Why Google Failed in China Mainland

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Table of Contents

Executive Summary
Introduction
Aims and Objectives
Background
Literature Review
Methodology
Analysis
Recommendations
Conclusion
References

Executive Summary

Google is the world’s leading internet search company and had commenced with its services in China in 2000. In the beginning Google was able to gain immense popularity in China because of its services being offered in Chinese as well as the simplicity and ease with which searches could be made efficiently.

Although Google had quickly become a leader amongst search engines in China, it very soon started experiencing a declining market share within a few years. This was because the internet in China was significantly censored by the state and people wanting to search on Google would often experience excessive delays.

The Chinese search engine Baidu had emerged as the leading search engine by 2005 and to successfully compete with this company, Google made a decision to launch a new search engine in China and called it www.google.cn, while agreeing to censor its contents. It is thus evident that Google was literally enforced to self censor its contents in deciding to launch its new website in China.

In the light of these circumstances, it becomes important to examine the role played by the Chinese government and the law relating to internet that adversely impacted Google in China, eventually leading to its failure in the Chinese market.

This paper has examined the reasons for Google’s failure in China by fist outlining the company’s entry into the country and then highlighting the adversities it had to face because of a virtual stand of with the Chinese government.

Introduction

Initially Google provided its services to Chinese users through its search engine www.google.com that had its servers in the USA. Such arrangement implied that all the content of this site had to clear firewalls set by the Chinese government, which frequently led to stalling and slowing of its browser.

The slowing down of Google.com in China which was directly related to the censorship and filtering initiated by the government and internet service providers in China. Because of such complexities, Google took a decision to censor content on its own and allow users to know of the same.

Consequently, issues were raised by human rights organizations and freedom activists about curbing of freedom of the press by Google. During the same period, the government in China was actively engaged in blocking many websites and such patterns became more prominent when there were increased security issues during events such as the National Party Congress and the Tiananmen Square incidents.

However, it was possible for Google users to evade censorship by making use of cached pages (Shinal, 2006). By the beginning of 2004, Chinese internet users had begun to believe that Google was not dependable and started relying on other search engines.

It is pertinent to note that as compared to its nearest rival Baidu, Google was seven times slow and the company’s management was much concerned about the manner in which Google was operating in China.

Aims and Objectives

Given Google’s much hyped entry into China in attempts to tap the biggest consumer market in the world, it had to eventually face disappointment because of several reasons that inherently and uniquely characterized the Chinese market. This was in spite of the fact that Google adopted a great deal of flexibility by even setting up a Chinese version of its global website in efforts to win additional customers.

However, the company faced failure in China because it was outpaced by the local search engine Baidu.com, which was able to attract the maximum users to its website in being able to understand local tastes and thus meeting customers’ aspirations.

The primary objective of this paper is t ascertain the circumstances that led Google to face such a failure in China despite its corporate might that allowed it to achieve extraordinary success in other parts of the world. The entire circumstances will be examined that created difficulties for Google and how it tried to overcome them in reallocating resources and reframing its policies while sticking to its core philosophy and vision.

Background

Google was much interested in having a major stake in the Chinese market because it was very lucrative in view of its huge size. China was characterized as being the second largest market after the US in terms of users and Google realized that it would have to be present locally if it wanted to provide reliable and better services to users in the country.

For Google to successfully function in China, it was required to get an Internet Content Provider license that would also require that Google’s content will have to be filtered. Google obtained permission from the Chinese Ministry of Information Industry in April 2005 and opened a new office in Shanghai and gave a new name to its website in China in 2006; www.google.cn.

With the launch of this new site, many felt that users would have more convenience and better experiences and that Google would eventually come out as the most popular search engine in China. In fact, in January, 2006, Google was strongly placed in challenging Baidu in the race for the best search engine in China.

Google had declared that its new website in China would be censored by itself in keeping with the guidelines provided by the Chinese government. Prior to this arrangement, the Chinese authorities were censoring Google’s content on its site and all material that was felt to be violating prevailing regulations, was removed or blocked (The New York Times, 2002).

The Chinese government did not want that Google should provide any provocative content on several sensitive issues such as human rights, Taiwan disputes, the Dalai Lama, Tibet, Tiananmen Square and the Falun and Gong spiritual movements. Google felt that by censoring search content its website in the country would gradually gain popularity in becoming easily accessible to maximum users.

In straying from its core philosophy Google had removed content from its website in China by responding to the local laws, regulations and policies. However the website did announce that users will be kept informed of all restrictions (Qiang, 2006).

Google had struck a deal with the Chinese government in 2006 and launched its website in the country, which was an extension of its search engine that was to function from China.

In having launched its website in China, Google had to function in adhering to the norms of Internet Service Providers in the country whereby the communist government required all ISPs to comply with conditions pertaining to self censoring and removing content from its search engines that was not in keeping with the law in the country.

The Chinese government was very particular about websites and search engines to avoid political issues such as democracy in Tibet and religious matters pertaining to the spiritual Falun Gong movement as well as matters relating to the Dalai Lama (Rosen, 2008).

The Chinese government temporarily disallowed pornographic material and in having chosen to launch its new site in the country, Google appeared to imply that its values and missions in China were in keeping with self-censorship practices in the country. From the financial perception, China was a fast-growing and dynamic market for Google although a significantly competent market.

In 2006, there were more than 105 million internet users in the country and the Chinese Internet market was only next to the USA although it only represented about nine per cent of the Chinese population.

Although google.com was accessible in China since 1999, its services were considerably slow and undependable for users primarily because of large-scale censoring of foreign websites by the Chinese government.

It is pertinent to note in this regard that Google’s competitors such as MSN, and Yahoo were permitted into the Chinese market as Internet Service Providers much earlier because they had agreed to adopt sell censoring practices.

Moreover, the accelerated competition from the Chinese search engine Baidu, had started grabbing a major market share from Google, which is evident from the fact that, Baidu’s market share had jumped from three per cent in 2002 to a dominating 58 per cent in 2007 (Fong, 2007).

It is also noteworthy that the decision taken by Google in 2006 to involve in self censoring in China invited considerable ethical criticism from different sections including the media. It is evident that the company’s motto is Don’t Be Evil, and before it entered China, Google had effectively created for itself an image of being distinct from other technology giants.

It had become an organization that won the trust of millions of Internet users for protecting and storing their personal information. But in the beginning of 2006 Google had to confront the Committee on International Relations in the U.S. House of Representatives and defend its policies in China, along with other companies such as Yahoo!, Microsoft and Cisco systems.

Google was blamed for accepting self-censorship and the debates and discussions that developed because of such a choice left Google with no alternative but to reconsider its priorities as a company and created circumstances for the global community to reassess the consequences of censorship.

Literature Review

It cannot be denied that Google is the largest search engine in the world. In being founded by Sergey Brin and Larry Page in 1998, Google had started with a humble beginning as a university research project. Sergey Brin and Larry Page were able to create and put in place new technologies that could examine web pages and extract the most relevant information about any given search requisition.

The innovations were found to be very attractive for the associates of the two founders, which led many people to come forward and invest huge amounts in the company. Once sufficient capital was generated through investors, the company began to grow in providing different products and services.

Presently, Google enjoys the status of not only being a search engine but it also provides mapping services, translation services, e-mail accounts and block hosting services amongst several others.

The company has gradually expanded globally and now boasts of hosting more than 150 website domains in different countries. Google is growing at a consistent speed and is continuing to expand in having a very strong position as the world’s top search engine (Dickie, 2007).

The company’s mission is to systematize information and make it useful and available to all people. The basic message of the company in terms of its code of conduct directly implies that all people who use Google’s services hold themselves to the maximum standards pertaining to ethical business behavior.

The company is a pioneer in allowing internet users to avoid frustration and wastage of time by immediately providing them with the required information without the need to scan through several tons of irrelevant information and data.

Google not only provides efficient and fast services but also aims at making information available for all people that have access to Internet. Google has a core philosophy of making its products universally accessible. It also claims to avoid making ethical sacrifice in order to enhance values for its shareholders.

In the context of China, analysts are in full agreement that the country’s government has been playing a game in attempting to adopt modern practices and to become a dominant player in the global markets. China made attempts and succeeded in becoming a member of the World Trade Organization, which made it obligatory for the country to open its markets to global companies in allowing them total access to Chinese markets.

In view of such unprecedented foreign excess, local companies in China started asking for modernized communication systems including modern infrastructures. The government in China was in agreement that modernization was essential and soon began to provide funding for this process, thus making the country amongst the world’s largest consumer of communication equipments.

But China’s acquirement of modern systems in the context of information technology not only led to enhanced flows of trading and communication out of the country but there was a similar flow into the country also.

The Ministry of Public Services in China was much concerned about the inflow of information into the country because the responsibility of public security agencies in the country included preventing, suppressing and investigating criminal activities.

They also had the responsibility of fighting against terrorist risks and maintaining social security. Moreover, the added responsibility of fighting against actions that jeopardized social orders implied that government agencies needed to police the expression of specific ideas and the acquirement of sensitive information.

In keeping with their efforts to match with the advanced information systems that were being introduced into the country Chinese authorities had to also source new technology that could serve in increasing their observation and scrutiny capability.

With the beginning of the new millennium, the Chinese government began to implement new technology and censorship activities in restricting exposure to information and ideas that could not be permitted in the country (Thompson, 2007).

The Chinese government introduced its Golden Shield Project in 2000 that aimed at using state of the art techniques in effectively checking the Chinese population. Although the advanced technology was used for monitoring voice and video Internet traffic, it also aimed at controlling flows of information on the Internet (Walton, 2001).

The Chinese government established infrastructure relating to MPS systems that were counter-altering systems with the ability to control and block particular kinds of content. Such types of firewall systems could check if the searched websites are black listed and their routers could tap the prohibited phrases and words on different websites (Einhorn, 2007).

Along with this, most of internet users in China are aware of the fact that their activities are under watch, which spontaneously creates fear of imprisonment and restricts the inflow of information that is found objectionable by the Chinese government. But such systems are known to block information that comes from foreign sources only.

The country’s internal servers have the ability to avoid these filters because of which there has been increasing controversy about the government’s filter system that it does not succeed in preventing availability of all content that is considered to be inappropriate.

In order to make the system more effective and to stop Chinese Internet users from getting access to such information from internal servers, the government required internet service providers with local servers to remove objectionable materials and to censor the information sought by their visitors (Kahn, 2002).

Moreover, for companies that operate within China, the government had provided for strong penalties in order to force them to keep their content entirely clean in keeping with government standards. Such practices are required to be implemented in the context of search engines, text messaging services and block sites.

The system also provides a legal basis for the Chinese government to block information within the nation without requiring establishing complex censorship systems. This censorship mechanism is backed by a consistent threat of prosecution as well as imprisonment in addition to other hostile actions if censorship laws are violated.

These strict rules create fear amongst service providers and internet users because of which they are very careful in censoring their own material within the country. Sometimes, internet users are reminded that the government is keeping a close watch over their Internet activities (Collings, 2001).

As per projections made by Google for the year 2006, the Internet market in China was expected to grow significantly by 2010. Additionally, there were more than 350 million mobile phones being used in China in 2006 and this figure was expected to increase by 56 million every year.

At the time of Google’s entry into China in 1999, the Google site in China was available to users in the country in the same manner as it was available to other users in the world. However, in deviating from its US competitors, Google was not in a hurry to establish a China-based search engine because it was not in favor of acquiescing to Chinese censorship regulations as was done by Yahoo! and Microsoft.

Instead, Google decided to establish a different version of its search engine that had the capability to understand character based languages such as Korean, Japanese and Chinese. It was possible for Google to administer such capabilities from its US-based facilities. For some years, Google was able to control almost 25 per cent of the search market in China and thus was able to avoid censorship by the Chinese government.

Till the year 2002, visitors to Google.com in China mainly comprised of white collar pro-Western businesspeople functioning in China. But the company began to face problems by the end of 2002 when internet users in the country were unable to have access to google.com because the Chinese government had started blocking the site and they had no choice but to divert to other search sites in the country.

Very soon, Google was able to temporarily resolve the issues with Chinese authorities and users were able to access google.com gain for some time. However, the government in China again enhanced censorship, which made the Google search engine very slow and unreliable. Consequently, Google in China was able to provide users with less than satisfactory versions of its search engine functions.

Additionally, by this time Baidu.com had become the biggest competitor for Google in China and began to grow remarkably fast in capturing 64 percent of the total market share by the end of 2006 in providing services to the larger percentage of the younger users that endeavored to download music and MP3 videos. As a result, Google’s market share sharply declined from 25 percent in 2002 to 19 percent in 2006 (Yardley, Jim. 2007).

Methodology

In order to get meaningful information about consumer perceptions in regard to what people felt about Google’s service in China a random survey was conducted by identifying 50 respondents from varied backgrounds that represented different age groups, gender and professions.

Amongst the fifty respondents 28 were male and 22 were female, while the maximum representation was in the age group of 18 to 25 that accounted for 51 percent of the total respondents. The age group of 26 to 40 accounted for 37 percent while the remaining were over 40 years of age. Most of the respondents were college students and those that had started working recently.

They were informed that the survey was to determine consumer patterns of using search engines in China and that their responses would be treated in utmost confidentiality.

They were not required to disclose their identity on the questionnaire but were requested to provide information only about their gender, age and profession. The following 15 questions were included in the questionnaire to get a broad idea of users’ perceptions of search engines in China:

Which sites do you use for searching the internet?
What kind of information do you usually search for?
Please name the websites that you visit most frequently?
What language do you prefer to use while browsing the web?
How often do you use the English language while searching the web for information?
Do you use search engines for academic purposes or others?
If the purpose is not academic please specify the kind of content that you search for.
What are the difficulties that you face in searching for information on the web?
Which website do you feel is the best for meeting your search aspirations?
Please inform the reasons for the same.
What do you feel about the censorship introduced by the Chinese government?
Do you feel it is necessary and in meeting the given objectives?
Do you prefer to use local Chinese websites for searching or you are open to search foreign websites also?
Which of the foreign websites do you think provides maximum efficiency and information?
How do you rate it with local websites in terms of efficiency and content?

It is evident that Google had made major mistakes by entering the Chinese markets. It is thus required to first examine the factors that determine any company’s situations in entering such ventures. Google did not proactively initiate measures to assess its macro environment in China in terms of industry and competitive conditions and forces that acted to reshape such environment.

In terms of its micro environment Google did not thoroughly research its market position and competitiveness, which was the main reason why it was unable to effectively meet the competition from internal companies such as Baidu.com. It was very important for Google to ascertain its competency, capability, resources, strengths, weaknesses and competitive abilities.

Baidu.com was already characterized with having dominant economic traits in terms of an already well established website that was appealing to customers. Consequently, baidu.com was a dominant force that proved to be very strong for Google.

There was constant change happening in the economic environment in the Chinese markets that was effectively being addressed by baidu, while Google chose to stick to its core philosophies that had succeeded in the developed world. It was unable to foresee the moves that were being planned by its rivals, especially in the context of economic changes being introduced by the Chinese government.

Analysis

The entry of Google into the Chinese market can also be examined from the perspective of Porter’s five competitive forces, whereby competition in any industry and the chances of success and profitability depend on five basic factors:

The present sellers that compete in the given market. It is important to determine the strongest forces that are present in the market.
Google faced threats from new competitors, which was a major factor for it to consider while dealing with barriers to entry and the expected responses of present competitors in the Chinese market.
Substitute products that can steal the company’s market share was an important issue to be considered by Google. It is evident in this context that baidu.com was a major competitor along with Yahoo China and MSN that had the potential to create strong competition for Google in China. Google did provide facilities to its users in creating price attractiveness and better quality but that was soon offset by the Chinese authorities in terms of the large scale censoring and blocking of Google’s sites. This allowed other companies to take its place amongst consumers who are always on the lookout for easy accessibility.
Google faced stiff opposition from competitive pressures resulting from supplier/seller relationships because the supplier power of baidu.com created powerful collaborative relationships with the Chinese authorities.
There was immense competitive pressure that resulted from seller/buyer relationships.

It is evident in this context that the general rule for enterprises in the context of Porter’s five competitive forces is that greater collective forces imply there is lesser collective profitability of the industry as a whole and lesser levels of industry potential for success.

Google did not effectively assess the strength of its rivals in terms of competition from them and from substitute offerings by local sites such as Baidu and others such as Yahoo China and MSN (Amnesty International, 2006). Google did not consider establishing its bargaining power as a supplier of services by creative attractive options through service offerings.

Instead, it continued with the same policies as had prevailed with its operations in the US, which were not received and perceived positively in China. These circumstances acted against Google’s interests in creating competitive pressures on it.

Obviously, the combined impact of all the five forces was extremely fierce and brutal, which Google was unable to cope with because of the hurdles created by censoring and blocking of its site and operations.

In view of the immense commercial potential for Google to expand in the Chinese market and given the company’s declining market share between the years 2002 to 2006, it became necessary for Google to decide whether to enhance its operations in the country at the cost of complying with the self censoring practices of the Chinese government.

Because Google’s expansion in China would require that it fully adopt self censoring policies of the government there was a clear potential of larger stakes than just commercial gains. The company’s mission comprised of two fundamental commitments. Firstly, Google was committed to cater to the interests of its users and in doing so to further develop a flourishing company in a highly competitive environment.

Secondly, Google’s policies rested on the convictions that by expanding availability of information to all people who need such information, the world will become freer, more informed and a much better place.

The company realized that the Chinese government was imposing restrictions that would make its objectives difficult to accomplish and in such situations it had no option but to become responsive to local conditions (Litterick, 2008).

In order to have a thorough grasp of why Google made such decisions, it is meaningful to analyze the link between interests of users and the extension of availability of information in view of the unique local circumstances in the country. Soon after the Chinese government began its crackdown on Internet in terms of censorship, internet users in China did not find Google.com to be reliable or of high-quality.

Search results from the site were generated very slowly because every search had to be cleared through intricate firewall censoring systems. In view of the fact that Google.com was not hosted within China and within the confines of the firewall systems, Google took an exceptionally long time to provide search results in comparison with other search engines that were hosted within the country such as Baidu.com and Yahoo China (Liu, 2007).

Moreover, internet users in China experienced that Google.com was not working efficiently most of the time in addition to the fact that news was never made available on the site. Another significant apprehension was in relation to user privacy and user interests.

At the beginning of 2006, while Google was making plans to set up google.cn, the Chinese government had given imprisonment sentences to some people who were held guilty of being cyber dissidents (Kristof, 2006). Google realized that any decision that it made for entering China would have to relate to the issue of government censorship and user privacy.

At the same time, Google had to live with the fact that because of censorship in China the quality of its website had become extremely poor and the company was not in a strong position to provide Chinese users with adequate accessibility to the required information. The company’s principles and values were being violated because it was certain that results were being filtered.

In the context of local circumstances, Google felt that it was very important to consider the extent of self censorship that it would be required to comply with and the extent to which it would impact Google’s search results.

Internet users in China that searched for information on political issues such as democracy, Tibet, the Dalai Lama or spiritual issues relating to Falun Gong, would get the same results as other people that search for the same information in other parts of the world. But if internet users in China attempted to open censored websites, their browsers would be automatically redirected to sites that were not censored (Oliver and Shinal, 2007).

In having exhaustively considered user interests, enhancement of information availability and the unique local circumstances, Google finally took a decision to establish the self-censored google.cn website in China in January 2006.

It took major initiatives in terms of its unique transparency policies that made it clearly distinct from its competitors such as Baidu.com, MSN and Yahoo in providing internet users with clearer messages when they searched pages that had been censored (Kerner, 2005). These messages did not inform the particular content that had been censored but only informed them that censorship has been made in their search.

In addressing concerns about user privacy and in avoiding requirements of corporations with Chinese government investigation departments, Google decided to choose refraining from providing its other products such as Bloger and gmail.

By setting up google.cn, the company was confident that China would eventually become one of its most significant markets although at that time it accounted for only a small percentage of Google’s entire revenue.

Moreover, Google also expected that its Chinese research centers would become major strongholds of innovation for the company, especially because of the outstanding talent of software engineers that originated from universities in China.

Some time after the launch of Google.cn, Google had to face the House of Representative’s Committee on International Relations in the US along with the other American companies such as Cisco Systems, Yahoo! and Microsoft that also operated in China. They were required to explain before various committees on human rights and international operations in the context of their business strategies in China (Schrage, 2006).

In the context of human rights, the company was asked to justify the reasons for adopting self-censorship through Google.cn in China. Google was of the firm belief that Microsoft MSN and Yahoo China were colluding with the Chinese government because of the fact that some cyber dissidents were convicted and imprisoned.

Other than being required to explain to the US government, Google was also required to justify its actions to its stakeholders. Majority of Google shareholders voted against anti censorship proposals in May 2007 (Larkin, 2007). Within two years of launching Google.cn, Google appeared to be doing quite well in China in being only second to baidu.com by way of market share.

In the second quarter of 2007 Google’s market share had increased to 28.8 percent while that of Baidu had declined 58.1 per cent. But later developments were not conducive to a healthy environment for Google, which eventually led to its failure in the country (Krazit, 2010).

When Google entered the Chinese market 16 years ago analysts believe that there was immense potential for the company and considered that the company’s move signified attempts to stay away from authoritarian controls and censorship. At this time, individual companies were virtually drooling over the huge consumer market and the opportunities that were implied in such initiatives.

Google had stepped out at this time in being clearly confident and sure that it could make a stronghold in China in the same manner as it was able to establish itself in America. However, analysts feel that this technical giant had deliberately and imprudently not given importance to the most basic rule of any business; that is to know one’s market.

They feel that Google had actually made attempts to enforce its western value systems of the World Wide Web on China and ended up in initiating a mess for itself and thus created easy profitability for local companies.

China has more than 380 million Internet users and therefore accounts for more than 20 per cent of the people in the world that use the Web. Hence, it is difficult to blame Google for aiming to achieve global domination while making plans and executing its entry into the Chinese market.

However, businesses as well as investors across the world have been holding Google responsible for taking ad hoc decisions and not making sincere attempts to ascertain even basic facts about local competition in China. Google appears to have made little efforts in ascertaining the market potential of companies such as Baidu and Tencent Holdings.

Moreover, the company mostly did not take much heed and attention in providing free music downloads, which is the major element that allowed Baidu to become extremely popular and successful in China. In fact, it is felt by critics that Google did not make much effort to change anything and just expected China to adjust with its business practices, rather than it adapting with the Chinese environment.

Upon observing the Google China website it is seen that a very similar search box that is found on Google.com is also present on Google.ca. This creates huge problems in view of the fact that it does not fit with the Chinese language or characters suitably.

The question thus arises whether the giant corporation was actually arrogant in assuming that internet users in its new market venture will not consider using their own language for searching information. This may have been possible but it is quite evident that the damage was done because Baidu.com commands more than 60% of the domestic online search market share in the country presently.

Google was also not much concerned about investigating that most internet users in China spent majority of their time online for entertainment as against internet users in America and Europe that make use of internet mostly for work related purpose.

Analysts also hold that before entering China, Google did not do its homework thoroughly in considering that 62 per cent of internet users in the country are less than 28 years of age while only 12 per cent hold university degrees and 42 per cent have income levels that are less than $146.

Apparently, Google does not appear to have considered that people in China do not have the habit of typing, perhaps because of the unique characteristics of the Chinese language that contains thousands of varied characters. Instead of typing they prefer to navigate by making use of their mouse. This is the main reason why many Chinese Web sites depict several colorful links in attracting the attention of visitors.

It is also known that in China users mostly depend upon user generated consumer reports and blogs while making purchase decisions, primarily because word of mouth is more trusted than just advertisements in motivating consumers to decide about their purchase and online activities.

Therefore, it is not surprising that consumers actively participate in blogs and reporting at double the levels as compared to their counterparts in other countries (BBC News, 2010).

Although the western media cries foul about the infringement of people’s online freedom and rights they have to accede that the internet still continues to be the freest environment in China. In being raised in an environmental of real life propaganda, most Chinese people think of the internet as a place that is characterized with an empowering environment and authenticity because of its untainted content that is created by users.

In view of the circumstances, the web assumes considerable significance for them as compared to other places. Although in the modern world the web is another form of communication, for Chinese citizens it is a very important means of getting information that cannot be obtained from other sources.

Assuming that even if Google took pro-active steps in researching the markets in China that were very crucial for its success in the country, it would never have been able to understand its users in the same way as local Chinese companies such as Baidu could. Hence, it appears to be quite difficult for Google to survive in the battle for dominating the Chinese internet market.

The latest development in the context of Google’s Chinese operations is that it eventually decided to defy China’s self-censorship regulations by transferring its mainland Chinese customers to a Hong Kong-based unfiltered site, thereby jeopardizing its ability to continue operating in the largest internet market in the world.

This action by Google resulted in a long dispute as the Chinese government held that the company had broken its promises by taking entirely wrong actions. Till the time Google transferred its functions to Hong Kong, it was continuing with censoring its search results on the Chinese site. The company has held that it will continue to maintain its research operations in mainland China (Brin, 2007).

The US government also expressed its disappointment about Google and China failing to reach a compromise and the conflict has further led to deteriorating relationships between the two countries, especially after disagreement about selling weapons to Taiwan and the valuation pertaining to the yuan.

Economists and business analysts have warned that Google is playing a very dangerous game and could eventually end up in bringing more damage than benefits for the company (Zeller, 2007).

Given that at the end of 2009, China had in excess of 385 million consumers that use the Internet, which considerably exceeds the entire US population, the strength of the Chinese market cannot be ignored by the Google. Baidu is Google’s closest competitor in China and commanded 59% of the total Chinese online search market as compared to 35% of Google in 2009.

It is thus very likely that Google’s Hong Kong site will also be blocked in the same manner as Google.com was. In fact many believe that the Google site in Hong Kong will be blocked more aggressively in view of its challenging behavior with the Chinese government (Carlson, 22 March, 2010).

Google officially entered the Chinese market eleven years ago and it is almost 5 years since it established its Chinese site. In spite of having a huge brand value google.cn was not able to dominate the search markets in China and faced considerable competition from its strongest rival Baidu.

As per the data provided by comScore, Baidu has now become the second biggest search engine in the world in accounting for more than 9 billion searches, and 146 million exclusive visitors in a single month.

Moreover, Baidu’s market share in China is almost 76 per cent as compared to Google China’s share of 19.9 per cent. It is obviously clear that Google is losing out its business in China. Analysts have cited a number of reasons for its failure in the country.

The networking of the Google website in China is extremely slow and is considered to be slower than Google.com, despite the fact that the servers of Google’s China site are based in Beijing while its international server is located in the US. Prior to the recent and extensive republication exercise conducted in China in the context of telecommunication resources, two major operators were present; China Telecom and China Netcom.

Because there was use of nonstandard technologies and in view of the high costs of communication equipments such as fiber optic cables and routers, there was a significant lack of band width between the two companies. Such circumstances and characteristics were found to be less supporting in the context of international band width that was provided by the USA in terms of financing and technological support.

Google’s China site was routed through China Netcom data center and people using China Telecom experienced extremely slow speeds. Conversely, Baidu was aware of the actual circumstances that prevailed in the context of relationships amongst telecommunication companies in China.

Subsequently it started using the content delivery network that allowed internet users to access Baidu.com in a very short time. Therefore, users gradually started preferring baidu.com because it provided search results faster than Google (Barboza, 2007).

The Chinese government makes use of ICP certificates to block several international websites. ICP certificates were first introduced in the country in 2003 with the objective of controlling different kinds of sensitive Internet content, specifically in the context of pornography and protection of copyright. After some time the Chinese government made it compulsory for all websites to have ICPs.

Prior to the year 2005, Google was not having valid ICP certification and the authorities in China held that Google was operating illegally in the country. This was a major reason why Google.com was blocked by Chinese authorities and many internet users diverted to other sites because they did not consider that it was proper to access a website with proxies.

Consequently, most users started patronizing Google’s competitor Baidu.com. Presently, all websites that legally operate in the country, including nonprofit websites, are required to have ICP certification.

People in China face lot of difficulties in pronouncing the word Google in addition to being unable to spell it correctly. So, when Chinese users wanted to use Google they would often type the wrong spelling and had to often repeat the search exercise.

In contrast, Baidu makes use of Pinyin in place of English. It is convenient for Chinese people to use Baidu.com, as against the complexity in using Google, which was a major factor for its immense success. Baidu.com provided users to easily search all their requirements in Pinyin, including entertainment searches.

Recommendations

The competitive forces had a strategic impact on Google because the competitive environment became unattractive for its operations in China from the perspective of attracting larger number of visitors to its site.

This was because rivalry was vigorous and entry barriers for new entrants were limited since China had opened up its economy after becoming a member of the World Trade Organization.

Google should have identified the major forces that would exert maximum influence on its operations in China for the first three years after it established its China website in 2006. In identifying the main drivers of change, it could have ascertained the factors that create market demand for its services that could decrease or enhance competition.

In China, there were different sets of circumstances in terms of internet capabilities and applications. There was enhanced globalization of services with significant changes in the long term growth rates in different industries. There was also a changing pattern in the structure of the consumer market as the purchasing power of Chinese citizens was changing during this period.

There was a marked awareness amongst citizens in the context of internet and web based services that opened a new world for them and creating immense excitement to get maximum satisfaction from what was available. Constant innovation in products and services was taking place by way of availability of cell phones, ipods, video games etc.

Such circumstances created a spate of aspirations in making consumers hasty to extract the maximum information in the shortest time. Google claimed to provide all these services but people were disappointed on realizing that its site was too slow in providing them the information that they need most desperately. Google can do well by addressing these concerns.

Conclusion

It is known that any search cannot succeed if it does not allow users to freely excess all its content. Although Google had initially asserted that users on its website will not face any difficulties, the firewalls were extremely sensitive, especially in the context of pornographic content.

The main reason for blocking content of Google International was that internet users in China were prone to search for pornographic images by making use of Google images. Eventually the Chinese government disabled the keyword selection features available on Google’s sites because it was considered to be a major tool for searching pornographic content.

Baidu was different in this context in having strong filters to block all undesirable content that was not acceptable by the Chinese government. Consequently, users on baidu.com had no chances for searching sensitive contents.

Google did not succeed because the government was not much concerned about its position, especially when citizens in the country are held responsible under the prevailing lock. Moreover there were several alternators for users because of which they were not much concerned about Google.

With increasing globalization of services and considerable changes taking place in the long term growth rates in different industries, Google could not meet the aspirations of Chinese users. There was also a changing pattern in the structure of the consumer market as the purchasing power of Chinese citizens was changing during this period.

There was a marked awareness amongst citizens in the context of internet and web based services that opened a new world for them and created immense excitement for getting maximum satisfaction from what was available. Constant innovation in products and services was taking place in China by way of availability of cell phones, ipods, video games etc.

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