Usage Of Google In China - Case Study Example

Executive Brief on ‘Google in China’ Table of Contents Table of Contents Background 2 Introduction 3 Summary of Environmental Audit 4 Internal Environment Analysis 4 External Environment Analysis 4 Evaluating current Strategy 6 Discussion 7 Conclusion and Recommendations 8 References 9 Background The key issue in the case study is detailing about the emergence of Google in China, its operations, the roadblocks it faced in its progress and to substantiate the reasons leading to its announcement of withdrawal of operations and closing its website, Google.cn from China. Google started its operations in China, one of the most important markets for economic growth, in 2006. After having established itself over a decade as the leading search engine, Google’s steps to expand its growth in China faced minor obstacles at the start and as a result, after sifting certain information according to the rules of the government, it steadily progressed to establish its presence in China. Within 3 years of launch of its website, Google garnered 30% of the share of total web search industry. (Google 2008) Later, due to its reluctance to apologize for allowing certain illegal sites to be obtained through its search results for Chinese users, it faced some regulation process from the Chinese government, banning several features of it. Following that, some malicious attacks on their Chinese servers and Gmail through alleged sources from China, Google reported in January 2010 as putting its operations in China in abeyance. A lot has been discussed about this move and several notions have been posed from several quarters. Decisions are yet to happen in a unanimous manner from all parties. Introduction Google’s stand on continuing its operations in China has presented an interesting proposition for analyzing the pros and cons of its decision. The current scenario is such that both the parties could lose out on major opportunities if Google decides to continue its suspended action in China. Google could lose out to its competitors of China and may end up losing out a major stake of its business from the fastest establishing super power of the world. At the same time, China’s rules and regulations are in correspondence to the rule of government, thereby disabling itself from any change of its course with respect to Google. The report aims at identifying the different factors such as the internal and external contributors, providing key inputs on the current strategy followed by both the parties involved, and depicting a possible movement of the market according to the different decisions that might be taken in future. Summary of Environmental Audit Internal Environment Analysis Google established its Google China (Google.cn) in 2006. The first step of its strategy was to obey to the rules of the government prohibiting certain search results accessible to its users. The second step was to establish a research and development team to customize their search engine according to the specifications of Chinese users. The Google working environment came into the grasp of the culture of China by understanding the factors influencing the work ethics of Chinese. (Thompson 2006) And hence, Google succeeded in pulling top level graduates into its company – a major strategic move. Google’s strategy involved short term as well as long term expansion strategies, acquiring several minor companies to its inner circle and thereby expanding its horizon. The alliance formation and aggressive product growth strategy helped Google to achieve a rapid growth after its establishment in China. External Environment Analysis Chinese market consists of a potential 1 billion users. It is the most booming economy of the world and hence has an integral role to play for any organization trying to establish itself. (CNN 2009) The internet market, in particular, has been on the rise exponentially in china. It is now estimated to be the second largest market for web industry. But, the government of China is proving to be a huge hindrance for any foreign organization to establish itself in China. The market nature of China and its potential customers have pushed Google customized the strategy of it according to their country needs. For censored information, Google has to display messages saying that the information is prohibited. (San Francisco Chronicle 2006) Currently, China’s internet market is led by private search engine provider, Baidu, owning 48% of the total market share. This is followed up by Google and Yahoo. In addition, future competition is expected from Sohu, a new website which is emerging to be as powerful as Google. Hence, it might eat into the shares of Google more than Baidu. The reason is that the content of advertisement present in Sohu is comparatively less and hence produces a simple and faster search. So, Google’s current strategy deals with combining the easy video preferences as offered in Sohu and to attenuate the volume of advertisements in comparison with Sohu and Baidu. (Sohu 2010) PEST model The Cultural Web Stories: Google’s move has received mixed reactions. Some believe it is in line with its mission and encouraged its act against the strong-will of the Chinese government. Others believe, it may deplete the market share of Google in China which in turn may affect its overall growth. Rituals and Routines: The expectancy level of Google has been soared high after its recent developments with Google docs and Translate. The intake of local employees is an integral proposition for Google to consider. Symbols: The symbol of Google has been returning quick search results and enhanced presentation of data and so far, it has been capable enough to maintain its integrity. The people of China will continue to embrace Google as long as the Sino-American relationship holds good. Organizational Structure: It has one of the most unique nontraditional organizational structures. It is a Cross functional and keenly led management structure. (Mills 2006) Control Systems Google has the best employee satisfaction rating. A proof of that is its reward of being awarded the best place to work in 2006 and 2007. It’s a loosely coupled company with innovative practice methods to develop new things almost every day. The employees are paid in an emphatic manner and control of the entire organization in on a strongest level. (Li 2010) Power Structures The employees are handed the real power to control the company. A high profile model irrespective of the cost is maintained. An example of which is the installation of multiple servers in multiple location. Thus, it ensures the satisfaction of the user to be kept at the most extreme level. (Langberg 2006) Evaluating current Strategy The current state of Google in China is that the Chinese government has renewed the license of Google to continue its operations but, it has in no way brought down any of its regulations on data. Google on the other hand is yet to come to a conclusive decision on it stand. The portfolio analysis of Google can be split up on two dimensions: Its growth in the market Its share in the market Google’s market growth has been on the high from 2006 to 2009 with the net profit grossing to US $3 billion. However its decision on January, 2010 though did not reduce its stock market value by more than half a percent, it did increase the stock values of Baidu by several percent. So, it could be said that the stakes of Baidu has consistently increased over past months of 2010. So, the market share of Baidu has been on the rise and the fact that the paid services of Baidu are performing extremely well in China when compared to Google’s does not augur well for the future of Google China.(Business 2006) Google’s decision to retract his business operations has diversified the opportunities in China and the current strategy of Google cannot be clearly determined as to whether it is against the restrictions of the government or against the cyber hacking of its servers. Inclusion of Google in the third party web services has been affected to a large extent. (Ft.com 2010) Several companies have taken a backseat in integrating the services of Google in their website. So, market penetrations are on the slower side for Google. Google needs to consolidate its position in China through methods like acquisitions of small companies that provide services. Google has already 4% share in Baidu’s stock and its current strategy is to buy more stakes at Baidu. At present, such a deal is yet to see the daylight. If it happens, such a deal could sure pull up the socks for Google in China and make it the supreme leader of both product development and market growth. (Perez 2009) Discussion Google’s progress in China has been stuck in the middle of sustaining the rights of human beings and at the same time improving its economic progress. With the current restrictions of the Chinese government, there is only a slim chance for Google to proceed to top level in both directions. China’s current strategy may be an appropriate step in its leadership and economic growth. But in the long run, obstructing business prospects through restriction of human rights and without political reform could cost it dearly. Its growth story is good at present but looks bleak if such an ad hoc treatment is meted out to such virtuous companies. Conclusion and Recommendations The current strategy has not yet panned out in its implications and is still in its burgeoning state. But, it has to be noted that the market share of Google is under depletion and there is strong indication of it losing it out to other companies. Google’s growth strategy in China has been obstructed with continuous changes in the regulations by the Chinese government. A successful strategy to foster its growth requires talented people from their own native so that any cultural barriers could be easily negotiated. Engaging in an affable relationship with the local corporations for merging of data such as from video groups and news organizations is essential for Google to understand its Chinese users’ needs and necessities. A possible strategy that could be created to establish this aspect would be to proceed with merging and acquisitioning of local database organizations. (Mullaney 2009) This would certainly push its market growth and would help in surpassing its competitor in China, Baidu. Time constraints, decisions on investments and costs involved in transactions has cut short the operating scale of growth and improvement for Google to develop resources within an internal environment. So, resources should be equally distributed between managing databases as well as research intensified works. A harmonious amalgamation of cutting edge technologies and understanding of the differences in culture is the ideal process for Google’s stability in China. The fecundity of such a process can be absorbed in its long run.   References Google 2008 Annual Report, Management’s Discussion and Analysis of Financial Condition and Results of Operation. 2008. Viewed 19 December 2010. http://www.investor.google.com/pdf/2008_google_annual_report.pdf CNN. 2009. China tops world in Internet users.´CNN.com. Viewed 19 December 2010 http://www.cnn.com/2009/TECH/01/14/china.internet/ Thompson, C. 2006. Google’s China Problem (and China’s Google Problem). The New York Times. Viewed 19 December 2010 http://www.nytimes.com/2006/04/23/magazine/23google.html?pagewanted=3&sq=google%20china&st=cse&scp=2 Mullaney, T. 2009. Alibaba Seeks to Work With Google, EBay, Ma Says.´ Bloomberg. Viewed 19 December 2010 http://www.bloomberg.com/apps/news?pid=20601080&sid=a9kbgY3rbaxw&refer=asia Perez, J C. 2009 Google Rolls out Semantic Search Capabilities.´PCWo rld. Viewed 19 December 2010 http://www.pcworld.com/businesscenter/article/161869/google_rolls_out_semantic_search_capabilities.html Business wire. 2006. “Google Poses Strong Challenges to Leader Baidu in China, Reports Keynote,” Business Wire. San Francisco. 2006. “How Google Censors Its Chinese Portal,” The San Francisco Chronicle. Langberg, M. 2006. “China Entry Raises Issues of Morals vs. Money,” Mercury News. Viewed 19 December 2010 http://www.mercurynews.com/mld/mercurynews/13702710.htm Millis, E. 2006. “Google to Censor China Web Searches,” CNET News.com. Viewed 19 December 2010. www.ZDNetAsia.com/news/internet/0,39044246,39307517,00.htm Ft.com,2010. Google ‘99% certain’ to shut China engine, Bloomberg. Li R. 2010. Why Competitor Google failed to make any real headway in China. Viewed 19 December 2010. www.venturebeat.com Sohu. 2010. Sohu Annual Report 2009. Read More