Successful factors of Google and related risks in Chinese market

In this paper, we will explore several aspects Google related in China market including the successful factors of Google and their related risks in Chinese market, reasons for Google to enter China, pros and cons of Google entering into China, Chinese censorship and Google, suggestions for Google’s future operation in China, which will be discussed in the following.

I. Successful factors of Google and their related risks in Chinese market

1). Successful factors

With reference to the information in the case, we find out several problems contribute to the success of Google in the first place.

Corporate culture

Corporate culture becomes the primary factor for Google’s success. Being the internet service provider, Google has devoted a lot of efforts to fostering the kind of harmonious corporate culture for employees. Take the kind of bread and circuses working environment for example.

In Google, there is no requirement for employees to work in cubicles. Instead, employees in Google are able to choose to work in a more open environment and space, where dogs and leisure tools around them to spark their inspiration. And health-conscious company chef concern employees’ health by meals, hockey games and other kinds of positive entertainment activities are offered to Google’s people.

Some people may doubt the charm and value of such kind of laid back corporate culture created by Google. And the purpose of this culture fostered by Google is to establish a nice setting for Google’s people to develop innovative ideas freely. As a matter of fact, such kind of informal environment contributes to a good level of innovation capability of people in Google, which also becomes one of the success reasons for this internet service provider.

Personnel management

Google is often regarded as one of the good places among a world of organizations to work in, which indirect prove Google’s success in attracting talents. For example, in the survey on the ideal employer of universum, 20% undergraduate students regard Google as their idea employer. Besides the already established fame of Google, such kind of trust from the potential candidates is built in the recruitment practices of Google under the support of modern technology, which provide fair and transparent job opportunities for every applicant (Wright 2009). This kind of recruitment practice strengthens the success of Google in attracting talents.

And thanks to the good talents pool developed by Google, people in Google also provide wise, reasonable, innovative and creative ideas and support for this internet service providers and witness its good and fast development pace as well.

Modern technology

Being a search engine, the capability of technology is the determinant for its success as well. The modern technology made use of by Google is worth prizing. For example, supporting by the innovative strategy to manage the page ranking, Google is also the company which operates the distributed computer system ranking in the top position in the world (Jian & Xiao 2010). Owing to the modern technology inside the search engine, the road leading to success for Google may be much easier than other competitors.

Business model

The business model of innovation becomes another factor for Google’s success in the first place. Google not only perfects its targeted advertisements, but also keeps on improving the users’ experience in the global region. And one of the goals for Google is to make its targeted advertisements have the contributions to its users when they are resorting to this search engine (Cai, Card & Cole 2004).

Generally speaking, the business model of innovation also facilitates Google to reach success.

Sucessful branding

On the ground of some suversy on the repuation of Google being an search engine brand, Google owns the fame to be the number one most welcome and popular global brand in the mind of internet users. These branding strategies and ways used by Googel controbute to its success in the first place, as well (Cai, Card & Cole 2004).

Focusing on the improvement of users’ expereince

Being the internet service provider, Google always keeps on improving the user expreince. For example, Google’s product decisions are focusing on optimizing the experience for users primarily and then it’s the turn for the revenue and profit. And people in Google also believes if users can expereince better experience when using Google, it will be much easier for Google to earn more profit (Cai, Card & Cole 2004).

Commendable corporate core values and mission

Maybe the success of Google in the first place results from its corporate values and mission for a large part. In the mission statement of Google, Google asserts it holds the mission to organize the world’s information and makes it universally accessible and useful. Meanwhile, the core value inside Google also implies that Google keeps on run its business being the internet service provider in very ethical like manner. In another world, Google is keen on making very business practices of it ethically and responsibly.

Generally speaking, responsibility and ethical behaviors of Google contribute to its success as well.

2). Related danger

Damage on reputation

The first danger come across by Google.cn is the doubt and upset of some people on its decision to enter China’s market, because it implies Google has no choice but to go against some ethical principles which are often persisted in by Google such as the respect on human rights in the freedom of speaking right, the press freedom and the right to be informed and other kinds of rights for internet users restricted by Chinese censorship system (Tewari 2006).

Generally speaking, to enter the market of China, an obvious cost for Google is to sacrifice its reputation as the responsible organization to respect ethical principles including several types of human rights and other kinds of rights cherished by ethical principles. This kind of fame for Google is built on full of thick and thin, which may be influenced a lot or even broken by entering into China. And till now, this cost may not be defined to be worthwhile or not.

Challenges from Chinese censorship system

Referring to the case of Google in China, nobody can ignore the influence from Chinese censorship system on Google’s operation. Some of the successful reasons for Google analyzed by us before are its respect to human rights, ethical principles and simplification, fast speed to help users to reach the sites of information as well (Tewari 2006). In other word, one of the major reasons for users to prefer Google to other search engine is these specialties. But entering Chinese market may imply Google has no choice but to lose these specialties for users in China.

Therefore, when Google losing these attractive specialties, how can this search engine to attract Chinese customers compared other competitors? In another word, the challenges faced by Google may be both the challenges from Chinese customers on the relatively disappointed internet service and high requirements from the Chinese censorship systems to force Google to make some unacceptable changes.

Fierce market competition

Just from the case Google in China, there are at least three rivals for Google in Chinese market such as Baidu.com, Yahoo! China and Microsoft. If Google wants to regain its prosperity as before, one of its major tasks is to fight with the three rivals and grab market shares from them (Pagnattaro 2007).

While, put the two foreign rivals such as Yahoo! China and Microsoft aside, the biggest rival for Google in China is Baidu.com which is the Chinese enterprise having great fame and reputation as the search engine among Chinese users. For example, the market share of Baidu.com grew from 3% to 63.7 in 2002, which proved the strong competitiveness of this search engine in China.

And owing to the sluggish period for Google in China lasts a relative long period, it gives these rivals of Google have relatively enough time to gain the previous market share and users of Google and shake the position of Google as the powerful and responsible search engine in the mind of Chinese users (Pagnattaro 2007).

In a word, if Google wants to regain its previous prosperity, the cost for Google to pay for not only the compromise to Chinese censorship systems but also the fierce market competition between these strong rivals, which may even result in the great loss of Google in China market (Pagnattaro 2007).

Economy risks

In the case, it advocates that the great number of internet users and mobile phones makes Chinese as the irreplaceable market to ask for great needs on internet service even in the world market, which is also why Google choose to enter into China.

But, the economy cost for Google to run business in China is great as well. For one thing, Google has to pay for the cost of building the self-censorship system to meet Chinese market requirement. For the other, the cost to open work office in China and employ new employees in China may also be huge (Stone & Hao 2010).

In addition, behind the great economic cost for Google to operate business in China, the ending for Google is doomed to be success. In another word, the huge economy investment on Chinese market for Google may also be in vain (Stone & Hao 2010).

II. Assessment of Google in China

1). Reasons for Google to enter China

Economy reason

Although Google has been keeping on ethical behaviors when operating its business in the world market, it is a business player, for which the profit is also the most significant concern for its shareholders. Therefore, the first promoter for Google to enter China is from economy reason.

Firstly, just from data of this case, till 2010, Chinese internet users were expected to reach 250 million and a large number of mobile phone users would also be increased fast, which imply China is one of the most significant market for all of the internet services providers.

Secondly, depending on the findings from IBISWorld (2012) from 2006 to 2012, the internet service industry has been enjoying a relatively fast developing speed, which will even reach $43.38 billion in 2012. And during the five to six years, the annual revenue will be increased at an average speed about 20.2%, which is driven by the rapid growing domestic demand.

Such kind of inference can be proved by the good development and stability of China’s economy development, which we can analyze via the annual GDP growth rate and GDP per capita rate of China in recent years ( see figure 1.0).

Figure 1.0

a). GDP annual growth rate of China from 2006 to 2012

Successful factors of Google

Source: http://www.tradingeconomics.com/china/gdp-growth-annual

b). GDP annual growth rate per capita in China from 2000 to 2012

Successful factors of Google1

Source: http://www.tradingeconomics.com/china/gdp-per-capita

From the above figure, it is easy to find that the economy situation of China people becomes better and better, which also implies that their consumption capacity on products such as internet service may also be enhanced to a high degree. In another word, the strong consumption power and capacity of Chinese users give Google a perfect excuse and incentive to enter China to make more profit from such a huge market.

Influence from its mission

In a way, Google can be regarded as a responsible search engine compared to other rivals. Therefore, the other factor to make Google to make up the decision to enter China is the influence from its mission.

It states crystal clearly Google is keen on organizing the world’s information and makes it universally accessible and useful. Meanwhile, the core value inside Google also implies that Google keeps on run its business being the internet service provider in very ethical like manner. But in the internet service industry of China, the situation before Google enter into is seemed in an oppressive environment for these internet service providers to operate their business (Dann & Haddow 2008).

The major search engine used by Chinese internet users is named Baidu.com-a Chinese enterprise, which is much easier for Chinese government to control in contrast to the foreign internet service provider such as Yahoo! China and Microsoft and others. In another word, the behaviors and internet services of Baidu.com provided to Chinese internet users may be considered to be relatively irresponsible and opaque which hinds too many facts and is inclined to protect the government of Chinese communist party and follow their wish. Under such kind of circumstance, when Chinese users use Baidu.com to search the information they need, the research results may be sometime lack of the objectivity and reliability especially when the information related to some sensitive topic banned by Chinese government.

In a word, this order and circumstance in the internet service industry of China may go against the mission and core value of Google to offer all users including Chinese users of course to actually enjoy the good user experience by the service presented from Google.

Therefore, Google plans to enter China to give more Chinese users more real and objective experience by using the search engine of Google. For one thing, even though some compromises have to be carried out by Google to enter China because of the Chinese censorship system, Google still maintains some of its insistence such as making Chinese users understanding what happened when their search is blocked in contrast to the cautious and relatively irresponsible behaviors of some rivals in Chinese internet service industry. For the other, some excessive business behaviors or operations are even given up by Google in China, such as open blogger or Gmail to keep on its insistence to respect the users’ privacy and avoid encountering the same situation as Yahoo! China and Microsoft once experienced to have no choice but to leak out the users’ privacy to China government.

In brief, the corporate mission and value to be a responsible search engine and improve the users’ experience in China make the issue of Google entering China come into being.

Talents attraction

The huge pool of talents in China is the reason for Google to enter China as well. In Liu and Zhang’s study (2010) , being the highest populated country, China owns huge labor market and talent pool of various talent categories. And with the recognizing of the importance of modern technology for the economy development of China, Chinese government has invested great support to boost the abundance of talents mastering modern technologies such as these IT talents. For example, until 2010, there were more than 570,000 IT engineers produced in China with high competitiveness. And besides there are also a large number of “sea turtle” talents in China, who are born in China and educated in western countries. Such kind of talents is also attractive for Google to absorb and use for itself.

Thirdly, in today’s China, talents all belong to the generation of well English speaking, which may ease the difficulty for the communication between foreign staff and Chinese staff of Google and improve the communication effectiveness and cohesion to present excellent performance (Gu 2010).

Briefly speaking, regarding with the relatively high talent quality and cheap labor cost in China, it is a must choice for Google to enter.

Enlarge the influence of Google

Besides the reasons before, Google may plan to enlarge its influence scope in China and then further strengthen its position in the international market as a search engine giant. Some clues of Google’s practices in China may support us to find out this point.

For example, different kinds of strategic partnerships developed between Google and some Chinese companies. In 2006, Google developed cooperation relationships with China Mobile to expand its influence on mobile users. In 2007, cooperation with YouTube, Xunlei.com and other internet service providers to take advantage of their influence to get more users for Google.cn. Also in 2007, Google promoted the cooperation with China Telecom and Tianya.com to take advantage of their great influence power on Chinese internet users to further strengthen its position in China as a popular search engine.

Thanks to these efforts, Google proved the positive consequence of strategic cooperation with some powerful Chinese partners, which made its market share increase from only 19.2% to 22.8% in 2007, which is told by the case.

In short, entering China market contributes to the improvement of influence of Google in China market and also the international market, which becomes one of the reasons for it to come into China as well.

2). Assessment

To assent the decision of Google to enter China market, we may present two kinds of perspectives based on the facts.

Pros of Google entering into China

The decision to enter China for Google brings many benefits for this well known internet service providers.

First of all, it brings great economy benefits for Google. As mentioned before, the internet service industry in China may be the relatively young industry, which is full of potential and opportunity such as its fast development speed, fast increasing revenue and so on. And in the case, Google’s profit status in China is also great, which may be observed from its improvement of market share performance. For example, its market share had increased from 19.2% to 22.8% only from 2006 to 2007, which can be considered as a good performance for Google.cn even compared to the performance of Google in other market globally.

Secondly, the relatively gloomy situation of it in China before has been changed by the cooperation with many big Chinese companies. In another word, its reputation and popularity in China has been regained to a large extent.

Thirdly, Google’s entering in China may give other rivals in China market including Baidu.com, Yahoo! China, and Microsoft and so on great pressure to improve their capability, which may facilitate the improvement of these standards and overall competitiveness such as the service level for users, the technology level and other kinds of necessary quality in the internet service industry. Therefore, this kind of modification and improvement may support the more healthy development of this industry in China.

Fourthly, to maintain some of its insistence, Google didn’t set up bloggers and Gmail in China to avoid leaking users’ privacy to Chinese government. Google also gives users some hints when their searching is blocked sometimes. Both of the two behaviors and insistence of Google promote the awareness of Chinese users on the importance of internet information transparency and the significance of the freedom on speaking right and press right for human beings, which may not be noticed for many Chinese people before. Such kind of consequence may make more or less contributions for Chinese society to pay more attention to the business ethics, human rights and other important moral issues in the future, which can be considered as a contribution as well.

Fifthly, besides the economy benefits obtained by Google, its entering in China also bring economy benefits for these Chinese partners. For example, the cooperation between Google and China mobile not only increases the users’ number of Google but also increases the amount of service purchasing of users on China mobile’s products, which brings win-win results for both Google and its partners. And the same results took place on Google and its other partners in China. Furthermore, the profits earned both by Google and its partners contribute to the economy development of the local community and present many job opportunities for local people.

In brief, the choice of Google to enter China has produced so many positive consequences. Under such kind of circumstance, the way Google chose to enter China is worth confirming.

Cons of Google entering into China

The cons for Google entering into China are included several aspects as well. At first, these compromises on ethical issues made by Google.cn caused by Chinese censorship system make negative impact on the good image of Google to a certain level, which may be observed from these doubts and resistance of its shareholders. In brief, these compromises of Google in Chinese market may affect the image of Google more or less.

In addition, great investment on China market made by Google may also have influence on Google on other business activity in other market region of the world. And worse still, there is the probability for Google to fail in China market, which may bring great loss of Google not only in economy capability but also image.

All in all, the choice of Google to enter China and the way it chooses to come into China actually bring two kinds of influences on this well known search engine. By comparing its pros and cons, we may point out what Google had done in China wasn’t an evil thing. Even though, these compromises made by Google may be seemed against some of its insistence, being a profit organization what Google should do also include the mission to earn money. Moreover, Google.cn has tries its best to protect and respect the right of its Chinese users compared to other rivals in this market. Therefore, based on the overall performance of Google, we still advocate what Google has done in China fit its motto “Don’t be evil.”

III. Chinese censorship and Google

1). Chinese censorship

Put the moral and ethical issues related to Chinese censorship aside, the Chinese censorship system may be thought of as a success.

First and foremost, the purpose of Chinese censorship system is to monitor the information flowing into China. In a word, the ultimate aim of Chinese censorship system is to protect the governance of Chinese communist party and against these people or organizations that own ulterior motives to do some harm to China’s stability and harmony. Therefore, there are many activities implemented by the Ministry of Public Service of China to control and monitor the censorship system including prevention, suppression and investigation of the criminal activities.

For one hand, in early 2000, China introduced the Golden Shield project to policy Chinese people on information receiving and delivering. For example, every piece of information from videos to voice delivered via internet is monitored by China depending on the Golden Shield project (Yan 2000). For the other hand, the information censor process is so strict such as the strict filters on these banned keywords in the content of these pieces of information, finding out improper content, and then preventing these pieces of improper information from reaching these Chinese internet users (Zhao 2009).

Thanks for the censorship system, there is a statistics to disclose the achievement of such system under the leading of the Ministry of Public Service of China. In the year of 2006, the performance of censorship system enjoyed great fame in China and even in the world according to the study from the Beckman Center for internet and society of Harvard, which is mentioned by the case as well. For example, China had successfully blocked information which was related to the Tiananmen massacre issue about 90% or so, information which included independent movements was blocked to about 31%, and the information which included negative image about Jiang Zemin, who is China’s former president was blocked to about 82%. Just think that these achievement made by Chinese censorship system only in 2006 was so outstanding and its influence in the next following years may be much larger.

In addition to that success above, the contribution of Chinese censorship system in carrying out the self-censorship policy for internet service providers in China is also great. Several clues for the case of Google in China can be found that both these foreign internet service providers such as Yahoo! China, Microsoft, Google.cn or other foreign providers and domestic internet service providers such as Baidu.com have all made promise to follow rules in China censorship system to make the self-censorship system which is fit for the requirement of China on information flowing principle. Such kind of issue also arouses many doubts and complaints from some foreign countries especially these western countries on the respect of human rights and other moral issues on China. But although there are so many doubts on this censorship system produced by China, all of these players who want to come into China and make expected profit, they have no other choice but to obey the principles of Chinese censorship system which is the same case met by Google. Therefore, from this aspect, the purpose of building censorship system in China is realized to a large part. It is successful.

And then, besides these compromises described above, there are even surprising stories related to Chinese censorship system to prove its achievement. From Google’s case in China, two big internet service providers such as Microsoft and Yahoo! China had done some inconceivable activities in Chinese market to make profit, which were so against the business ethics principles and some kinds of human rights. For example, Yahoo! China leaked out information from its user’s email to Chinese government, which even resulted in relatively harsh sentence on its Chinese users including Shi Tao, Li Zhi and Jiang Lijun. Besides, Microsoft had also leaked out its user’s information to Chinese government, which also produced side effects on this user. Generally speaking, what Yahoo! China and Microsoft had done may go against the business ethics principle which advocates protecting the customers’ right including the freedom of speech and the freedom to press. But at the same time, it may prove the success and influence of Chinese censorship system that even under the pressure to go against these business ethical principles which are insisted by so many western business players in their home market, Yahoo! China and Microsoft still chose to lower their heads in front of Chinese government in order to make profit in China. Therefore, it also proves the censorship system of China is very influential.

In addition, even Google which is so proud of its insistence on respecting the information transparency has no choice but to follow these principles required by censorship system in China. It further emphasizes the well function of Chinese censorship system expected by Chinese government.

In brief, from all of these aspects discussed above, it concludes the success of China censorship system is on its strict requirements on every piece of information and powerful technology support and cautious operation to regulate the order of internet information delivery as the expectation of Chinese government.

2). Google in China

The event of Google coming into China may date back to 2006. Google is the well known and big internet service especially internet search service provider, even today the influence of Google in the world market can’t be ignored. And because of the great market potential existing in China not only at the year of 2006 but also even at today, Google planed to enter China.

Certainly, there are costs for Google to pay for the bill. For one thing, although Google states in its corporate mission that it is in the purpose to organize the world’s information and makes it universally accessible and useful. In other word, in the mission statement of Google, it shows great respect to the users’ right to enjoy the speaking right freedom and the press right freedom and so on and so forth. For the other the insistence of Google in the world market or in its home market may be not so suitable for Google to still insist when come into China.

If Google still operates its business as it does in the international market or in its home market, the difficulty for Google to enter China will be enhanced. But Google is also wise, because it made some changes when it came into China. Firstly, Google followed the requirements of China to present the self-censorship on these pieces of information from its internet service for users to avoid these forbidden information flowing into China via Google.cn. Such kind of the change made Google.cn qualified to enter China market than before. In another word, the modified version – Google.cn was designed especially for the China market, which has so many specialties to meet the requirements of such strict Chinese censorship system. Therefore, it fits the censorship system in China for most part.

Secondly, when meeting the most important requirement what Google had done may be more than the requirement of China censorship system. For example, learning from the lesson of Yahoo! China and Microsoft, Google gave up launching its blogger and Gmail in China market in order to escape from the same embarrassment once met by Yahoo! China and Microsoft to leak out users’ private information to China government. This is the improvement and attempt of Google in China to both meet the basic restriction of coming to China by obeying the censorship system of China and stick to its basic insistence of protecting and respecting its users privacy, which should be affirmed.

Briefly speaking, both these giving ups to the basic requirements of Chinese censorship system and its refusal to introduce the Gmail and blogger to China to protect users reflect the responsibility of a business player to follow the game principle in other countries and strict to some certain level of its insistence as well. Therefore, the way Google came to China may be defined as suitable to some extent.

3). Suggestions

Localization

Many Chinese scholars point out one reason for Google to be less competitive compared to Baidu.com in China is from its market orientation, which is mostly targeted the white collar market instead of other types of users such as student users, farmer users, ordinary workers and so on. In another word, the market which Google tries to open is too limited. In China, it owns large number of agricultural population and other kinds of population. Therefore, too limited market focus even makes Google losing many users. While referring to the market orientation of Baidu.com, it is much more far-sighted than Google, whose market orientation is so widely to cover different needs of users in China from different level. Therefore, the achievement of Baidu.com in China is greater than Google. (Hu 2012 & Jie et al. 2012)

Learning from the successful story of Baidu.com, Google should try every reasonable means to localize itself to understand Chinese user the more the better. For example, in China the main stream thought named Confucianism. For Google to understand how Chinese people are influenced by the Confucianism may be a breakthrough for Google to develop more suitable products and services for Chinese users and be more profitable.

Product diversification

In China, as we have pointed out before, it owns great number of agricultural population. Therefore, for such kind of population, the frequency for them to use mobile phone is greater than internet. And meanwhile, the chance for student users to use mobile phone to surf internet and use internet service may also be bigger than computers. Therefore Google should invest more energy to investigate Chinese market and their needs and explore more suitable product and services to meet their needs. (Hu 2012 & Jie et al. 2012)

More ads promotion

Undoubtedly, Google is a very confident company. But in China market, it can be treated as a new comer although it owned a relatively good reputation before. With the changed situation, the promotion activities of Google were so little under so fierce competition in China. The fame and prosperity of Google in China is the past, it should spend more time and energy on the ads and other promotion activities to improve its fame and popularity in China. (Hu 2012 & Jie et al. 2012)

Be more open to Chinese users

China is a fast developing country, in which so many changes take place such as the changes in market, customers’ preference, and requirement and so on. For Google, there is no choice but to be fit for these changes in China. Frankly speaking, the modern technology mastered by Google may be stronger than its biggest rival Baidu.com. But the promotion for Google to emphasize its modern technology and great feature compared to other rivals is so seldom, which can’t meet the needs of today’s Chinese customers to follow the fashion and be cool. In contrast, Baidu.com is fit for the taste of Chinese users to pursue the feeling of freshness and fashion. (Hu 2012 & Jie et al. 2012)

Therefore, Google should be more open to show its competitiveness and capacity to attract more Chinese users.

Conclusion

Depending on the case study of Google in China, we find there are so many points worth affirming for Google and there are also several points which are not so good. Therefore, if Google still wants to pursue better performance and great fame in China market, there are still a lot for Google.cn to do in the future.

Reference

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