Google in China (B) Harvard Case Solution & Analysis

Company Overview

Google Inc. had started its journey as an online search engine and soon after its inception it became a market leader in the internet market. The company’s rapid growth and success were the result of its highly developed processes and the capability to make innovation in the world of information technology. Google had launched its search engine facility in China, Google.cn, at the start of 2006. The market share and revenue growth of the company had increased steadily in the Chinese internet market between 2006 and 2009. The company’s revenues reached to US$23 billion by the end of 2009 and it had dominated the global online advertising market through its AdWords and Adsense products. These products had enabled the company to enjoy two third of the US market share and were accounted for 97% of its overall revenues. The company had also got an entry to the mobile phone market by developing a mobile operating system in 2008, Android, which would compete the Apple’s iPhone OS. The company was running more than one million servers in parallel data, developing proprietary technology, which was capable of processing more than one billion search requests and 20 petabytes of user-generated data every day.

Earlier to its official launch, Google was providing services in China through its US based servers, but after the development of a firewall by the Chinese government to censor the information provided by different search engines and other online websites for the Chinese people, Google was unable to maintain the speed and performance of its services through the US based servers. As a result the company took an initiative to open its operations in China because they thought that it would be better to provide censored information rather than providing no information at all. But the company was still much behind its major competitor i.e. Baidu, in the Chinese market in terms of product development in local languages. On the other hand, Baidu had also introduced the pay for performance (P4P) model, which was totally based upon the performance rather than charging fixed prices for their services, which had changed the overall structure of the industry and left Google and other players far behind. Google had also faced a number of legal and security related issues in the Chinese market, which had compelled executives of the company in the US to consider the continuity of its future operations in the Chinese market.

S-W Analysis

•    Strengths: - Google had a strong global presence over more than 150 countries of the world and considered as a clear leader of the world’s internet search engine providers. It had made an astonishing success since its inception through a strong product development and R&D facility. The company was offering a number of services to the online community, i.e. Gmail, Google Talk, Google Chrome, Google search engine, AdWords, Adsense, Google Earth, Google Translator, etc.…. It had a strong sales function to support the internet search business of the company in different regions of the world. Due to its strong global financial position and professional team, the company had established a sophisticated infrastructure in the Chinese market, which had let it to compete and develop new products according to the preferences and compatibility requirements of the Chinese market. Due to its global presence, it had an advantage of low operating cost and high customer brand loyalty.

•    Weaknesses: - It had not focused upon the development of Chinese local language products for that specific market. Though the firm had conducted a comprehensive research before its entry to the Chinese market but still it was unable to meet a number of legal requirements of the Chinese government. Google had published the works of a number of Chinese authors without getting approval from them, which had left the company in disputes with them. The company’s revenue model was an advertisement driven one, which would not best suit for long term sustainability in the market. Flat charges model of Google for advertisements would be capable to compete with the Baidu’s P4P model. Censoring requirements of the Chinese government would limit the Google China’s capability to search contents of the foreign websites and their associative-word function.

External Environment

In order to understand the external environment of the industry, we will perform PEST analysis.

PEST

•    Political: - The political environment of China was not in favor of the company because of the lengthy approval process for the company’s operations in China. The government of China had also imposed a number of legal restrictions on Google regarding its capability of providing an access to the foreign websites and independent democratic mode of searching. It had also faced a stiff resistance from the censorship policy of the Chinese government.

•    Economical: - The economic condition of China was stable and growing rapidly, which was a favorable advantage to the company in order to move towards the Chinese market because most of the people were switching to the internet and being a global leader Google, could capture their attention easily. Most of the online and real world companies had started establishing their operations in China; therefore Google could enter into some...............

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In January 2010, a public statement, Google threatened to stop censoring search results on your website Google.cn, as required by the Chinese authorities. If Google leave China? Or attempt to compromise with the Chinese government? "Hide
by John A. Quelch Source: Harvard Business School 1 pages. Publication Date: April 1, 2010. Prod. #: 510110-PDF-ENG

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