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Google in China

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Google in China

Cohort Manara

Google In China

Corporate Social Responsibility Professor Kenny Tang

HULT International Business School Module B

Submitted By: Manara Team 10 Hafswa Salim Adriéne T. Smith Ornella Anoh Aravind Sathyanandham Yogesh Ranwa Samer Abou Fakher

March 9th, 2014

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Google in China

Cohort Manara

Table of Content Analyze…………………………………………………………………………………………………………………………………………………………………3

Stakeholders…………………………………………………………………………………………………………………………….…………………………..3

Alternatives……………………………………………………………………………………………………………………………………………………………6

Recommendations…………………………………………………………………………………………………………………………………………….……8

Evaluation…………………………………………………………………………………………………………………………………………………………..….8

Reference………………………………………………………………………………………………………………………………………………………….……9

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Cohort Manara I. Analyze Situation Analysis: Google a US company that provides various technological goods and services to help individuals and businesses make everyday life more efficient and simple wanted to extend their brand presence and launched a new website in China. As the #1 online search engine provider who prides itself on organizing the world’s information to make it accessible and useful1they had a challenging experience with this new website launch. This caused a great controversy in companies history.2 In early 2006 they launched a Chinese-­‐language version search engine of Google.com and the effect was not a positive one. Their primary purpose was to increase it’s presence within and growing economy and offer Chinese users an online platform that is simple and efficient. However, several circumstances surrounding this new implementation including: censorship, corporate government compliance, foreign legalities, company’s future credibility, compromised company’s operating mission, values and ethical beliefs arose from this corporate issue. Therefore based on this we can conclude that human right is the primary CSR issue revolving around this case.

Managements Strategic Objective: Google’s expansion aim was to make information reachable and ensure communication to people all over China. However Managements business and strategic objectives seeking to address the issue were non-­‐existent. Operating in a country like China allows no room for business strategy especially if it relates to Internet access. Either the companies comply with the government enforced censorship laws or they choose not do business within those confines of that country. Problem Analysis: The following information was not available in the case that could have been helpful to make a decision: Financial Information and Information as to whether Google did extensive research on the affects of it’s other stakeholders outside of China. Key Issue: “How to successfully have a presence in a country with an aggressive censorship system?” II. Stakeholders

The management’s decision to enter China, a country that has an aggressive censorship system resulted in several consequences against stakeholders. The tables below outline the list of the specific stakeholders affected by the key issue mentioned earlier as well identify their concerns and motivations by ranking them in term of priority (low, neutral, high).

Table 1: Stakeholder List

https://www.google.ae/intl/en/about/ University of Western Ontario, Richard Ivey School of Business Article “Google in China” Case # 906E19 3

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Cohort Manara

Stakeholders Interest/Expectation o Reputation on stake (-­‐) o Their main motive is to provide information to the general people (+) o Generate revenue: maximize return for shareholders (+) o Expand and growth globally (+) o Strategies used to enter the Chinese market go against Google’s principles and vision. (-­‐) o Return on investment (+) o Keeping the reputation of the company in shape so as to avoid any but publicity that can be associated to them. (-­‐) o Return on investment: profit (+) o Share price (+) o Keeping the reputation of the company in good shape: “backlash” can also affect the stock price and value (-­‐) o Higher benefit (+) o Job opportunities (+) o Incentives (+) o Job security (+)

o Government and military information hacking by Chinese hackers (-­‐) o Cyber attack (-­‐) o Relations with the Chinese government (+) o Citizens are the main factors in stake (+) o Trying to balance the demand for more information (-­‐) o controlling and maintain power (-­‐) o Avoid regime downfall: if Google were to supply open search results it could create public revolution (-­‐) o Freedom of speech: people from China should be freed (-­‐) o Free and unlimited access to information (-­‐) o Difficulty to know for sure what is going on in China at any given time (-­‐) o Right to access all information; even those hidden from them by their government and censored by Google. (-­‐) Do not get the full access and use of the internet (-­‐) o The Full “freedom” of the internet as a tool of freedom of speech (-­‐) o Right to access all information; even those hidden from them by their government and censored by Google.(-­‐) o Higher profit (+) New market opportunity (+) o Website traffic increases (+) o More revenue (+) o Communication within and outside Chinese border(-­‐) and privacy and data protection (-­‐) o Avoid misleading the public with misinformation and censorship of the truth (-­‐) o Want information to be make public (+) o importance of the individual expression (-­‐) o foster progress in society (+) o Possibility to make their claim public (+) o foster progress in society (+) o Threat to the market share due to Google competitive advantage (-­‐) o Losses (-­‐) o Could be put out of business (-­‐) o Decrease in market share: Google is entering a new market and expanding(-­‐) o Easier access to Chinese market (+) o Free flow of information (-­‐) o Higher regulations of information entering China: downfall could be diplomatic crisis, internal affairs crisis. (-­‐) o Access to unlimited information at any given time (+) o Accuracy and transparency of information (-­‐) o With more freedom comes higher regulations and restrictions (-­‐) o Harassment and Jail time for violating the rules (-­‐) o Increase in the demand of hardware (+) o More revenue (+) o Building lasting relationship/ contracts (+) o New market opportunity (+) o More revenue, more growth (+) o Reputation at sake since associated with Google.(-­‐) Importance

Google

High

Banks: Financial Institution Shareholders

High High

Employees US Government Departments Chinese Government departments

Neutral

High

High

Community Chinese Users Expat Users Advertisers Content Providers Software and hardware users Censorship Activists Other Human Rights Activists Local Competitors Global Competitors Foreign Media

High High High Neutral High High

High

Neutral High High High

Chinese Media

High

General Suppliers Advertising Companies Computer Software Companies

High Neutral Low

oAndroid, Apple, RIM oIncreased Revenue (+) oGlobal Exposure(+) o Higher profit (+) Internet Software o Covering more ground (+) Providers o Greater accessibility to their service worldwide (+) o Market expansion and growth (+) o Higher investment in R and D so as to overpass censorship system (-­‐) VPN Providers o Higher costs (-­‐)

Table 2: Stakeholder’s Ranking

Low High

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Cohort Manara

The above ranking showcased in table 2 derives the following in depth analysis of the two most important categories in the mix. • High power/ High interest: Google engages in strategies to satisfy the advertising companies, shareholders, suppliers, consumers and service users, Google’s management, financial institutions and the Chinese government. These stakeholders are always considered when implementing new strategies and while governing the company even at a national level. On one hand, the Chinese government is very important; the corporation is obliged to comply with all the rules and regulations as long as it does its business in China. Departments under the Chinese government have the “power to influence”. They impose their will and bring the desired outcomes. Moreover the competitors, at a global and national level can also be categorized in this category. Google also carefully monitors its competition on a national and global level within its external environment and take into consideration changes when evaluating or implementing any new strategy.

• Low power/High Interest: The media and the censorship activist group play an important role in influencing the more powerful stakeholders even though they have a low power within Google. The censorship system is a sensitive matter and claims important to these stakeholders; in other words, the “urgency to claim” is priority. As a result, the main goal of Google is to maintain a constant communication with them to ensure and keep track of any raising issues so as to react accordingly. Overall the priority of these stakeholders does not change much during the timescale, as the government does not alter the decision to change their censorship policies. Therefore it is up to Google to either accepts the restrictions or they leave China entirely. If Google decides to leave China, it will not lose any of its credibility. However the existing competitors within China would greatly benefit from this, increasing their local market share, and revenues. On the other hand the Chinese Government, the Chinese and expatriate users, the local and global media as well as shareholders might incur heavy losses, in terms of profits, flow and accessibility to information. The more penetration into the Chinese market, the more conflicts among stakeholders. For example the revenue generation will increase the corporate value for shareholders however, as critics and media backlash take place, shareholders priorities will definitely change resulting them in no longer focus on the profitable and lucrative aspects of this strategy, but on the long term consequences for the corporation; such as it is reputation, image, and its corporate value.

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Cohort Manara Materiality Mix: Win-­Win Situation

Table 3: Materiality Mix

Google could align the stakeholders’ expectations with the management objectives; such as its purpose to maximize returns to shareholders, to create a win-­‐win situation. The materiality matrix above summarizes our findings. This win-­‐win situation can be achieved if Google implement strategies toward accomplishing for example corporate goals and vision, fostering its reputation, maintain its brand, build and improve customer’s satisfaction and so on. III. Alternatives Google essentially faces 5 alternatives to be based on the following 3 options: Stay in China, partially exit China or leave China completely. If Google chooses to stay in China they could consider the following 3 alternatives: Alternative 1: Do nothing and fully comply with the Chinese government The strength to this alternative is to be able to address the shareholders profit maximization theory by taking advantage of the Chinese growing economy and increasing internet usage, while still complying to the governments demands. This would solve the problems with the Chinese government placing Google in a good competitive position to Baidu. Majority of the Chinese users are most likely going to accept this solution as they are generally used to censorship. However this would intensify Google’s image problem being faced in the United States as well as other parts of the world and its inability to achieve its mission. With this option Google will just be just giving in to the Chinese government demands without any further discussion, and it is very likely that the Chinese government will intensify these demands over time, creating further future conflicts. Alternative 2: Use Media to manage the situation. Another alternative could be the creations of full fledge Media campaign. The management can utilize media to justify their actions of censoring google.cn and rationalizing their step. Through this action Google will be able to provide first hand information directly to the protestors an the public on their actions of self-­‐censoring the search engine. This will provide Google with a chance to alter the public’s

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Cohort Manara opinion and save their brand image and motto “Do No Evil”. However this can back fire on Google in many ways as media and protestors can create complex questions and raise difficult issues, which can directly harm Google’s brand image as well as reputation. Moreover media is also known for modifying statements and justifications and this may likely affect Google as they may feed the public with complete different perspective which can negatively impact Google’s share prices and market value. Alternative 3: Apply political pressure on China Google could utilize its ties in the United States to convince the United States government to apply political pressure on China. This would likely solve Google’s image problem in the United States as well as Google’s operational problems in China. However the probability of success is very low since China highly relies on its emerging economic power and importance therefore tends to ignore foreign criticism for its actions and policies.

The above option based on Google staying in China has the following advantages and disadvantages: Advantages Most of the information will be accessible. • Google will become the best search engine • For the government Google will provide transparency to • users • Maintain the large market share Promote global growth On the other hand Google can also decide to partially exit by considering the below alternative: Alternative 4: Withdraw google.cn and merge with a local partner in offering other services To help reduce the risks and costs associated Google could withdraw partially from china by creating a joint venture or merge with a local company, such as Baidu. The establishment of a business partner is a good strategy to help divert the negative media attention that Google is currently receiving. If this venture proves to be successful then the integration of the two companies can form an entity that can operate as a subsidiary under Google’s direct command, and also keeping away from the media attention that Google is currently attracting. Advantages Presence to Chinese market Minimum interference from the Chinese government. Disadvantages Less information will be provided to the Chinese people Possible loss of jobs Loss of current investments Loss of Chinese market share Loss of becoming the best search engine Loss of long term returns market share and profit growth Disadvantages Loss of reputation and brand image. Change in users perception of Google as unstable Complying to Chinese standards Continuous censorship

• • • • •

• •

However if Google wishes to maintain high ethical standards then they could opt for the following alternative Alternative 5: Leave China and its growing market. Google should be committed to maintaining high ethical and moral standards since it is a big multinational company. Leaving China is likely going to ease the tension going on against Google’s serving China under the censorship, i.e. “doing evil.” Moreover, this alternative

• • • • • •

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Google in China

Cohort Manara is likely to demonstrate Google’s concern for social responsibility as well as improving its brand image and profits in western markets. However this might upset its advertisement partners who will be loosing revenue in China.

Advantages Google will be upholding its reputation Affirmed anti censorship viewpoint Customer loyalty and reputation maintained Disadvantages Less information will be provided to the Chinese people Possible loss of jobs Loss of current investments Loss of complete Chinese market share Loss of becoming the best search engine Loss of long-­‐term returns market share and profit growth to rival search engines.

• • •

• • • • • •

III. Recommendations

Although Google takes a lead away from its competitors in the international web search space, the expansion of its organization into the Chinese market is definitely posed great challenges. As a multinational company, brand image and reputation is very important and any conflict between ethics and social responsibility should be avoided. Based on the varying socially responsible and ethical considerations in this case, Google should have completely withdrawn from the Chinese market and explore other potential markets for expansion. Every individual corporation and person has an obligation to maintain its own values, ethics and beliefs and they should not under any circumstances violate these. Although Google would completely miss out on the growing Chinese market, staying in the Chinese market would definitely contradict Google’s own beliefs and values by accepting to censor and limit information to the Chinese citizens. This maintenance of brand image is very important as it creates a competitive advantage of having loyal customers and positive brand image. Another corporation will definitely enter the Chinese market and this can result in the possibility of the Chinese government building proper market guidelines with the other company hence alleviating some of the Chinese government strict regulations on censorship. And if this opportunity is to arise Google can re-­‐enter china and slowly begin to capture the Chinese market from the first mover through word of mouth. Once this is done Google should 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 are. IV. Evaluations Effectiveness of the Recommendation: As much as Google has incurred a cost in being in China its best for them to leave as the cost of staying in china may result in greater losses. By implementing the above-­‐mentioned recommendation Google would have been upholding its reputation, values and ethics. This would have resulted in Google maintaining its current revenue from its loyal customer base outside China and attracting more external users in the future by upholding to it values and mission. However this would not be the case if Google decided to stay in China as there would loose more revenue from its loyal customer base compared to the revenue gained in China. The generation of revenue as well as brand reputation protection will likely to boost corporate value of Google thereby attracting more shareholders to the corporation increasing the corporation’s capital. Furthermore there would be no potential future controversial conflicts between the both governments (Chinese and US) and the corporation therefore maintaining a normal relation

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Cohort Manara between both parties, this is likely to benefit Google in the future should they consider establishing services other than internet access in China. Lastly completely withdrawing from China would have likely increased the social interaction between users outside China i.e. not only will the loyal customer base continue using Google, but new users will be attracted to this service as Google explores and expand to other potential markets. Management Scaling: On a scale 1-­‐5 (with 1=lowest 5=highest), the management's rate of handling the situation would be a 3 . After all the government restrictions, pushback and public criticism Google CEO stated, “It is arrogant for us (Google) to walk into a country where they are just beginning operations and tell that country how to run a itself”. This showed that the management showed great respect as a foreign company and adhered to the rules and regulations of the country and was not tempted to create any controversial issues. But however this choice and their decision of staying in China were only looking to maintaining its reputation within China and not abroad as adhering to the censorship system conflicts with the corporation’s mission. Lessons Take Away: Many of Google’s stakeholders outside of China weren’t too thrilled with the decision; letters were sent to management, rallies were organized. This showed that Google failed to consider all stakeholders and decided to continue its operation efforts in China focusing on achieving a great market share. From this we learn that shareholders have the greatest power in any business and their objective of profit maximization will always be a priority for any business. Furthermore when Google tried to increase its global presence into another part of the world they didn’t fully evaluate the risk from the response of it’s other users around the world. It’s important to always keep in mind that when it comes to business, government relations are extremely critical. Google knew who they were dealing with but only to a certain level and failed to fully consider how their corporate values and belief would be compromised when operating in a very strict society. Unfortunately with, China’s policy “when in China do as the Chinese do” Google could not infiltrate or manipulate the system which lead to the removal of certain content from google.cn. Reference Stanford Graduate Business School, “Google in China” Case # P-­‐54 2014.[ONLINE] Available at: http://www.ihrb.org/commentary/staff/google_china_decision_remarkable_courageous_and_far-­‐ reaching.html. [Accessed 07 March 2014]. Google – About Google. 2014. Google -­‐ About Google. [ONLINE] Available at: https://www.google.ae/intl/en/about/. [Accessed 07 March 2014].

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...Analysis of the problem. * Case is based on the negotiation that took place between Google and the Chinese government to allow their citizens access to Chinese version of Google. 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 USA and multinational companies. But Chinese government had censorship demand to Google that created some problems with opening Google search engine in China. * In 2002 Google was blocked in China. It all happened because of Chinese culture and maybe of political views. Co-founder of Google Sergey Brin began to read a dozen books to know this country. And then Google was restored for unknown reasons but Chinese users faced another problem – censorship. Chinese government very aggressively began to censor Google’s search results. Google censored some historical moments, political topics such as democratic reform, Taiwanese independence, the banned Falun Gong movement and references to the notorious Tiananmen Square massacre of democratic protestors that occurred in 1989. After that the human rights activists protested against Google. Their argument was that Google abandoned it principals in order to make higher profits. * Explanation of implication of issues and problem for affected parties is simple. Google wanted to operate in China due to its economy and market potential and don’t wanted to lag behind of its......

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Premium Essay

Google in China

...Google in China Case Study Introduction On January 12, 2010 Google’s Corporate Development and Chief Legal Officer, David Drummond, posted an online memo that targeted the Chinese government. The company stated that it had detected highly sophisticated cyber-attacks originating from China and that the evidence suggested the primary goal of the hackers was to access Gmail accounts of Chinese human rights activists. The memo further disclosed that Google was no longer willing to censor its search results on Google.cn and it would exit China if its conditions on non-censorship were not met. The problem faced by Google is that, the Chinese government has been determined to control the flow of information on the Internet and insists on removing certain information that it considered politically objectionable from search results. Google’s mission as a company is “to organize the world’s information and make it universally accessible and useful. However, China’s policies on censorship seemed to conflict with several of Google’s core principles. There is also the question; did Google do its homework to thoroughly analyze the Chinese operating environment as it relates to censorship? By 2005, Chinese search engine company, Baidu, emerged as the leading internet search engine in China. A very important piece of information to consider is that, freedom of speech and freedom of the press are not considered inherent rights in the People’s Republic of China. Therefore, to compete......

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Premium Essay

Google in China

...at Duke Universit y Business Ethics GOOGLE IN CHINA “The Great Firewall” Prepared by Kristina Wilson, Yaneli Ramos, and Daniel Harvey under the supervision of Professor Wayne Norman (edited by Professor Chris MacDonald) In early 2006, search-engine giant Google struck a deal with the People’s Republic of China and launched Google.cn, a version of its search engine run by the company from within China. Launching Google.cn required Google to operate as an official Internet Service Provider (ISP) in China, a country whose Communist government requires all ISPs to selfcensor, removing content that is considered illegal from search results. From a financial perspective, China represented for Google a dynamic and fast-growing, though increasingly competitive, market. Google’s decision to self-censor Google.cn attracted significant ethical criticism at the time. The company’s motto is “Don’t Be Evil,” and prior to entering China, Google had successfully set itself apart from other technology giants, becoming a company trusted by millions of users to protect and store their personal information. The choice to accept self-censorship, and the discussion and debate generated by this choice, forced Google to re-examine itself as a company and forced the international community to reconsider the implications of censorship. This case was prepared as the basis for class discussion rather than to illustrate either the effective or ineffective handling of an administrative......

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