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For Google in 2005, from a business perspective, what are the arguments for and against entering China?

The decision of whether to censor data in exchange for access to a multi-billion dollar market or to maintain a level of international integrity was a dilemma Google faced with their opportunity to enter the Chinese market in 2005. Two years after their inception in 1998, Google had enjoyed positive growth leading to them owning 25% of market share in the Internet search market; once search results became censored in 2004, Google experienced the complexities of working with a dictatorship when posed with the opportunity to enter a communist market, China. In 2005, Google’s Board of Directors met to discuss the pros and cons, and the costs and benefits, of entering the Chinese market, knowing that they would be required to limit the information they made available to Chinese users.
If Google chose to enter into agreement with the Communist Party, they would be able to tap into an enormous market opportunity. Google would thereby be able to establish a dominant presence within one of the world’s most rapidly growing countries, getting potential access to over 1.3 billion people and 103 million Internet users. Furthermore, China has been able to break barriers in every market, quickly demanding the attention of foreign investors: “As a result of these [Mao’s successors] reforms, China’s GDP grew tenfold over three decades” (Ibid., 471). Worsfold’s Google in China case study explains:
“In the U.S., nearly 70% of the total population is online, whereas in China, fewer than 10% of its 1.3 billion people use the web. With 20, 18, and 34% growth in web users for the years 2005, 2004, and 2003 respectively, the PRC will soon make up the world’s largest block of internet users”.
Every company has an obligation to their stakeholders and Google establishing themselves in a position that would allow them to reap growth from the global market can be seen as an opportunity they would be foolish to not take.
However, there are equally plausible arguments that should have caused Google to refrain from entering the Chinese market altogether. The communist party has controlled China through crude censorship for many years, and their dedication to their reign of control cannot be underestimated even now. The Communist Party of China (CPC) is “known for its pervasive corruption and widespread human rights abuses” (Worsfold). Accordingly, there are many risks Google would have to take as a result of entering the Chinese market under the expected type of stringent CPC censoring and their poorly-defined repercussions for the Chinese people. Google would need to invest significant time and resources into managing the business relationship – a relationship that has no guarantee for long-term sustainability, due to competition that has an unfair competitive advantage, specifically on that of Baidu.
Many people believe that ‘making a deal with the devil’ is completely unethical and fails to honor the famous ‘Don’t be Evil’ Google mantra; from a business standpoint, this could mean result in tremendous backlash from the broader market. A tainted reputation can cause irrevocable damage for future business. Similarly, maintaining international integrity has the potential for positive press and building stronger relationships with key partners in the long run. In 2006, Google decided to enter the Chinese market and adhere to the CPC’s censorship rules. As a result, Google faced broad criticism and co-founder Sergey Brin found himself repeatedly justifying Google's position. By 2007, Sergey admitted that entering China was a mistake and that the decision had “… damaged the company’s reputation in the US and Europe”. Nevertheless, Google remained optimistic about becoming the leading search engine in Europe; their numbers however, proved otherwise at a disappointing 20% market share. Furthermore, a cyber attack on Gmail accounts of many human rights activists in 2010 pushed Google to the edge and was one of the defining catalysts for the company to pull out of the main land China domain and move the business over to the Hong Kong domain (Birch). Even though Hong Kong is part of China, it has rights to rule itself through 2047 through the One Country Two Systems policy.

From an ethical perspective, what are the arguments for and against entering China?

From an ethical perspective, there are several arguments for and against entering China. The goal of the Google search engine is “to organize the world’s information and make it universally accessible and useful” The question lies, can Google hold true to their mission while integrating itself into China? Many questions arise in regard to both business and situational ethics; while abiding by the rules and regulations instituted by the Chinese government, can Google remain ethically sound? When first launched in China, Google decided to release its entire website to the country and allow for the Chinese government to decide when and where to block content. The company essentially took a “path of least resistance approach” which resulted in the company taking no ethical responsibility for their actions, and putting responsibility for any deviation from their mission on the Chinese government and their provisions. Unfortunately, this was quickly shut down by the Chinese government as the government did not want information made available to the public for any content pertaining to Falun Gong, the Tibetan opposition, or human rights organization information. Consequently, during their re-launch in 2006, Google censored much information including the items on the unofficial blacklist of banned items. As Elliot Schrage, VP of Global Communication, noted, “Figuring out how to deal with China has been a difficult exercise for Google. The requirements of doing business in China include self-censorship – something that runs counter to Google’s most basic values and commitments as a company” The ethical choice made by Google hinged on being meaningful yet imperfect. Yet, the question that remains is whether this an ethical choice for the company as it contradicts Google’s commitment to free speech. As Morrill points out, “Situational ethics becomes very pertinent to the ethical decisions of Google in China” Schrage further elaborates his point commenting, “We believe that our current approach to China is consistent [with the mission]". “Our hope is that our mix of measures, would accomplish more for Chinese citizens’ access to information than the alternative.” Google is helping the average Chinese user gain more access to information within the constraints of communist ideals. As Harper addresses in Google isn’t evil, “the search engine will expose the Chinese people to a world of information and ideas” In this manner the company justifies its actions as appropriate and in line with business ethics. Yet, one must still address the mission of the company, the issue regarding free speech, and the motto of “don’t be evil.” Most Chinese internet users believe that the internet is changing politics in China: 63% believe that citizens will learn more about politics by going online, 54% of users believe the internet provides more opportunities for criticizing the government, and 45% believe that the internet provides more opportunities to express political views. Yet, can this be true if so much of what the general public is exposed to requires censorship? Furthermore, is the availability of a monitored site really allowing for a greater base of information, or is it simply increasing the “brain-washing” and governmental control of society? As Kai-Fu Lee’s equation refers to “freedom” as a critical component of Google’s work in China, it poses the question of: is it ethical for Google to only allow the site in such a restricted fashion? Is this true freedom? The argument’s foundation is built on the idea that Google should not cross the line of self-censorship, and should not be actively complicit in imposing limits on public information and free expression of speech. The internet freedom that Americans enjoy is not the same internet freedom enjoyed by people in China. The discussed disparities are what truly cause pause and also really highlight the question of whether situational ethics exist or are merely sound business ethics that should ring true despite various circumstances.

If Google decides to enter China, how can it do so while mitigating adverse ethical impacts? In answering this question, please formulate possible option and evaluate their strengths and weaknesses.

As we have discussed so far, Google's opportunity, and ultimate decision to enter the Chinese market, is complicated in both strategy and ethics. Despite Google’s decision to leave China in January 2010 in an effort to strengthen the company’s anti-censorship stance, Google recently announced that it is reconsidering its position and has renewed its license to do business in China. While the company has adamantly denied rumors that Google’s move equates to a graying of the company’s well known mantra “do no evil," it has made little effort to expand on its decision to renew the ICP license. Similar to the moral and ethical dilemmas the company faced in both 2005 and 2010, the company finds itself back in the spotlight as many question the motives and potential ethical infringements of this new decision.
Before reviewing the options available to Google, it is important to discuss the motives for reconsidering the company’s position on censorship in China. In addition to having one of the fastest expanding internet driven markets, China has recently presented two new opportunities in the areas of increasing advertisement displays and a lack of Google based Android markets. Google currently services a number of display advertisements, but has been hindered from market growth as a result of its departure from mainland China. In terms of Google’s potential in the Android market, China currently does not offer preloaded marketplaces on its smartphone devices. While it has attempted negotiations with multiple wireless carriers in China, the company has found itself mired by China's ongoing anti-censorship stance.
The two main issues facing Google today center on the potential ethical dilemma of operating in a country that violates fundamental human rights, specifically freedom of expression and thought, and the company’s obligation to its shareholders. As it had in 2006, the company still has many options in light of the ways that it could work to mitigate adverse ethical impacts if it chooses to fully pursue the Chinese market again.

Option 1 – Shareholder focused and Ethically Reasonable: Re-Enter the China Market and Comply in the Short-term while Working to Establish New Guidelines:

Based on a similar strategy used during the company’s 2006 entry, Google has the option to re-enter the Chinese market with the understanding that compliance will be accepted in the short-term. Initially, Google faced backlash for this strategy as many felt the company jeopardized abiding by its ethical standards, faced increased regulations from the Chinese government, and fled the market within four years. In order to prevent a similar occurrence, Google will need to work harder to ensure that new guidelines are established in a timely manner. There are a number of strengths in this approach, namely, Google would be addressing the financial needs and requirements of its shareholders and working to maintain its ethical position on non-censorship; realistically, this approach has potential. If Google was able to gain traction in the display ads market and Android Marketplace, then it might be able to pressure the Chinese government to collaborate on a set of censorship guidelines that not only meet the basic needs of the government, but that also allow Google to maintain its ethical standards for working towards a “world without censorship”. Major weaknesses in this plan are the ability of Google to withstand renewed backlash from within China and the ability to capture market share.

Option 2 – Maintain High Ethical Standards: Leave the Chinese Market:

As a company committed to maintaining high ethical and moral standards, Google can choose to withdraw completely from the Chinese market and focus on different markets. While this option would satisfy some stakeholders, it may not sit well with all of Google’s shareholders who see the financial and growth potential of the Chinese market; the potential returns could be enormous. This option faces a number of weaknesses beyond the potential loss of shareholder support. Google claims that it works towards facilitating a better world through expanding its services, so leaving the Chinese market altogether may be seen as a failure to live up to the company’s mission as well. The one strength this option would provide is that it would allow the company to blatantly affirm its stance on anti-censorship from an ethical standpoint.

Option 3 – Financially Driven: Re-enter the Market, comply with Chinese regulations:

The third option the company has is to re-enter the market without dispute of regulatory requirements brought on by the Chinese government and focus on capturing market share. Obviously this approach presents a number of questionable unethical choices and moral challenges on behalf of Google. Beyond increasing its financial status, which may have some positive side effects, including increased employment both foreign and domestic, this option may lead to many reevaluating the position of Google as a socially responsible corporation.

What do you think Google should do, and why?

Based on the varying socially responsible and ethical considerations, Google should not enter the Chinese market. However, as discussed, Google would do itself, and the global market as a whole, a disservice by excluding countries or communities from having access to their search and other services. While the Chinese government may be opposed to a total lack of censorship, it is important to consider that some Chinese internet users would be critical of Google for assisting the Chinese government in suppressing their own citizens, predominantly those who are nonconforming to their government's rules and are also strong advocates of human rights. To give you further insight, the Human Rights Watch, Reporters without Borders, and Amnesty International, had criticized Google and had the company hypocritical for agreeing to China's demands while also fighting the United States government's requests for similar censorship and tracking information. Furthermore, if Google does not enter the market, another company will. A trend in globalization is that markets are open and keeping all barriers to entry constant, it is possible for any company to engage in new communities and open markets. In light of Google's stakeholders (the users who want access to information), and in light of Google's shareholders (those who want to benefit financially and reap returns from the market entry), it makes sense for Google to re-enter the Chinese market. However, doing a cost benefit analysis in terms of what the repercussions would be from the Chinese government if Google enters with their anti-censorship stance would be necessary to estimate both short and long term sustainability in the market. Also, being the powerhouse that it is in its industry, Google should certainly be able to create more awareness of human rights campaigns to the Chinese government and the Chinese people to demonstrate how important free and open information is. Moreover, keeping a country's citizens at bay with huge gaps of information can lead to a weakness in the strength of a country in numbers. Information makes people aware and keeps them up to date on what things and issues are happening in the world. Putting a temporary slow-down in the face of globalization may hurt China in the long run in this particular case. Due to the aforementioned, we think it would be best to go with Option 1: Shareholder focused and Ethically Reasonable: Re-Enter the China Market and Comply in the Short-term while Working to Establish New Guidelines. This particular case makes entering the Chinese market for Google a catch 22 situation from a combined business and ethical standpoint, but given the right guidance, the right resources, and the time, Google can work in the short run, but aim for changes and new processes that will be beneficial to their shareholders, their stakeholders, and the Chinese market in the long run.

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