dimensions or complexities.
• Identifies either legal, regulatory, or profit-related problems but treats them as isolated facts.
• Provides minimal or inaccurate explanation of underlying conflicts or lacks insight into Baidu’s challenges.
• May misinterpret roles of key actors (e.g., Baidu, hospitals, regulators).

2 points

• Identifies significant issues such as:
  • The tension between profit motives and public welfare, especially Baidu’s reliance on paid medical ads.
  • Moral hazard inherent in Baidu’s ad-bidding system, where revenue incentives undermine ad monitoring.
  • Challenges Baidu faces in effectively policing advertisement content due to conflicting financial interests.
• Provides a straightforward but partial analysis focused mainly on Baidu’s business practices and compliance struggles.
• Response lacks deeper investigation into why these issues persist or the regulatory context enabling them.

Sample answers: A, B

3 points

• Explores broader systemic issues, including:
  • Limits and gaps in regulatory oversight over powerful tech platforms like Baidu.
  • Uneven playing field for foreign platforms such as Google, whose exit directly benefited domestic giants such as Baidu.
  • The outsourcing of state regulatory functions to internet companies and resulting accountability ambiguities.
  • The complexity of enforcing advertising laws in a fast-evolving digital environment.
• Discusses how Baidu’s market dominance complicates government intervention and public trust.
• Begins to probe the tension between short-term crisis responses and longer-term structural reform.

Sample answers: A, B

4 points

• Provides a sophisticated and comprehensive examination of core issues, such as:
  • The fundamental ambiguity in Chinese law regarding responsibility for misinformation — distinguishing advertiser vs. publisher liability.
  • Why enforcement of advertising laws remained weak until widespread public outcry forced action.
  • Structural causes behind distorted medical advertising, including how China’s public hospital financing (fiscal decentralization, budget shortfalls) pressures medical providers into profit-driven, “branding and packaging” behaviors.
  • The institutional and political dynamics shaping Baidu’s ambiguous role as both a profit-driven platform and a de facto regulatory agent.
  • The moral hazard created by the interplay of state laissez-faire regulation, Baidu’s business incentives, and escalating public criticism.
• Engages with the deeper implications of these contradictions for public welfare, digital governance, and corporate responsibility.
• Draws on class readings (on e-commerce, censorship, health care, surveillance capitalism) and broader contexts to enrich the argument, highlighting interconnected economic, political, and social factors.

Sample answers: A, B

Question 3: Action

You may demonstrate creativity and imagination in your response, but only if it is historically defensible and based on a thoughtful and empathetic understanding of risk factors and power relations in the case. Indeed, you are evaluated less by the specific action you advocate, but how well you reason. Specifically, you are rewarded for engaging with the document’s ambiguities and gaps and draw reasonable inferences from the text within a broad spectrum of possibility, without drawing conclusions that are overly rigid.

Below are some factors that you might consider.

Public gestures

Baidu, China’s dominant search engine, found itself in a double bind: not only was its advertising bid system under scrutiny, but its very position as the nation’s primary gateway to the internet, wielding significant censorship power, also drew sharp criticism. Even with the implicit sanction of the state, the company was expected to offer immediate apologies and perhaps dismiss responsible executives as a preliminary step to quell the unfolding public relations crisis. Such proactive gestures, aimed at soothing the anger of netizens and preventing a wider conflagration of public discontent, would also serve the crucial purpose of signaling a cooperative spirit to the Cyberspace Administration of China, now tasked with investigating the tech giant.

Profit concerns and product reform

Baidu’s reluctance to satisfy Chinese netizens’ demand to disallow medical advertisements has a simple reason: private healthcare companies actually contribute significantly to Baidu’s advertising revenue. This delicate financial equilibrium, however, may soon be disrupted. It is likely that the Cyberspace Administration of China may demand Baidu to re-organize its search page and modify its information rank bidding service. In reality, the Wei Zexi Incident is forcing Baidu to suspend its business cooperation with medical companies and reduce its ad revenue forecast. In the short term, this is bad news for Baidu, but it is a necessary reckoning for consumer protection and Chinese cyberspace regulation. More importantly, it also presents Baidu with a chance to emerge from this crisis not merely chastened, but as a leader in the nascent field of online regulation, and to chart a course toward more sustainable, diverse sources of growth.

Legal reform

The Wei Zexi Incident reveals a series of connected issues plaguing both the digital giant Baidu and China’s healthcare reforms: the proliferation of online medical advertisements, often without proper oversight; the opaque outsourcing of medical departments within state-run military hospitals to private entities; and the chronic under-funding of China’s public hospitals and lack of health care coverage for major diseases. While Baidu found itself in the crosshairs for its role in disseminating these dubious advertisements, it was also one piece of a much larger, more complex puzzle. To mend its damaged public trust—and, perhaps, to reclaim a measure of influence over its regulatory environment—the company would do well to harness the intense scrutiny now directed at online medical advertising, transforming public and expert debate into tangible regulatory momentum and demonstrating a commitment to genuine corporate leadership.

Scoring Rubric

0 points

• Suggests no plausible or coherent action plan.
• Recommendations contradict well-established facts or rest heavily on unsupported or unfounded assertions.
• Response may display misunderstanding of key contextual factors or misrepresent actors’ constraints.

1 point

• Offers a simplistic or superficial recommendation (e.g., “apologize immediately”) without deeper engagement.
• Relies primarily on moralistic or broad critiques (e.g., “Baidu is greedy” or “the government is corrupt”).
• Does not weigh alternative options, stakeholder interests, or potential risks.
• Lacks nuance or any strategic consideration of feasibility or consequences.

2 points

• Proposes a plausible action (e.g., Baidu issuing an apology, modifying ad practices).
• Identifies important risks and benefits but presents a somewhat undeveloped plan lacking detail or prioritization.
• May suggest mitigation strategies but fails to analyze how these actions might affect precedent, competitor behavior, or long-term outcomes.
• Ignores or underestimates practical constraints or oversimplifies societal or political realities (e.g., assuming censorship can eliminate all backlash).

Sample answers: A, B

3 points

• Develops a clear, realistic, and nuanced action plan for one or more stakeholders:
  • Restoring trust through public gestures (apologies, compensation, executive accountability).
  • Reforming advertising practices (labeling ads clearly, restricting medical ads, suspending problematic partnerships).
  • Government measures to improve regulation and oversight.
• Addresses how recommended steps should be implemented, including sequencing or prioritization.
• Weighs costs and benefits, including short-term reputational damage versus long-term sustainability.
• Recognizes strategic opportunities available to Baidu in navigating the crisis constructively.

Sample answers: A, B

4 points

• Anticipates potential responses from key stakeholders: governmental authorities (e.g., Cyberspace Administration), netizens, advertisers, and Baidu’s internal actors.
• Proposes a sophisticated, well-justified course of action that reflects deep understanding of:
  • The political and regulatory environment in China, including Baidu’s ambiguous relationship with the state.
  • The economic pressures driving Baidu’s business model and the medical advertising ecosystem.
  • Public opinion’s powerful role and the limits of censorship as crisis management tools.
  • Legal ambiguity around responsibility for misinformation and advertising content.
• Engages with the balancing act between profit motives, regulatory compliance, and social responsibility.
• Integrates multiple layers of strategy: immediate PR measures, medium-term product reform, and long-term legal or institutional reforms.
• Explores potential risks and mitigation strategies in detail, showing awareness of competing actors’ incentives and likely reactions.
• Demonstrates clarity, balance, and actionable insight that is historically plausible and sensitive to context.

Sample answers: A, B

Score Distribution

Here’s a breakdown of the scores:

Metric	Q1	Q2	Q3	Total
Median	3	2	3	8
Average	2.92	2.5	2.74	8.16
STD	0.91	0.95	0.79	2.16

The final letter grade is calculated based on the distribution of scores.

Grade	Cut-off	Frequency	Percentage
A	10	12	31.58
A-	8	10	26.32
B+	6	12	31.58
B	3	4	10.53