Google in China

Executive Summary

This is a case analysis of Google’s entrance into China, and the problems it has faced which has led them to a difficult decision of exiting that market. Within this case problems are identified with the link or symptom or the problem and what caused the problem. The results will offer a comparison of competition between some major players in the internet search industry in China.

II Statement of the Problem

2006 to 2009, Google experienced a strong growth in revenues doubling from 2006 to US $23 billion in 2009. This was the result of highly developed processes, a strong online advertising presence which provided the solid revenue base which aided in the financing for continual R&D, and the launch of innovative products and search infrastructures such as Google Docs, Google Calendar, Google Chrome, Google Translator. Internet search industry in China is highly competitive with some of the major players: Baidu, Google, Yahoo, Sohu, and Sina. While Google’s launch in China made significant progress, it was not without roadblocks.

As per the case, following were some of the problems and their symptoms and root causes. Firstly, Google.cn commenced operation 18 months after its set up in 2006. This was the result of the Chinese government lengthy approval process, and Google receiving the official license to operate in September of 2007. Secondly, Google was subjected to criticism from Chinese regulators, in January 2009, for making “pornography available through its search engine.” Due to the lack of shame and censorship presented by Google China in this matter, in June 2009, Chinese regulators suspended Google China’s searching abilities. A symptom of this was Google users were driven away to use Baidu or Sina search engines. Later in 2009, there was a copyright dispute with Chinese Authors who were published in Google’s online library. The cause of this dispute was that the Authors accused Google of copyright infringement. A symptom of the earlier disputes with Chinese regulators resulted in the CEO of Google China’s resignation. January 2010, there was an official announcement indicating the detection of unusual security incidents in mid-December 2009. Cyber attacks originating from China attacked 20 large companies, amongst them was Google China, resulting in theft of intellectual property. As a result of this, Google.cn reviewed their business operations in China, deciding to no longer apply censorship on search results. One of the symptoms of this would mean shutting down Google.cn. Exiting from China could cost them US $300 million. Although there were lagging significantly behind Baidu, China was a small portion of Google’s global revenue. A symptom of the exit announcement resulted in half a cent drop in Google stocks. A concern the posed