Google Operations in China

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Background

According to Yin and Fang (2010), Google China was introduced in China in 2006 and after three years, its revenue in China had doubled. This was attributed to Google’s advanced product innovation and its outstanding technological framework. In 2009, online advertising was mainly through two of its products: Adsense and Adwords (Davis, 2006, p. 152).

These products increased the company’s profit margin immensely. In addition, this outstanding revenue triggered Google to launch some popular applications such as Google Calendar, Google Talk, and Google Docs among others. To operate these products, Google had to pump colossus revenue into developing internet-based infrastructure. This resulted to millions of servers and billions of search requests being processed daily.

The internet search industry in China has been characterized by rapid growth and stiff rivalry. Other players in the market have been Baidu, Yahoo, Sohu, and Sina. Baidu and Google dominated the largest percentage of the market, especially in 2008. While in China, Google put in place mechanisms for its growth.

These entail investment in its Research and Development, development and expansion of its sales team, devising a primary search product and developing partnerships with other firms. This enabled the company to enlarge its market share in China. In addition, the company also launched some other services to support the search function.

While in China, Google faced several hurdles such as delayed licensing from the China government, accusations for use of pornography in its search words, copyright violation tussles with Chinese writers and censorship resulting to suspension of its internet services. As MacKinnon (2006) explains, Google had some problems with the China government in 2002 that had seen the latter block the company’s search engine.

This went on until later in 2009 when Google officially announced several security concerns, especially on some of its Chinese Gmail accounts. Earlier this year (2010), there was much discussion and evaluation of the reported incident and its implications, especially towards the future of Google in China.

Introduction

Google is one of the largest internet-based companies globally. A few years back, it introduced its operations in China, one of the world’s fastest-growing economies. While there, there were opportunities for growth just like there were challenges.

The greatest of such challenges is the Chinese government’s censorship of internet search results. This work assesses the environment surrounding Google in china, looks at the strategy taken by the company in response to security assaults to its operations and its feasibility and sustainability.

Cultural Web

According to Jeffs (2008), “the cultural web was designed by Gerry Johnson and Kevan Scholes in the year 1992,” and it enables one to have not only an understanding of their organization’s culture but also an opportunity to change it.

It encompasses seven key areas: stories, symbols, power structures, organizational structure, control systems, routine and rituals, and the paradigm (Jeffs, 2008. P. 70). Below is a table showing Google China’s cultural web.

Key areas
Stories:	Focus on some historical important events. The founders of Google (Larry Page and Sergey Brin) came up with a new approach to online searching while at Stanford University twelve years ago. The Initial Public Offer was through an auction whose main objective was to avail investors with an opportunity to acquire stock.
Symbols:	Refer to the organization’s symbols of accomplishment. With an exponential growth through both verbal communication and evasion of shared investment, Google has become one of the commonly used search engines. Compared to others, its search engine is faster and has non-complex layout.
Power Structures:	Highlight those who are the decision-makers and the degree of influence. Google’s hierarchy is flat and most of the important decisions affecting the running of the company are made by distinct shareholders and its pioneers. It has an open plan office structure with executives who can be reached and talked to about the company’s developments and any other relevant information with ease.
Organizational Structures:	The employees in Google work as a team rather than individually. There is also flexibility that allows workers to switch roles; for instance, a web designer can take a break from his work and embark on translating a website into Spanish, or still, a software engineer can change and start developing a website when the need for the same arises.
Control systems:	Describe the type of control, as in whether it is performance-driven or ceremonial. The Company has some foundational philosophies, including being client-focused, doing that which is good, and working at a faster pace. The company also has finite rules and reduced supervision.
Routines and Rituals:	Entail any specific moments that are eventful. The headquarters has a Google café and fulltime shop where donuts are traded. It has pother leisure activities such as piano, exercise balls, and hockey within its parking zone. Work should be completed without delay though it is in the employee’s discretion to ascertain how it is supposed to be completed.
The Paradigm:	This focuses on what is of cultural value to the Company. The Google Company focuses on doing good rather than evil, not settling for just being the best, but always striving to improve, supporting online democracy and basically letting internet be amusing (Jeffs, 2008. P. 70).

Stakeholder Power Matrix

Stakeholders are people who play a significant role in an organization with respect to decision-making. Although Google has a flat hierarchy, its founders, Larry Page and Sergey Brin make most of the company’s key decisions (Wahla, 2006, p.19).

The Company’s decision to physically get into the Chinese territory was managed by Tom MacLean who was then the director of the Company’s international business (Martin, 2008, P. 2).

Although, part of the Google’s mission is to allow its users to access global information (Miller, 2007, p. 10), the Chinese government’s censorship on search results posed a challenge to the execution of the power that emanated from the Google’s top authority.

The decision to stop censorship of its search results in China and the possibility of reviewing its business operations in China was purely a decision of Google’s United States executives (Ying and Fang, 2010, p.6).

Ansoff Matrix

This is a method of categorizing the four basic approaches of product marketing, which entails market penetration, market enlargement, product development, and diversification (Statt, 2004, p.5). The Ansoff matrix for Google is summarized in the table below.

Ansoff matrix component	How Google meets it
Market penetration	Google gets into China market in 2006. In 2009, its operations spread to other parts like Shanghai, Beijing, and Guangzhou.
Market enlargement	Market share grows by 15% after launch of the Chinese website. About 90% of the searches were dominated by Google and Baidu in 2008. Partnership with China Mobile expanded Google’s market too. Advertising market is said to have been dominated by Google.
Product development	After the launch of the China search product, other products like Picasa web album, Google Docs, Google Talk, Google Calendar, and Google Checkout were developed in 2006. In support of its search functions, other products were introduced. These are Google Earth, Google Hotlist, Q&A and a free music download.
Product diversity	Google AdWords and AdSense for advertising. Google docs, Google talk, Google calendar and Google checkout for support of search product. Smart phone as a mobile-based product and a music download service.

BCG Matrix

As Griffin (2006) explains, the BCG matrix enables managers to analyze strategies related to the business and its products which is determined by two major aspects, which are the rate at which the market grows and the portion of the market occupied by the company.

As Schermerhorn (2010) highlights, matrix places the industry or products into four strategic categories: Dogs, stars, question marks and cash cows. Google’s BCG matrix is summarized in the table below.

Strategic Type	Explanation
Cash Cows	These businesses have a large market share and generate lucrative profits that can be used to support other strategies. Google AdWords and AdSense contributed towards the company’s 97% revenue in 2009 that saw it launch other products.
Stars	Have a high share of a fast-growing market. The launch of the Google China and other products like Google Docs, Google Talk, Picasa web album, Google Calendar, Google Checkout, and Android saw the company enlarge its market share in China greatly in 2009.
Question Marks	Business units with a small market share found in a high-growth industry. Are generally new commodities with a good commercial perspective. For example, the China Google search product, Google Earth, Google Hot List, and Q&A fall here.
Dogs	Businesses with low market share in low-growth markets. They neither produce cash nor call for large investments of funds. Given the rapid growth of the Chinese market, dogs were not conspicuous in Google China.

Product Portfolio Analysis

In 2006, Google devised the currently famous products: Picasa web album, Google Docs, Google Talk, Google Calendar and Google Checkout. A mobile operation system, Android was launched in 2008. It was found to compete closely to Apple’s iPhone platform. Both Google Translate and Google Chrome was released during the same time.

In 2009, 97% of Google’s total income came from its advertising products: Google AdWords and AdSense. This two also dominated a larger portion of the United States market. Additionally, in an attempt to compete Baidu, Google launched some services that could support its search function. These include Google Earth, Google Hotlist, Q&A and a free music download.

On the other hand, the Google’s Gmail product was attacked by hackers. As Arthur (2010), puts it, Internet Explorer (6) is susceptible to attacks and is the one that Google has been using. The company announced a change in its infrastructure after the attacks.

Current State of the Industry and Strategic Direction

There have been reported series of attacks on the company’s infrastructure leading to theft of intellectual property. Primarily, the Chinese Human Rights advocates have been the most affected. However, Google China has been more aggressive to counter this challenge by enhancing security measures for its account holders.

The information deserved a broad audience due to its implications on security, human rights, and freedom of speech. The attacks and the limit of free speech on the net led to a conclusion that requires a review of Google’s feasibility in China.

This includes not subjecting the company’s search engine results to censorship and deliberations with the Chinese government on the possibility of operating unfiltered search engines within the law. Although the company’s search engine was closed for a few days in China, it was active again, but still bringing censorship results. As Physorg (2010) reports, Google had to exit China by April 10 2010.

Conclusion

Google’s current strategy to seek dialogue with the China government to be allowed to continue operating without being censored may be futile.

This is because the Chinese government may regard it as a direct infringement on its democracy by the United States, which will further stifle the possibility of doing business in China. Therefore, the strategy is not sustainable as long as it seeks to be non-compliant with the Chinese government rules.

Recommendation

Although as Scott (2008), explains, Google’s mission is to enable its users to access global information, it may be prudent for the company to adjust this within the China setting if it has to continue operating there due to censorship policies. Since as Jeffs (2008) reports, the company’s structure allows it to be client-centered. The customers in China are so many and it is necessary for Google to accept censorship and continue serving them.

Secondly, the company should explore the possibility of collaborating with Baidu to help it retain its China market. This is because, among all its rivals in China, Baidu is the best performing economically. The company still has a strong social backing from China due to numerous internet users.

Thirdly, Google should adjust its political astuteness with the Chinese government by taking a low political profile and yet being business active. This may help it continue operating in China like other Western-based organizations.

Fourthly, as suggested by Fatokimi (2010), given that China is one of the greatest global growing economies, Google should consider succumbing to China’s regulations and retain this market while being an enormous investment for its shareholders. By doing so, the company will generate more income, keep business and retain workers.

Fifthly, Google needs to change the supplier of its browsing version to use the one that is more secure. Lastly, more investment in Research and Development is recommended to ensure that the company’s product quality exceeds that of its rivals to counter competition, especially from Baidu.

Moreover, as suggested in Law 360 (2010), like any other American company, Google can only retain its operation and market in China by being patient with the Chinese government. That means being active economically but taking a low profile in active politics.

Summary of Environmental Audit

SWOT Analysis

This refers to the Strengths, weaknesses, opportunities and threats of a given Company. As Glossbrenner (2001) argues, emergence of Google as one of the best global search engines must be due to its strength. This is summarized in the table below.

Strengths	Quality and competent human resources that have seen it produce high-speed and superior search results in addition to its quality products. High revenue generation to enable it carry R&D, train and remunerate staff.
Weaknesses	Insecurity of some of its products. For example, users’ Gmail accounts were hacked in China. Involvement in Chinese politics that became the Company’s economic undoing.
Opportunities	There is a possibility of collaborating with its China rivals: Baidu or Yahoo. Huge China population enhances marketability of the company’s products to its rivals.
Threats	Stiff competition from the China-based Baidu and other internet providers. Vulnerability of some of its products to hackers. Possibility of losing the Chinese market

PEST Analysis

This analysis aims at evaluating how the political, economic, social, and technological analyses have affected Google in China. Politically, the company’s operation has been curtailed by censorship of its services from the China government. An attack of Chinese human rights activists’ Gmail accounts may also indicate political instability. Google recorded good economic growth between 2006 and 2009.

This can be attributed to the company’s extensive use of advertising, and other social aspects like high Chinese population hence increased demand and increased internet usage of China citizens as part of their recreational activity.

Technologically, Google’s innovation and development of internet infrastructure led to the growth not only in its products but also in its revenue. As Yin and Fang (2010) explain, Google’s market share in China also grew due to its extensive engagement in Research and development.

Pest Analysis Summary

Component	Effect on Google China
political	Political uncertainty in China revealed through -Government censorship of the Company’s search results curtails implementation of its mission. -Hacking of Chinese human rights activists Gmail accounts.
Economic	High economic growth by the company due to -High Chinese population -High economic growth between 2006 and 2009 from advertising -Increased demand and usage among Chinese people.
Social	-Internet use is a hobby for majority of citizens hence good market for Google. – High population growth rate increases demand
Technological	– Development of internet infrastructure led to creation of diverse products and high revenue. -Increased revenue attributed to advanced Research and Development

Porter’s Five Model

In looking at the nature of external environment surrounding Google, the Porters five forces model becomes handy. According to Learn Marketing.Net (2010), the Porter Five Forces model has five components: Competitive rivalry, power of suppliers, power of buyers, threat of substitute, and threat of new entrants.

Google’s competitive rivalry is high because first, it is costly for it to pull out the Chinese market since doing this will mean losing about $300 million of its annual revenue. This is apart from plunging thousands of its Chinese employees into unemployment (Robles, 2010 cited in Ying and Fang, 2010).

Secondly, competitive rivalry is high because given the uncertainties surrounding Google’s operation in China, a close rival; Baidu.com has already occupied more than half of the market share. It has also designed a unique product that suits the needs of the Chinese and the unmatched pay-for-performance marketing service (Ying and Fang, 2010).

Information Gatekeepers Inc. (2007) reveals that various companies have expressed their willingness to supply Google Company in China with materials that it may require to boost its performance by purchasing both system equipment and mobile handsets. Such companies include Alcatel, Ericson, Nortel and Siemens.

It is also reported that the Google Company in China is willing to be supplied with equipment from international recording companies. This is to help it offer copyrighted music online. This move is plausible since it will enable Google in China share its profits with these companies.

The threat of substitutes for the Google Company in China is high. This is because its closest rival – Baidu offers very competitive products to the Chinese citizens. This includes not only its affordable pay-for-performance marketing service but also its unique search engine product that has been tailor-made to suit the client’s needs.

This is already a threat to Google’s market in China since Baidu is also China-based and as such preferred by most customers. Lastly, the threat of a new company entering into the Chinese market is low. This is because the Chinese government does not warrant uncensored internet-based businesses.

Most search engine providers would want to operate in a business environment that is free from barriers so that they can penetrate a wider market. In a study by Inc Icon Group International (2008), both Germany and France gave up their plans to penetrate the China market.

Components of Porters five Model and how they affect Google

Component	Effect on Google China
Competitive Rivalry	High competitive rivalry because Its rival, Baidu.com has occupied a bigger market share. Both Google and Baidu are employing similar strategies that is suiting their search results to the Chinese language Pulling out of China market is costly and will mean losing $300 million of its annual revenue.
Power of Suppliers	Alcatel, Ericson, Nortel and Siemens willing to supply Google China with system equipment and mobile handsets The company is ready to receive supplies from international recording companies to offer copyrighted music
Power of Buyers	High internet use among Chinese people. High population enhances ready market of the company’s products. Customers are sensitive to prices. That is why they prefer Baidu’s performance-based online marketing product (P4P).
Threat of Substitute	High threat of substitutes because Baidu offers competitive products like P4P. Baidu is Google-based and thus preferred by most users. Baidu’s products are tailor made to suit the local use.
Threat of New Entrants	The threat of a new company getting into China is low due to the government’s regulation regarding censorship of internet results For instance, Germany and France gave up plans to get to China.

The Suitability, Acceptability, and Feasibility of the Google’s Strategy

The current state of Google in China is still the way it was announced by some of its officials earlier this year. There have been reported series of attacks on the company’s infrastructure leading to theft of intellectual property.

Primarily, the Chinese Human Rights advocates have been the most affected; however, Google China has been more aggressive to counter this challenge by enhancing security measures for its Gmail account holders. The information deserved a broad audience due to its implications on security, human rights, and freedom of speech.

The attacks and the limit of free speech on the net led to a conclusion that requires a review of Google’s feasibility in China. As stated by Allen (2010), hacking and a security-related rift between Google and the Chinese government pose the uncertainty of closure of the Google Company that may lead to losses to the company and unemployment.

As Physorg (2010) reports, Google had to exit China by April 10 2010. Thus, the acceptability of the Company’s operation in China is only possible if the Google’s executives accept censorship of its search results.

Assessment of Current Strategy (Sustainability)

Google’s current strategy to seek dialogue with the China government to be allowed to continue operating without being censored may be futile.

References

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