Alternatives for Google in its Expansion to China Market - Case Study Example

Internationalization By: Institution: Course: Instructor: Date of submission: During the last five decades, much international trade’s barriers fell and numerous firms began their pursuit of global strategies to ensure that they attain competitive advantage. This is evident as numerous companies with their origin in Asia and Europe have branches In North America that have attained success and they include Samsung, Sony, Volkswagen, and Reebok. Apart from that, numerous clients are purchasing products through online means despite the fact that these companies may not exist in their home countries (International Business Publications 2015, p. 15). Despite this, a number of industries have benefited while others have failed. An international strategy is a term commonly used to mean that that internationally distributed subsidiaries act in an independent manner and the other companies do not coordinate their activities. Companies contemplating to extend internationally must make a decision of ensuring that their businesses are firmly established in the domestic market. International businesses and global trade present various opportunities for the firm but this can be achieved with adequate preparation towards the entry into the foreign market. Internationalization of the business involves bringing about changes in the strategies of the business and this includes the manner by which the business carries out its marketability as well as interacts with the consumers. If the demand for the service or the product is high in non-English speaking countries for instance in China as well as in other emerging markets, it is important to make various changes that will help in ensuring the acceptability of the products in an area where there exist various cultural, legal, political, and language differences (Jones, Coelen, Beelen, & Wit 2016, p. 23). The process of internalizing a business faces numerous challenges owing to the various potential differences in political, economic, and cultural environment, as well as the regulation between the domestic as well as the foreign markets that the company targets. When the process is carried out in a proper manner, ensuring the internalization of the business attract numerous benefits such as increased sales and new opportunities. Alternatives for Google in its Expansion to China Market It is important for the company to comprehend the Chinese market. Before entering the market, it would have been prudent for the company’s management to visit China, have a meeting with potential clients and businesses, as well as familiarize themselves with culture as well as the language. Apart from that, it is important for the company to carry out extensive research to ensure that it has found the product’s best market. Apart from that, it is important for Google to identify the prevailing regulations, business requirements, as well as culture of the marker, and in this case the Chinese market. Conducting such research will assist in ensuring the minimization of the probable risk as well as help in saving time, energy, and money (Kleinert 2014, p. 25). There exist two main researches for this and they include the following: Secondary research on market: this involves the gathering of the information mainly from public resources such as newspaper, books, studies and market reports, as well as the internet. Primary research ion market: this involves direct communication with customers, experts, as well as other info sources and this aims at filling the gap after carrying out the secondary research (International Business Publications 2015, p. 23). Marketing research is essential when it comes to the process of decision-making when it comes to the in the market planning. At the start of 2006, Google Corporation entered into the Chinese market after striking a deal with the Chinese government. It went ahead to launch Google.cn requiring that the company would operate as ISP (Internet Service Provider) within China, but the government called for the self-censorship of all the ISP, ensuring the removal of all the illegal contents from the search results. From the financial viewpoint, China was a fast growing as well as competitive market. The decision by Google.cn to ensure self-censor was highly criticized. The motto of the company is “Don’t be Evil”, and before it entered China, Google had attained success in operating on its own away from other technology giants. Many users trusted the company to ensure the storage as well as the protection of personal information (Kleinert 2014, p. 39). The choice to ensure the acceptance of censorship, and the debate as well as the discussion that resulted from this choice made Google to re-assess itself as well as forced the global community to reconsider censorship implications. The internet market of China attracted 105 million users, coming second after the US but this was a representative of 8% of the entire population of China. Although Google.com had its presence in China since its establishment in 2009, it has a slow as well as unreliable service owing to the extensive censorship from the Chinese government regarding the international content (Wahid 2010, p. 27). The major competitor of Google in the US namely Microsoft MSN and Yahoo had their entry in China market earlier on and had accepted censorship. Apart from that, the increasing competition mainly from the search engine of China namely Baidu.com greatly eroded the market share of Google.com from 2002 to 2007. The market share of Baidu.com rose from 3% to become dominant at 58%. Currently, the company is the global leader in search engine and was established by Sergey Brin and Larry Page in 1998, having initiated as a project of the college. The company is currently headquartered at Mountain View in California (Jones, Coelen, Beelen, & Wit 2016, p. 27). The growth of the company saw the growth of the services as well as products. Presently, the company operates as a mapping service, search engine, translator, blog-hosting service, an email account among others. There has been the expansion of the company in numerous countries and it is presently a host to more than 50 domains of country websites. Despite the considerable expansion, continue to ensure the free flowing of the ideas. The atmosphere of the company is informal and this ensures that each person is performing their activities outside their positions as well as their specialty whenever there a need occur. China has been making attempts to be a leader in the global market. Its successful entry into the World Trade Organization meant that the country was to grant foreign companies to enter into its market (Kleinert 2014, p. 41). During this period, numerous companies in China began calling for modern infrastructure as well as advanced telecommunication. The government of China concluded that it was essential to ensure modernization and led to China becoming among the global leaders in the consumption of telecommunication equipment. However, the acquisition of the various modern information technologies resulted into increased flow of communication and trade out of the country as well as into the country. In early 2000, there was the introduction of the MPS in the country whose aim was to ensure the utilization of technology of state-of-art to ensure efficacy in policing the people of China. This form of technology aimed at monitoring everything. The MPS operates by ensuring the blockage of certain materials (International Business Publications 2015, p. 28). The government of China on its part fails to ensure the prevention of access to content that they perceive to be inappropriate. The government required that the companies entering the Chinese market would ensure that the content was clean from any form of inappropriateness. According to the 2006 projections by Google.cn, the company (Google) was already present in the market of China. Since the inception of the site in 1999, Google.com had extended to the Chinese market as well as other markets across the globe. As compared to its Competitors, Google Company made a choice to ensure the creation its search engine version that had the capacity to comprehend character-based languages such as Japanese, Korean, Chinese and the company aimed at running the same at the company’s head office in California. Google.cn, a version of Google.com gained the capacity to control approximately 25% search market of the Chinese by the year 2002 and this was aimed at ensuring a complete avoidance of censorship by the Chinese Government (Sanderson 2008, p. 12). The Government of China blocked the Google.com site in September 2002 and diverted the search to the sites owned by Chinese firm. The government made the access possible after two weeks but there was heightening of the censorship by the government, and the search engine was slower as well as less reliable (Marinov & Marinova 2012, p. 3). The decision to make such a move is perceived to have been made to ensure that Baidu.com, a newly established Chinese search engine. The period marked the beginning of growth of the rival of Google.com. Baidu.com. As a way of obeying the law of censorship brought about by the Chinese government, the representative of Google indicated that the company would comply with the requirement by the Chinese government and erased any sites that the government of China disapproved (Jones, Coelen, Beelen, & Wit 2016, p. 27). After it was launched in 2006 in China market, Google as well as other US based search engines namely Yahoo! Cisco Systems, and Microsoft were called to provide a testimony before a senate subcommittee on the Pacific and Asia as well as the Subcommittee on International Operations, Global Human Rights, as well as Africa regarding their mode of operation within China (Marinov & Marinova 2012, p. 6). In addition, Google was required by the U.S government to give explanation of its action to its stakeholders. Most of the shareholders of Google voted against the proposal on anticensorship. The Board of Directors of Google as well as Google as a company urged its stakeholders to be in favor of the proposal which had been proposed by the New York City’s Office of the Controller (Marinov & Marinova 2012, p. 5). Two years after its launch, Google’s performance in China improved and its market share stood at 19.2%. The company aimed at penetrating the Chinese market by ensuring that Google.cn becomes more of “Chinese” and this was by ensuring that the employees hired were specifically Chinese and also made partnership with firms from China (Li 2007, p. 31). Although the company has made partnership with numerous other Chinese Companies including China Telecom as well as Tianya.com, Google is yet to become as successful as Baidu.com. There exist numerous Alternative strategies that Google could have used in order to enhance success in the Chinese Market. However in 2010, the company pulled out all its search services from the Chinese market following a hack by the government. It is clear that the government of China is warning the internet companies whose root is outside China, to either adhere to the censorship. Google has never returned to the Chinese market (Livingstone 2009, p. 27). The solution to what Google went through is mere sacrifice that is; handing the data over to the government as well as control, and them the government will allow you to have access to the market. China’s Great Firewall is ensuring the prevention of the information perceived to harm the Communist Party of China from its entry into the Chinese Market. China is consistently strengthening the legal foundation of wall, ensuring the closure of the breaches as well as ensuring the reinforcement of its control of the wall’s web (Kleinert 2014, p. 43). Foreign market strategies of entry appear different based on the level of risk that they exhibit, the commitment as well as the resources, as well as the return on investment (ROI) they promise (Sanderson 2008, p. 3). Google could have utilized the following strategies of entry: Joint venture A joint venture operates in a way that the international venture has a management voice as well as equity position in the foreign company. It involves the formation of partnership between the home country and the host firms, and this lead to the generation of a third firm. Such an agreement ensures that the local firm is having can control the operations as well as ensure that it is accessing knowledge of the local market. Although Google did withdraw from China, the company should have continued to partner with more local firms as this will have enabled it to win more customers in China (Sanderson 2008, p. 15). The international firm such as Google has relationship networks especially of the franchise and has less exposure to the exploration of risk following the partnership it has with local firms. This is a popular agreement in the realm of the international management mainly because of the fact that it allows the control problems’ avoidance of the other forms of entry strategies of foreign market (Jones, Coelen, Beelen, & Wit 2016, p. 37). Strategic alliance This entails cooperative agreements existing between various firms, for instance formal joint ventures, shared research, as well as minority equity participation. This form of alliances is gaining popularity and is usually between firms in the emerging as well as developed economies. The main focus of strategic alliance is ensuring the creation of new technologies as well as products. Since no single firm can have efficacy of R & D efforts, it was important for Google to have formed such alliances with local firms as this would have helped the company become more innovative and create better products thus gaining more market share. This enhances the capacity of the company to remain competitive via innovation (Wahid 2010, p. 17). However, the main setback of strategic alliance is the competitive collaboration risk. Some of these alliances incorporate firms that fiercely compete outside the specific alliance scope (Kleinert 2014, p. 31). By collaborating with the Chinese government, Google would have gained the chance to grow as well as develop in the rich Chinese market. In additions, collaboration ensures the removal of risks especially in relation to the local market’s capacity. Apart from that, partnership increases the chances of learning, basically the improvement of skills ensuring access to the country as well as via having a working relationship with the partners (Li 2007, p. 49). China is perceived as the World’s factory because approximately 13.2% of manufacturing activities takes place in the nation. China offers favorable conditions for manufactures of the Western World by ensuring that the materials are offered at a low cost and ensuring that the labor is cheap. Outsourcing to China by foreign firms can be via whole owned subsidiaries or contract manufacturer of the western firm’s parent company. Many western firms are faced with numerous difficulties in the process of ensuring the outsourcing of the production to the Communist China (Livingstone 2009, p. 34). The global marketplace ensures that American companies are experiencing numerous opportunities of doing businesses. According to studies, companies that internalize their businesses have a tendency of growing faster and at the same time have a low failure rate compared to those that fail to internationalize. One of the strategies that Google can use is “increased commitment” market development method whereby the entry into the Chinese Market is through an independent local firm (Wahid 2010, p. 21). As the business as well as the confidence grows, the next step will involve the enactment of direct controlled subsidiary. This approach of internationalization is essential in ensuring the building of the market of the country in a quick manner as well as the desire to ensure the minimization of risks in addition to the need to gain knowledge regarding the market as well as the country from a low knowledge base. The entry into the new market also allows the company to increase its sales. It also allows for an improvement of profit (Li 2007, p. 51). Bibliographies International Business Publications, U. (2015). Doing business and investing in china: strategic, practical information, regulations, contacts. [Place of publication not identified], Intl Business Pubns Usa. Jones, E., Coelen, R., Beelen, J., & Wit, H. D. (2016). Global and local internationalization. http://public.eblib.com/choice/publicfullrecord.aspx?p=4202038. Kleinert, J. (2014). The role of multinational enterprises in globalization. Berlin, Springer. Li, S. (2007). Internationalization. [United States?], Addison-Wesley. http://proquest.safaribooksonline.com/55555LTI00039. Livingstone, J. M. (2009). The internationalization of business. Basingstoke, Macmillan. Marinov, M., & Marinova, S. T. (2012). Internationalization of emerging economies and firms. New York, Palgrave Macmillan. http://public.eblib.com/choice/publicfullrecord.aspx?p=851049. Richter, N. F., & Wulhorst, F. (2013). Firms' financial benefits and costs of internationalization today. Hamburg, Techn. Univ. Hamburg-Harburg. http://ssrn.com/abstract=2340071. Sanderson, J. (2008). Doing business in China. New York, N.Y., DK Pub. http://public.eblib.com/choice/publicfullrecord.aspx?p=485167. Wahid, F. (2010). Innovation-performance relationship: the moderating role of the degree of internationalization of a firm. Waterloo, Ont, University of Waterloo. Wahid, F. (2015). The impact of internationalization on post-IPO performance of firms. Thesis (Ph.D)--University of Waterloo, 2015. Read More