Google in China Case Analysis

Key – Stick to the most important facts presented (Point form is expectable ONLY in this section) ▪ Case is based on the negotiation that took place between Google Inc. and the Chinese government to allow their citizens access to Chinese version of ( ▪ Google looking at vast business opportunities in China as a long-term strategy. Due to its population size and market potential, China has become an attractive market for many U.S. and multinational companies ▪ In order to establish a presence in China, Google had to agree to allow Chinese government to censor access to certain sites ▪ Google take great satisfaction in being different from other corporations; strives towards the highest possible standard of ethical business conduct. Most important asset is their reputation (“Don’t be evil” motto); expressed mission is to “to organize the world’s information and make it universally accessible and useful”

In 2006, China attempted to move away from socialism and declared itself committed to economic reform and to opening itself to the outside world. Expanded personal freedoms for its citizens, however,China still maintained a harsh enforcement of political and religious regulations ▪ Membership in the WTO put China back on the map as a possible market for Western companies ▪ Yahoo! first American Internet company to enter China in 1999.

Uncensored Internet information was not welcomed by Chinese authorities and government officials immediately implemented rules restricting access to content deemed improper or harmful, and monitored Internet usage of its citizens ▪ Included many private citizens in their surveillance efforts, and implemented public propaganda campaigns to create atmosphere of fear from reprisal and self-censorship ▪ Tom MacLean director of International Business for Google Inc. for last nine months; starting to worry about his job security after a storm of criticism resulting from decision to agree to subject Google’s search results to Chinese authority scrutiny ▪ Felt that he and his team had been mindful of political pitfalls they could face in implementing their strategic plan in China; level and intensity of subsequent backlash and disapproval was unexpected ▪ Elliot Schrage, Google’s vice president of Global Communications and Public Affairs,

Defended Google’s censorship agreement as necessary, while at the same time admitting decision conflicted deeply with Google’s core principles, and that it was something they were not proud of ▪ Congressional hearing planted seeds of doubt in MacLean about Google in China decision. Starting to question if Google was endorsing censorship by conforming to the Chinese authorities’ rules, if Google was acting as a tool for the government, if Chinese citizens were actually better off after Google’s decision to enter China, and whether censorship decision did go against their stated corporate philosophy ▪ Top leadership claim Google’s decision was made based on information currently available at the time; were not afraid to revisit that decision if necessary

▪ MacLean has only one day before attending a meeting where he would be questioned on the development and implementation of Google’s China strategy and asked for his suggestions for future courses of action ▪ MacLean under a lot of pressure to act, but his instinct is to stick by his strategy and let it play out a bit longer; hoping that Senate hearing would be the last bit of publicity for a while

Problem Identification: (Write in complete sentences from now on)

Key – Identify major problem(s) and any minor contributing problem(s) ▪ Google’s launching of Google China and agreeing with Chinese government’s censorship demands has tarnished their reputation and public image (major) ▪ Lots of bad publicity generated globally; makes them look like hypocrites ▪ Caught between alienation of a potentially extremely lucrative international market and an ethical dilemma of global proportion ▪ Company ridiculed for its professed “don’t be evil” motto; critics blame Google for supporting a country with a regime known for its numerous, well-documented abuses of human rights and oppressive measures; violation of internationally recognized norms (minor) ▪ What should MacLean say at the meeting to justify his strategy? ▪ Has it become necessary for Google’s top leadership team to revisit decision in light of new information and circumstances? What should we do? Under a lot of pressure to act….soon

Inferences:Key – Read between the lines and make some assumptions about the case that are suggested but not explicitly provided (read between the lines) ▪ Decision by Google to select China as its international target at this particular point in their political and social history is suspect, however, in accordance with their long-term global strategy, they could not pass up such a tremendous opportunity ▪ Censorship decision was necessary to maintain their position as global search-engine market leaders and to fend off advances from major competitors such as Yahoo! (who already have an established foothold in China) and Microsoft

▪ Capable of weathering out the storm of criticism without major negative financial implications ▪ In time, entire episode will simply “blow over” as media moves on to something else ▪ For long-term gain, worth putting up with short-term pain ▪ Actions can be justified if given the proper “spin” ▪ No irreparable damage has been done to the company’s reputation ▪ International business risk associated with decision can be managed

General Case Ideas:Key – Link applicable course material/theory to the caseState applicable theory (the “what”)▪ The global economy (Chapter 1, pages XX)▪ Cultural influences on global business (Chapter 3, pages XX) ▪ Hofstede’s Cultural Dimensions & Market Screening Process handouts ▪ Ethics and Corporate Social Responsibility in International Business handout ▪ Government and political influences on global business (Chapter 4, pages XX) ▪ Managing international business risk (Chapter 21, pages XX) Make relevant connections between course theory and the case (the “so what”) ▪ There are four major categories of the international business environment that MNCs should consider when deciding on potential expansion markets: 1. Geographic Conditions (climate, terrain, seaways, natural resources) 2. Cultural & Social Factors (accepted behaviours, values, and customs; language, education, religion, social relationships) 3. Political and Legal Factors (type of government, political stability, government policies toward business) 4. Economic Conditions (type of economic system, general education level of the population, types of industries, level of technology)

▪ The two of these that are most applicable to this case are: Cultural & Social FactorsThe more similar one’s own culture is to another in history, language, religion etc., the less difficult it is to conduct business in that society. But when societies differ on most of these characteristics, the potential for difficulty grows exponentially. For most American businesses in China, this potential is very high. There will be innumerable, unforeseen challenges, even when there is an honest effort to learn about and understand China and its people. When doing business in China, many cultural and social considerations must be addressed. Political and Legal Factors

China has been under the communist party rule for many decades. The communist party exercises absolute power over legislations and economic and cultural institutions. Unlike western economies where the government promotes transparency for doing business, in China rules and regulations are not so transparent. Strict laws and patents in economies of the west protect domestic and foreign businesses, whereas in China, the legal system is loosely defined, giving rise to various loopholes in the law. When doing business in China, many political and legal considerations must be considered.

Conclusion and Recommendations:Key – Suggest specific and implementable solutions to solve identified problems ▪ Maintain status quo regarding decision …but go into damage control mode ▪ Hire an internationally-experienced and renowned public relations firm to present the situation in a more positive light (“spin doctors”) ▪ Counter bad publicity by using the media to your advantage. Issue a series of press releases arguing that it would be more damaging to pull out of China altogether; address criticisms directly and clearly explain the rationale of your decision ▪ Argue that censorship is necessary to keep the Chinese government from blocking Google altogether, and that Google can play a role more useful to the cause of free speech by participating in China’s information technology industry than by refusing to comply and being denied admission to the mainland Chinese market

▪ Highlight the fact that Chinese authorities have restricted citizens to popular search engines such as Altavista and Yahoo! in the past, and that while removing search results is inconsistent with Google’s mission, providing no information at all would be even more inconsistent with their mission ▪ More public visibility of Yahoo founders Page and Brin as well as CEO Eric Schmidt. Delivery of consistent message through carefully orchestrated television and print ad campaigns and appearances at national and international industry forums ▪ Alter public perception through increased promotion of Google’s philanthropic work ▪ It is not Google’s job to fix governments but to provide the best service to users and the best return possible to its stakeholders. By choosing to do business in China, it is their job to serve the Chinese people in their best, albeit restricted, manner given current political climate ▪ If we didn’t do it, someone else would have

▪ Emphasize that censorship issues are not restricted to China and that Google also had to do similar things in Germany as well as in their own home country to meet legal requirements ▪ Stand together as an industry. Enlist rival’s assistance with similar issues and common interests. Get Bill Gates, billionaire founder of Microsoft, to stand up for arch-rival Google and argue that state censorship was no reason for technology companies not to do business in China. Get Gates to issue public statement that the Internet “is contributing to Chinese political engagement, as access to the outside world is preventing more censorship” ▪ Close its China offices and abandon market