google problems in china

8/13/2019 Google problems in China

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Googles Problems in China


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Statement

2

A decisionisneeded! Exit?Stay?

China is going to be the largest market in the world. If

Google isnt the leader there, will it really be the leading

search company in the world?


3/27

Agenda

1. Company Profile2. Timeline China

3. Stakeholder Analysis

4. Options

5. Recommendations

3


4/27


5/27

Timeline China: Stage 1

5

200

0

2005 2009 2010

Google.cn Era Current Situation

200

0

200

2

2003 200

5

Google.com

enters

Chinese

market with

24 million

websites in

Chinese

Google

gainspopulari

ty

New filteredsoftware

ResistancebyChinas

government

Block google.com

Google.comrestored

but

oftenfilteredwithservi

cedisruptions

No. 1 in

Chinas search

engine

market with

34,8% market

share

Market sharedecreases

Launch of Chinese Google

News service

Government blocks

English Google

News and

otherservices

Market share

< 30%

Baidureaches

No.1 with

46%

ofmarketshar

e

Environment in China

Entering China

In 2005: Strategic decision to stay in China with as censored search engine


6/27

6

200

5

200

6

2007 200

8

Google develops a

transparentyetcens

ored google.cn

byself-censoring

China not clear in

instructionsastow

hat to filter

Representative

office in

Shanghai and

R&D

Launch of google.cn

censorshipwithdiscl

osure

Government

dissatisfiedwith

google.cn

itgetsblocked in

severalcities

Partners

withTianya Club

andentersalliance

swith Sina

Corporation and

Tom Online to

isolateBaiduOlympicgames

ledtodecrease

drestrictions

but after

theyincreased

again

Launch of

musicsearc

hservicewit

houtbigsucc

ess

200

0

2005 2009 2010

Google.cn Era




7/27

77

Industry Experts:

Google.cn enablesGoogle to increase

performance in China

Google Loyalist: Chinaas a country will always

remain unsatisfied

Human Rights Watch:Danger that Google will

cooperate with China

and give government

names of people who

searched for banned

words

Senior Policy Counsel of

Google: Censored searchengine is more consistent

with mission than providing

no information at all

Without Google.cn the

existing search engines

would continue to censor

which keeps authentic

information from the user

If in the future Google wont

achieve its goal to offer all

information, Google willreview its business in China

International Reactions GooglesAnswer

International/National Conflicts (1/2)

Governmentdissatisfied with

google.com and

google.cn

Google.com is blocked

in China

Google.cn works butwith frequent disruptions

and is often blocked

ChineseGovernmentRe

action


8/27

8

200

92010

Government is

against features,

e.g. Suggest

Feature

Google removes

somefeatures

Services like YouTube and

Gmail but also Facebook

andTwittergetblockedbyth

egovernment

Demand to increasecensorship

Cyber Attack on Googles

Server:Chinas hackers target

corporate infrastructure

Theft of intellectual property

Human rights advocates

Gmail

Government

invites

Google

toresolvethei

ssuelegally

Google begins

to offeruncensored

content on

google.cn

200

0

2005 2009 2010

Current Situation




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9

Industry Experts:Remarkable decision

because big corporations

rarely put principles above

profitgood business in

long-term

USA Government: Welook to the Chinese

government for anexplanation

China

isputtingwesterncompanies

in

censorshipwithnetworksecu

rityissues

Other Experts: Just areason to exit

Google CEO:Wecannotparticipate

in

censorshipanymore

Google mightnot

fullyleaveChina

Unclearwhethertheywanttoexitor not?

Government: Keep onblocking google.cn

In China the online

businesswouldthrive

Chinasgovernmentenc

ouragesinternetgrowth

Foreigninternetcompani

esshouldobeythelocalla

w

International and National

ReactionsGooglesAnswer

ChineseGovernmentRe

action

International/National Conflicts (2/2)

Users voicesfor and againstGoogle in Chinae.g.Thank ouforholdin valuesover rofits


10/27

Strategic Issue

10

ShouldGoogle stay inChina orexit China

(shut down

google.cn)

WhichoptionsshouldGoogle consider?

Whatconflicts and issuesdoes google.cn face in China?

Whatisgooglemissing in China?


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Stakeholder Analysis

11

Government

ChinasSpecific Environment

Whatconflicts and issuesdoes google.cn face in China?


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12

China has always been a relatively

closed society that has tried to

keep close control on its citizens

media experience Communist government developed

an internet infrastructure that let

them control the flow of information

Censor sensible political content to

prevent "westernization

Government

blocksages&

censorship

Episodic

Structural


13/27


13

Governmentis more powerfulthan Google

Google fails in understanding the censorship

Google asan american voice in the market

hasdifficultiestoinfluencegovernment sdecisionsCanlead to international conflicts USA and China

Google

doesnotgettheinfor

mationrequiredfort

hecensorshipfromt

hegovernment


14/27


14

58% 57% 58% 61% 60% 61% 64% 63% 60% 59%

17% 19% 23%24% 26% 26%

26% 28% 30% 31%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Competitors

others

Zhongsou

Sogou

Yahoo China

Google China

Baidu

Market

Players

Baidu,

Zhongsou,

Sogou

Google,

Yahoo

China

LocalForeign

Baidu: Leading internet serviceprovider offeringsearchengine in

Mandarin

MainUsers: StudentsSince 2003rapidlygainedmarket

share:

Extensive advertising

throughtelevision and digital

media Providedpopularserviceslikebull

etinboards, MP3 search

BAIDU Market LeaderSince 2006


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Stakeholder analysis

15

Baidu more powerfulthan Google

Google wasnotabletooffer the samerangeofproducts and services

Baiducouldbe in the future a potentialthreat in othermarkets

Understandsthe Chinese

marketbetter as an Chinese

company

Has a good

relationwiththegovernment

Employeesworkaccording to

the Chinese market


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StakeholderAnalysis

16

Users: High end users

Reason: Business opportunitiesExpectedgrowth: From 2009 with

396 millionto840 millionusersin 2013 (47% growth)

Usersremainloyal to a

searchengine

Users andCompanies

Further Issue: Prospectivecustomers wont choose to do

business with Google, if it

continues to threaten to exitChina

Further Issues: Google has

failedto

meetChinasculturalneedsand

theneeds of Chinasyoungpeople.

Simultaneously, Google faces a

reputationalrisk in therestofthe

world.

Employeeswant to have a safe job

Further Issues: UnstableEmployer

Damages trust in the job

market

Decrease of employee loyalty


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Result

17

Capabilties required ininternet search market to

succeed in ChinaAbility to work in a controlled

environment

Government: Goodrelations n

eeded to negotiate/

Cencorship

User: Understandculture andlanguage

Competitior:Ability to face ahugecompetitorwhogets

governmentalsupport

Employees and businesscustomers: Prefer stabilcompany

WhatisGooglesmissing?Ability to operate in controlled

enviroment and offerfree

information

Government: Not able tonegotiate/adaptthe

censorship as wishedfromthegovernment (againstmission)

User: Loyal professionaluserbasebutdoesnotreally

understandculture and

language

butfuture potentialCompetitor:Ability to facethe

worldsleaderbutnotBaidu in

China

Customer:Able to

attractcutomersbut justifseenstable

Capabilitie

s requireddo notmatch

capabilities

possessed

What are the option?

Whatisgooglemissing in China?


18/27

Available Options

18

Stay Exit

StatusQuo

Stay +Build/Acquireneededcapabilities

Exitpartially

byleaving

R&D

ExitChina

WhichoptionsshouldGoogle consider?


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Evaluating Options

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Measuring the compatibility of Googles mission with eachoption available.

Organize the worlds information

Make information universally accessible and useful Score of 3 denotes full compatibility and vice versa

Type A (Consistency with GooglesMission)

Measuring the effect of each option on the StakeholderSatisfaction.

Score of 3 denotes high Satisfaction and vice versa

Type B (Stakeholder Satisfaction)

Measuring the ability to acquire Chinas market potentialwith each option.

Score of 3 denotes maximum opportunity and vice versa

Type C (Opportunity)

Evaluation Parameters and What They Measure

Measuringscale

1 2 3

1 2 3

1 2 3


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Option 1: Status Quo

20

Type A(Consistency

withGooglesMission)

Type B

(StakeholderSatisfaction)

Type C(Opportu-

nity)

2

1

3

Google is facing a mission conflict with Chinesecensorship policies

Difficult to make information universally accessible

because of Chinese government intervention

Every stakeholder will be dissatisfied

Users support Google but others are against GoogleGovernment and Google face continued friction ifGoogle

doesnt increase compliance

Employeesface uncertainty about their job futureCustomerswill not advertise on Google because of its

suboptimal service

Chinese search engine market is huge and is expected

to double by year-end 2013

However, China makes up just 2% of Googles

revenues


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21

Type A(Consistency

withGooglesMission)

Type B


Type C(Opportu-

nity)

Form agreements with government and local

partnersBuild/Acquire capabilities required by the market

without further sacrificing its values

Make information accessible and available by

entering into certain censorship agreements

Overall, all the stakeholders will be satisfiedGovernment agreements will ensure better relations anduninterrupted service

Users satisfied by continuous serviceEmployeessatisfied with a stable employerCustomerswill feel confident about advertising on areliable search engine



However, China makes up just 2% of Googles revenue

2

3

Option 2: Stay + Build/AquireNeeded

Capabilities

3


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22

Type A(Consistency

withGooglesMission)

Type B


Type C(Opportu-

nity)

Google will not violate its values or business modelwhen its operations are confined to R&D

At the same time, Google will not be able to make

information available to the Chinese market

Overall, all the stakeholders will be dissatisfiedGovernmentwill make it even harder for Google tooperate in retaliation for the unwillingness to cooperate

Userswill no longer have access to GoogleEmployees: Google will not be able to attract the bestCustomers will not buy advertising space if Google is

just investing in R&D



At least Google is maintaining some presence in the

country

But note, China makes up just 2% of Googles revenue

1

2

Option 3: Partial Exit (Maintain R&D)

2


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23

Type A(Consistency

withGooglesMission)

Type B


Type C(Opportu-

nity)

Leaving China is consistent with Googles missionand business model to offer all available information

At the same time, Google will not be able to make

information available to the Chinese market

Overall, all the stakeholders will be dissatisfiedGovernmentfaces negative impact to internationalreputation

Users dissatisfied by losing google.cnEmployeesat google.cn will be left unemployedCustomers will not be able to advertise on Google andso will move to and strengthen competitors


to double by year-end 2013 where Google exit from

Bad for any return to the Chinese market in the future

However China makes up just 2% of Googles revenue

2

1

1

Option 4: CompleteExit


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Result

24

Stay withStatus Quo Stay+Build/Acquire needed

Capabilities

ExitPartially Exit

Consistency withgooglesmission

2 2 2 2

StakeholderSatisfaction

1 3 1 1

Opportunity 3 3 2 1

Sum 6 8 5 4


25/27

Result

25

Why China should have a agreement?

ProOpportunity for improving USA-China relationship

Maintain investment confidence in ChinaGovernment invited google to negotiate and find a legal solution -->

suggests openness to negotiate

ConChina prefers Baidumore than Google --> National interest


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Recommendation

26

Stay + Build/Acquire needed Capabilities

Recommendation are based on stakeholder analysis and on conflicts/issues. They are arranged by importance and must be implemented as

fast as possibles simultaneously.

Government: Long term agreements about what has to be censored; extent ofcensorship; must be reviewed periodically and kept up-to-date

Competitors:Get local partners to ensure Googles understanding of culture and Mandarinlanguage; complete a deeper market analysis to understand users needs/identify target

groups

Employees: By focusing on being a stable company, Google can attract highly educatedemployees and offer excellent business opportunities, competitive salaries, friendly

working environment

Users: Because Chinese users are loyal to their search engines, Google should focus onmarketing presence in schools/universities and sponsorship for important Chinese events

Customers: Become a stable company so that customers can continue advertising

Best way to decrease international conflicts between USA and China

2


27/27

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Thankyouforyourattention.

google problems in china

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