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MENDOZA, Saramay C.

May 9, 2017

20150786 BA301

Global Trade W 8:00-12:00pm

Opening Case: Googles Steep Learning Curve in China

SUMMARY:
The world is indeed spinning towards a direction inclined in both technology and
interconnectedness. Technology has defied spaces and has conquered time zones in order to
create connections and communications that transcends borders all over the world. It is through
technology that the world seemed to be one click away when in fact were all separated millions
of miles away from each other. The global sphere of the modern day era has opened new doors
for business ventures which were both profitable, cost-efficient and helpful in todays society.
Markets expanded, possibilities were heightened and the diversity in business flourished.
However, the Chinese virtual realm begs to differ from your average and typical modern day
virtual market. The Chinese market have always been different compared to other market from
all around the world. The fact that its internet users alone equates to the total population of the
United States of America already sets them in a different league. Furthermore, internet
censorship in China has shaped their entire society in a different sphere compared to modern day
democratic states. This has virtual market of China into a whole different domain. The mastery
of local virtual hoops for companies, including Google, in the intricacy of policies and cultural
factors of consumers in China has eventually became a struggle for establishments and
businesses in the Chinese market. With a population over billion, China is not only a very
lucrative marketplace, but the world of its own.

Therefore, it is no surprise when the largest American multinational technology company


specializing in Internet-related services and products such as Google tries to venture and enter
the biggest yet peculiar market in the world; the Chinese market. What sets China apart from
other countries is its huge population, eccentric market together with a strict and authoritarian
government. No business has ever made it in China as soon as it defies its policies and fails to
comply to the demand of its government. Therefore, when Google, a free-enterprise with a
liberal spirit with a motto of dont be evil, the conflicts in terms of ideals when it comes to
their company interest and the criteria theyd have to meet in order to stay relevant in the
Chinese market created a huge conflict that is far too concerning to overlook at. Google China
simply started as a base that will conduct research and learn more about the Chinese market. The
research base soon became an ambition of establishing a Google China that shall cater to the
Chinese market. Thats where things started to get muddled. Google was highly known as
different from the rest of internet companies, it values free information and highlights the
importance of human rights and freedom of speech; it aspires to build an internet company with
the highest possible standard of ethical business it's a shared space for free interchange of ideas
liberated from overpowering restrictions. So, when it suddenly altered its policies and decided to
shift gears starting from removing websites that the Chinese government disapproves to choosing
not to display sites promoting free speech in China, all hell broke loose for Google. This
immediately bore a negative effect in Google as a whole. Their company executives were
immediately called in congressional hearings, its stocks fell and there were rallies across the
companys headquarters. Suddenly the image of Google being a trustworthy company became
rusty.

Thats when it became confusing for Google it had to choose between catering its
ideals towards the Chinese market and stay relevant in the biggest local market in the world or
actually tarnish its image across the globe. Google, soon enough, decided to no longer comply to
the demands of the Chinese government and chose to not censor any search results in its Chinese
service. Human rights activists were of course happy for the decision that Google made and that
undoubtedly did not sit well in the Chinese government. Soon enough Google China will shut
down itself as a repercussion of not following the Chinese policies in the market. And thats
where another venture of a prevailing business across the globe failed in China yet again.

QUESTIONS:
1. Can Google afford not to do business in China?

Yes. Googles market is already the world apart from China. It has the funds and
resources to not get involved with Chinas government. They are sustainable and profit generating
with or without China. Although, it would of course limit its horizon through not being able to
breakthrough the biggest yet peculiar market in the world. In other words, Google wont be nothing
without China but it will be more with it business revenue speaking wise. The allure of generating
large profit not only across the world but also China does seem striking but the cons will eventually
outweigh the pros. Specially, for a company like Google with an image to uphold.

2. Which stakeholders would be affected by Googles managers possible decision to shut


down its Chinese operations? How would they be affected? What trade-offs would
Google be making?

Shareholders, creditors, employees, customers and suppliers would of course be


affected by Googles possible decision to shut down in its Chinese operations. They would be
affected by both the good and bad effects of shutting the Google Chinese operations. To give
concrete examples; as Google began redirecting tens of millions of mainland Chinese users early
Tuesday, Beijing time, to its Hong Kong-based Web site, google.com.hk, parts of the companys
remaining mainland operations quickly came under pressure from Googles Chinese partners and
from the government itself. Chinas biggest cellular communications company, China Mobile, was
widely expected to cancel a deal that had placed Googles search engine on its mobile Internet
home page, used by millions of people daily. One official in Chinas media industry said that the
company was scrapping the deal under government pressure even though it had no replacement
lined up. Furthermore, Google would be making expansions which will allow the company access
to a large number of Internet users, delivering them more information, and at the same time
bolstering the companys bottom line. But for the millions of Internet users in China, Pakistan, and
other places where censorship is the norm, the tradeoff for getting to use new services remains the
same: Easily accessible information comes at the cost of continued government control, filtered
through American Internet companies.

3. Should Googles managers be surprised by the Chinese predicament?

Coming to the Chinese market have always been a great risk to take. Google
entering China was inevitable. Over the last 30 years, China opened its doors for foreign investors.
In turn, its economy grew at unprecedented levels. During the last 10 years, Google was growing
as a company. The firm's success allowed it to expand outside the United States. The growth of
both China and Google during the same time period made their meeting almost inevitable.
However, given the clear differences between the companys ideals and Chinas government
policies; it would be no surprise for the Google team to meet such conflicts. They had it coming
given their disparities Google practices good ethics when conducting its business and the Chinese
government needs none of that especially if it doesnt sit well with their stand or advantage. Google
took the risk and leap to see whether or not they can succeed in the venture of changing the Chinese
internet there have always been to outcome; success and failure. And, their venture ended like
many of the foreign investors entering the Chinese market: it went wrong.