Running Head: First Case Study Analysis: Google In China

Case Study Analysis – Google in China

Ardavan A. Shahroodi

Northeastern University

LDR 6140 – Developing the Strategic Leader

Professor W. Joseph Condon

Saturday, November 01, 2014

First Case Study Analysis: Google in China

Introduction

This Case Study Analysis first examines the history, development, mission, growth and

financials of Google, Inc. Next, the Case Study conducts a Porter’s Five Forces Model and

SWOT Analyses of Google describing the strengths, weaknesses, opportunities and threats that

are faced by the company. In the last section of the Case Study, Google’s mission and business

strategy are analyzed. In addition, in the last section, Google’s particular experiences in China

are evaluated and analyzed. Finally, in this last section, a number of recommendations and

observations are offered indicating that Google must refrain from re-entering the Chinese

Internet search market in order to preserve the credibility of its search product and maintain the

reputation of the company as the foremost purveyor of unrestricted and uncensored information

to users worldwide.

Google’s History, Development, Mission, Growth and Financials

Google, the company, was incorporated in 1998 by Larry Page and Sergey Brin in the

state of California, U.S.A. While attending graduate school in Stanford University, Page and

Brin began working with each other in 1996 on designing and launching a “search engine called

BackRub…BackRub operates on Stanford servers for more than a year—eventually taking up

too much bandwidth” (Our History In Depth, About Google, Google Inc., n. d.). In 1997, the

founders register the Web domain Google.com with the name representing a “play on the word

googol, a mathematical term for the number represented by the numeral 1 followed by 100

zeros—reflects Larry and Sergey’s mission to organize a seemingly infinite amount of

information on the Web” (Our History In Depth, About Google, n. d.). Initially, also in 1998, the

yet to be incorporated company receives a $100,000 backing form the co-founder of Sun and

begins operations in the garage of a residential home. In late 1998, PC Magazine observes that

First Case Study Analysis: Google in China

Google “has an uncanny knack for returning extremely relevant results” (Our History In Depth,

About Google, n. d.) and further selects Google as the “search engine of choice” (Our History In

Depth, About Google, n. d.).

In the ensuing years, Google evolved into being the “most popular search engine in the

world” (Martin, Google, Inc., in China/condensed, Business Roundtable Institute for Corporate

Ethics, 2007, p. 2) using a technology that relies on an “algorithm to find possible Web pages

with search criteria provided by the user” (Martin, 2007, p. 2). The major portion of Google’s

revenue is generated via advertising viewed on its Web pages where search “neutrality” (Martin,

2007, p. 2) is promoted by “advertisements being distinguished from all other search

results…Companies… [can] not purchase placement on a search-result list” (p. 2).

Google also “adopted the informal corporate motto Don’t be evil” (Martin, 2007, p. 3)

and declared its mission as being “to organize the world’s information and make it universally

accessible and useful” (About Google, Google Inc., n. d.). As one of the co-founders, Larry

Page “described the perfect search engine as something that understands exactly what you mean

and gives you back exactly what you want” (What We Do You, Our Products and Services, What

We Do, Company, About Google, Google Inc., n. d.). Indeed, Google proudly declares in its

Website that “our goal is to make it as easy as possible for you to find the information you need

and get the things you need to do done …making search smarter and faster” (What We Do For

You, n. d.).

As Google has grown, it has launched a number of additional products, acquired related

businesses and is being described as a “web search and advertising services provider…manages

a wide index of Websites and other related online content” (Company Overview, Google, Inc.-

Financial and Strategic Analysis Review, Global Data, December 26, 2013, p. 1). The

First Case Study Analysis: Google in China

company’s business is divided into four categories, namely “search, advertising, operating

system and platform, and enterprise” (Company Overview, Global Data, p. 1, 2013) and its

products and services are listed as “Google.com, Applications, Client, Google Maps, Earth and

Local, Google Mobile, Google Display, and Android” (Company Overview, 2013, p. 1). In

addition, Google is also described as a “global technology company that offers search,

advertising, operating systems and platforms, enterprise, and hardware products” (Company

Overview, Company Profile Google Inc., MarketLine, September 19, 2014, p. 4). At the end of

2013, Google is reported to operate with “53,861” (Key Information, Company Snapshot, Global

Data, 2013, p. 1) employees offering “products and services in more than 100 languages across

50 countries” (Key Information, 2013). A further estimate places the number of Google

employees at “47,756” (Key Facts, MarketLine, Company Profile Google Inc., 2014, p. 3).

At the end of 2012 fiscal year, Google reported revenues of $50,175.00 million which

illustrated “an increase of 32.37% over 2011” (Financial Performance, Global Data, 2013, p. 1),

operating profit of $12,760.00 million that was an “increase of 9.70% over 2011” (Financial

Performance, 2013, p. 1) and a net profit of $10,737.00 that reflected an “increase of 10.27%

over 2011” (Financial Performance, 2013, p. 1). In the fiscal year 2013, Google reported

revenues of $59, 825.00 million, an “increase of 19.2% over FY2012” (Company Overview,

Company Profile Google Inc., MarketLine, 2014, p. 3), operating profit of $13,966.00 million

that is an “increase of 9.5% over FY 2012” (Company Overview, 2014, p. 3) and a net profit of

$12,920.00 million which is an “increase of 20.3% over FY 2012” (Company Overview, 2014, p.

3). Google’s Operating Profit Margin for 2012 and 2013 were 25% percent and 24 % percent

respectively (Google’s Income Statement Information, 2014 Financial Tables, Investor

Relations, About Google, Google Inc., n. d.).

First Case Study Analysis: Google in China

Strategic Analysis

As a company, Google has very “strong brand value, and robust research and

development capabilities with a broad service portfolio” (Overview, SWOT Analysis, Google

Inc., Global Data, 2013, p. 2). These characteristics allow Google to hold an admirable “market

share and global reach, which provides sustainable advantage as the company’s entrenched

position in the market enables it to drive revenues” (SWOT Analysis, Google Inc., MarketLine,

2014, p. 4). Nevertheless, Google is also operating in an extremely competitive business

environment that is exposed to “rapid technological changes” (Overview, SWOT Analysis,

Google Inc., Global Data, 2013, p. 2). In the future, these pressures and transformations may

potentially “impact the market share and growth prospects for the company” (SWOT Analysis,

MarketLine, 2014, p. 4).

The application of Porter’s Five Forces Model in the case of Google illustrates that the

“risk of entry by potential competitors” (Hill & Jones, 2012, p. 58) is high due to the

revolutionary nature of technological transformation although Google enjoys overwhelming

superiority with respect to “economies of scale” (p. 58), “brand loyalty” (pp. 58-59) and

“absolute cost advantage” (pp. 59-60). In regards to “rivalry among established companies”

(Hill & Jones, 2012, p. 61), again we observe intense competition involving Google in both

“fragmented” (Hill & Jones, 2012, p. 61) and “consolidated” (p. 61) industries although here

“industry demand” (p. 62) and “cost conditions” (p. 62) remain extremely favorable to the

company. In addition, in relation to the “bargaining power of buyers” (Hill & Jones, 2012, p.

63), Google is in a very favorable condition due to its sheer size and the credibility of its search

results. In regards to the “bargaining power of suppliers” again Google enjoys an advantage due

to the size of the company. Lastly, there exists an extremely high potential threat of “substitute

First Case Study Analysis: Google in China

products” (Hill & Jones, 2012, p. 65) competing with Google’s services and products due to the

ever changing nature of technology.

SWOT Analysis

Strengths. Google’s first source of strength has been the continuing “increase in

revenue” (Strengths, Google Inc., Global Data, 2013, p. 2) that it has been experiencing over the

recent years. Indeed, Google’s reported Revenue and net profit in 2008 stood at $21,795.5

million and $4,226.9 million (Financial Performance, Global Data, 2013, p. 1) respectively,

whereas those figures in 2013 had jumped to $59,825.00 million and $12,920.00 (Company

Overview, Company Profile Google Inc., MarketLine, 2014, p. 3) million. Google’s second

strong characteristic is its “strong market share and global reach…company’s search engine has

leading technology which enabled it to gain market share” (Strengths, SWOT Analysis, Google,

Inc., MarketLine, 2014, p. 4). Here, Google’s “competitors have struggled to match the search

engine’s accuracy and have fallen behind in popularity…Google holds the majority of the share

in the global search engine market, and this does not look set to change” (Strengths, MarketLine,

2014, p. 4).

Here, Google’s global search engine market share in 2014 stood at “71%” (Strengths,

Google Inc., MarketLine, 2014. p. 5), with “over 90% of the mobile search conducted through

Google” (p. 5) and the U.S. share standing at “approximately 67.6%” (p. 5). Google’s third

strength lies in its “robust research & development capabilities” (Strengths, SWOT Analysis,

Google Inc., Global Data, 2013, p. 2) allowing the company to “implement innovative

technologies and deliver advanced products and services that meet its customers critical needs”

(p. 2). A fourth aspect of Google’s strength is the “broad range of services including index of

Websites and other online content, and online advertising to augment its revenue and

First Case Study Analysis: Google in China

profitability” (SWOT Analysis, Google Inc., Global Data, 2013, p. 2). The fifth cause of

Google’s strength resides in the decision to acquire Android platform which is the “leading

smartphone operating system in the world with a market share of approximately 78.9% in 2013

compared to 68.8% in 2012” (SWOT Analysis, Google Inc., MarketLine, 2014, p. 5).

Weaknesses. Google’s primary weakness is in the form of an overwhelming reliance on

advertisements in order to generate its revenues. In this light, “for FY2013, FY2012, and

FY2011, advertising accounted for 84.3%, 87.1% and 96.4%, respectively, of the company’s

total revenues” (SWOT Analysis, Google Inc., MarketLine, 2014, p. 6). This trend may turn

problematic because “expenditures by advertisers tend to be cyclical, reflecting overall economic

conditions and budgeting and buying pattern” (SWOT Analysis, Google Inc., MarketLine, p. 6,

2014). In addition, Google is at a competitive disadvantage versus Facebook with its social

networks endeavor Google+ “especially as the social platforms continue to attract higher

advertising dollars and are forecasted to grow tremendously” (SWOT Analysis, Google Inc.,

MarketLine, 2014, p. 6).

An additional source of weakness is in relation to the potentially vast Chinese internet

search market, where Google has also experienced a number of disappointments and conflict

ridden encounters with the uncompromising government of the Middle Kingdom. In this climate

of uncertainty, with restrictions placed on the company’s products and services, Google’s

Chinese competitor Baidu “has consolidated its grip on China’s search market after Google’s

departure (it is estimated to command a share of greater than 70%)” (Google in China,

Economist, January 11, 2013). As of September 2011 “China had 500 million internet users…up

from 485 million three months earlier…By contrast, the U.S. had 220 million internet users in

November [2011], up from 212 million a year earlier” (Efrati & Chao, Google Softens Tone on

First Case Study Analysis: Google in China

China, Wall Street Journal, January 12, 2012). By 2012, the Chinese market accounted for “no

more than 2% of Google’s total revenue” (Efrati & Chao, Wall Street Journal, 2012) where the

company’s share of the Web-search results had fallen to “17.2% in the third quarter of 2011 from

36% in the fourth quarter of 2009, largely to the benefit of Baidu Inc.” (Efrati & Chao, 2012).

Also in regards to the online advertising in China, “Google’s share…stabilized at around 7%

during the first half of 2011…down from 10.9% in the second quarter of 2010” (Efrati & Chao,

2012).

Opportunities. Google’s Android platform which is the “leading smartphone operating

system in the world with a market share of approximately 78.9% in 2013” (SWOT Analysis,

Google Inc., MarketLine, 2014, p. 7) will allow the company to “continue to be the market

leader in the medium term for both the smartphone and tablet markets” (p. 7). In addition, in

coming years, Google is attractively situated to be able to take advantage of the growth in

“display and mobile ad” (SWOT Analysis, Google Inc., MarketLine, 2014, p. 7) expenditures.

Furthermore, Google is “poised to benefit from growing online video consumption” (SWOT

Analysis, Google Inc., MarketLine, 2014, p. 7) through the ownership of YouTube that “held a

market share of more than 20.5% in the U.S. video ad market…would reach 22.9% by 2015

generating $1.6 billion of net ad revenues” (pp. 7-8).

Google is also positioned to experience “growth potential from its cloud service offerings

with growing markets for cloud computing and managed IT solutions” (SWOT Analysis, Google

Inc., Global Data, 2013, p. 3) with the “global market for cloud computing is forecast to grow

from $37.8 Billion in 2010 to $121.1 Billion in 2015” (p. 3). Lastly, “strategic

acquisitions…growth” (SWOT Analysis, Google Inc., Global Data, 2013, p. 3) will allow

Google “in the expansion and strengthening of its product portfolio and market presence” (p. 3).

First Case Study Analysis: Google in China

Threats. The most important threat to Google emanates from “intense competition…in

every aspect of its business, particularly from companies that seek to connect people with

information on the Web and provide them with relevant advertising” (SWOT Analysis, Google

Inc., MarketLine, 2014, p. 8). The company’s business model is “subject to changing

technologies, shifting user needs, and frequent introductions of new products and services”

(SWOT Analysis, Google Inc., MarketLine, 2014, p. 8). Google is under pressure to

“continually introduce new products that achieve market acceptance” (SWOT Analysis, Google

Inc., Global Data, 2013, p. 3). Google is also “subject to a number of intellectual property

infringement claims…A number of patent, copyright, and trademark infringement lawsuits have

been filed against Google” (SWOT Analysis, Google Inc., MarketLine, 2014, p. 9).

Google’s Mission, Business Strategy and its Experience in China

As the aforementioned sections in this Case Study Analysis has illustrated, Google’s

spectacular expansion, prosperity and profitability in recent years have largely transpired

irrespective of its involvement or lack thereof in the Chinese online search market. In the

upcoming discussion, this paper will first review and analyze Google’s company philosophy

followed by a brief history of its experience in China and concluding by a number of

recommendations and solutions that are intended to address the most difficult quandaries that

have arisen in the face of this conflict ridden encounter.

Google’s Mission and Company Philosophy

Google’s mission found on the company Website is “to organize the world’s information

and make it universally accessible and useful” (About Google, Google Inc., n. d.). Google’s

company philosophy also annunciated in its Website under the link titled “What We Believe”

First Case Study Analysis: Google in China

(What We Believe, Company, About Google, Google Inc., n. d.) and the heading “Ten Things

We Know To Be True” (Ten Things We Know To Be True, Google Inc., n. d.) is a collection of

beliefs and business goals that the firm aspires to implement and achieve in its everyday conduct.

The first and by far the most central among these beliefs states that “we’ve focused on providing

the best user experience possible…we take great care to ensure that…ultimately serve you,

rather than our own internal goal and bottom line…when we build new tools and applications,

we believe they should work so well…” (Ten Things We Know To Be True, Google Inc., n. d.).

A second belief emphasizes that “We do search…focused exclusively on solving search

problems…we know what we do well, and how we could do it better…our dedication to

improving search problems…our hope to bring the power of search to previously unexplored

areas, and help people access and use even more of the ever-expanding information in their

lives” (Ten Things We Know To Be True, Google Inc., n. d.). The third belief, in referring to the

importance of speed in producing search results states “we continue to work on making it all go

even faster” (Ten Things We Know To Be True, Google Inc., n. d.). An equally important belief

named “Democracy on the web works” (Ten Things We Know To Be True, Google Inc., n. d.)

explains how Google’s “patented PageRank algorithm” (Ten Things We Know To Be True,

Google Inc., n. d.) and other technologies are actually more efficient and produce better search

results when allowed in an unobstructed fashion to evaluate which “sites offer content of value”

(Ten Things We Know To Be True, Google Inc., n. d.).

An additional belief titled “You can make money without doing evil” (Ten Things We

Know To Be True, Google Inc., n. d.) asserts that Google generates advertising revenue without

displaying ads that are not “relevant” (Ten Things We Know To Be True, Google Inc., n. d.) to

the intended search, it does not “accept pop-up advertising” (Ten Things We Know To Be True,

First Case Study Analysis: Google in China

Google Inc., n. d.) and the company does not mislead users by the type of advertising that is not

“clearly identified as sponsored link…does not compromise the integrity of…search

results…never manipulate ranking…users trust our objectivity” (Ten Things We Know To Be

True, Google Inc., n. d.). A further belief establishes a goal for the company to “continue

looking into ways to bring all the world’s information to people seeking answers” (Ten Things

We Know To Be True, Google Inc., n. d.). A final code that is directly related to the discussion

in this Case Study Analysis holds that Google’s “mission is to facilitate access to information for

the entire world, and in every language” (Ten Things We Know To Be True, Google Inc., n. d.).

As illustrated in the aforementioned paragraphs, Google’s declared mission, beliefs and

company goals are focused on delivering authentic, truthful, accurate and expeditious search

results for its users. This mission and the ability to deliver credible information to the users are

indeed the most crucial characteristic of Google’s search results. The more users will believe in

the credibility of Google’s search results, the more they are likely to utilize its search engines in

order to execute their searches. Google’s business strategy is also directly and synergistically

related to its mission in delivering a credible service/product (information) to its users whereby

search related advertising is displayed together with the search results. Importantly, as Google

has emphasized in its Ten Things We Know To Be True document, the display of this search

related advertising does adhere to a number of professional standards so as not to mislead users

or “compromise the integrity of…search results” (Ten Things We Know To Be True, Google

Inc., n. d.). This is precisely why all displayed advertising are “clearly identified as sponsored

link” (Ten Things We Know To Be True, Google Inc., n. d.).

As illustrated earlier in the SWOT Analysis section of this Case Study Analysis, the

advertising proceeds that Google generates from business partners who advertise with the

First Case Study Analysis: Google in China

company form the overwhelming portion of its revenues and net income. Here, the higher the

number of users who are executing searches on Google’s search engines the higher the potential

for increased advertising revenues for the company. Moreover, users are more likely to utilize a

search engine when they are convinced and believe that the results offer them the most pertinent,

relevant, unbiased and accurate collection of information that is available on the internet.

Consequently, this is exactly why the credibility, accuracy, convenience (speed) and objectivity

of Google’s searches is the most important enabler of its advertising revenue generating

capabilities. In this dynamic we are also able to observe a direct correlation and symbiotic

relationship in-between Google’s mission and the company’s business strategy.

Hill & Jones (2010) describe a business model as a “manager’s conception of how the set

of strategies his company pursues should mesh together into a congruent whole, enabling the

company to gain a competitive advantage and achieve superior profitability and profit growth”

(p. 6). This excellent description, in light of the aforementioned discussion, allows us to clearly

observe how the ideals declared in Google’s mission and philosophy (Ten Things We Know To

Be True) together with effective execution has allowed the company to enhance the credibility

and reputation of its product thereby securing ever increasing advertising revenues. As a result,

this application of Google’s mission and philosophy in the company’s strategy have established

its “competitive advantage and achieve superior profitability and profit growth” (Hill & Jones,

2010, p. 6).

Observations and Analysis Concerning Google’s Experience in China

As indicated in the case titled “Google’s Mission, Ethical Principles and Involvement in

China” (Hill & Jones, 2012, pp. 52-53), Google initially launched a “Chinese language service in

2000, although the service was operated from the United States” (p. 52). With this particular

First Case Study Analysis: Google in China

service, “when users attempted to click on a banned site, a full, unfiltered list was produced and

they would be blocked by Chinese filters…Users were able to see the complete list of all the

information pertaining to their search, including the information that the Chinese government

considered threatening” (Martin, p. 5, 2007). This U.S. based service was blocked by the

Chinese authorities for a period of two weeks in 2002 and when the service resumed, “Chinese

users soon found that they could not access politically sensitive sites that appeared in Google’s

search results, suggesting that the government was censoring more aggressively” (Hill & Jones,

2012, p. 52). Eventually, Google decided to “establish operations in China” (Hill & Jones, 2012,

p. 52) in 2006 with the “creation of Google.cn which was located in China and subject to

Chinese filtering” (Martin, 2007, p. 5). Here, Google had determined that “serving Chinese

users from the United States was too slow, and the service was badly degraded by the censorship

imposed” (Hill & Jones, 2012, p. 52).

As much as the commercial and profit maximizing potential of the huge Chinese search

market were tantalizing for Google, when taking into consideration its missions and philosophy,

the company did face a dilemma by establishing local operations and being subject to restrictive

“regulations, including those censoring information” (Hill & Jones, 2012, p. 52). As has been

mentioned in the previous section, it is important to emphasize that Google’s business strategy is

very much an extremely effective execution of its missions and company philosophy (Ten Things

We Know To Be True). In this light, the company maintains its credibility and reputation by

producing high quality search results thereby attracting new and returning users to its service.

This unsullied reputation among frequent users as a destination of choice for internet search is

also directly correlated to the ability of Google to generate advertising revenues via its offered

services.

First Case Study Analysis: Google in China

In 2006, Google’s Chinese based internet search service/product called Google.cn “in

accordance with Chinese regulations…engage[d] in self-censorship, excluding results on such

politically sensitive topics as democratic reform…Tiananmen Square massacre of democratic

protestors that occurred in 1989” (Hill & Jones, 2012, p. 52). These particular restrictions and

exclusions were severely criticized by “human rights activists [who] quickly protested, arguing

that Google had abandoned its principles in order to make greater profit” (Hill & Jones, 2012, p.

52). On the other hand, Google responded that

“it was better to give Chinese users access to a limited amount of information, than to

none at all, or to serve the market from the United States and allow the government to continue

proactively censor its search results, which would result in a badly degraded service…Google

argued that it was the only search engine in China that let users know if search results had been

censored” (Hill & Jones, 2012, p. 52).

As much as the undesired quality of a “degraded service” (Hill & Jones, 2012, p. 52)

would have been against Google’s emphasis on speed annunciated in its company philosophy

(Ten Things We Know To Be True), the decision to offer a product that is consciously self-

limiting by engaging in self-censorship was clearly contradictory to the company’s mission. As

mentioned in previous sections, Google’s mission and company philosophy place a crucial and

fundamental emphasis on serving the needs of the user in having access to and securing the

desired information that is requested in their search results. This indeed is repeated time and

again in one manifestation or the other in regards to accuracy, relevancy, authenticity,

accessibility, universality, openness and speed in its mission and company philosophy (Ten

Things We Know To Be True). Consequently, Google’s mission and company philosophy call

for optimum performance in securing the results of each and every internet search in order to

First Case Study Analysis: Google in China

serve and satisfy the informational needs of its users. Nevertheless, such a goal is inherently

unachievable when curtailed, deformed and corrupted by the restrictions of self-censorship.

As a result, in 2006, “Google’s stance toward search in China” (Hill & Jones, 2012, p.

53) was essentially inconsistent with its mission. In addition, as discussed earlier, Google, in

alignment with its mission, through the creation of a superior search experience for its users

executes its effective business strategy generating advertising revenues on the basis of the

credibility and reputation of its service/product. Here, the sheer brilliance of Google’s business

strategy is in monetizing or commoditizing of information as a legitimate business asset . In this

light, it may also be argued that in the long run the decision to enter China and engage in self-

censorship also stands in contrast and detrimental to Google’s business strategy.

Eventually, in the beginning of 2010, in response to a cyber-attack linked to Chinese

hackers “who allegedly stole some of the company’s proprietary computer code and attempted to

spy on Chinese activists’ Gmail accounts…Google…stopped offering Web search on its main

Chinese site, Google.cn and instead directed people to a search site based in Hong Kong, which

isn’t subject to the same government censorship requirements” (Efrati & Chao, Wall Street

Journal, 2012). As one commentator observed “allowing censorship is one thing; but standing

by while personal identities of G-Mail users are uncovered is another” (Heineman, The Atlantic,

January 13, 2010).

All the same, the Hong Kong search site has also been “plagued with service disruptions

because of the government’s Web-filtering system” (Efrati & Chao, Wall Street Journal, 2012).

In the interim period, Chinese authorities have made “sites like Google…painfully slow to use,

and block individual search terms the authorities find objectionable (say, freedom…)…The

results is a frustrating mix of poor results, error messages and apparent incompetence on the part

First Case Study Analysis: Google in China

of the search provider” (The Economist, 2013). Here, as recent as the summer of 2014 during

the 25th anniversary of pro-democracy demonstrations and crackdown in Tiananmen Square,

“authorities in China made Google’s services largely inaccessible” (Levin, The New York

Times, June 2, 2014).

Recommendations and Solutions Regarding Google’s Dilemma in China

Google’s decision to leave China in 2010 and direct its users to a site in Hong Kong

received backing and support from “human rights activists and non-governmental organizations”

(Tan & Tan, Journal of Business Ethics, October 9, 2012). Subsequently, the contrast between

Google versus other search engines that acquiesce to Chinese government’s demands on

censorship reflected well on the company in the Western media. The departure,

“effectively illustrated and improved Google’s world image as a responsible firm; its

main competitors in China were criticized for neglecting values such as civil liberties and human

rights…Thus, in some respects, business ethics provided the tool to improve Google’s

international reputation, gain trust from Internet users outside of China…Even as Google pulled

out of mainland China, its business ethics strategy likely improved its position and performance

in the global market” (Tan & Tan, 2012).

As an article in The Next Wave/Word Press Website argues,

“An ethical edge just might be the ultimate cause of advantage. It’s how better

distribution, production, marketing, and pricing—all just proximate causes of advantage—

ultimately happen…without an ethical edge, new value cannot be created—old value can only be

shuffled around” (Google, China, and Strategic Ethics, The Next Wave, Word Press, January 17,

2010).

First Case Study Analysis: Google in China

The aforementioned observations imply that possessing the reputation of an ethical

organization allows companies such as Google to have a strategic advantage versus their rivals in

the marketplace. However, it is crucial to be cognizant of the fact that this strategic ethical

advantage is only credible and useful when applied with authenticity, honesty and truthfulness.

Here, an ethical posture that is adopted only for reasons of expediency or to project a false and

pretentious image will be understood as the latest marketing and advertising campaign intended

to create a desired image. On the other hand, the incredible success of Google in recent years

has been rooted in the company’s ability to establish synergy and authentic correlation in-

between its mission/philosophy and the firm’s business strategy. An example of this competent

execution is Google’s single minded focus on improving the search experience for the users of

its Internet search engine. Indeed Google is continuously endeavoring to improve the quality of

its search results and thereby enhance its legitimacy.

What Google has encountered in China is a country that is extremely distrustful of

foreign and especially Western agendas and intentions. This entrenched distrustfulness is rooted

in what China considers its humiliating pre WWII relationship with the West, its particularly

painful encounter with the Japanese Empire during WWII and its horrific experience under

communism pursuant to WWII. In this environment, the Chinese government also motivated by

a strong sense of nationalism exercises a near monopoly of power in organizing and unleashing

political and economic forces in the country and thereby closely and almost religiously controls

the dissemination of all information.

Undeniably, many sectors, industries, organizations and populations in both the West and

China have benefited enormously from the economic cooperation of the past 30 years. However,

Google and other search engine companies must always be cognizant of the very fact that the

First Case Study Analysis: Google in China

Chinese government in its present format and inclination will never allow an unrestricted search

environment in its Internet domain. Indeed, for the Chinese government this is an inherently

existential matter where the ability of the system to control and restrict information is directly

related to its success in surviving challenges to its legitimacy and its potential to govern

effectively. The incredibly high stakes that are at play for the Chinese Government in this

climate are of such heightened magnitude that even if search engine companies declined to

invest directly in China due to concerns over censorship, the results would not alter the status

quo significantly.

Here, Google must be continuously cognizant of the “global forces” (Hill & Jones, 2012.

P. 75) that shape its commercial environment and the “political and legal forces” (Hill & Jones,

2012, p. 76) that “shape a society’s laws…constrains the operations of organizations and

managers and thus create both opportunities and threats” (p. 76). In China, Google has found

such a situation where historically embedded global forces and political considerations/realities

have placed limitations in the application of its mission and the exercise of its business strategy.

As illustrated in this Case Study Analysis, in recent years, Google has also dramatically

increased its revenues and net profits irrespective of the lack of a forceful presence in the

Chinese Internet search market. Consequently, the recommendation of this Case Study Analysis

is for Google to concentrate on perfecting its already existing formidable core competencies in

environments where such an unrestricted exercise is feasible and realistic. Specifically, in

relation to the reintroduction of Google’s search oriented service in China this would imply not

compromising the indispensable credibility of this product and thereby not reentering the

Chinese search market.

First Case Study Analysis: Google in China

Conclusion

Google exercises an extremely effective execution of its mission in its business strategy.

This competent synergic application of mission to business strategy has resulted in the creation

of a highly credible and reputable Internet search product generating enormous profitability and

profit growth for the company. However, the very characteristics of Google’s search engine in

producing the most unrestricted and highly relevant amount of information for its users has run

counter to censorship parameters placed by the Chinese government on all Internet search

providers. Consequently, Google must refrain from reentering the Chinese search market in

order to preserve the much valued credibility of its product and the very reputation of the

company.

First Case Study Analysis: Google in China

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