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Radiyah Ali- 807002366 Kaleel Mohammed 806003355

Table of Contents 1. Abstract ................................................................................................. 2 2. Introduction ........................................................................................... 3 3. Case Questions and Discussion ............................................................ 6
3.1 Google was attempting to introduce its search engine in China. Google faced many regulatory issues both at home (US) and in China. Was Google's China strategy appropriate and did they implement it in a satisfactory manner? ................... 6 3.2 What challenges did Google managers face in launching a Chinese language service?........................................................................................................................ 8 3.3 Identify stakeholders in Google's China language offering and describe their various reactions to Google's offering. ....................................................................... 12 3.4 Consider the outcome of Google's offering in China. Was it worth it? ................. 16

4. Conclusion ............................................................................................ 20 5. Bibliography .......................................................................................... 22

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1. Abstract
This study aims to highlight the motion put forward by major internet service giant Google to venture into China, a country with strong communist ties and media filtration practices. This study would answer four major questions, namely was Googles strategy appropriate and implemented properly? What challenges were faced? Stakeholders input/reactions? Was the venture worth it? Examining this move by Google would illustrate the dynamism faced when cultural barriers are not addressed as part of your essential business plan.

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2. Introduction
Google China is a subsidiary of Google, Inc., the world's largest Internet search engine company. Google China ranks as the number 2 search engine in the People's Republic of China, after Baidu (Daily, 2006). In Jan 2010 Google declared that it had been the victim of a massive hacker attack originating within China, and had decided as a result that it would no longer participate in government-imposed self-censorship within mainland China. On March 22, 2010, Google began redirecting all google.cn traffic to google.com.hk (Google Hong Kong), thereby bypassing Chinese regulators and allowing uncensored Simplified Chinese search results (Google Business Reasons for Leaving China, 2010). Peoples Republic of China has a highest economic growth since 1990 and still evolving. Thus, Google China serves a market of mainland Chinese Internet users that was estimated in July 2009 to number 384 million. Hence, there were specific issues of self censorship, considering the Chinas biggest market Google may lose its biggest revenue. This report examines:

1. Issues related to strategy formulation and implementation across multiple markets 2. Impact of legal and regulatory and social pressures on strategy implementation 3. The cultural and strategic influence affecting Googles business model in China and uses several strategic management theories to analyze the future prospects of business in China, followed by some recommendations taken from the analysis.

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Table 1. Brief History of Google China

Timeline
2005

Details
A Chinese-language interface is developed for the google.com website.

Jan 2006

Launch of China-based google.cn search page with censored results.

Mar 2009 present

China blocks access to Google's YouTube site; access to other Google online services is denied to users on an ad hoc basis.

Jan 2010

Google announces it is no longer willing to censor searches in China and may pull out of the country.

Feb 2010

Hacking attacks on Google are traced to mainland China.

March 2010

Google re-routes searches to uncensored Google Hong Kong.

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3. Preparation Questions
1. What principles are relevant for Googles decision to enter China? Is censorship consistent with Googles core values? Should compromises be made? Google was founded in 1998 by Larry Page and Sergey Brin, two Stanford University graduate students who had developed a superior search-engine technology to find and organize information on the Web. The two embraced an ambitious mission: To organize the worlds information and make it universally accessible and useful. The company attracted users quickly through making Internet searches simple, quick, effective, and unbiased. Consistent with its core principle of Do no evil, Google displayed search results in order of calculated relevance to users rather than in order of advertising payments, unlike some competing search providers (Wilson, 2010).

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4. Case Questions and Discussion

4.3 Google was attempting to introduce its search engine in China. Google faced many regulatory issues both at home (US) and in China. Was Google's China strategy appropriate and did they implement it in a satisfactory manner?
Like most foreign corporations, Google mainly adopts market

development strategy in China. From the market aspect, this strategy direction of Google China has no serious problem, which is proven by fact that Google china market share has doubled from 2006 until it quit in 2010. In other words as a worlds leading search engine, Google is doing well in its products in the Chinese market. The reason Google china market share is lower than Baidu (Rival Chinese search engine) mainly dues to the late entry into Chinese market. If Google continues to operate in the mainland china it is expected to obtain a greater success in that market. Nevertheless Google now has moved its traffic out of mainland china and continues losing market share. The consolidation strategy it adopts now wont work much. It is not sustainable that placing more video and banner advertisement may get short term benefit of its revenue but will result in losing more users in a long term. Googles problem in china is mainly the conflict between its motto and the Chinese communist party (CCP). The CCP needs censorship policy to keep the limit at which the people are informed for its control of the large country. The choice of Google seems to be limited either quit or surrender to the CCP. If Google obeys the censorship it will be able to operate in the market and get much financial benefit but this action will be harm-full to its reputation. It is difficult to
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identify how much potential costs Google will pay for this loss of reputation in the whole worlds market but it will be significant. Perhaps Google might consider some other options like acquisition of a Chinese local search engine to re enter china and obey censorship laws to obtain market share and keep learning how to operate in Chinese markets.

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3.2 What challenges did Google managers face in launching a Chinese language service?
The problem faced by Google in China and its dilemma about whether to stay in the Chinese market or not, is a good example of needing to devise a strategy in action. This is not an examination of the past, but an attempt to identify some strategic action choices for the future (Google Business Reasons for Leaving China, 2010) suggests that The process of strategy formation is a dynamic one that corresponds to the dynamic conditions that drive it. If that is so, then we need to examine the changing factors behind Googles position in China. Googles operating environment in China seems to be constantly changing. There are clearly drivers for change at work, and the need to identify these drivers is by a PESTEL analysis; (standing for Political, Economic, Social, Technological, Environmental and Legal). The use of the cultural web analysis has highlighted that a main problem facing Google is the unpredictable attitude of Chinese officialdom, (Political), allied to strong local competition in a rapidly-growing and otherwise profitable market (Economic). In the Social sector, the cultural web suggested that Google has not reacted well to the Chinese local needs; which it needs to do in a market where Technological change is rapid. Other drivers for change can also be identified. Looking at Figure 1 below we can see the many dynamic features of the environment Google has chosen to operate in representing clearly the differences in culture and tradition and its effects on a growing business.

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Figure 1 The Paradigm of China (Johnson & Scholes, 2008)

Googles mission statement asserts that Googles mission is to organize the worlds information and make it universally accessible and useful (Google Business Reasons for Leaving China, 2010).The core message under the companys code of conduct is that being a Googler means holding yourself to the highest possible standard of ethical business conduct (Liu, 2007), Google wants to be able to save its users time and frustration by making the information that the user is looking for readily available, without having to sift through tons of useless information. Not only does Google want to provide fast and efficient service, but the company also wants to make its information
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available for everyone who has access to the internet; they want their product to be universally accessible. Also, the company claims not to want to make ethical sacrifices just in order to increase value for shareholders. The company has made it a priority not to sell high placement in search results to anyone and to show only non-flashy ads that are relevant to the users search query. In early 2006, Google struck a deal with the Peoples Republic of China and launched Google.cn, a version of its search engine run by the company from within China. By choosing to launch Google.cn, Google seemed to be implying that its mission and values could be consistent with self-censorship in China. From a financial perspective, China represented for Google a dynamic and fast-growing, though increasingly competitive, market. With over 105 million users online in early 2006, Chinas Internet market was the second in size only to that of the United States, but it still represented only about 8% of the Chinese population (David Drummond, 2010). Though Googles U.S.-based site, Google.com, had been available in China since the sites inception in 1999, service was slow and unreliable due to extensive Chinese government censoring of international content. However, in the fall of 2002, problems struck. Suddenly, in early September, computer users in China could not access Google.com. The Chinese government had blocked access to the site, and users were instead diverted to rival Chinese search sites. Two weeks later, it again became possible to access Google.com, but government censorship had been heightened, making the search engine far slower and less reliable. Much speculation exists as to why China suddenly chose to shut down and then to stringently censor Google.com. Google Co-founder Sergey Brin and many technology professionals in China believe it was the result of
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an effort by a Chinese competitor, like the then-new search engine Baidu.com, to gain market share at Googles expense through pulling strings in the government (Google Business Reasons for Leaving China, 2010). Whatever the cause, Google was left offering users in China a slow and lessthan-satisfactory version of Google.com. Moreover, Baidu.com, now Googles chief rival in China, began to grow, blossoming from a 3% market share player in 2002 . Googles decision to self-censor Google.cn attracted significant ethical criticism at the time. The companys motto is Dont Be Evil, and prior to entering China, Google had successfully set itself apart from other technology giants, becoming a company trusted by millions of users to protect and store their personal information. Googles choice to accept self-censorship, and the discussion and debate generated by this choice, forced Google to reexamine itself as a company and forced the international community to reconsider the implications of censorship. In 2010 Google withdrew partly from the Chinese market due to reevaluation of censorship regulations and in light of a cyber attack that has been clouded in confusion with sources showing encouragement from Chinese government to acquire Googles source code as well as links to Chinese human rights activists.

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4.4 Identify stakeholders in Google's China language offering and describe their various reactions to Google's offering.
Google has always been such a company who not only revolutionizes the traditional online industry but also excelled in corporate social responsibility (CSR) and ethics through their Dont be Evil motto (Wilson, 2010). But since the time Google has launched google.cn in China in 2005 there have been numerous forces that consistently influenced Googles decision making process in China and hindered them from sticking onto their organizational motto. Even though China has the second largest internet market but from the cultural analysis it became clear that the Chinese market is not only regulated by the Chinese government but also controlled by the Great Firewall of China (Wilson, 2010). Google has been struggling since 2002 and have gone a long way of change, from google.com (unrestricted) to google.cn (restricted) and finally to google.hk (unrestricted). Due to the lack of clarification of intention, Google has been meeting with the consistent furies and outcries from different groups (David Drummond, 2010). There has been observed a serious cultural clash between Google and China starting from the very beginning (i.e. 2002). Finally due to the heavy restriction to publish the restricted information followed by cyber attack and to keep up with their organizational belief of being not evil, in 2010 Google decided not only to move to Honk Kong but also started their unrestricted google.hk (Google Blog). Googles decision of being in Chinese internet market but not being in Beijing (China) needs more clarification and is yet to be defined. Even after knowing the possible pitfalls of this decision, which may finally lead to leave the fastest growing internet market, when they were enjoying the second
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largest share after Baidu(Chinese search engine) cannot be justified only on the basis of their organizational motto and can be further understood through stakeholders analysis. Strategically, the type of pressure from the stakeholders that exist behind Googles decision to leave Beijing (China) has been explained by the Stakeholders identifying and positioning model (SIP). In the process of decision making it is not important to know only about the different stakeholders but to know about the stakes they hold and how much influential they are (Fang, 2006). In a dynamic system stakeholders contend, conflict and compete with each other and finally try to pull the organization in their direction. The tug-of-war not only creates pressure on Googles decision making team but also affects their decision to a large extent. Base on the study of Googles stance in Google Blog, various newspapers and articles, some of the attributes of the stakeholders like power of influence, direction of influence, consistency and visibility are noted, which will be of great help to construct the SIP model (see figure 2.) The optimization model shows arrows signifying the stakeholders and there is a difference in the boldness of the arrow which represents the extremity of stakeholders power and effectiveness. The model further has some stakeholders like employees who has got a divided position and some neutral stakeholders like U. S. Government who just supports Google in all cases (i.e. whether to leave or enter China). From the study of the model it has been quiet clear that Enter China portion is collectively stronger not only because of their close association with the decision making team but also because of their consistency in their push.

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Figure 2.

Optimization model stakeholder analysis adapted from (David

Drummond, 2010)

Although there has been a maximum coverage of the overall decision making process but this is not an exhaustive depiction of the whole process and there are many more issues and patterns which can also
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influence the whole decision process. For example, the mass media has not considered as one of the stakeholder because of the increased bias of media inside and outside China. Chinese media supports Chinese government decision of restriction of the free flow of information whereas if the media in the US and UK follow Googles decision of free flow of information and freedom of speech. As a result of this study its clear that media mostly acts as a mediator of information to all different stakeholders rather than acting as one in reality. Googles decision of continuing with the unrestricted Google.hk from Hong Kong came as a result of Googles strong organizational belief of Dont be Evil, strong world market position, extreme profit and finally due to the support from the customers worldwide. But it is also important to note that understanding the structures and struggles among the stakeholders may not always guarantee the success of the policy because of the dynamics of the whole process which is greatly dependent on the changing stakeholders needs and position in future. With the help of the SIP model there is an attempt of simplifying the complicated reality and also to enhance the robustness of the whole process of Googles decision making.

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4.5 Consider the outcome of Google's offering in China. Was it worth it?

Google as an international entity was making a significant move by entering the Chinese market in 2003, as every international firm either trading or in service industry hopes to capitalize on the huge market unlike any other country.

Figure 3 GDP of the worlds major countries.

On this basis, it is important to determine the strategic reasons behind Googles considering exiting China. Based on on-going development reported in the news coverage, business reviews and widely available literature on the nature between Google and

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China, the strategic reasoning by Google can be narrowed down to four main factors:

1.Strong competition During the early period of Googles presence in China, it remained the significant market leader ahead of other search engine providers, including Baidu which was just starting up. Even when Google began to provide Chinese interface on its google.com in 2005, followed by the inception of google.cn the next year it was still not getting anywhere close to becoming the leader. The main reason behind this was due to the fact that Baidu has developed an incomparable understanding of Chinese internet users, hence able to provide much preferred content. 2. Chinas economic nationalism Although undeniably a huge market waiting to be capitalised on, beyond its size factor potential China is also a very complicated market. Historically, many foreign firms ended up struggling to understand the Chinese consumers. Conventional international business strategies strongly practiced by Western multinationals must be adopted differently in China since the market tends to strongly support local firms, eventually. 3. Google business policies and principles Google has been very reluctant towards the Chinese authorities imposing of extensive filtering in internet search results, mainly on subjects related to the countrys history of political violence and human rights suppression in the pasts. This contradicts with Googles corporate philosophies such as freedom of information and you can make money without doing evil. In addition, Google constantly wants to maintain its reputation as an efficient search engine globally with user-friendly features, without exception.
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5. Limited service variability and quality Three of Googles main services, YouTube, Google Blog and Picasa are blocked from being accessible by internet users in China through the countrys network firewall, The Golden Shield Project or also famously known as The Great Firewall of China (Google Blog, 2010). The services are blocked by the firewall to stop contents such as pornography, images or articles on police brutality, Tiananmen Square protest (1989), Dalai Lama, Tibetan

Independence Movement or any content that originates from the Taiwanese authorities. The Golden Shield Project is under the control of Chinas Ministry of Public Security. Extensive filtering of internet content is also causing the slow data transfers for Google consumers. The review above reveals that by analyzing Google strategic reasoning behind its consideration, it is obvious that Google is encouraged not only by the information freedom policy but also business fertility factors and in the business world the effort was worth it. Now Google can learn to understand this new market and adapt strategies to satisfy both consumer and legality regulations (see Figure 4 below) and complete what it initially started to do and fulfill its motto which is held in highest esteem in the business world.

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Figure 4:

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4. Conclusion
The economic attraction of such a large and growing market is obvious, but the difficulties involved in the continued operation, make the certainty of future activities unclear. The situation is fluid, and the direction of change uncertain. To take account of this, we need a theoretical approach that will not only help to clarify the situation, but also give some guidance as to how to approach strategy in the future. Many international organisations attempting to set up operations in China have struggled, so an analysis of the cultures involved, using the Cultural Web, was a logical starting point. This has highlighted several features, such as the position of the Chinese Government with regard to control, and the importance of being in tune with the Chinese culture and market demands when providing a service; something that Google did not do well in the initial stages of its operation in China. Another important point is that the approach of the Chinese Government with regard to censorship is in direct conflict with Googles stance on freedom of information, and willingly accepting such censorship would damage its brand image and reputation. The major factors produced by the Cultural Web have then been taken and input the other theoretical models used in this report, namely Stakeholder Analysis and PESTEL/Scenario Planning. Both these models have the degree of flexibility required, in that they can both help to explain the existing situation, but also be used to indicate what might happen if the details of the drivers for change alter to any degree. Thus, the Stakeholder Analysis emphasises the importance of Googles shareholders and the economic pull of the Chinese market, but this could change. Should Google continue to lose market share to Baidu, then the shareholders might decide this no longer fits
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with Googles desire to be market leader in its chosen markets, and their support for Google in China might weaken. Such possible changes could then be tested on the scenario planning model, which would take the drivers for change identified by the Cultural Web and Stakeholder Analysis, and see how changes in these drivers would affect the overall operating situation for Google.

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5. Bibliography
Daily., C. (2006). How Many Internet Users Are There in China?. Retrieved 03 2012, from Ministry of culture, People's Republic of China website. David Drummond. (2010). A new approach to China: an update,. Policy and issues, The official Google blog,. Fang, T. (2006). Negotiation: the Chinese style.. Journal of Business & Industrial Marketing, 21 (1), , 50-60. Google Business Reasons for Leaving China. (2010, April 6th). Wall Street Journal . Johnson G, S. K. (2008). Exploring Corporate Strategy. London: Prentice Hall. Liu, J. (2007, July 26th). Baidu and Google at logger heads in China; Business Asia by Bloomberg. International Herald Tribune . negotiations, C. (2010). A stakeholder analysis of Chinese negotiation. Retrieved 03 2012, from http://www.chinesenegotiation.com/2010/ Wilson, K. R. (2010). Google in China: the great firewall. Case Study in Ethics, Duke University.

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