in China

CASE STUDY
OVERVIEW

By:
Shahid Naseem
Subash Acharya

Google in China [an overview]

Subash Acharya

by Shahid Naseem and

CONTENTS

Introduction.................................................................................................................... 1
Background and The Issue............................................................................................. 1
Multinational Company Response When Its Core Values are at Odds With Policies of a
Host Government........................................................................................................... 2
Why Did Google Issue The Statement of January 12......................................................2
Challenges of Business-Government Relationships in an Emerging Economy................2
Future of Google in China............................................................................................... 3
Conclusion...................................................................................................................... 3
References...................................................................................................................... 5

Google in China [an overview]

Subash Acharya

by Shahid Naseem and

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INTRODUCTION
Google was founded back in 1996 by Sergey Brin and Larry Page as a search engine, two young
graduate students from Stanford. Google was launched as a college research project. The
founders designed an innovative mechanism that can evaluate websites and retrieve the
utmost relevant material for any specified search inquiry.
They inaugurated their first office in a garage. Initially, Google had a very simple and plane
web design. Google registered in the year 1997 and incorporated in year 1998. The workplace
had a dryer and washer and a hot-tub that was what today continues to be Googles laid-back
corporate culture. Now the company has a much larger office in Mountain View, California
called Googleplex,.
With the time, Google grew, so did its variety of products and services. Nowadays, Google is
not only a search engine, but it also offers E-Mail services for individuals as well as corporate
sector, navigation and mapping services, a translator that can translate into more than 100
languages, a social network, audio and video messaging, a web browser, a mobile operating
system, a blogger service, besides many other services. In fact, Google now has over 200
products and services which extend beyond its prime search engine, with much more in
development. The company has also grown into many other countries and now hosts over 180
country website domains. Google growing and expanding continuously and has a rock-solid
position as the worlds #1 search portal. Google was named by Fortune magazine as the best
company to work for in 2007.

BACKGROUND & THE ISSUE

Google, stepped in the Chinese market in 2000 by forming a Chinese-language version of its
original website, google.com. This Chinese-language version was located in the US that can
manage search queries from China. Thus, the website was not under the Chinese censorship
laws, as the resources were not inside Chinese borders, and Google did not need an
authorization from the Chinese authorities to run its business. In 2002, the Chinese-version of
Google website was shut down and totally unreachable for colleges and universities within
China.
In 2005, the Chinese company Baidu appeared as the top Internet search engine in China. By
2006, Google decided to launch its search engine(www.google.cn) from China to compete with
Baidu. Google accepted to censor the content by means of filters known as The Great Firewall
of China.
Risky content contained material affecting democracy (e.g. freedom), spiritual and religious
cults (e.g. Falun Gong), or revolutionary protests (e.g. Tiananmen Square). Human rights
advocates start heavily criticizing Google as it censored data and info regarding human rights.
A moral question rises in here whether Googles moto Dont be Evil (offering users equitable
approach to information) and their mission statement to organize the worlds information and
make it universally accessible and useful have been constantly followed. By censoring queries
and data, one could argue that Google has drifted from its commitment to provide every user
get open and unrestricted approach to data over the internet. Google acknowledged that the
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launching of Chinese Google(google.cn) was not according to their mission statement. In the
words of Schrage, Googles vice president of Global Communications and Public Affairs:
Google, Inc., faced a choice to compromise our mission by failing to serve our users in China
or compromise our mission by entering China and complying with Chinese laws that require us
to censor search results. Self-censorship, like which we are now required to perform in China, is
something that conflicts, deeply with our core principles. This was not something we did
enthusiastically or something were proud of at all. (Scharge, 2010)
On March 22, 2010 after a cyber-attack on Googles servers and Chinese authorise demands for
more tight censoring, Google decided not to censor any search results.
On March 30, 2010, the Chinese government blocked access to Googles search engine from
Mainland China.

MULTINATIONAL COMPANY RESPONSE WHEN ITS CORE VALUES ARE AT ODDS

WITH POLICIES OF A HOST GOVERNMENT
For a multinational corporation to operate in another country, they should have to respect the
laws of the land where they are going to operate. Government multinational corporation
affairs are sometimes critical for doing effective business in developed as well as in developing
countries. There are diverse laws in different countries according to their local environment.
Laws about working hours of employees in the United States are way different than Germany,
doesnt allows any US company operating in Germany to treat their employees with the same
laws and policies they have in the United States. Laws are defined and approved by respective
countrys parliament and anyone operating within their boundaries are legally and morally
bound to abide the rules.
Every company should review their policies and the laws of the country where they are
planning to operate and critically need to evaluate the conflicts and review their policies.
Google failed to do so initially and they end up having big clashes between their business
statement and censor policies of the Chinese government, resulting in shutting down their
business in China.
Companies have to grasp what they are getting into, whom they are going to deal with, what
are their anticipations and what their policies are.

WHY DID GOOGLE ISSUE THE STATEMENT OF JANUARY 12

Apparently, Google decided to leave the Chinese market is abundantly based on the following
reasons.
- Google has specified that the Google had spotted very complex and refined attacks initiating
from China on its servers. Moreover, Google was not comfortable with the Internet censorship
policies by Chinese government.
- Googles philosophy of doing business (do no evil) was contradictory with Chinas policies for
censorship of internet contents. For example, the Chinese censorship isolated data regarding
Chinese human rights activists or contents regarding Tibet issue.
- In addition, the dialogues between Google and the Chinese Writers' Association and other
organizations on the use of patents and copyrights in China were stand-off.
Google in China [an overview]
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by Shahid Naseem and

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These are the motives specified by Google for leaving the Chinese market. But in real, ever
since Googles entry in the Chinese market, Google retained market share was only at 31% to
this point, way inferior than the market share of Chinese search engine Baidu, which was round
64%. The advertising profit of Google from China was far away from ideal, merely about 1% of
its total profit. Google.cn not only requires a lot of investment, but also requires the target
competence to compete its rival Baidu, as Google was working with their global attitude, that
was clearly not suitable for the Chinese market.

CHALLENGES OF BUSINESS- GOVERNMENT RELATIONSHIPS IN AN EMERGING

ECONOMY
As multinational corporations considering emerging markets for their growth, mostly to
outsource their production these markets turn out to be very important for success. India,
China, Bangladesh, Indonesia and Malaysia are very attracted destinations for the international
businesses. These markets have their importance in nowadays business world. But sometimes
there are some regulations and laws in those countries make it difficult for some certain type of
business. For instance, it is quite challenging for a foreign internet company to be successful in
China. Ebay, Yahoo, Google were defeated by local companies but on the other hands
companies like BMW, Mercedes, Apple and Samsung revenues are increasing with every year.
India, the second large emerging market doesnt have much restrictions and international
companies are getting more and more popular.
Companies have strong concerns with number of laws and regulations that affect companies
way of doing business. Not only the laws, but in some developing countries like India,
businesses also have to face political influence as well as corrupt officials. It is almost near
impossible to do business with having good relationships with them. With the fact that
companies usually do not like to involve in any kind of politics as this can put them in a more
challenging position with a government change, they cannot avoid it totally. While making
policies, they have to keep any eye on political situation in the particular country too.
Professor David Bach and Professor Gregory C. Unruh from IE Business School Spain illustrate
their research regarding business and political/government in a paper. While most work on
corporate political activity focuses on the domestic arena, globalization has raised the business
salience of international policymaking such that firms increasingly engage in international
political processes as well. Political dynamics in the two arenas follow different logics whose
management implications have been largely overlooked. (David Bach, Gregory C. Unruh,
2014)

FUTURE OF GOOGLE IN CHINA

After Google closes its operations China back in 2010, it lost approach to a massive market.
China has 700 million internet users, twice the total population of the United States, and
number of internet users in China growing way faster of any other country. Google has been
developing strategies to reappear in China in the near future. Couple of months back Google
revealed its deals with 2 major Chinese companies Xiaomi and Sohu.com fuelling rumours
about their revival approach to Chinese market. According to a recently published business
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article Googles search business could return via Sogou, the mainlands third largest search
engine company, which is owned by Sohu.com, according to a person with knowledge of the
matter, who asked not to be named the two companies have discussed a partnership where
Google would perform some of the searches and Sogou would conduct the results screening.
So, that way neither loses face, the source said. (Sijia Jiang, 2016)
According to a report in the Wall Street Journal (Barr, 2015) , Google is in talks with Chinese
government officials about a special version of its Play store that carries only apps approved by
the government. A few number of Googles services like Google Play app store and Google
Maps are most likely making a partial return to in the form of Google being a third-party
support provider.
There is still future of google in china because the fact that China has the world largest market
cannot be ignored. Google acknowledge the value of the Chinese market and trying to find a
way without having conflicts with the Chinese government. This time Google adopted the
strategy of entering the Chinese market by making partnerships with local Chinese companies
rather than entering the market directly. With this approach Google can offer its services to
Chinese users without compromising its business statement do no evil.

CONCLUSION
It is a fact that almost every western internet company defeated in China by its local rivals.
Googles leaving Chinese market was not an exceptional case. Other major companies like
Yahoo and eBay were also vanquished by the local internet companies. The key reason behind
the failure of the western companies in Chinese market is the misunderstanding of the Chinese
culture, and lake of understanding of the internet user in China.
Chinese government did not have any signs of compromise for changing its censorship China.
If other Internet companies want to appear in the Chinese market, they have to be prepared to
relinquish something. It is certainly not a reasonable practice, the successful experiences in
other countries bringing into China. Furthermore, awareness of the other countries culture, to
accept their policies, is not always sufficient to run the business successfully. The ultimate issue
is that these corporations should recognise the real demands of the users of these countries,
and to meet these demands and even give up some of interests and ideas of their selves.
The main reason behind failure of the successful Western Internet companies in China is the
lack of understanding of the Chinese culture, demand and requirements of Chinese internet
users.

Google in China [an overview]

Subash Acharya

by Shahid Naseem and

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REFERENCES
Barr, A. (2015, September 4). Google Pursuing a Return to China. Retrieved from www.wsj.com:
http://www.wsj.com/articles/google-negotiates-a-return-to-china-1441408051
David Bach, Gregory C. Unruh. (2014, 12 7). working papers economia. Retrieved from
http://latienda.ie.edu: http://latienda.ie.edu/working_papers_economia/wp04-37.pdf
New approach to china. (2010, March 22). Retrieved from googleblog.blogspot.com/:
http://googleblog.blogspot.com/2010/03/new-approach-to-china-update.html
Scharge. (2010). Google VP's statement. Google in China.
Sijia Jiang, Z. S. (2016, May 19). What recent deals tell us about Apple and Googles future in
China. Retrieved from scmp.com: http://www.scmp.com/business/article/1947489/whatrecent-deals-tell-us-about-apple-and-googles-future-china#main-content

Google in China [an overview]

Subash Acharya

by Shahid Naseem and