Monday, October 1, 2012

GOOGLE’s CHINESE CONUNDRUM HOW GOOGLE DID THE RIGHT THING IN CHINA Distance Assignment, Internationalization of the Firm PG 19.9.2012 Distance Assignment 19.09.2012 1. Why GOOGLE Entered China From a business management perspective, the case for a GOOGLE launch in China was clear cut and primarily two-fold; 1. with only 8% of the total Chinese population using the internet, its 105 million users was still the world’s second largest internet market and represented a huge and lucrative growth opportunity for GOOGLE; and 2. GOOGLE’s main competitors in internet search, YAHOO and Microsoft, had already entered China, so it had to address its competitors. However, GOOGLE was required by the Chinese gov-ernment to self-censor its search service. This posed an ethical dilemma for GOOGLE as one of its core corporate tenant is “Don’t be evil” and agree-ing to self-censor could be seen as a violation of this principle. So what did GOOGLE do? After performing a moral spreadsheet analysis and balancing 1. its business commitment to serving user interests with 2. its policy commitment to access to information, in the context of 3. local market conditions, GOOGLE man-agement concluded it would have been "more evil" to deny the 1.4 Billion Chinese (approximately 105 million internet users circa 2006) a GOOGLE-choice i.e., an external enlightened progressive Western value-centric internet service provider. GOOGLE's self-censorship, in the short term as a prerequisite to be available to Chinese users, is merely a tactic to comply with the current Communist Chinese ISP self-censorship "Golden Dome" policy. It is thus a practical and necessary compromise by GOOGLE and is "less evil" than being corporately self-righteous and deny innocent Chinese internet customers a GOOGLE-choice by being absent from the Chinese internet market. GOOGLE is #2 to domestic search rip-off Chinese copy-cat BAIDU and is gradually gaining market share thus proving that Chinese internet consumers appreciate GOOGLE's choice. 2. GOOGLE’s Decision to Enter China Followed Sound Internationalization Strategy An enterprise that has conquered its domestic market by achieving a dominant market position is required to pursue a FDI strategy or internationalization expansion plan to expand, grow and add value for its stockholders . GOOGLE’s international expansion is de facto in line with FDI patters circa 2000-2011. Representing the world’s 2nd largest internet market, GOOGLE in fact had an ethical financial fiduciary obligation to its stockholders to enter China and grow its business there. It was also required to address the competitive threat posed by its domestic search rivals, YAHOO and Microsoft, who had previously entered China and were growing their user bases there. 3. GOOGLE’s Next Move GOOGLE should continue doing what its doing and following its current strategy as it is working and GOOGLE is gaining market share at the expense of the market leading Chinese incumbent Baidu.com. GOOGLE’s stated plans are to let its Chinese GOOGLE team make GOOGLE China “Chinese” and thus different from other GOOGLE search services. This is smart and a sound strategic decision. Allowing GOOGLE China to adapt and adjust itself so that it appeals to Chinese users while toeing the line with Chi-nese Internet Law and Policy should allow GOOGLE’s superior search technology and business management to allow it to become the #1 search service in the market. In the words of then-GOOGLE CEO Eric Schmidt, “We were late entering the market but our investment is paying off and we will eventually be the leader”. 4. Conclusion GOOGLE made both a smart business decision and an ethically responsible corporate value compromise by entering China by agreeing to self- censor its search service. Bibliography

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