Google in China Harvard Case Solution & Analysis

Google Inc. vs. Baidu

The Google Inc. and Baiduhave been competingin China in order to increase the usage of their respective search engine market shares. Significant source of revenues for the two companies is cost per click (CPC) methodand the results of the second quarter, as collected by the China Internet Watch (CIT) shows that Baidu has outperformed the Google Inc. in terms of revenue generated through CPC from different industries who have managed their advertisement on the internet through CPC ads (Incitez, 2014). However, Google Inc. has generated higher revenue from the industries such as metal and chemical material, insurance and electrical equipments, but revenues from these industries are quite lower than other industries where Baiduhas a dominated position.Baidu has reported revenues of $1.932 billion during the second quarter of 2014, whereas, Google Inc. has generated $15.42 billion in revenues during the 1ast quarter of 2014, which are significantly higher than the revenues of Baidu (Dan, 2014).

PESTLE Analysis

Political Factors

The Chinese government authorities have been inquiring about the information that Google.cn has gathered since the beginning of its operation in China during the 2006.Chinese Governemtn has put pressure on Google to censor certain results as well.The government of China has also taken initiatives to limit the access of international online companies.(Incitez, 2014).

Economic Factors

Chinese Market for Internet Search Engines

The China’s internet search market has been growing during the year 2013but experienced a slight decline in internet search engine's revenues during the first quarter of 2014. However, Google Inc. represents only 12.8% revenues of China’s internet search engine market during the first quarter of 2014, meanwhile, Baidu has a market share of 79% during the same period, which shows that Baidu is more profitable and is more popular search engine among the Chinese masses (Incitez, 2014).

Social Factors

Further, the local culture of China is very much different from that of the United States. Hence, a different society and culture of China has a significant effect on the operations of Google Inc. in China. Because Google Inc. uses an advanced technology that enables Google’s search engines to identify the location of its search engine users and gathers other informations, which is considered to be very bad practice according the Chinese societies (Kevin, 2014).

Technological Factors

Additionally, the search engine requires regular upgradation of search methodologies, algoritms and advanced computers that enable the users to search their required information from the internet. However, the Chinese market for internet search engines is developing and a Chinese search engine Baidu, which is a major competitor of Google Inc.has developed its search engine but still the technology of Google Inc. is more advanced compared to Baidu. Therefore, the technological factors are not like to impact the future positioning of Google Inc. in China (Keith, 2014).

Environmental Factors

However, since the internet search engine does not affect the environment, neither have they had other harmful affect on the lives of surrounding population. Therefore, the Chinese local environment is not going to influence the operations of Google Inc ((Lauren, 2014).

Legal Factor

Meanwhile, Google Inc. has been enquired by the Chinese law enforcement authorities for the provision of user information that Chinese agencies may use for national interest. Hence, Google Inc. has to face the regulation imposed byChinese government; meanwhile, Google Inc. has to adhere to the GNI code of conduct which requires its members to protect the consumer information in order to protect the right of freedom of speech for its users.

Ratio Analysis

Liquidity Ratios

Current Ratio:

Liquidity ratio measures the company’s ability to meet its short time cash requirements in order to repay the short term liabilities. Currently the current ratio of Google Inc. is 4.58 times, which means that the company has only $4.58 of liquid assets to repay $1 of its current liabilities. However, the current ratio is significantly higher, and incurs an additional cost of capital that is tied into the management of current working capital. Meanwhile, the current ratio has been at the same level during the five yearperformance, which shows that Google Inc. has maintained its working capital.

Quick Ratio:

Further, the quick ratio also measures the short term liquidity position, but it considers the cash and cash equivalents and trade receivables in this calculation because they are more easily convertable into cash than the inventory or other current assets. However, the quick current ratio of Google Inc. is 3.69 whichmeans that the Google Inc.can afford to pay $3.69 for each $1 of its current liabilities in a very short time period, which is again higher. Meanwhile, there is not much difference between current and quick ratio which is due the insignificant level of inventors. However, the quick ratio has been decreased during the last five years in order improve the working capital management...........................

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