Sustainable Strategy -Google in China - Case Study Example

Sustainable Strategy -Google in China  Table of Contents 1.Background of the Case 2 2.Introduction 3 3.Summary of Environmental Audit 4 4.Evaluating current Strategy 5 5.Discussion 7 6.Conclusion 8 7.Recommendation 9 8.Reference 12 1. Background of the Case Google, the most famous search engine in the world is facing intense trouble in Chinese market. Google have become one of the most widely used wed search site in the world. However, in China, Google is facing cyber attack over its Gmail account. The company has accused the China for attempting to hack the Gmail accounts and hence, the company is considering pulling out from the Chinese market. However, the Chinese authorities have denied the claim and they accused that Google has announced the ‘pulling out’ decision before having negotiation with the government officials. According to Google officials in China, the hackers targeted the Gmail account of eminent Chinese human right activists. The internet giant, Google entered in the Chinese market in 2006 by launching its China specific search engine ‘Google.cn’. Google also made agreements with the Chinese government on certain censorship policies and thus, the company was assured to get proper support and protection from the governments. However, four years after this agreement, Google has found it the necessary requirements from the government ends had not been met properly. The Chinese indigenous internet company, Baidu is the leading search engine in China and it has created an upper hand position in the market and gained a competitive advantage over Google. Currently, there are three leading internet search engine provider are playing in the market i.e. Baidu, Google and Yahoo. Baidu is leading in the market with 60% market share followed by Google with 30% and Yahoo with 10% (BBC News, 2010). At such situation, Baidu has claimed that Google’s pulling out decision is driven by financial reasons as the company failed to dominate the Chinese search engine market. In spite of the latest technology offerings and great market exposure, Google has unable to perform in Chinese market comparing to it global operations and leadership. Within a decade the number of Chinese internet users has increased to 340 million to 10 million. In this growing market, Baidu has created its dominance over the market. However, many critics have argued that Google must give a second thought for this decision and must negotiate with government officials on this issue. 2. Introduction Google‘s current issue in China has become an major area of concern for the company. Google’s global market is very strong and it is dominating in the most of the developing and developed countries like, India, USA, UK, Australia etc. The company was founded in 1998 by Larry Page and Sergey Brin who named their company ‘Google’ meaning “a play on the word “googol” , the mathematical term for a 1 followed by 100 zeros” (Google-a, 2010). Page and Brin developed a unique business idea that allows the common people to access a vast area of information. The mission statement of the company is “to organize the world’s information and make it universally accessible and useful” (Google-a, 2010). Gradually, the company has included other value added services like Google Books, Google, Scholar, Google News archive, Google Maps etc. In order to make search engine more proficient, the company provides useful internet software like Google Toolbar and Google Chrome. Gmail is its one of the major services that offers common people e-mail services. The company earns it revenue from the ads that published in the websites of Google, Gmail, and Orkut etc. The company has acquired huge number of advertisers who use its websites. This paper will attempt to deal with the case of Google in China. The Chinese market has great potential as the number of internet users are increasing at higher rate. The decision of Google to pull out from the Chinese market may lead to lose a great opportunity. Therefore, this paper will analyse the entire situation and will provide relevant recommendations that will help Google to stay back in China and create a competitive advantage over the market. 3. Summary of Environmental Audit China has the largest population in the world and this country has efficiently using its human resource for growth and development. The current estimated population of China is 1,330,141,295 and there were around 298 million internet users during 2008 (CIA, 2010). The internet market is growing rapidly in China as Chinese have become more conscious regarding use of IT, websites and e-mail etc. Before entering into the growing interment market of China, Google already established its brand position in the global market. Google used to provide its global search engine services through its existing Google.com website. However, prior to 2006, Google.com became popular in china and this prompted the company to enter in China with Google.cn. During 2002 September, Google search engine was made inaccessible for the two weeks and after its restoration in China market, it was become slow and inaccessible for Chinese students (Martin, n.d.). However, the Chinese government imposed strict regulation on the search engine providers and Google was affected significantly by these regulations causing steep reduction in its market share in China. Besides, the other companies like Yahoo, Facebook, and Microsoft etc. However, after the censorship agreement, Google entered in that market. Baidu is the leading competitor for Google in China. The trouble faced by Google in China is more of political, legal and security rather than financial. 4. Evaluating current Strategy The growing Chinese internet market has attracted a large number of global and domestic players in the market. Yahoo was the first internet company entered into the Chinese market in 1999 and later other leading global companies also entered in the market. One of the major reasons for this growth was the increasing e-business. The growing trade and business in China had led to increase the necessity of e-marketing and e-shopping. The search engine providers in China serve the e-advertising industry. The Chinese government realized the unlawful and unethical use of search engines. Hence, the government developed a standard rules and regulations for these search engine providers and it imposed censorship regulation on internet industry in China. Chinese and government authorities monitor the censorship and enforce the necessary law to regulate the market and corporations. Besides, Chinese government is also very strict with the foreign investors for the corporate governance issues. It has banned certain categories for the internet services. These are given below. Table 1: Banned Categories of Internet Materials (Source: Martin, n.d.) As per the above table, the Google developed their business strategy before entering into the Chinese market. Google followed proper censorship strategy in China. Google has attempted to introduce self-censorship policy for its Chinese operations to comply with the Chinese government internet related policies. However, the Google officials argued that this canonship affects the quality of services and users will not be able to access the unbiased and objective result (Bangiolo, 2006). The entire macro-economic factors that affect the internet industry of China were mainly driven by the government policies. Chinese government is also responsible in controlling the technological aspects of internet market (Martin, n.d.). In order to provide better service to its global market, Google has developed its core principles. The company’s philosophy primarily focuses on ten areas. These are “focus on the user and all else will follow”, “fast is better than slow”, “democracy on the web works”, “you don’t need to be at your desk to need an answer”, “you can make money without doing evil”, “there’s always more information out there”, “the need for information crosses all borders”, “you can be serious without a suit”, “great just isn’t good enough” (Google-b, 2010). However, these principles did not work in Chinese internet market due to government interference and legal restrictions. After entering into agreement with the Chinese government, Google decided to expand its market. To offer better services for Chinese people, the company made its entire applications in Chinese language. The Google in China aims to bring innovation in its operations and hence, the company keeps hiring the Chinese engineers. 5. Discussion The high potential Chinese market was the main reason for Google’s entry in China. However, the company has to comply with the legal restrictions imposed by the Chinese government. Google was not in favour of censorship policy but increasing market share of Google in China has led it to accept the agreement. Google has to modify its certain business principles as per the government’s internet market policies. The previous section has shown the basic principle of Google that strives to create value added services for its users. However, these principles are not suitable for the Chinese market. It aims to satisfy the needs and interest of the users and provide democracy in internet using. However, Chinese government is unwilling to disclose much information to its population that may lead to create chaos in the country. Initially, Google was in rise in Chinese market after its 2006. The market share of Google increased from 19.2% to 22.8%. Baidu, the leading search engine in China faced reduction its market share as it fell to 58.1% from 63.7% (Wilson, n.d.). The primary core competency of the Google is its technological expertise. Google keeps bring innovative ideas in its service offerings. In spite of lower market share, Google has developed its primary resources related to physical, human, intellectual and financial. The major opportunity for Google in Chinese market was the increasing internet users and the company is in better position to capture this opportunities by using its core competencies. However, the increasing governments’ pressure and competition from Baidu were the major threats for the company. The case of this paper has identifies its major weakness in Chinese market. Google’s global strategy can be interpreted as its major weakness for the Chinese market. The above discussions indicates that Chinese government will continue to impose its censorship policy on Google and Google must developed a proper and efficient strategy that will enable the company to sustain in the market. 6. Conclusion The current strategy of Google in China must be restructured as it is unable to cope up with the current issues. The first issue for Google is that it is facing security issues of its users due to Gmail account hacking. Secondly, the company is experiencing hindrances for censorship reasons. The company’s current strategy does not have enough strategy to control these two problems. In order to counter the first issues, Google can develop its high security for its user by introducing innovative technologies. For the second issue, the company has to develop a specific strategy and business principles for its Chinese market. Google has been focusing on the expansion strategy in China. However, in this situation, the company strategy must be developed as per the present requirements. Instead of pulling out from the Chinese market, company should work for regaining its market position. 7. Recommendation The above discussions have figured out the major issues for the Google’s operation in Chinese market. The internet giant, Google has enough resources to maintain a growth oriented strategy in the China. The global operations of Google have created its brand value as its major core competency. Google is technically very sound company comparing to its key competitors. Therefore based on internal strengths and weaknesses and external opportunities and threats, the company must develop its proper strategy in China. Google can follow the Asnoff model as given below. Figure 1: Asnoff Model Strategy (Source: Smidt and Wever, 1990, p.122) As per the above figure, the internet market of China is exiting and product is also exiting. Therefore, Google must follow market penetration. It can also follow hybrid strategy by combining the market penetration and product develop. Google is a master in offering innovative services. Hence, Google should attempt to penetrate the market by providing the new and unique value added services. However, , it has to focus on other important areas to sustain in Chinese market. These are given below. It must develop standard self-censorship strategy for China. It should invest in its R&D programs to develop a safeguard against increasing hacking of Gmail account. It should keep recruiting Chinese engineers for using their technology to bring innovations. It must improve its corporate social responsibilities and corporate governance activities to meet the, ethical, legal and social objectives in China. To attract the advertisers, Google should aim to achieve cost leadership strategy to penetrate the market. 8. Reference Bangiolo, February 23, 2006. Censorship: Google's newest business strategy. [Online]. Available at: http://www.infosci.cornell.edu/courses/info435/2007sp/w8/googcen.html. [Accessed on December 13, 2010]. BBC News. January 13, 2010. Google 'may pull out of China after Gmail cyber attack'. [Online]. Available at: http://news.bbc.co.uk/2/hi/8455712.stm. [Accessed on December 13, 2010]. CIA, 2010. The World Factbook: China. [Online]. Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html. [Accessed on December 13, 2010]. Google-a. 2010. Company overview. [Online]. Available at: http://www.google.com/corporate/index.html. [Accessed on December 13, 2010]. Google-b, 2010. Our philosophy. [Online]. Available at: http://www.google.com/intl/en/corporate/tenthings.html. [Accessed on December 13, 2010]. Martin, K. E. No date. Google, Inc. in China. [Pdf]. Available at: http://www.darden.virginia.edu/corporate-ethics/pdf/BRI-1004.pdf. [Accessed on December 13, 2010]. Smidt, M. D. and Wever, E. 1990. The Corporate firm in a changing world economy: case studies in the geography of enterprise. Taylor & Francis. Wilson, K., Ramos, Y. & Harvey, D. No Date. Google in China. [Pdf]. Available at: http://www.caseplace.org/pdfs/GoogleInChina.pdf. [Accessed on December 13, 2010]. Read More