Executive Summary
Rarely do potentially momentous business decisions get made without a significant amount of debate, consideration, and in some cases, compromise. This is precisely the case in Google’s decision to not only open a product research and development centre in China, but also to revitalize its web search engine’s Chinese presence through launching Google. cn. In launching this new site, Google made the difficult decision to compromise on its mission of providing open and free access to information, in favour of increasing user satisfaction.
Essentially, though searches are easier and more streamlined through Google. cn, items that would have previous been blocked by the Chinese government on Google. com are now “self-censored” by Google itself. Thus, the decision was made to comply with Chinese policies, and from this, Google faced large-scale criticism that it was actively participating in the suppression of free speech. Faced with this dilemma, Google has hired Navigator Consulting to help determine its next steps coming from this decision. In this report we begin by identifying the key issues that Google must consider before identifying a direction.
These issues particularly surround balancing Google’s socially responsible reputation with its commercial interests of expansion and profit. This balance must be achieved, while also ensuring that Google maintains a competitive edge with both primary rivals (Yahoo! , Microsoft), and domestic Chinese rivals (Baidu). Following this we analyze these issues using a SWOT (Strengths, Weaknesses, Opportunities, Threats) Analysis, a PEST (Political, Economic, Socio-cultural, and Technological) Analysis, and a Porter’s Five Forces Analysis to assess over-all industry attractiveness.
Prior to these, we ensure to set out the relative importance and urgency of each issue that Google must consider, with Corporate Social Responsibility and Shareholder Profit ranking high in both importance and urgency. Recommendations are then made for Google to consider as they go forward from this decision. Despite facing criticism, Google should remain in the Chinese market, functioning and developing as was intended prior to any reservations felt upon facing negative public opinion. Google’s motto is “Do No Evil,” and we wholeheartedly feel that in this circumstance Google has done no evil.
Instead Google has committed itself to a competitive advantage through increasing Chinese user satisfaction and opening new R&D and product development opportunities. More importantly, Google has also established itself as a potential catalyst for making further inroads in increasing freedom of expression in China. From this, steps for the resolution of this issue and the implementation of recommendations are suggested for both the short and long term. In the short-term, Google is primarily concerned with managing the negative public opinion through producing a solid media message and pursuing a dialogue with its critics.
From this dialogue should come tangible outcomes for mitigating its impact in the Chinese market and working towards future reforms in Chinese freedom of expression. In the long-term, Google, should continue working towards these reforms, continue working to satisfy its new Chinese user market, and over-all, continue producing the same high-quality, innovative products and services that has established it as an icon in the digital age.
As the case is extensively studied, our panel felt that the aforementioned issues were important for Google to succeed globally. Discussion for each issue is presented below. There on, Google has always seen an upwards trend in its share prices earning net profits year after year for its share holders. Google shares traded at $ 466 on January 13, 2006, the highest it has been since the IPO. Following the press release on February 03, 2006 and the Congressional hearing the share prices dropped further to $357 on March 10, 2006, a drop of 23. 39%. At this time, the investors are alarmed and further drop in stock prices is foreseen if remedial actions are not taken. Thus, at the present time it is key for Google to address its falling stock prices and regain confidence within investors.
Corporate Expansion
The presence of Google on the World Wide Web is incomparable to any other website or search engine in operation. Availability and usability of Google is still constricted to the western world and the rest of the world either faces issues with speed or other technical glitches. Google needs to move into newer markets and gear its services towards specific users.
Thus, Research and Development of new services catered towards specific markets becomes essential for the progress. In this situation, Google had an opportunity to extend its services to a vast majority of users who are expected to increase in the near future. Thus, Google must consider expanding into bigger markets and continue developing products to suit the needs of its customers.
Corporate Social Responsibility
It is a form of corporate self-regulation integrated into the business model whereby business would monitor its adherence to law, ethical standards and international norms. Similarly it encourages businesses to embrace responsibility for the impact of their activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere (http://en. wikipedia. org/wiki/Corporate_social_responsibility). In this case, Google is highly criticized by protesters in the favour of Tibet liberation and the government where Google’s executives were called to a congressional hearing comparing their decisions to Nazi Collaborators. As a global company, Google should consider the effects of its decisions on the global community.
Profits are important but it is also key that the global community agrees with decisions made by Google . Thus, Google needs to see how it can be socially responsible, thereby addressing emotional considerations of investors and general public.
Competition
It is to be noted that internet search users are expected to increase from 100 million to 187 million in two years (http://news. bbc. co. uk/1/hi/technology/4645596. stm), thus there is great potential for Google as a search engine.
However, there is fierce competition from already established china-based search engine, Baidu. com. Besides, Google also faces competition from its western competitors such as yahoo. com, msn search, who would like to tap into the Chinese market. Thus, it is important for Google to consider the impact of Competition looking forward.
Reputation
Google has a great reputation within its customers for providing the best possible user experience, delivering fast and effective search results and of “doing no evil”. By bringing such strong points forward as part of the ten key philosophies Google needs to consider the impact of its decisions on its users who access Google primarily because it differentiates itself from many other search engines based on the aforementioned points.
Research & Development
Google has always offered innovative products to its customers. These products range from the search engine it offers, backed by research conducted by its founders to incomparable email service.
All these products are backed by research enabling them to become instant hits in the market. The same kind of research is required to understand Chinese market. Research in terms of potential products and services along with understanding consumer opinions, trends and need. Considering the amount of money invested into the new R&D wing in China, we feel it is essential to mention the importance of this Unit in terms of the value it adds and how to successfully benefit from its existence.
Issues of High Urgency and Low Importance
Google has fierce competition from other search providing companies and if it loses this opportunity to establish itself in China, other companies will be able to gain a greater portion of the market share and it may become impossible for Google to reestablish itself. Once the new users are exposed to and familiarize themselves to the interface provided by Google, learn about the company policies and practices and get habitual of using Google as a search engine, it will be hard for competitors to win over customers away from Google.
Thus, competition should be of concern to Google within china at the present moment but is not very important considering other implications that it is facing globally. These accusations and negative publicity are not only affecting its business elsewhere in the world but also causing it to become a centerpiece of political agenda. Thus, Google must address the issue of Corporate Social Responsibility immediately so show its caring and compassionate stand as part of the Ten Philosophies Google adheres to. Shareholders Profits: With a constant gain in the price of shares, profits year after year the investors have always been supportive of decisions made by Google.
However, in the past month the share prices have witnessed a decline primary caused by the issue of Google complying with the Chinese Government, negative publicity by media and being caught in the political agenda. Google needs to reassure its investors and regain confidence of potential investors to stabilize its declining stock price. Analysis A SWOT analysis was performed in order to understand the strengths of the company and how to capitalize them, address current weaknesses, facilitate organizational change and improve the competitive position. SWOT stands for Strengths, Weaknesses, Opportunities and Threats.
Strengths Google initially became popular because of its effective algorithm of using inbound links to rank sites. Google is also preferred over other search engines because of its clean interface and no pop-up approach. These attributed along with other features that enable the user to search without hassle have caused them to remain loyal Google customers. Google has also capitalized on this and created an effective business model around the pay-per-click (PPC) and AdWords technology.
Within China, Google has invested heavily in R&D where the R&D expenditures have risen by $258,346 in one year. Headed by and industry pioneer, Dr. Kai-Fu Lee Google has a competitive edge due its intellectual assets. Google is in the position of employing and training talented people who have a good knowledge about Chinese market and can develop new and effective products. Google is not just a search engine, but also home to many other services such as Maps, Email service, Bloggers etc. that can be vital when entering into the Chinese Market.
Weaknesses
Google has product lines that show variability in terms of presence in different areas. To illustrate this, consider Gmail. It is available when a user invites their friends to the service; however this is not available to users in China. Same is the case with Blogger, Images etc. At the same time, currently AdWords will show results from US when a user in China searches to find information on a product. There are users who would like to use a service but cannot because of their geographical location.
Opportunities
Google has very less competition within China. Its main competitor is Baidu, a search engine primarily used by people in China. After adhering to regulations in place by the Chinese government and investments made towards R&D in China, Google has an advantage of any other search engine that it competes with elsewhere currently. Because of the strict rules and regulations in place by the Chinese government, it is considerably hard for other search providers to enter the market.
As mentioned earlier, the market size is projected to increase by 87 million users in the next two years that is essential for Google’s corporate expansion. Moreover, by moving into the Chinese market Google will have an opportunity to work with the government and take measures to ease the regulations in place for certain keywords. This will tie into Google’s brand and motto of doing no evil.
Threats
As long as Google plans on staying in China, it has to adhere to the strict rules and regulations in place by the Chinese Government. Also known as the ‘great firewall of China’, referrers to the censorship of information on the World Wide Web. Thus, Google must work within tight boundaries to maintain its presence in China. Google may also find itself in a crossfire of political interests where US government may pressurize it towards certain decisions. This leads us into negative Media coverage that can be detrimental for a company’s reputation and future. The end user may hold accusations made by the Media against Google and decide to stop or restrict their use.
With different factors playing varied roles, the stock prices may suffer leading to financial trouble for Google. PEST Analysis With the turn of events in the last few months, much has changed in the environment that Google deals in. Google has witnessed the callousness from many at one end and sympathy from others on the other hand. Thus, to better describe the macro-environmental factors that pay a crucial role in strategic management of upcoming projects we scan the environment using the PEST Analysis. PEST is an acronym for describing an analysis that focuses on Political, Economical, Socio-Cultural and Technological Factors.
As well, though streamlining its Chinese web presence puts it on par with the service provided by Baidu, taking this opportunity adds Baidu to the list of Google’s intense competitors. Although Baidu, is a Chinese only search engine, its domestic popularity in China (reflected by its total revenue growth between 2004 and 2005 coming in at 172%, compared with Google’s 92%) identifies it as a fierce competitor in a market new to Google. Despite this, Google has done no evil. Political reforms have been more effective when made in steady steps than in leaps and bounds.
In entering the Chinese market and revitalizing its Chinese web offerings, Google has made a step towards better service and access to information in China. More importantly it has planted itself as a strong corporate presence in the commercial landscape of China. The helps Google establish a foundation of leverage that could be used in the future to make further inroads towards achieving its organizational mandate of open and free access to information. Google has already committed itself to this goal, despite assertions made by critics.
Google’s decision to transparently note when a search item has been blocked, and to not offer certain applications, such as email and chat, have shown that it wants to avoid the severe ethical compromises made by such competitors as Yahoo!. Beyond that, the expansion of revenue, users, and R;D increases Google’s advantage over its competitors. The opening of Google’s product research and development center is China also has the potential to expand its global offerings. Additionally, in the case of Baidu, Google’s international presence, offerings and consolidated revenue give it much more competitive stamina.
