Google’s Strengths and Weaknesses in China

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Table of Contents

Google’s History, Development and Growth
Google’s internal strengths and weaknesses
Analysis of Google China using PEST
The nature of external environment surrounding Google
Evaluation of Google’s SWOT analysis
Google’s Corporate- level and Business- level strategy
Structure and Control systems
Recommendations
Reference List

Google’s History, Development and Growth

As stated by Jeremy (2005), before introduction of libraries of data, information could be commonly accessed from both institutional and public libraries.

However, storage of information in such libraries posed several challenges such as tedious selection, cataloguing and classification of information for easier accessibility, slow criteria of adding books into the library and limited physical book storage capacity that could not accommodate further book additions. Libraries of data were found to provide solutions to some of these problems.

They have programmes that aid in data storage and as their electronic cost reduces with an increase in date compression, extra data can be stored within the same space at reduced cost. As long as data is arranged in forms that computers can process, data pre-arrangement and scientific classification is unnecessary.

Additionally, there exist computer programmes that can both compile and update data base indexes perpetually. Search engines are not limited by physical location, language, organizational or shelving arrangements. Web servers containing internet data are unconfined and not centrally managed. As such, they can reach a broad spectrum of users.

This has paved way for rapid growth of internet data, a multiple times faster than addition of information to any physical library. This can be compared well by looking at the growth of information on the Google search engine and the library of Congress. About one billion pages were added to Google’s indexes annually, from 2001 to 2004. Library of Congress’ total page count in at least ten years could not have matched this.

This was soon before doubling the volume of information that Google could search, indicating rapid growth of web information. Towards the end of 2004, Google announced its intention to liaise with some institutions to provide some of the already printed books in electronic form.

This was meant to encourage usage of printed materials and libraries rather than replace them. After merging with major academic learning libraries and publishers, there was a reported increase in usage of libraries. This has made it easy for people to access information in a convenient manner through a library without walls.

As MacKinnon, (2006) argues, there were earlier problems between Google and the Chinese government in 2002. The government of China had temporarily blocked its people from accessing the Google search engine. However, this freeze was lifted due to what one of the co-pioneers said was increased demand that was experienced until 2006 when the censured Google.cn site was introduced.

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. 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.

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.

Google’s internal strengths and weaknesses

As Glossbrenner (2001) argues, emergence of Google as one of the best global search engines must be due to its strength. Google’s first strength is quality and competent human resource. The development of some of its effective services such as ADsense, ADWords, Gmail, Google Docs, and Google talk, among numerous others is a reflection of a smart, professional, competent and innovative staff.

As Wahla (2006) puts it, these talented workers are drawn to Google because the company empowers them. Secondly, the company enjoys high revenue.

This is reflected not only in Google’s ability to hire innovative and competent staff, but also in its ability to use billions of money to develop user friendly products and offer them freely. For instance, users can open and use Gmail accounts and ADWords, among others is free, (Wahla, 2006, p.23). To provide these quality services, Google must be spending enormously to train its staff.

The third strength is research, innovation, and development. Introduction of Google print between Google and institutional libraries to help them reproduce printed books online was innovative and original. The efficiency of Google’s products compared to those provided by other companies depicts its ability to engage in thorough market research before launching them.

The third strength of Google is marketing. As Strickland (2010) affirms, Google did not only dominate three quarters of the search engine advertising market earlier in 2010, but the usability in its Gmail account increased by a bigger percentage between 2009 and 2010. Both increased advertising and popularity in Gmail use show Google’s higher market penetration strategy and power.

Despite all these strengths, a major weakness in Google’s operations is the security aspect that led hackers to attack Gmail accounts of several human right activists. The hackers are alleged to have connections with the Chinese government. This came after a row between Google and the Chinese government over the former’s inability to censure some of its sites.

Google’s Gmail product should have been protected against hackers’ attack. As stated by Allen (2010), hacking and a security related rift between Google and the Chinese government poses the uncertainty of closure of the Google Company that may lead to losses to the company and unemployment of many people.

Analysis of Google China using PEST

Google’s external environment can be analyzed in terms of the political, economic, social, and technological (PEST) factors. Although Google’s success in China was evident, the internet censorship by the Chinese government seemed to be the main hurdle to its business. An attack of Chinese human rights activists’ Gmail accounts may also indicate political instability.

The exponential growth of Google between 2006 and 2009 led to a remarkable growth in its revenue. This positive economic growth of the company was contributed mainly from its advertising services. Google’s economic growth was also due to social factors such as the high population of internet users in China and the increased internet use of most Chinese at their leisure time.

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.

The nature of external environment surrounding Google

In looking at the nature of external environment surrounding Google, the Porters five forces model becomes handy. According to Learn Marketing.Net (2010), the porters 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 substitute 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 clients 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 due to the fact that 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.

Evaluation of Google’s SWOT analysis

With this analysis, it would therefore be appropriate for Google in China to undertake several measures if it has to continue surviving the Chinese market. First, as Arthur, (2010) argues, that Internet Explorer (6) is the version that is most vulnerable to hackers, Chinese Google ought to replace it with a more secure version.

As Gurusmith (2009) states, a company’s SWOT analysis can be used to consider changing its supplier, potential partnership or taking a strategic alternative like venturing into a new market or introducing a new product.

From this standpoint, since Google is using a less secure browser version (Internet Explorer (6)), it can consider approaching another supplier with a more secure version to help it guard the data of its users. Thirdly, Baidu is to be the main competitor of Google in China. Google can consider partnering with it so as to retain the China market.

Fourthly, Google can also consider venturing into a new market with a demand for its services so as to help retain its profitability. Fifthly, Google being an American based Company can not change the Chinese socialistic state overnight. 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.

This means subscribing to the Chinese government’s online censorship policy like Baidu.com has done as it waits the country’s social development to keep pace with its economic development.

Additionally, as argued in Law 360 (2010), the Chinese government’s threat of paralyzing Google’s engine search operations because they were not under censorship should open the company’s management eyes of not being actively involved (politically) with the Chinese government. They can remain conspicuous business wise but take a low profile when it comes to handling political issues.

Google’s Corporate- level and Business- level strategy

As Wong and Ungson (2008) explain, strategy revolves around an organization’s vision and position within its surrounding. It also enhances an organization’s context and consistency to its continuous operations. As Scott (2008) explains, the mission of Google was to help its users access global information.

According to Yin and Fang, (2010), Google’s main business is the primary search product but it engages in other supportive functions such as both Research and Development, and marketing. There exists a related diversification among the company’s products.

Establishment of these products enabled Google to grow in China as it aimed at partnering with other firms, bettering its word search quality and widening its line of products.

The business strategy of Google entails running some low-cost products such as Gmail account, ADWords, and ADsense. Although the company generates substantial revenue from most of these products, it can consider modifying its products to take after that offered by Baidu (Pay-for-performance) to better its competitive strategies.

Structure and Control systems

As Jeffs (2008) explains, the organizational structure of Google is both team oriented and flexible, allowing employees to swap tasks. On the other hand, the control system encompasses some foundational philosophies such as doing good and not evil, being quick rather slow, being client-focused.

Also the few rules and reduced supervision exist. Therefore Google’s dispute with the Chinese government based on its non-apologetic concern for including pornography in its search engine may be a sign of bad strategy implementation. This is because of its philosophy of doing good and not evil.

Recommendations

Google is an innovative and flexible firm that is receptive to new concepts and change. However following reported attacks to its Gmail product and its row with the Chinese government, the Company ought to change some of its suppliers, take a low political profile, accept censorship and consider partnership with some of its rivals.

First, Google should accept the Chinese internet censorship policy like Baidu and other rivals have done. Although doing this will impede it from achieving its mission of letting its client’s access worldwide information, the opposite will continue stifling its operation within the Chinese market.

Secondly, the company should explore the possibility of partnering 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 so as 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 so as to counter competition especially from Baidu.

Reference List

Allen, E., 2010. The Houston Chronicle: Doomed marriage: Google’s China problem shows repression and free speech don’t mix. Web.

Arthur, C., 2010. UK ignores fears over Internet Explorer despite French and German warnings. Guardian News and media. Web.

Davis, H., 2006. Google advertising tools. Sebastopol: O’Reilly media.Inc. Web.

Fatokimi, T. et al. 2010. Google in China case study. Slideshare Inc. Web.

Glossbrenner, A., 2001. Search Engines for the World Wide Web. Berkeley: Peachpit press. Web.

Gurusmith. 2009. How can SWOT analyst help in short listing strategic alternative at the corporate level? Web.

Information Gatekeepers Inc. 2007. China Telecom Newsletter. Beijing: Information Gate Keepers Inc. Web.

Jeffs, C., 2008. Strategic Management. London: Sage Publications. Web.

Jeremy, M. N., 2005. From Gutenberg to the Internet: a sourcebook on the history of information technology. California: Norman Publishing. Web.

Law 360. 2010. 3 lessons from Google’s China fiasco. New York: Portfolio media. Inc. Web.

MacKinnon, R., 2006. CHINA – “Race to the Bottom” Corporate Complicity in Chinese Internet Censorship. Beijing: Human Rights Watch. Web.

Scott, V., 2008. Google. Google Controversies. Westport: Greenwood Publishing Group. Web.

Strickland, J., 2010. How Stuff Works: Google and Microsoft Strengths and Weaknesses. Web.

Wahla, S., 2006. Litigation@Google. Lul. Web.

Wong, Y. and Ungson, G., 2008. Global Strategic Management. New York: M.E Sharpe, Inc. Web.

Yin, M. and Fang, Y., 2010. Google in China. Beijing: Richard Ivey Foundation of Business Foundation. (Attached material).

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