MGT6041 - Strategic Management

Google in China

Page 1 of 15

Table of Contents

Introduction 2

Brief History of Google China 2

Google Strategic Reasoning 3

Cultural analysis 5

Stakeholder‟s analysis of Google china issue 7

PESTEL and its use in Scenario analysis 10

Conclusion 12

References 14

MGT6041 - Strategic Management

Google in China

Page 2 of 15

Google China

Introduction

Google China is a subsidiary of Google Inc the worlds largest Internet search engine

company Google China ranks as the number 2 search engine in the Peoples Republic of

China after Baidu In Jan‟2010 Google declared that it had been the victim of a massive

hacker attack originating within China and had decided as a result that it would no longer

participate in government-imposed self-censorship within mainland China On March 22

2010 Google began redirecting all googlecn traffic to googlecomhk (Google Hong Kong)

thereby bypassing Chinese regulators and allowing uncensored Simplified Chinese search

results (Wikipedia 2010) People‟s Republic of China has a highest economic growth since

1990 and still evolving (see Exhibit 1) Moreover Google China serves a market of mainland

Chinese Internet users that was estimated in July 2009 to number 384 million (CNNIC

2010) This estimate is up from 458 million in June 2002 (CNNIC 2002) Hence though

there were a specific issue of self censorship considering the China‟s biggest market Google

may lose its biggest revenue This report examines the cultural and strategic influences

affecting Google‟s business model in China and uses several strategic management theories

to analyse the future prospects of business in China followed by some recommendations

taken from the analysis

Brief History of Google China

Timeline Details

2005 A Chinese-language interface is developed for the googlecom website

Jan 2006 Launch of China-based googlecn search page with censored results

Mar 2009

ndash present

China blocks access to Googles YouTube site access to other Google online

services is denied to users on an ad hoc basis

Jan 2010 Google announces it is no longer willing to censor searches in China and may

pull out of the country

MGT6041 - Strategic Management

Google in China

Page 3 of 15

Feb 2010 Hacking attacks on Google are traced to mainland China

March 2010 Google re-routes searches to uncensored Google Hong Kong

Exhibit 1

Google Strategic Reasoning

Google as an international was making a significant move by entering the Chinese market in

2003 as every international firm either trading or in service industry hopes to capitalise on

the huge market unlike any other country On this basis it is important to determine the

strategic reasons behind Google‟s considering exiting China

Based on on-going development reported in the news coverage business reviews and widely

available literature on the nature between Google and China the strategic reasoning by

Google can be narrowed down to four main factors

1 Strong competition

MGT6041 - Strategic Management

Google in China

Page 4 of 15

During the early period of Google‟s presence in China it remained the significant market

leader ahead of other search engine providers including Baidu which was just starting up In

recent years Baidu has expanded and managed to lead the market with 584 compared to

Google with 356 (WSJ 2010) Even when Google began to provide Chinese interface on

its googlecom in 2005 followed by the inception of googlecn the next year it was still not

getting anywhere close to becoming the leader The main reason behind this was due to the

fact that Baidu has developed an incomparable understanding of Chinese internet users

hence able to provide much preferred content

2 China‟s economic nationalism

Although undeniably a huge market waiting to be capitalised on beyond its size factor

potential China is also a very complicated market Historically many foreign firms ended up

struggling to understand the Chinese consumers Conventional international business

strategies strongly practiced by Western multinationals must be adopted differently in China

since the market tends to strongly support local firms eventually Volkswagen for instance

was steadily losing its market share albeit Chinese car market was experiencing exciting

increase at the average of 49 between 2006 and 2009 (Volkswagen 2010)

3 Google business policies and principles

Google has been very reluctant towards the Chinese authorities imposing of extensive

filtering in internet search results mainly on subjects related to the country‟s history of

political violence and human rights suppression in the pasts This contradicts with Google‟s

corporate philosophies such as ldquofreedom of informationrdquo and ldquoyou can make money without

doing evilrdquo In addition Google constantly wants to maintain its reputation as an efficient

search engine globally with user-friendly features without exception

4 Limited service variability and quality

Three of Google‟s main services YouTube Google Blog and Picasa are blocked from being

accessible by internet users in China through the country‟s network firewall The Golden

Shield Project or also famously known as The Great Firewall of China (Google Blog 2010)

The services are blocked by the firewall to stop contents such as pornography images or

articles on police brutality Tiananmen Square protest (1989) Dalai Lama Tibetan

Independence Movement or any content that originates from the Taiwanese authorities The

MGT6041 - Strategic Management

Google in China

Page 5 of 15

Golden Shield Project is under the control of China‟s Ministry of Public Security Extensive

filtering of internet content is also causing the slow data transfers for Google consumers

The review above reveals that by analysing Google strategic reasoning behind its

consideration it is obvious that Google is encouraged not only by the information freedom

policy but also business fertility factors

Cultural analysis

Culture is an integral part of any society and thus it‟s very essential for anyone to adapt to the

culture of the society to be a part of it The idiom ldquoWhen in Rome do as the Romans dordquo

explains this

But Google certainly did not follow this in China which is evident with the way it has been

running its Chinese operations in the last few years On analyzing the cultural difference the

reason why Google is threatening to stop its operation in China is that one of China‟s

underlying principles is to protect and guards politically sensitive information from the public

which would otherwise cause mayhem in the country whereas the mission of Google is ldquoto

organize world‟s information and make it universally accessible and usefulrdquo This is one of

the major cultural differences in this context Though Google signed the censorship

agreement with China initially the thought of influencing the Chinese government to change

the information and communication laws in due course of time was highly prevalent among

Google officials which backfired But there are other cultural differences which stopped

Google from doing something it does best ie to be the market leader in China

Confucianism one of the components of Chinese business culture includes six values Some

of those values are need for harmony concept of face concepts of trust respect for age and

hierarchy and avoidance of conflict (Fang 2006) The Chinese would maintain decorum and

avoid something that would cause public embarrassment But Google accused the Chinese

government of backing the hackers who launched a sophisticated cyber attack on Google‟s

database which brought about the frustration in the government Google breached the

Censorship agreement thereby breaking the trust of the Chinese government disrespecting

them and bringing about a conflict between them and the government In all the cases

Google has managed to go against all the values mentioned above

MGT6041 - Strategic Management

Google in China

Page 6 of 15

In China any business negotiation would occurs at a slow pace The Chinese business culture

has a very strong influence in the negotiation process and patience is the need of the hour

during negotiation But Google issued the Chinese government an ultimatum stating that it

would pull out its operations from China if the government did not agree to their terms in a

month‟s time which is completely a non-Chinese way of business negotiation ldquoThe Chinese

negotiator will typically not force you into accepting the Chinese terms but rather signals that

your competitors are waiting next door prepared to present a better offerrdquo (Fang 2006)

That‟s what‟s precisely the Chinese government did

Business meetings in china would take place with appointments fixed a lot earlier It would

not be held during meals and social events whereas most of the meetings in Google would

take place during the lunch Chinese social structure is very hierarchical and those in the

hierarchy follow certain protocol whereas the structure of Google is flat with just one line of

top management (no hierarchy) The Google environment is very informal in that it neither

does have any departments as such nor are there any mandatory protocols to be followed

This certainly reflected in the way in which Google held negotiations with the Chinese

government

ldquoThe Chinese believe that interrelations with things and others are continuous Once a

relation is established it can hardly be brokenrdquo (Yau 2007) He also says that Chinese are

considered to be the most loyal customers in the world They often try to conform to group

norms and therefore are more like to buy the product from a certain brand recommended by

the group members

Baidu could owe its success to the above characteristic of Chinese but Google could have

made good use of its customer base when it had a commendable market share earlier

It‟s pretty apparent that Google went into China advocating the American values that

certainly did not go well with the Chinese

MGT6041 - Strategic Management

Google in China

Page 7 of 15

Source Adapted from (Johnson amp Scholes 2008)

Stakeholderrsquos analysis of Google china issue

Google has always been such a company who not only revolutionizes the traditional online

industry but also excelled in corporate social responsibility (CSR) and ethics through their

bdquoDon‟t be Evil‟ motto (Google Blog) But since the time Google has launched googlecn in

China in 2005 (Wu 2007) there have been numerous forces that consistently influenced

Google‟s decision making process in China and hindered them from sticking onto their

organizational motto

Even though China has the second largest internet market but from the cultural analysis it

became clear that the Chinese market is not only regulated by the Chinese government but

also controlled by the bdquoGreat Firewall‟ of China (Wilson et al 2010) Google has been

struggling since 2002 and have gone a long way of change from googlecom (unrestricted) to

googlecn (restricted) and finally to googlehk (unrestricted) Due to the lack of clarification

- High influence ofcommunism-No freedom of speech

- government decides and people obey the law

- Trust and relationship matters more than profit

-Standard dress for communist party officials- Language

Hierarchical

-Bureaucratic-Highly formal

The Paradigm

StoriesSymbols

Rituals and routines

Power structures

Control systems Organisational

structures

MGT6041 - Strategic Management

Google in China

Page 8 of 15

of intention Google has been meeting with the consistent furies and outcries from different

groups (Thompson 2006 cited in Yardey 2006) There has been observed a serious cultural

clash between Google and China starting from the very beginning (ie 2002) Finally due to

the heavy restriction to publish the restricted information followed by cyber attack and to

keep up with their organizational belief of being not evil in 2010 Google decided not only to

move to Hongkong (China) but also started their unrestricted bdquogooglehk‟ (Google Blog)

Google‟s decision of being in Chinese internet market but not being in Beijing (China) needs

more clarification and is yet to be defined Even after knowing the possible pitfalls of this

decision which may finally lead to leave the fastest growing internet market when they were

enjoying the second largest share after bdquoBaidu‟(Chinese search engine) cannot be justified

only on the basis of their organizational motto and can be further understood through

stakeholders analysis

Strategically the type of pressure from the stakeholders that exist behind Google‟s decision

to leave Beijing (China) has been explained by the bdquoStakeholder‟s identifying and positioning

model (SIP) In the process of decision making it is not important to know only about the

different stakeholders but to know about the stakes they hold and how much influential they

are (Wu 2007) In a dynamic system stakeholders contend conflict and compete with each

other and finally try to pull the organization in their direction The tug-of-war not only creates

pressure on Google‟s decision making team but also affects their decision to a large extent

Base on the study of Google‟s stance in bdquoGoogle Blog‟ various newspapers and articles

some of the attributes of the stakeholders like power of influence direction of influence

consistency and visibility are noted which will be of great help to construct the SIP model

MGT6041 - Strategic Management

Google in China

Page 9 of 15

Optimization model ndash stakeholder analysis

Source adapted from (Wu 2007)

We can clearly see in the optimization model that there has been arrows‟ signifying the

stakeholders and with the extremity of their power and effectiveness there is a difference in

the boldness of the arrow The model further has some stakeholders like employees who has

got a divided position and some neutral stakeholders like U S Government who just supports

Google in all cases (ie whether to leave or enter China)

From the study of the model it has been quiet clear that bdquoEnter China‟ portion is collectively

stronger not only because of their close association with the decision making team but also

because of their consistency in their push

Although there has been a maximum coverage of the overall decision making process but this

is not an exhaustive depiction of the whole process and there are many more issues and

Go

og

les

De

cis

ion

Ma

kin

g T

ea

m

US Government

Users outside China

Advocacy Group

Googlersquos Investors

Googlersquos Chinese Employees

Users outside China

Chinese Government

Googlersquos InvestorsChinese Search Engines

American Internet Providers

Chinese end users

Googlersquos Employees

LEAVE

CHINA

ENTER

CHINA

Media

Vis

ible

No

t V

isib

le

Symbols directory

bullArrow = Stakeholders

bullDirection of arrow = Position on whether to enter China or leave China

bullSize of arrow = The power and strength of influence

bullSolid or broken arrow = Consistency and continuity of influence

bullArrow starting point = Extremity Sincerity of the position

bullUp or below surface line = Salience and Visibility of influence

MGT6041 - Strategic Management

Google in China

Page 10 of 15

patterns which can also influence the whole decision process For example the mass media

has not considered as one of the stakeholder because of the increased bias of media inside and

outside China Chinese media supports Chinese government decision of restriction of the free

flow of information whereas if we talk about media of US and UK they follow Google‟s

decision of free flow of information and freedom of speech As a result of this study it‟s clear

that media mostly acts as a mediator of information to all different stakeholders rather than

acting as one in reality

Google‟s decision of continuing with the unrestricted Googlehk from Hongkong came as a

result of Google‟s strong organizational belief of bdquoDon‟t be Evil‟ strong world market

position extreme profit and finally due to the support from the customers worldwide But it is

also important to note that understanding the structures and struggles among the stakeholders

may not always guarantee the success of the policy because of the dynamics of the whole

process which is greatly dependent on the changing stakeholder‟s needs and position in

future With the help of the bdquoSIP model‟ there is an attempt of simplifying the complicated

reality and also to enhance the robustness of the whole process of Google‟s decision making

PESTEL and its use in Scenario analysis

The problem faced by Google in China and its dilemma about whether to stay in the Chinese

market or not is a good example of needing to devise a strategy in action This is not an

examination of the past but an attempt to identify some strategic action choices for the

future Walsh (2005 p119) suggests that ldquoThe process of strategy formation is a dynamic

one that corresponds to the dynamic conditions that drive itrdquo If that is so then we need to

examine the changing factors behind Google‟s position in China

Google‟s operating environment in China seems to be constantly changing There are clearly

drivers for change at work and the need to identify these drivers is by a PESTEL analysis

(standing for Political Economic Social Technological Environmental and Legal)

The use of the cultural web analysis has highlighted that a main problem facing Google is the

unpredictable attitude of Chinese officialdom (Political) allied to strong local competition in

a rapidly-growing and otherwise profitable market (Economic) In the Social sector the

cultural web suggested that Google has not reacted well to the Chinese local needs which it

MGT6041 - Strategic Management

Google in China

Page 11 of 15

needs to do in a market where Technological change is rapid Other drivers for change can

also be identified

This PESTEL analysis is useful for classifying the drivers for change and it can be rather

static However it is a useful starting point for further strategy development Stakeholder

analysis can be used to suggest how some of these drivers might change and can also

identify those that might be correlated either negatively or positively

The drivers can also be used for the next stage in the process of strategy development which

is Scenario Planning

Scenario Planning is helpful when the environment is highly complex or is rapidly changing

(as it is here) It tends to be especially useful when

There are a limited number of key drivers influencing the success of the strategy

There is a high level of uncertainty about such issues

Outcomes could be radically different

All these factors apply to a greater or lesser extent to Google in China The numbers of key

drivers are not high With regard to one of the key drivers the Chinese political attitude it is

difficult to predict what their future attitude will be but there‟s no doubt that a positive

attitude would probably ensure success for Google while a stronger negative attitude could

well stop Google from trading in China at all

Given this degree of uncertainty the use of scenario planning could well be a help to Google

Typically starting from the drivers with the greatest uncertainty managers could prepare

different scenarios to give plausible views of how the business environment may change in

the future Interrelated drivers and scenarios must be consistent eg it is possible that very

low economic growth in China might produce an unstable political situation but it‟s highly

unlikely that high economic growth would Scenarios tend to be bdquooptimistic‟ middling‟ or

bdquopessimistic‟ and normal procedure is to create between 7-9 initial scenarios which would

then be reduced to between 2-4 most likely positions

The use of this technique could help Google but there are problems associated with it The

choice of the most likely scenarios will probably still contain a strong element of value

judgement and managers will have to guard against the temptation to so weight the scoring

as to pick an option which may have been initially prepared anyway The flexibility of the

MGT6041 - Strategic Management

Google in China

Page 12 of 15

system and its ability to react to changing situations is attractive but it may not always be

advisable to try to change strategy on a regular basis However when used in conjunction

with the cultural web and stakeholder analysis it is another technique that might help to give

Google a clearer indication of what strategy they need to follow

Conclusion

The aim of this investigation has been to find a strategic structure that will help Google in its

assessment of its operation serving the Chinese market The economic attraction of such a

large and growing market is obvious but the difficulties involved in the continued operation

(and the rapid rate of change in the internet service industry anyway) make the certainty of

future activities unclear The situation is fluid and the direction of change uncertain To take

account of this we need a theoretical approach (or more likely a combination of theoretical

approaches) that will not only help to clarify the situation but also give some guidance as to

how to approach strategy in the future

Many international organisations attempting to set up operations in China have struggled so

an analysis of the cultures involved using the Cultural Web was a logical starting point This

has highlighted several features such as the position of the Chinese Government with regard

to control and the importance of being in tune with the Chinese culture and market demands

when providing a service something that Google did not do well in the initial stages of its

operation in China Another important point is that the approach of the Chinese Government

with regard to censorship is in direct conflict with Google‟s stance on freedom of

information and willingly accepting such censorship would damage its brand image and

reputation

The major factors produced by the Cultural Web have then been taken and input the other

theoretical models used in this report namely Stakeholder Analysis and PESTELScenario

Planning Both these models have the degree of flexibility required in that they can both help

to explain the existing situation but also be used to indicate what might happen if the details

of the drivers for change alter to any degree Thus the Stakeholder Analysis emphasises the

importance of Google‟s shareholders and the economic pull of the Chinese market but this

could change Should Google continue to lose market share to Baidu then the shareholders

might decide this no longer fits with Google‟s desire to be market leader in its chosen

markets and their support for Google in China might weaken

MGT6041 - Strategic Management

Google in China

Page 13 of 15

Such possible changes could then be tested on the scenario planning model which would

take the drivers for change identified by the Cultural Web and Stakeholder Analysis and see

how changes in these drivers would affect the overall operating situation for Google

What we need is therefore a strategic model that links these techniques together Such a

model is shown below

Strategic Development Model adopted from (Walsh PR 2005)

This strategy development model shows how the theories we have examined can help

improve the analysis of the present situation and also be sufficiently flexible to help update

Google‟s management team as and when needed However it also emphasises that there are

other factors to be taken into account when making a final decision The three theories we

have looked at have helped to explain the rapidly-changing environment that surrounds

Google‟s operations in China and there is no doubt that these are important but just as

important is the internal operation of Google as a company its core competencies and beliefs

and the other factors that might be affecting its global operations

MGT6041 - Strategic Management

Google in China

Page 14 of 15

References

China Daily ldquoHow Many Internet Users Are There in Chinardquo Ministry of culture

Peoples Republic of China website

Chinese negotiations(18th

January 2010) ldquo A stakeholder analysis of Chinese

negotiationrdquo [Online] Available at httpwwwchinesenegotiationcom2010

[Accessed 3rd

April 2010]

CNNIC ldquo25th Statistical Survey Report on the Internet Development in Chinardquo China

Internet Network Information Center website

David Drummond ldquoA new approach to China an updaterdquo March 3 2010 post on blog

ldquoPolicy and issuesrdquo The official Google blog

Fang T (2006) ldquoNegotiation the Chinese stylerdquo Journal of Business amp Industrial

Marketing 21 (1) 50-60

httpgoogleblogblogspotcom accessed May 2010

httpwwwchinacultureorggben_aboutchina2003-0924content_26129htm accessed

April 2010

httpwwwcnniccnuploadfilespdf2010315142705pdf accessed April 2010

IMF ldquoGross domestic product growth in the advanced economies accumulated for the

periods 1990 - 1999 and 1990 - 2006rdquo International Monetary Fund website

httpwwwimforgexternalpubsftweo200501datadbginimcfm accessed May 2010

Johnson G Scholes K Whittington R (2008) Exploring Corporate Strategy 8th

ed

London Prentice Hall

Liu J ldquoBaidu and Google at logger heads in China Business Asia by Bloombergrdquo

International Herald Tribune (July 26 2007) LexisNexis Duke University Library 6

Nov 2007

National electronic Library for Health (Updated 16 Jan 2005) ldquoCan walking make you

slimmer and healthierrdquo (Hitting the headlines article) [Online]

Available at httpwwwnhsukhthwalking [Accessed 10 April 2010]

Reuters (16th

January 2010) ldquoChina affirms control over Internetrdquo [Online] Available

at httpwwwreuterscomarticleidUSTRE60D0CA20100114 [Accessed 3rd

April

2010]

The official Google blog [Online] Available at httpgoogleblogblogspotcom

[Accessed 3rd

April 2010]

MGT6041 - Strategic Management

Google in China

Page 2 of 15

Google China

Introduction

Google China is a subsidiary of Google Inc the worlds largest Internet search engine

company Google China ranks as the number 2 search engine in the Peoples Republic of

China after Baidu In Jan‟2010 Google declared that it had been the victim of a massive

hacker attack originating within China and had decided as a result that it would no longer

participate in government-imposed self-censorship within mainland China On March 22

2010 Google began redirecting all googlecn traffic to googlecomhk (Google Hong Kong)

thereby bypassing Chinese regulators and allowing uncensored Simplified Chinese search

results (Wikipedia 2010) People‟s Republic of China has a highest economic growth since

1990 and still evolving (see Exhibit 1) Moreover Google China serves a market of mainland

Chinese Internet users that was estimated in July 2009 to number 384 million (CNNIC

2010) This estimate is up from 458 million in June 2002 (CNNIC 2002) Hence though

there were a specific issue of self censorship considering the China‟s biggest market Google

may lose its biggest revenue This report examines the cultural and strategic influences

affecting Google‟s business model in China and uses several strategic management theories

to analyse the future prospects of business in China followed by some recommendations

taken from the analysis

Brief History of Google China

Timeline Details

2005 A Chinese-language interface is developed for the googlecom website

Jan 2006 Launch of China-based googlecn search page with censored results

Mar 2009

ndash present

China blocks access to Googles YouTube site access to other Google online

services is denied to users on an ad hoc basis

Jan 2010 Google announces it is no longer willing to censor searches in China and may

pull out of the country

MGT6041 - Strategic Management

Google in China

Page 3 of 15

Feb 2010 Hacking attacks on Google are traced to mainland China

March 2010 Google re-routes searches to uncensored Google Hong Kong

Exhibit 1

Google Strategic Reasoning

Google as an international was making a significant move by entering the Chinese market in

2003 as every international firm either trading or in service industry hopes to capitalise on

the huge market unlike any other country On this basis it is important to determine the

strategic reasons behind Google‟s considering exiting China

Based on on-going development reported in the news coverage business reviews and widely

available literature on the nature between Google and China the strategic reasoning by

Google can be narrowed down to four main factors

1 Strong competition

MGT6041 - Strategic Management

Google in China

Page 4 of 15

During the early period of Google‟s presence in China it remained the significant market

leader ahead of other search engine providers including Baidu which was just starting up In

recent years Baidu has expanded and managed to lead the market with 584 compared to

Google with 356 (WSJ 2010) Even when Google began to provide Chinese interface on

its googlecom in 2005 followed by the inception of googlecn the next year it was still not

getting anywhere close to becoming the leader The main reason behind this was due to the

fact that Baidu has developed an incomparable understanding of Chinese internet users

hence able to provide much preferred content

2 China‟s economic nationalism

Although undeniably a huge market waiting to be capitalised on beyond its size factor

potential China is also a very complicated market Historically many foreign firms ended up

struggling to understand the Chinese consumers Conventional international business

strategies strongly practiced by Western multinationals must be adopted differently in China

since the market tends to strongly support local firms eventually Volkswagen for instance

was steadily losing its market share albeit Chinese car market was experiencing exciting

increase at the average of 49 between 2006 and 2009 (Volkswagen 2010)

3 Google business policies and principles

Google has been very reluctant towards the Chinese authorities imposing of extensive

filtering in internet search results mainly on subjects related to the country‟s history of

political violence and human rights suppression in the pasts This contradicts with Google‟s

corporate philosophies such as ldquofreedom of informationrdquo and ldquoyou can make money without

doing evilrdquo In addition Google constantly wants to maintain its reputation as an efficient

search engine globally with user-friendly features without exception

4 Limited service variability and quality

Three of Google‟s main services YouTube Google Blog and Picasa are blocked from being

accessible by internet users in China through the country‟s network firewall The Golden

Shield Project or also famously known as The Great Firewall of China (Google Blog 2010)

The services are blocked by the firewall to stop contents such as pornography images or

articles on police brutality Tiananmen Square protest (1989) Dalai Lama Tibetan

Independence Movement or any content that originates from the Taiwanese authorities The

MGT6041 - Strategic Management

Google in China

Page 5 of 15

Golden Shield Project is under the control of China‟s Ministry of Public Security Extensive

filtering of internet content is also causing the slow data transfers for Google consumers

The review above reveals that by analysing Google strategic reasoning behind its

consideration it is obvious that Google is encouraged not only by the information freedom

policy but also business fertility factors

Cultural analysis

Culture is an integral part of any society and thus it‟s very essential for anyone to adapt to the

culture of the society to be a part of it The idiom ldquoWhen in Rome do as the Romans dordquo

explains this

But Google certainly did not follow this in China which is evident with the way it has been

running its Chinese operations in the last few years On analyzing the cultural difference the

reason why Google is threatening to stop its operation in China is that one of China‟s

underlying principles is to protect and guards politically sensitive information from the public

which would otherwise cause mayhem in the country whereas the mission of Google is ldquoto

organize world‟s information and make it universally accessible and usefulrdquo This is one of

the major cultural differences in this context Though Google signed the censorship

agreement with China initially the thought of influencing the Chinese government to change

the information and communication laws in due course of time was highly prevalent among

Google officials which backfired But there are other cultural differences which stopped

Google from doing something it does best ie to be the market leader in China

Confucianism one of the components of Chinese business culture includes six values Some

of those values are need for harmony concept of face concepts of trust respect for age and

hierarchy and avoidance of conflict (Fang 2006) The Chinese would maintain decorum and

avoid something that would cause public embarrassment But Google accused the Chinese

government of backing the hackers who launched a sophisticated cyber attack on Google‟s

database which brought about the frustration in the government Google breached the

Censorship agreement thereby breaking the trust of the Chinese government disrespecting

them and bringing about a conflict between them and the government In all the cases

Google has managed to go against all the values mentioned above

MGT6041 - Strategic Management

Google in China

Page 6 of 15

In China any business negotiation would occurs at a slow pace The Chinese business culture

has a very strong influence in the negotiation process and patience is the need of the hour

during negotiation But Google issued the Chinese government an ultimatum stating that it

would pull out its operations from China if the government did not agree to their terms in a

month‟s time which is completely a non-Chinese way of business negotiation ldquoThe Chinese

negotiator will typically not force you into accepting the Chinese terms but rather signals that

your competitors are waiting next door prepared to present a better offerrdquo (Fang 2006)

That‟s what‟s precisely the Chinese government did

Business meetings in china would take place with appointments fixed a lot earlier It would

not be held during meals and social events whereas most of the meetings in Google would

take place during the lunch Chinese social structure is very hierarchical and those in the

hierarchy follow certain protocol whereas the structure of Google is flat with just one line of

top management (no hierarchy) The Google environment is very informal in that it neither

does have any departments as such nor are there any mandatory protocols to be followed

This certainly reflected in the way in which Google held negotiations with the Chinese

government

ldquoThe Chinese believe that interrelations with things and others are continuous Once a

relation is established it can hardly be brokenrdquo (Yau 2007) He also says that Chinese are

considered to be the most loyal customers in the world They often try to conform to group

norms and therefore are more like to buy the product from a certain brand recommended by

the group members

Baidu could owe its success to the above characteristic of Chinese but Google could have

made good use of its customer base when it had a commendable market share earlier

It‟s pretty apparent that Google went into China advocating the American values that

certainly did not go well with the Chinese

MGT6041 - Strategic Management

Google in China

Page 7 of 15

Source Adapted from (Johnson amp Scholes 2008)

Stakeholderrsquos analysis of Google china issue

Google has always been such a company who not only revolutionizes the traditional online

industry but also excelled in corporate social responsibility (CSR) and ethics through their

bdquoDon‟t be Evil‟ motto (Google Blog) But since the time Google has launched googlecn in

China in 2005 (Wu 2007) there have been numerous forces that consistently influenced

Google‟s decision making process in China and hindered them from sticking onto their

organizational motto

Even though China has the second largest internet market but from the cultural analysis it

became clear that the Chinese market is not only regulated by the Chinese government but

also controlled by the bdquoGreat Firewall‟ of China (Wilson et al 2010) Google has been

struggling since 2002 and have gone a long way of change from googlecom (unrestricted) to

googlecn (restricted) and finally to googlehk (unrestricted) Due to the lack of clarification

- High influence ofcommunism-No freedom of speech

- government decides and people obey the law

- Trust and relationship matters more than profit

-Standard dress for communist party officials- Language

Hierarchical

-Bureaucratic-Highly formal

The Paradigm

StoriesSymbols

Rituals and routines

Power structures

Control systems Organisational

structures

MGT6041 - Strategic Management

Google in China

Page 8 of 15

of intention Google has been meeting with the consistent furies and outcries from different

groups (Thompson 2006 cited in Yardey 2006) There has been observed a serious cultural

clash between Google and China starting from the very beginning (ie 2002) Finally due to

the heavy restriction to publish the restricted information followed by cyber attack and to

keep up with their organizational belief of being not evil in 2010 Google decided not only to

move to Hongkong (China) but also started their unrestricted bdquogooglehk‟ (Google Blog)

Google‟s decision of being in Chinese internet market but not being in Beijing (China) needs

more clarification and is yet to be defined Even after knowing the possible pitfalls of this

decision which may finally lead to leave the fastest growing internet market when they were

enjoying the second largest share after bdquoBaidu‟(Chinese search engine) cannot be justified

only on the basis of their organizational motto and can be further understood through

stakeholders analysis

Strategically the type of pressure from the stakeholders that exist behind Google‟s decision

to leave Beijing (China) has been explained by the bdquoStakeholder‟s identifying and positioning

model (SIP) In the process of decision making it is not important to know only about the

different stakeholders but to know about the stakes they hold and how much influential they

are (Wu 2007) In a dynamic system stakeholders contend conflict and compete with each

other and finally try to pull the organization in their direction The tug-of-war not only creates

pressure on Google‟s decision making team but also affects their decision to a large extent

Base on the study of Google‟s stance in bdquoGoogle Blog‟ various newspapers and articles

some of the attributes of the stakeholders like power of influence direction of influence

consistency and visibility are noted which will be of great help to construct the SIP model

MGT6041 - Strategic Management

Google in China

Page 9 of 15

Optimization model ndash stakeholder analysis

Source adapted from (Wu 2007)

We can clearly see in the optimization model that there has been arrows‟ signifying the

stakeholders and with the extremity of their power and effectiveness there is a difference in

the boldness of the arrow The model further has some stakeholders like employees who has

got a divided position and some neutral stakeholders like U S Government who just supports

Google in all cases (ie whether to leave or enter China)

From the study of the model it has been quiet clear that bdquoEnter China‟ portion is collectively

stronger not only because of their close association with the decision making team but also

because of their consistency in their push

Although there has been a maximum coverage of the overall decision making process but this

is not an exhaustive depiction of the whole process and there are many more issues and

Go

og

les

De

cis

ion

Ma

kin

g T

ea

m

US Government

Users outside China

Advocacy Group

Googlersquos Investors

Googlersquos Chinese Employees

Users outside China

Chinese Government

Googlersquos InvestorsChinese Search Engines

American Internet Providers

Chinese end users

Googlersquos Employees

LEAVE

CHINA

ENTER

CHINA

Media

Vis

ible

No

t V

isib

le

Symbols directory

bullArrow = Stakeholders

bullDirection of arrow = Position on whether to enter China or leave China

bullSize of arrow = The power and strength of influence

bullSolid or broken arrow = Consistency and continuity of influence

bullArrow starting point = Extremity Sincerity of the position

bullUp or below surface line = Salience and Visibility of influence

MGT6041 - Strategic Management

Google in China

Page 10 of 15

patterns which can also influence the whole decision process For example the mass media

has not considered as one of the stakeholder because of the increased bias of media inside and

outside China Chinese media supports Chinese government decision of restriction of the free

flow of information whereas if we talk about media of US and UK they follow Google‟s

decision of free flow of information and freedom of speech As a result of this study it‟s clear

that media mostly acts as a mediator of information to all different stakeholders rather than

acting as one in reality

Google‟s decision of continuing with the unrestricted Googlehk from Hongkong came as a

result of Google‟s strong organizational belief of bdquoDon‟t be Evil‟ strong world market

position extreme profit and finally due to the support from the customers worldwide But it is

also important to note that understanding the structures and struggles among the stakeholders

may not always guarantee the success of the policy because of the dynamics of the whole

process which is greatly dependent on the changing stakeholder‟s needs and position in

future With the help of the bdquoSIP model‟ there is an attempt of simplifying the complicated

reality and also to enhance the robustness of the whole process of Google‟s decision making

PESTEL and its use in Scenario analysis

The problem faced by Google in China and its dilemma about whether to stay in the Chinese

market or not is a good example of needing to devise a strategy in action This is not an

examination of the past but an attempt to identify some strategic action choices for the

future Walsh (2005 p119) suggests that ldquoThe process of strategy formation is a dynamic

one that corresponds to the dynamic conditions that drive itrdquo If that is so then we need to

examine the changing factors behind Google‟s position in China

Google‟s operating environment in China seems to be constantly changing There are clearly

drivers for change at work and the need to identify these drivers is by a PESTEL analysis

(standing for Political Economic Social Technological Environmental and Legal)

The use of the cultural web analysis has highlighted that a main problem facing Google is the

unpredictable attitude of Chinese officialdom (Political) allied to strong local competition in

a rapidly-growing and otherwise profitable market (Economic) In the Social sector the

cultural web suggested that Google has not reacted well to the Chinese local needs which it

MGT6041 - Strategic Management

Google in China

Page 11 of 15

needs to do in a market where Technological change is rapid Other drivers for change can

also be identified

This PESTEL analysis is useful for classifying the drivers for change and it can be rather

static However it is a useful starting point for further strategy development Stakeholder

analysis can be used to suggest how some of these drivers might change and can also

identify those that might be correlated either negatively or positively

The drivers can also be used for the next stage in the process of strategy development which

is Scenario Planning

Scenario Planning is helpful when the environment is highly complex or is rapidly changing

(as it is here) It tends to be especially useful when

There are a limited number of key drivers influencing the success of the strategy

There is a high level of uncertainty about such issues

Outcomes could be radically different

All these factors apply to a greater or lesser extent to Google in China The numbers of key

drivers are not high With regard to one of the key drivers the Chinese political attitude it is

difficult to predict what their future attitude will be but there‟s no doubt that a positive

attitude would probably ensure success for Google while a stronger negative attitude could

well stop Google from trading in China at all

Given this degree of uncertainty the use of scenario planning could well be a help to Google

Typically starting from the drivers with the greatest uncertainty managers could prepare

different scenarios to give plausible views of how the business environment may change in

the future Interrelated drivers and scenarios must be consistent eg it is possible that very

low economic growth in China might produce an unstable political situation but it‟s highly

unlikely that high economic growth would Scenarios tend to be bdquooptimistic‟ middling‟ or

bdquopessimistic‟ and normal procedure is to create between 7-9 initial scenarios which would

then be reduced to between 2-4 most likely positions

The use of this technique could help Google but there are problems associated with it The

choice of the most likely scenarios will probably still contain a strong element of value

judgement and managers will have to guard against the temptation to so weight the scoring

as to pick an option which may have been initially prepared anyway The flexibility of the

MGT6041 - Strategic Management

Google in China

Page 12 of 15

system and its ability to react to changing situations is attractive but it may not always be

advisable to try to change strategy on a regular basis However when used in conjunction

with the cultural web and stakeholder analysis it is another technique that might help to give

Google a clearer indication of what strategy they need to follow

Conclusion

The aim of this investigation has been to find a strategic structure that will help Google in its

assessment of its operation serving the Chinese market The economic attraction of such a

large and growing market is obvious but the difficulties involved in the continued operation

(and the rapid rate of change in the internet service industry anyway) make the certainty of

future activities unclear The situation is fluid and the direction of change uncertain To take

account of this we need a theoretical approach (or more likely a combination of theoretical

approaches) that will not only help to clarify the situation but also give some guidance as to

how to approach strategy in the future

Many international organisations attempting to set up operations in China have struggled so

an analysis of the cultures involved using the Cultural Web was a logical starting point This

has highlighted several features such as the position of the Chinese Government with regard

to control and the importance of being in tune with the Chinese culture and market demands

when providing a service something that Google did not do well in the initial stages of its

operation in China Another important point is that the approach of the Chinese Government

with regard to censorship is in direct conflict with Google‟s stance on freedom of

information and willingly accepting such censorship would damage its brand image and

reputation

The major factors produced by the Cultural Web have then been taken and input the other

theoretical models used in this report namely Stakeholder Analysis and PESTELScenario

Planning Both these models have the degree of flexibility required in that they can both help

to explain the existing situation but also be used to indicate what might happen if the details

of the drivers for change alter to any degree Thus the Stakeholder Analysis emphasises the

importance of Google‟s shareholders and the economic pull of the Chinese market but this

could change Should Google continue to lose market share to Baidu then the shareholders

might decide this no longer fits with Google‟s desire to be market leader in its chosen

markets and their support for Google in China might weaken

MGT6041 - Strategic Management

Google in China

Page 13 of 15

Such possible changes could then be tested on the scenario planning model which would

take the drivers for change identified by the Cultural Web and Stakeholder Analysis and see

how changes in these drivers would affect the overall operating situation for Google

What we need is therefore a strategic model that links these techniques together Such a

model is shown below

Strategic Development Model adopted from (Walsh PR 2005)

This strategy development model shows how the theories we have examined can help

improve the analysis of the present situation and also be sufficiently flexible to help update

Google‟s management team as and when needed However it also emphasises that there are

other factors to be taken into account when making a final decision The three theories we

have looked at have helped to explain the rapidly-changing environment that surrounds

Google‟s operations in China and there is no doubt that these are important but just as

important is the internal operation of Google as a company its core competencies and beliefs

and the other factors that might be affecting its global operations

MGT6041 - Strategic Management

Google in China

Page 14 of 15

References

China Daily ldquoHow Many Internet Users Are There in Chinardquo Ministry of culture

Peoples Republic of China website

Chinese negotiations(18th

January 2010) ldquo A stakeholder analysis of Chinese

negotiationrdquo [Online] Available at httpwwwchinesenegotiationcom2010

[Accessed 3rd

April 2010]

CNNIC ldquo25th Statistical Survey Report on the Internet Development in Chinardquo China

Internet Network Information Center website

David Drummond ldquoA new approach to China an updaterdquo March 3 2010 post on blog

ldquoPolicy and issuesrdquo The official Google blog

Fang T (2006) ldquoNegotiation the Chinese stylerdquo Journal of Business amp Industrial

Marketing 21 (1) 50-60

httpgoogleblogblogspotcom accessed May 2010

httpwwwchinacultureorggben_aboutchina2003-0924content_26129htm accessed

April 2010

httpwwwcnniccnuploadfilespdf2010315142705pdf accessed April 2010

IMF ldquoGross domestic product growth in the advanced economies accumulated for the

periods 1990 - 1999 and 1990 - 2006rdquo International Monetary Fund website

httpwwwimforgexternalpubsftweo200501datadbginimcfm accessed May 2010

Johnson G Scholes K Whittington R (2008) Exploring Corporate Strategy 8th

ed

London Prentice Hall

Liu J ldquoBaidu and Google at logger heads in China Business Asia by Bloombergrdquo

International Herald Tribune (July 26 2007) LexisNexis Duke University Library 6

Nov 2007

National electronic Library for Health (Updated 16 Jan 2005) ldquoCan walking make you

slimmer and healthierrdquo (Hitting the headlines article) [Online]

Available at httpwwwnhsukhthwalking [Accessed 10 April 2010]

Reuters (16th

January 2010) ldquoChina affirms control over Internetrdquo [Online] Available

at httpwwwreuterscomarticleidUSTRE60D0CA20100114 [Accessed 3rd

April

2010]

The official Google blog [Online] Available at httpgoogleblogblogspotcom

[Accessed 3rd

April 2010]

MGT6041 - Strategic Management

Google in China

Page 3 of 15

Feb 2010 Hacking attacks on Google are traced to mainland China

March 2010 Google re-routes searches to uncensored Google Hong Kong

Exhibit 1

Google Strategic Reasoning

Google as an international was making a significant move by entering the Chinese market in

2003 as every international firm either trading or in service industry hopes to capitalise on

the huge market unlike any other country On this basis it is important to determine the

strategic reasons behind Google‟s considering exiting China

Based on on-going development reported in the news coverage business reviews and widely

available literature on the nature between Google and China the strategic reasoning by

Google can be narrowed down to four main factors

1 Strong competition

MGT6041 - Strategic Management

Google in China

Page 4 of 15

During the early period of Google‟s presence in China it remained the significant market

leader ahead of other search engine providers including Baidu which was just starting up In

recent years Baidu has expanded and managed to lead the market with 584 compared to

Google with 356 (WSJ 2010) Even when Google began to provide Chinese interface on

its googlecom in 2005 followed by the inception of googlecn the next year it was still not

getting anywhere close to becoming the leader The main reason behind this was due to the

fact that Baidu has developed an incomparable understanding of Chinese internet users

hence able to provide much preferred content

2 China‟s economic nationalism

Although undeniably a huge market waiting to be capitalised on beyond its size factor

potential China is also a very complicated market Historically many foreign firms ended up

struggling to understand the Chinese consumers Conventional international business

strategies strongly practiced by Western multinationals must be adopted differently in China

since the market tends to strongly support local firms eventually Volkswagen for instance

was steadily losing its market share albeit Chinese car market was experiencing exciting

increase at the average of 49 between 2006 and 2009 (Volkswagen 2010)

3 Google business policies and principles

Google has been very reluctant towards the Chinese authorities imposing of extensive

filtering in internet search results mainly on subjects related to the country‟s history of

political violence and human rights suppression in the pasts This contradicts with Google‟s

corporate philosophies such as ldquofreedom of informationrdquo and ldquoyou can make money without

doing evilrdquo In addition Google constantly wants to maintain its reputation as an efficient

search engine globally with user-friendly features without exception

4 Limited service variability and quality

Three of Google‟s main services YouTube Google Blog and Picasa are blocked from being

accessible by internet users in China through the country‟s network firewall The Golden

Shield Project or also famously known as The Great Firewall of China (Google Blog 2010)

The services are blocked by the firewall to stop contents such as pornography images or

articles on police brutality Tiananmen Square protest (1989) Dalai Lama Tibetan

Independence Movement or any content that originates from the Taiwanese authorities The

MGT6041 - Strategic Management

Google in China

Page 5 of 15

Golden Shield Project is under the control of China‟s Ministry of Public Security Extensive

filtering of internet content is also causing the slow data transfers for Google consumers

The review above reveals that by analysing Google strategic reasoning behind its

consideration it is obvious that Google is encouraged not only by the information freedom

policy but also business fertility factors

Cultural analysis

Culture is an integral part of any society and thus it‟s very essential for anyone to adapt to the

culture of the society to be a part of it The idiom ldquoWhen in Rome do as the Romans dordquo

explains this

But Google certainly did not follow this in China which is evident with the way it has been

running its Chinese operations in the last few years On analyzing the cultural difference the

reason why Google is threatening to stop its operation in China is that one of China‟s

underlying principles is to protect and guards politically sensitive information from the public

which would otherwise cause mayhem in the country whereas the mission of Google is ldquoto

organize world‟s information and make it universally accessible and usefulrdquo This is one of

the major cultural differences in this context Though Google signed the censorship

agreement with China initially the thought of influencing the Chinese government to change

the information and communication laws in due course of time was highly prevalent among

Google officials which backfired But there are other cultural differences which stopped

Google from doing something it does best ie to be the market leader in China

Confucianism one of the components of Chinese business culture includes six values Some

of those values are need for harmony concept of face concepts of trust respect for age and

hierarchy and avoidance of conflict (Fang 2006) The Chinese would maintain decorum and

avoid something that would cause public embarrassment But Google accused the Chinese

government of backing the hackers who launched a sophisticated cyber attack on Google‟s

database which brought about the frustration in the government Google breached the

Censorship agreement thereby breaking the trust of the Chinese government disrespecting

them and bringing about a conflict between them and the government In all the cases

Google has managed to go against all the values mentioned above

MGT6041 - Strategic Management

Google in China

Page 6 of 15

In China any business negotiation would occurs at a slow pace The Chinese business culture

has a very strong influence in the negotiation process and patience is the need of the hour

during negotiation But Google issued the Chinese government an ultimatum stating that it

would pull out its operations from China if the government did not agree to their terms in a

month‟s time which is completely a non-Chinese way of business negotiation ldquoThe Chinese

negotiator will typically not force you into accepting the Chinese terms but rather signals that

your competitors are waiting next door prepared to present a better offerrdquo (Fang 2006)

That‟s what‟s precisely the Chinese government did

Business meetings in china would take place with appointments fixed a lot earlier It would

not be held during meals and social events whereas most of the meetings in Google would

take place during the lunch Chinese social structure is very hierarchical and those in the

hierarchy follow certain protocol whereas the structure of Google is flat with just one line of

top management (no hierarchy) The Google environment is very informal in that it neither

does have any departments as such nor are there any mandatory protocols to be followed

This certainly reflected in the way in which Google held negotiations with the Chinese

government

ldquoThe Chinese believe that interrelations with things and others are continuous Once a

relation is established it can hardly be brokenrdquo (Yau 2007) He also says that Chinese are

considered to be the most loyal customers in the world They often try to conform to group

norms and therefore are more like to buy the product from a certain brand recommended by

the group members

Baidu could owe its success to the above characteristic of Chinese but Google could have

made good use of its customer base when it had a commendable market share earlier

It‟s pretty apparent that Google went into China advocating the American values that

certainly did not go well with the Chinese

MGT6041 - Strategic Management

Google in China

Page 7 of 15

Source Adapted from (Johnson amp Scholes 2008)

Stakeholderrsquos analysis of Google china issue

Google has always been such a company who not only revolutionizes the traditional online

industry but also excelled in corporate social responsibility (CSR) and ethics through their

bdquoDon‟t be Evil‟ motto (Google Blog) But since the time Google has launched googlecn in

China in 2005 (Wu 2007) there have been numerous forces that consistently influenced

Google‟s decision making process in China and hindered them from sticking onto their

organizational motto

Even though China has the second largest internet market but from the cultural analysis it

became clear that the Chinese market is not only regulated by the Chinese government but

also controlled by the bdquoGreat Firewall‟ of China (Wilson et al 2010) Google has been

struggling since 2002 and have gone a long way of change from googlecom (unrestricted) to

googlecn (restricted) and finally to googlehk (unrestricted) Due to the lack of clarification

- High influence ofcommunism-No freedom of speech

- government decides and people obey the law

- Trust and relationship matters more than profit

-Standard dress for communist party officials- Language

Hierarchical

-Bureaucratic-Highly formal

The Paradigm

StoriesSymbols

Rituals and routines

Power structures

Control systems Organisational

structures

MGT6041 - Strategic Management

Google in China

Page 8 of 15

of intention Google has been meeting with the consistent furies and outcries from different

groups (Thompson 2006 cited in Yardey 2006) There has been observed a serious cultural

clash between Google and China starting from the very beginning (ie 2002) Finally due to

the heavy restriction to publish the restricted information followed by cyber attack and to

keep up with their organizational belief of being not evil in 2010 Google decided not only to

move to Hongkong (China) but also started their unrestricted bdquogooglehk‟ (Google Blog)

Google‟s decision of being in Chinese internet market but not being in Beijing (China) needs

more clarification and is yet to be defined Even after knowing the possible pitfalls of this

decision which may finally lead to leave the fastest growing internet market when they were

enjoying the second largest share after bdquoBaidu‟(Chinese search engine) cannot be justified

only on the basis of their organizational motto and can be further understood through

stakeholders analysis

Strategically the type of pressure from the stakeholders that exist behind Google‟s decision

to leave Beijing (China) has been explained by the bdquoStakeholder‟s identifying and positioning

model (SIP) In the process of decision making it is not important to know only about the

different stakeholders but to know about the stakes they hold and how much influential they

are (Wu 2007) In a dynamic system stakeholders contend conflict and compete with each

other and finally try to pull the organization in their direction The tug-of-war not only creates

pressure on Google‟s decision making team but also affects their decision to a large extent

Base on the study of Google‟s stance in bdquoGoogle Blog‟ various newspapers and articles

some of the attributes of the stakeholders like power of influence direction of influence

consistency and visibility are noted which will be of great help to construct the SIP model

MGT6041 - Strategic Management

Google in China

Page 9 of 15

Optimization model ndash stakeholder analysis

Source adapted from (Wu 2007)

We can clearly see in the optimization model that there has been arrows‟ signifying the

stakeholders and with the extremity of their power and effectiveness there is a difference in

the boldness of the arrow The model further has some stakeholders like employees who has

got a divided position and some neutral stakeholders like U S Government who just supports

Google in all cases (ie whether to leave or enter China)

From the study of the model it has been quiet clear that bdquoEnter China‟ portion is collectively

stronger not only because of their close association with the decision making team but also

because of their consistency in their push

Although there has been a maximum coverage of the overall decision making process but this

is not an exhaustive depiction of the whole process and there are many more issues and

Go

og

les

De

cis

ion

Ma

kin

g T

ea

m

US Government

Users outside China

Advocacy Group

Googlersquos Investors

Googlersquos Chinese Employees

Users outside China

Chinese Government

Googlersquos InvestorsChinese Search Engines

American Internet Providers

Chinese end users

Googlersquos Employees

LEAVE

CHINA

ENTER

CHINA

Media

Vis

ible

No

t V

isib

le

Symbols directory

bullArrow = Stakeholders

bullDirection of arrow = Position on whether to enter China or leave China

bullSize of arrow = The power and strength of influence

bullSolid or broken arrow = Consistency and continuity of influence

bullArrow starting point = Extremity Sincerity of the position

bullUp or below surface line = Salience and Visibility of influence

MGT6041 - Strategic Management

Google in China

Page 10 of 15

patterns which can also influence the whole decision process For example the mass media

has not considered as one of the stakeholder because of the increased bias of media inside and

outside China Chinese media supports Chinese government decision of restriction of the free

flow of information whereas if we talk about media of US and UK they follow Google‟s

decision of free flow of information and freedom of speech As a result of this study it‟s clear

that media mostly acts as a mediator of information to all different stakeholders rather than

acting as one in reality

Google‟s decision of continuing with the unrestricted Googlehk from Hongkong came as a

result of Google‟s strong organizational belief of bdquoDon‟t be Evil‟ strong world market

position extreme profit and finally due to the support from the customers worldwide But it is

also important to note that understanding the structures and struggles among the stakeholders

may not always guarantee the success of the policy because of the dynamics of the whole

process which is greatly dependent on the changing stakeholder‟s needs and position in

future With the help of the bdquoSIP model‟ there is an attempt of simplifying the complicated

reality and also to enhance the robustness of the whole process of Google‟s decision making

PESTEL and its use in Scenario analysis

The problem faced by Google in China and its dilemma about whether to stay in the Chinese

market or not is a good example of needing to devise a strategy in action This is not an

examination of the past but an attempt to identify some strategic action choices for the

future Walsh (2005 p119) suggests that ldquoThe process of strategy formation is a dynamic

one that corresponds to the dynamic conditions that drive itrdquo If that is so then we need to

examine the changing factors behind Google‟s position in China

Google‟s operating environment in China seems to be constantly changing There are clearly

drivers for change at work and the need to identify these drivers is by a PESTEL analysis

(standing for Political Economic Social Technological Environmental and Legal)

The use of the cultural web analysis has highlighted that a main problem facing Google is the

unpredictable attitude of Chinese officialdom (Political) allied to strong local competition in

a rapidly-growing and otherwise profitable market (Economic) In the Social sector the

cultural web suggested that Google has not reacted well to the Chinese local needs which it

MGT6041 - Strategic Management

Google in China

Page 11 of 15

needs to do in a market where Technological change is rapid Other drivers for change can

also be identified

This PESTEL analysis is useful for classifying the drivers for change and it can be rather

static However it is a useful starting point for further strategy development Stakeholder

analysis can be used to suggest how some of these drivers might change and can also

identify those that might be correlated either negatively or positively

The drivers can also be used for the next stage in the process of strategy development which

is Scenario Planning

Scenario Planning is helpful when the environment is highly complex or is rapidly changing

(as it is here) It tends to be especially useful when

There are a limited number of key drivers influencing the success of the strategy

There is a high level of uncertainty about such issues

Outcomes could be radically different

All these factors apply to a greater or lesser extent to Google in China The numbers of key

drivers are not high With regard to one of the key drivers the Chinese political attitude it is

difficult to predict what their future attitude will be but there‟s no doubt that a positive

attitude would probably ensure success for Google while a stronger negative attitude could

well stop Google from trading in China at all

Given this degree of uncertainty the use of scenario planning could well be a help to Google

Typically starting from the drivers with the greatest uncertainty managers could prepare

different scenarios to give plausible views of how the business environment may change in

the future Interrelated drivers and scenarios must be consistent eg it is possible that very

low economic growth in China might produce an unstable political situation but it‟s highly

unlikely that high economic growth would Scenarios tend to be bdquooptimistic‟ middling‟ or

bdquopessimistic‟ and normal procedure is to create between 7-9 initial scenarios which would

then be reduced to between 2-4 most likely positions

The use of this technique could help Google but there are problems associated with it The

choice of the most likely scenarios will probably still contain a strong element of value

judgement and managers will have to guard against the temptation to so weight the scoring

as to pick an option which may have been initially prepared anyway The flexibility of the

MGT6041 - Strategic Management

Google in China

Page 12 of 15

system and its ability to react to changing situations is attractive but it may not always be

advisable to try to change strategy on a regular basis However when used in conjunction

with the cultural web and stakeholder analysis it is another technique that might help to give

Google a clearer indication of what strategy they need to follow

Conclusion

The aim of this investigation has been to find a strategic structure that will help Google in its

assessment of its operation serving the Chinese market The economic attraction of such a

large and growing market is obvious but the difficulties involved in the continued operation

(and the rapid rate of change in the internet service industry anyway) make the certainty of

future activities unclear The situation is fluid and the direction of change uncertain To take

account of this we need a theoretical approach (or more likely a combination of theoretical

approaches) that will not only help to clarify the situation but also give some guidance as to

how to approach strategy in the future

Many international organisations attempting to set up operations in China have struggled so

an analysis of the cultures involved using the Cultural Web was a logical starting point This

has highlighted several features such as the position of the Chinese Government with regard

to control and the importance of being in tune with the Chinese culture and market demands

when providing a service something that Google did not do well in the initial stages of its

operation in China Another important point is that the approach of the Chinese Government

with regard to censorship is in direct conflict with Google‟s stance on freedom of

information and willingly accepting such censorship would damage its brand image and

reputation

The major factors produced by the Cultural Web have then been taken and input the other

theoretical models used in this report namely Stakeholder Analysis and PESTELScenario

Planning Both these models have the degree of flexibility required in that they can both help

to explain the existing situation but also be used to indicate what might happen if the details

of the drivers for change alter to any degree Thus the Stakeholder Analysis emphasises the

importance of Google‟s shareholders and the economic pull of the Chinese market but this

could change Should Google continue to lose market share to Baidu then the shareholders

might decide this no longer fits with Google‟s desire to be market leader in its chosen

markets and their support for Google in China might weaken

MGT6041 - Strategic Management

Google in China

Page 13 of 15

Such possible changes could then be tested on the scenario planning model which would

take the drivers for change identified by the Cultural Web and Stakeholder Analysis and see

how changes in these drivers would affect the overall operating situation for Google

What we need is therefore a strategic model that links these techniques together Such a

model is shown below

Strategic Development Model adopted from (Walsh PR 2005)

This strategy development model shows how the theories we have examined can help

improve the analysis of the present situation and also be sufficiently flexible to help update

Google‟s management team as and when needed However it also emphasises that there are

other factors to be taken into account when making a final decision The three theories we

have looked at have helped to explain the rapidly-changing environment that surrounds

Google‟s operations in China and there is no doubt that these are important but just as

important is the internal operation of Google as a company its core competencies and beliefs

and the other factors that might be affecting its global operations

MGT6041 - Strategic Management

Google in China

Page 14 of 15

References

China Daily ldquoHow Many Internet Users Are There in Chinardquo Ministry of culture

Peoples Republic of China website

Chinese negotiations(18th

January 2010) ldquo A stakeholder analysis of Chinese

negotiationrdquo [Online] Available at httpwwwchinesenegotiationcom2010

[Accessed 3rd

April 2010]

CNNIC ldquo25th Statistical Survey Report on the Internet Development in Chinardquo China

Internet Network Information Center website

David Drummond ldquoA new approach to China an updaterdquo March 3 2010 post on blog

ldquoPolicy and issuesrdquo The official Google blog

Fang T (2006) ldquoNegotiation the Chinese stylerdquo Journal of Business amp Industrial

Marketing 21 (1) 50-60

httpgoogleblogblogspotcom accessed May 2010

httpwwwchinacultureorggben_aboutchina2003-0924content_26129htm accessed

April 2010

httpwwwcnniccnuploadfilespdf2010315142705pdf accessed April 2010

IMF ldquoGross domestic product growth in the advanced economies accumulated for the

periods 1990 - 1999 and 1990 - 2006rdquo International Monetary Fund website

httpwwwimforgexternalpubsftweo200501datadbginimcfm accessed May 2010

Johnson G Scholes K Whittington R (2008) Exploring Corporate Strategy 8th

ed

London Prentice Hall

Liu J ldquoBaidu and Google at logger heads in China Business Asia by Bloombergrdquo

International Herald Tribune (July 26 2007) LexisNexis Duke University Library 6

Nov 2007

National electronic Library for Health (Updated 16 Jan 2005) ldquoCan walking make you

slimmer and healthierrdquo (Hitting the headlines article) [Online]

Available at httpwwwnhsukhthwalking [Accessed 10 April 2010]

Reuters (16th

January 2010) ldquoChina affirms control over Internetrdquo [Online] Available

at httpwwwreuterscomarticleidUSTRE60D0CA20100114 [Accessed 3rd

April

2010]

The official Google blog [Online] Available at httpgoogleblogblogspotcom

[Accessed 3rd

April 2010]

MGT6041 - Strategic Management

Google in China

Page 4 of 15

During the early period of Google‟s presence in China it remained the significant market

leader ahead of other search engine providers including Baidu which was just starting up In

recent years Baidu has expanded and managed to lead the market with 584 compared to

Google with 356 (WSJ 2010) Even when Google began to provide Chinese interface on

its googlecom in 2005 followed by the inception of googlecn the next year it was still not

getting anywhere close to becoming the leader The main reason behind this was due to the

fact that Baidu has developed an incomparable understanding of Chinese internet users

hence able to provide much preferred content

2 China‟s economic nationalism

Although undeniably a huge market waiting to be capitalised on beyond its size factor

potential China is also a very complicated market Historically many foreign firms ended up

struggling to understand the Chinese consumers Conventional international business

strategies strongly practiced by Western multinationals must be adopted differently in China

since the market tends to strongly support local firms eventually Volkswagen for instance

was steadily losing its market share albeit Chinese car market was experiencing exciting

increase at the average of 49 between 2006 and 2009 (Volkswagen 2010)

3 Google business policies and principles

Google has been very reluctant towards the Chinese authorities imposing of extensive

filtering in internet search results mainly on subjects related to the country‟s history of

political violence and human rights suppression in the pasts This contradicts with Google‟s

corporate philosophies such as ldquofreedom of informationrdquo and ldquoyou can make money without

doing evilrdquo In addition Google constantly wants to maintain its reputation as an efficient

search engine globally with user-friendly features without exception

4 Limited service variability and quality

Three of Google‟s main services YouTube Google Blog and Picasa are blocked from being

accessible by internet users in China through the country‟s network firewall The Golden

Shield Project or also famously known as The Great Firewall of China (Google Blog 2010)

The services are blocked by the firewall to stop contents such as pornography images or

articles on police brutality Tiananmen Square protest (1989) Dalai Lama Tibetan

Independence Movement or any content that originates from the Taiwanese authorities The

MGT6041 - Strategic Management

Google in China

Page 5 of 15

Golden Shield Project is under the control of China‟s Ministry of Public Security Extensive

filtering of internet content is also causing the slow data transfers for Google consumers

The review above reveals that by analysing Google strategic reasoning behind its

consideration it is obvious that Google is encouraged not only by the information freedom

policy but also business fertility factors

Cultural analysis

Culture is an integral part of any society and thus it‟s very essential for anyone to adapt to the

culture of the society to be a part of it The idiom ldquoWhen in Rome do as the Romans dordquo

explains this

But Google certainly did not follow this in China which is evident with the way it has been

running its Chinese operations in the last few years On analyzing the cultural difference the

reason why Google is threatening to stop its operation in China is that one of China‟s

underlying principles is to protect and guards politically sensitive information from the public

which would otherwise cause mayhem in the country whereas the mission of Google is ldquoto

organize world‟s information and make it universally accessible and usefulrdquo This is one of

the major cultural differences in this context Though Google signed the censorship

agreement with China initially the thought of influencing the Chinese government to change

the information and communication laws in due course of time was highly prevalent among

Google officials which backfired But there are other cultural differences which stopped

Google from doing something it does best ie to be the market leader in China

Confucianism one of the components of Chinese business culture includes six values Some

of those values are need for harmony concept of face concepts of trust respect for age and

hierarchy and avoidance of conflict (Fang 2006) The Chinese would maintain decorum and

avoid something that would cause public embarrassment But Google accused the Chinese

government of backing the hackers who launched a sophisticated cyber attack on Google‟s

database which brought about the frustration in the government Google breached the

Censorship agreement thereby breaking the trust of the Chinese government disrespecting

them and bringing about a conflict between them and the government In all the cases

Google has managed to go against all the values mentioned above

MGT6041 - Strategic Management

Google in China

Page 6 of 15

In China any business negotiation would occurs at a slow pace The Chinese business culture

has a very strong influence in the negotiation process and patience is the need of the hour

during negotiation But Google issued the Chinese government an ultimatum stating that it

would pull out its operations from China if the government did not agree to their terms in a

month‟s time which is completely a non-Chinese way of business negotiation ldquoThe Chinese

negotiator will typically not force you into accepting the Chinese terms but rather signals that

your competitors are waiting next door prepared to present a better offerrdquo (Fang 2006)

That‟s what‟s precisely the Chinese government did

Business meetings in china would take place with appointments fixed a lot earlier It would

not be held during meals and social events whereas most of the meetings in Google would

take place during the lunch Chinese social structure is very hierarchical and those in the

hierarchy follow certain protocol whereas the structure of Google is flat with just one line of

top management (no hierarchy) The Google environment is very informal in that it neither

does have any departments as such nor are there any mandatory protocols to be followed

This certainly reflected in the way in which Google held negotiations with the Chinese

government

ldquoThe Chinese believe that interrelations with things and others are continuous Once a

relation is established it can hardly be brokenrdquo (Yau 2007) He also says that Chinese are

considered to be the most loyal customers in the world They often try to conform to group

norms and therefore are more like to buy the product from a certain brand recommended by

the group members

Baidu could owe its success to the above characteristic of Chinese but Google could have

made good use of its customer base when it had a commendable market share earlier

It‟s pretty apparent that Google went into China advocating the American values that

certainly did not go well with the Chinese

MGT6041 - Strategic Management

Google in China

Page 7 of 15

Source Adapted from (Johnson amp Scholes 2008)

Stakeholderrsquos analysis of Google china issue

Google has always been such a company who not only revolutionizes the traditional online

industry but also excelled in corporate social responsibility (CSR) and ethics through their

bdquoDon‟t be Evil‟ motto (Google Blog) But since the time Google has launched googlecn in

China in 2005 (Wu 2007) there have been numerous forces that consistently influenced

Google‟s decision making process in China and hindered them from sticking onto their

organizational motto

Even though China has the second largest internet market but from the cultural analysis it

became clear that the Chinese market is not only regulated by the Chinese government but

also controlled by the bdquoGreat Firewall‟ of China (Wilson et al 2010) Google has been

struggling since 2002 and have gone a long way of change from googlecom (unrestricted) to

googlecn (restricted) and finally to googlehk (unrestricted) Due to the lack of clarification

- High influence ofcommunism-No freedom of speech

- government decides and people obey the law

- Trust and relationship matters more than profit

-Standard dress for communist party officials- Language

Hierarchical

-Bureaucratic-Highly formal

The Paradigm

StoriesSymbols

Rituals and routines

Power structures

Control systems Organisational

structures

MGT6041 - Strategic Management

Google in China

Page 8 of 15

of intention Google has been meeting with the consistent furies and outcries from different

groups (Thompson 2006 cited in Yardey 2006) There has been observed a serious cultural

clash between Google and China starting from the very beginning (ie 2002) Finally due to

the heavy restriction to publish the restricted information followed by cyber attack and to

keep up with their organizational belief of being not evil in 2010 Google decided not only to

move to Hongkong (China) but also started their unrestricted bdquogooglehk‟ (Google Blog)

Google‟s decision of being in Chinese internet market but not being in Beijing (China) needs

more clarification and is yet to be defined Even after knowing the possible pitfalls of this

decision which may finally lead to leave the fastest growing internet market when they were

enjoying the second largest share after bdquoBaidu‟(Chinese search engine) cannot be justified

only on the basis of their organizational motto and can be further understood through

stakeholders analysis

Strategically the type of pressure from the stakeholders that exist behind Google‟s decision

to leave Beijing (China) has been explained by the bdquoStakeholder‟s identifying and positioning

model (SIP) In the process of decision making it is not important to know only about the

different stakeholders but to know about the stakes they hold and how much influential they

are (Wu 2007) In a dynamic system stakeholders contend conflict and compete with each

other and finally try to pull the organization in their direction The tug-of-war not only creates

pressure on Google‟s decision making team but also affects their decision to a large extent

Base on the study of Google‟s stance in bdquoGoogle Blog‟ various newspapers and articles

some of the attributes of the stakeholders like power of influence direction of influence

consistency and visibility are noted which will be of great help to construct the SIP model

MGT6041 - Strategic Management

Google in China

Page 9 of 15

Optimization model ndash stakeholder analysis

Source adapted from (Wu 2007)

We can clearly see in the optimization model that there has been arrows‟ signifying the

stakeholders and with the extremity of their power and effectiveness there is a difference in

the boldness of the arrow The model further has some stakeholders like employees who has

got a divided position and some neutral stakeholders like U S Government who just supports

Google in all cases (ie whether to leave or enter China)

From the study of the model it has been quiet clear that bdquoEnter China‟ portion is collectively

stronger not only because of their close association with the decision making team but also

because of their consistency in their push

Although there has been a maximum coverage of the overall decision making process but this

is not an exhaustive depiction of the whole process and there are many more issues and

Go

og

les

De

cis

ion

Ma

kin

g T

ea

m

US Government

Users outside China

Advocacy Group

Googlersquos Investors

Googlersquos Chinese Employees

Users outside China

Chinese Government

Googlersquos InvestorsChinese Search Engines

American Internet Providers

Chinese end users

Googlersquos Employees

LEAVE

CHINA

ENTER

CHINA

Media

Vis

ible

No

t V

isib

le

Symbols directory

bullArrow = Stakeholders

bullDirection of arrow = Position on whether to enter China or leave China

bullSize of arrow = The power and strength of influence

bullSolid or broken arrow = Consistency and continuity of influence

bullArrow starting point = Extremity Sincerity of the position

bullUp or below surface line = Salience and Visibility of influence

MGT6041 - Strategic Management

Google in China

Page 10 of 15

patterns which can also influence the whole decision process For example the mass media

has not considered as one of the stakeholder because of the increased bias of media inside and

outside China Chinese media supports Chinese government decision of restriction of the free

flow of information whereas if we talk about media of US and UK they follow Google‟s

decision of free flow of information and freedom of speech As a result of this study it‟s clear

that media mostly acts as a mediator of information to all different stakeholders rather than

acting as one in reality

Google‟s decision of continuing with the unrestricted Googlehk from Hongkong came as a

result of Google‟s strong organizational belief of bdquoDon‟t be Evil‟ strong world market

position extreme profit and finally due to the support from the customers worldwide But it is

also important to note that understanding the structures and struggles among the stakeholders

may not always guarantee the success of the policy because of the dynamics of the whole

process which is greatly dependent on the changing stakeholder‟s needs and position in

future With the help of the bdquoSIP model‟ there is an attempt of simplifying the complicated

reality and also to enhance the robustness of the whole process of Google‟s decision making

PESTEL and its use in Scenario analysis

The problem faced by Google in China and its dilemma about whether to stay in the Chinese

market or not is a good example of needing to devise a strategy in action This is not an

examination of the past but an attempt to identify some strategic action choices for the

future Walsh (2005 p119) suggests that ldquoThe process of strategy formation is a dynamic

one that corresponds to the dynamic conditions that drive itrdquo If that is so then we need to

examine the changing factors behind Google‟s position in China

Google‟s operating environment in China seems to be constantly changing There are clearly

drivers for change at work and the need to identify these drivers is by a PESTEL analysis

(standing for Political Economic Social Technological Environmental and Legal)

The use of the cultural web analysis has highlighted that a main problem facing Google is the

unpredictable attitude of Chinese officialdom (Political) allied to strong local competition in

a rapidly-growing and otherwise profitable market (Economic) In the Social sector the

cultural web suggested that Google has not reacted well to the Chinese local needs which it

MGT6041 - Strategic Management

Google in China

Page 11 of 15

needs to do in a market where Technological change is rapid Other drivers for change can

also be identified

This PESTEL analysis is useful for classifying the drivers for change and it can be rather

static However it is a useful starting point for further strategy development Stakeholder

analysis can be used to suggest how some of these drivers might change and can also

identify those that might be correlated either negatively or positively

The drivers can also be used for the next stage in the process of strategy development which

is Scenario Planning

Scenario Planning is helpful when the environment is highly complex or is rapidly changing

(as it is here) It tends to be especially useful when

There are a limited number of key drivers influencing the success of the strategy

There is a high level of uncertainty about such issues

Outcomes could be radically different

All these factors apply to a greater or lesser extent to Google in China The numbers of key

drivers are not high With regard to one of the key drivers the Chinese political attitude it is

difficult to predict what their future attitude will be but there‟s no doubt that a positive

attitude would probably ensure success for Google while a stronger negative attitude could

well stop Google from trading in China at all

Given this degree of uncertainty the use of scenario planning could well be a help to Google

Typically starting from the drivers with the greatest uncertainty managers could prepare

different scenarios to give plausible views of how the business environment may change in

the future Interrelated drivers and scenarios must be consistent eg it is possible that very

low economic growth in China might produce an unstable political situation but it‟s highly

unlikely that high economic growth would Scenarios tend to be bdquooptimistic‟ middling‟ or

bdquopessimistic‟ and normal procedure is to create between 7-9 initial scenarios which would

then be reduced to between 2-4 most likely positions

The use of this technique could help Google but there are problems associated with it The

choice of the most likely scenarios will probably still contain a strong element of value

judgement and managers will have to guard against the temptation to so weight the scoring

as to pick an option which may have been initially prepared anyway The flexibility of the

MGT6041 - Strategic Management

Google in China

Page 12 of 15

system and its ability to react to changing situations is attractive but it may not always be

advisable to try to change strategy on a regular basis However when used in conjunction

with the cultural web and stakeholder analysis it is another technique that might help to give

Google a clearer indication of what strategy they need to follow

Conclusion

The aim of this investigation has been to find a strategic structure that will help Google in its

assessment of its operation serving the Chinese market The economic attraction of such a

large and growing market is obvious but the difficulties involved in the continued operation

(and the rapid rate of change in the internet service industry anyway) make the certainty of

future activities unclear The situation is fluid and the direction of change uncertain To take

account of this we need a theoretical approach (or more likely a combination of theoretical

approaches) that will not only help to clarify the situation but also give some guidance as to

how to approach strategy in the future

Many international organisations attempting to set up operations in China have struggled so

an analysis of the cultures involved using the Cultural Web was a logical starting point This

has highlighted several features such as the position of the Chinese Government with regard

to control and the importance of being in tune with the Chinese culture and market demands

when providing a service something that Google did not do well in the initial stages of its

operation in China Another important point is that the approach of the Chinese Government

with regard to censorship is in direct conflict with Google‟s stance on freedom of

information and willingly accepting such censorship would damage its brand image and

reputation

The major factors produced by the Cultural Web have then been taken and input the other

theoretical models used in this report namely Stakeholder Analysis and PESTELScenario

Planning Both these models have the degree of flexibility required in that they can both help

to explain the existing situation but also be used to indicate what might happen if the details

of the drivers for change alter to any degree Thus the Stakeholder Analysis emphasises the

importance of Google‟s shareholders and the economic pull of the Chinese market but this

could change Should Google continue to lose market share to Baidu then the shareholders

might decide this no longer fits with Google‟s desire to be market leader in its chosen

markets and their support for Google in China might weaken

MGT6041 - Strategic Management

Google in China

Page 13 of 15

Such possible changes could then be tested on the scenario planning model which would

take the drivers for change identified by the Cultural Web and Stakeholder Analysis and see

how changes in these drivers would affect the overall operating situation for Google

What we need is therefore a strategic model that links these techniques together Such a

model is shown below

Strategic Development Model adopted from (Walsh PR 2005)

This strategy development model shows how the theories we have examined can help

improve the analysis of the present situation and also be sufficiently flexible to help update

Google‟s management team as and when needed However it also emphasises that there are

other factors to be taken into account when making a final decision The three theories we

have looked at have helped to explain the rapidly-changing environment that surrounds

Google‟s operations in China and there is no doubt that these are important but just as

important is the internal operation of Google as a company its core competencies and beliefs

and the other factors that might be affecting its global operations

MGT6041 - Strategic Management

Google in China

Page 14 of 15

References

China Daily ldquoHow Many Internet Users Are There in Chinardquo Ministry of culture

Peoples Republic of China website

Chinese negotiations(18th

January 2010) ldquo A stakeholder analysis of Chinese

negotiationrdquo [Online] Available at httpwwwchinesenegotiationcom2010

[Accessed 3rd

April 2010]

CNNIC ldquo25th Statistical Survey Report on the Internet Development in Chinardquo China

Internet Network Information Center website

David Drummond ldquoA new approach to China an updaterdquo March 3 2010 post on blog

ldquoPolicy and issuesrdquo The official Google blog

Fang T (2006) ldquoNegotiation the Chinese stylerdquo Journal of Business amp Industrial

Marketing 21 (1) 50-60

httpgoogleblogblogspotcom accessed May 2010

httpwwwchinacultureorggben_aboutchina2003-0924content_26129htm accessed

April 2010

httpwwwcnniccnuploadfilespdf2010315142705pdf accessed April 2010

IMF ldquoGross domestic product growth in the advanced economies accumulated for the

periods 1990 - 1999 and 1990 - 2006rdquo International Monetary Fund website

httpwwwimforgexternalpubsftweo200501datadbginimcfm accessed May 2010

Johnson G Scholes K Whittington R (2008) Exploring Corporate Strategy 8th

ed

London Prentice Hall

Liu J ldquoBaidu and Google at logger heads in China Business Asia by Bloombergrdquo

International Herald Tribune (July 26 2007) LexisNexis Duke University Library 6

Nov 2007

National electronic Library for Health (Updated 16 Jan 2005) ldquoCan walking make you

slimmer and healthierrdquo (Hitting the headlines article) [Online]

Available at httpwwwnhsukhthwalking [Accessed 10 April 2010]

Reuters (16th

January 2010) ldquoChina affirms control over Internetrdquo [Online] Available

at httpwwwreuterscomarticleidUSTRE60D0CA20100114 [Accessed 3rd

April

2010]

The official Google blog [Online] Available at httpgoogleblogblogspotcom

[Accessed 3rd

April 2010]

MGT6041 - Strategic Management

Google in China

Page 5 of 15

Golden Shield Project is under the control of China‟s Ministry of Public Security Extensive

filtering of internet content is also causing the slow data transfers for Google consumers

The review above reveals that by analysing Google strategic reasoning behind its

consideration it is obvious that Google is encouraged not only by the information freedom

policy but also business fertility factors

Cultural analysis

Culture is an integral part of any society and thus it‟s very essential for anyone to adapt to the

culture of the society to be a part of it The idiom ldquoWhen in Rome do as the Romans dordquo

explains this

But Google certainly did not follow this in China which is evident with the way it has been

running its Chinese operations in the last few years On analyzing the cultural difference the

reason why Google is threatening to stop its operation in China is that one of China‟s

underlying principles is to protect and guards politically sensitive information from the public

which would otherwise cause mayhem in the country whereas the mission of Google is ldquoto

organize world‟s information and make it universally accessible and usefulrdquo This is one of

the major cultural differences in this context Though Google signed the censorship

agreement with China initially the thought of influencing the Chinese government to change

the information and communication laws in due course of time was highly prevalent among

Google officials which backfired But there are other cultural differences which stopped

Google from doing something it does best ie to be the market leader in China

Confucianism one of the components of Chinese business culture includes six values Some

of those values are need for harmony concept of face concepts of trust respect for age and

hierarchy and avoidance of conflict (Fang 2006) The Chinese would maintain decorum and

avoid something that would cause public embarrassment But Google accused the Chinese

government of backing the hackers who launched a sophisticated cyber attack on Google‟s

database which brought about the frustration in the government Google breached the

Censorship agreement thereby breaking the trust of the Chinese government disrespecting

them and bringing about a conflict between them and the government In all the cases

Google has managed to go against all the values mentioned above

MGT6041 - Strategic Management

Google in China

Page 6 of 15

In China any business negotiation would occurs at a slow pace The Chinese business culture

has a very strong influence in the negotiation process and patience is the need of the hour

during negotiation But Google issued the Chinese government an ultimatum stating that it

would pull out its operations from China if the government did not agree to their terms in a

month‟s time which is completely a non-Chinese way of business negotiation ldquoThe Chinese

negotiator will typically not force you into accepting the Chinese terms but rather signals that

your competitors are waiting next door prepared to present a better offerrdquo (Fang 2006)

That‟s what‟s precisely the Chinese government did

Business meetings in china would take place with appointments fixed a lot earlier It would

not be held during meals and social events whereas most of the meetings in Google would

take place during the lunch Chinese social structure is very hierarchical and those in the

hierarchy follow certain protocol whereas the structure of Google is flat with just one line of

top management (no hierarchy) The Google environment is very informal in that it neither

does have any departments as such nor are there any mandatory protocols to be followed

This certainly reflected in the way in which Google held negotiations with the Chinese

government

ldquoThe Chinese believe that interrelations with things and others are continuous Once a

relation is established it can hardly be brokenrdquo (Yau 2007) He also says that Chinese are

considered to be the most loyal customers in the world They often try to conform to group

norms and therefore are more like to buy the product from a certain brand recommended by

the group members

Baidu could owe its success to the above characteristic of Chinese but Google could have

made good use of its customer base when it had a commendable market share earlier

It‟s pretty apparent that Google went into China advocating the American values that

certainly did not go well with the Chinese

MGT6041 - Strategic Management

Google in China

Page 7 of 15

Source Adapted from (Johnson amp Scholes 2008)

Stakeholderrsquos analysis of Google china issue

Google has always been such a company who not only revolutionizes the traditional online

industry but also excelled in corporate social responsibility (CSR) and ethics through their

bdquoDon‟t be Evil‟ motto (Google Blog) But since the time Google has launched googlecn in

China in 2005 (Wu 2007) there have been numerous forces that consistently influenced

Google‟s decision making process in China and hindered them from sticking onto their

organizational motto

Even though China has the second largest internet market but from the cultural analysis it

became clear that the Chinese market is not only regulated by the Chinese government but

also controlled by the bdquoGreat Firewall‟ of China (Wilson et al 2010) Google has been

struggling since 2002 and have gone a long way of change from googlecom (unrestricted) to

googlecn (restricted) and finally to googlehk (unrestricted) Due to the lack of clarification

- High influence ofcommunism-No freedom of speech

- government decides and people obey the law

- Trust and relationship matters more than profit

-Standard dress for communist party officials- Language

Hierarchical

-Bureaucratic-Highly formal

The Paradigm

StoriesSymbols

Rituals and routines

Power structures

Control systems Organisational

structures

MGT6041 - Strategic Management

Google in China

Page 8 of 15

of intention Google has been meeting with the consistent furies and outcries from different

groups (Thompson 2006 cited in Yardey 2006) There has been observed a serious cultural

clash between Google and China starting from the very beginning (ie 2002) Finally due to

the heavy restriction to publish the restricted information followed by cyber attack and to

keep up with their organizational belief of being not evil in 2010 Google decided not only to

move to Hongkong (China) but also started their unrestricted bdquogooglehk‟ (Google Blog)

Google‟s decision of being in Chinese internet market but not being in Beijing (China) needs

more clarification and is yet to be defined Even after knowing the possible pitfalls of this

decision which may finally lead to leave the fastest growing internet market when they were

enjoying the second largest share after bdquoBaidu‟(Chinese search engine) cannot be justified

only on the basis of their organizational motto and can be further understood through

stakeholders analysis

Strategically the type of pressure from the stakeholders that exist behind Google‟s decision

to leave Beijing (China) has been explained by the bdquoStakeholder‟s identifying and positioning

model (SIP) In the process of decision making it is not important to know only about the

different stakeholders but to know about the stakes they hold and how much influential they

are (Wu 2007) In a dynamic system stakeholders contend conflict and compete with each

other and finally try to pull the organization in their direction The tug-of-war not only creates

pressure on Google‟s decision making team but also affects their decision to a large extent

Base on the study of Google‟s stance in bdquoGoogle Blog‟ various newspapers and articles

some of the attributes of the stakeholders like power of influence direction of influence

consistency and visibility are noted which will be of great help to construct the SIP model

MGT6041 - Strategic Management

Google in China

Page 9 of 15

Optimization model ndash stakeholder analysis

Source adapted from (Wu 2007)

We can clearly see in the optimization model that there has been arrows‟ signifying the

stakeholders and with the extremity of their power and effectiveness there is a difference in

the boldness of the arrow The model further has some stakeholders like employees who has

got a divided position and some neutral stakeholders like U S Government who just supports

Google in all cases (ie whether to leave or enter China)

From the study of the model it has been quiet clear that bdquoEnter China‟ portion is collectively

stronger not only because of their close association with the decision making team but also

because of their consistency in their push

Although there has been a maximum coverage of the overall decision making process but this

is not an exhaustive depiction of the whole process and there are many more issues and

Go

og

les

De

cis

ion

Ma

kin

g T

ea

m

US Government

Users outside China

Advocacy Group

Googlersquos Investors

Googlersquos Chinese Employees

Users outside China

Chinese Government

Googlersquos InvestorsChinese Search Engines

American Internet Providers

Chinese end users

Googlersquos Employees

LEAVE

CHINA

ENTER

CHINA

Media

Vis

ible

No

t V

isib

le

Symbols directory

bullArrow = Stakeholders

bullDirection of arrow = Position on whether to enter China or leave China

bullSize of arrow = The power and strength of influence

bullSolid or broken arrow = Consistency and continuity of influence

bullArrow starting point = Extremity Sincerity of the position

bullUp or below surface line = Salience and Visibility of influence

MGT6041 - Strategic Management

Google in China

Page 10 of 15

patterns which can also influence the whole decision process For example the mass media

has not considered as one of the stakeholder because of the increased bias of media inside and

outside China Chinese media supports Chinese government decision of restriction of the free

flow of information whereas if we talk about media of US and UK they follow Google‟s

decision of free flow of information and freedom of speech As a result of this study it‟s clear

that media mostly acts as a mediator of information to all different stakeholders rather than

acting as one in reality

Google‟s decision of continuing with the unrestricted Googlehk from Hongkong came as a

result of Google‟s strong organizational belief of bdquoDon‟t be Evil‟ strong world market

position extreme profit and finally due to the support from the customers worldwide But it is

also important to note that understanding the structures and struggles among the stakeholders

may not always guarantee the success of the policy because of the dynamics of the whole

process which is greatly dependent on the changing stakeholder‟s needs and position in

future With the help of the bdquoSIP model‟ there is an attempt of simplifying the complicated

reality and also to enhance the robustness of the whole process of Google‟s decision making

PESTEL and its use in Scenario analysis

The problem faced by Google in China and its dilemma about whether to stay in the Chinese

market or not is a good example of needing to devise a strategy in action This is not an

examination of the past but an attempt to identify some strategic action choices for the

future Walsh (2005 p119) suggests that ldquoThe process of strategy formation is a dynamic

one that corresponds to the dynamic conditions that drive itrdquo If that is so then we need to

examine the changing factors behind Google‟s position in China

Google‟s operating environment in China seems to be constantly changing There are clearly

drivers for change at work and the need to identify these drivers is by a PESTEL analysis

(standing for Political Economic Social Technological Environmental and Legal)

The use of the cultural web analysis has highlighted that a main problem facing Google is the

unpredictable attitude of Chinese officialdom (Political) allied to strong local competition in

a rapidly-growing and otherwise profitable market (Economic) In the Social sector the

cultural web suggested that Google has not reacted well to the Chinese local needs which it

MGT6041 - Strategic Management

Google in China

Page 11 of 15

needs to do in a market where Technological change is rapid Other drivers for change can

also be identified

This PESTEL analysis is useful for classifying the drivers for change and it can be rather

static However it is a useful starting point for further strategy development Stakeholder

analysis can be used to suggest how some of these drivers might change and can also

identify those that might be correlated either negatively or positively

The drivers can also be used for the next stage in the process of strategy development which

is Scenario Planning

Scenario Planning is helpful when the environment is highly complex or is rapidly changing

(as it is here) It tends to be especially useful when

There are a limited number of key drivers influencing the success of the strategy

There is a high level of uncertainty about such issues

Outcomes could be radically different

All these factors apply to a greater or lesser extent to Google in China The numbers of key

drivers are not high With regard to one of the key drivers the Chinese political attitude it is

difficult to predict what their future attitude will be but there‟s no doubt that a positive

attitude would probably ensure success for Google while a stronger negative attitude could

well stop Google from trading in China at all

Given this degree of uncertainty the use of scenario planning could well be a help to Google

Typically starting from the drivers with the greatest uncertainty managers could prepare

different scenarios to give plausible views of how the business environment may change in

the future Interrelated drivers and scenarios must be consistent eg it is possible that very

low economic growth in China might produce an unstable political situation but it‟s highly

unlikely that high economic growth would Scenarios tend to be bdquooptimistic‟ middling‟ or

bdquopessimistic‟ and normal procedure is to create between 7-9 initial scenarios which would

then be reduced to between 2-4 most likely positions

The use of this technique could help Google but there are problems associated with it The

choice of the most likely scenarios will probably still contain a strong element of value

judgement and managers will have to guard against the temptation to so weight the scoring

as to pick an option which may have been initially prepared anyway The flexibility of the

MGT6041 - Strategic Management

Google in China

Page 12 of 15

system and its ability to react to changing situations is attractive but it may not always be

advisable to try to change strategy on a regular basis However when used in conjunction

with the cultural web and stakeholder analysis it is another technique that might help to give

Google a clearer indication of what strategy they need to follow

Conclusion

The aim of this investigation has been to find a strategic structure that will help Google in its

assessment of its operation serving the Chinese market The economic attraction of such a

large and growing market is obvious but the difficulties involved in the continued operation

(and the rapid rate of change in the internet service industry anyway) make the certainty of

future activities unclear The situation is fluid and the direction of change uncertain To take

account of this we need a theoretical approach (or more likely a combination of theoretical

approaches) that will not only help to clarify the situation but also give some guidance as to

how to approach strategy in the future

Many international organisations attempting to set up operations in China have struggled so

an analysis of the cultures involved using the Cultural Web was a logical starting point This

has highlighted several features such as the position of the Chinese Government with regard

to control and the importance of being in tune with the Chinese culture and market demands

when providing a service something that Google did not do well in the initial stages of its

operation in China Another important point is that the approach of the Chinese Government

with regard to censorship is in direct conflict with Google‟s stance on freedom of

information and willingly accepting such censorship would damage its brand image and

reputation

The major factors produced by the Cultural Web have then been taken and input the other

theoretical models used in this report namely Stakeholder Analysis and PESTELScenario

Planning Both these models have the degree of flexibility required in that they can both help

to explain the existing situation but also be used to indicate what might happen if the details

of the drivers for change alter to any degree Thus the Stakeholder Analysis emphasises the

importance of Google‟s shareholders and the economic pull of the Chinese market but this

could change Should Google continue to lose market share to Baidu then the shareholders

might decide this no longer fits with Google‟s desire to be market leader in its chosen

markets and their support for Google in China might weaken

MGT6041 - Strategic Management

Google in China

Page 13 of 15

Such possible changes could then be tested on the scenario planning model which would

take the drivers for change identified by the Cultural Web and Stakeholder Analysis and see

how changes in these drivers would affect the overall operating situation for Google

What we need is therefore a strategic model that links these techniques together Such a

model is shown below

Strategic Development Model adopted from (Walsh PR 2005)

This strategy development model shows how the theories we have examined can help

improve the analysis of the present situation and also be sufficiently flexible to help update

Google‟s management team as and when needed However it also emphasises that there are

other factors to be taken into account when making a final decision The three theories we

have looked at have helped to explain the rapidly-changing environment that surrounds

Google‟s operations in China and there is no doubt that these are important but just as

important is the internal operation of Google as a company its core competencies and beliefs

and the other factors that might be affecting its global operations

MGT6041 - Strategic Management

Google in China

Page 14 of 15

References

China Daily ldquoHow Many Internet Users Are There in Chinardquo Ministry of culture

Peoples Republic of China website

Chinese negotiations(18th

January 2010) ldquo A stakeholder analysis of Chinese

negotiationrdquo [Online] Available at httpwwwchinesenegotiationcom2010

[Accessed 3rd

April 2010]

CNNIC ldquo25th Statistical Survey Report on the Internet Development in Chinardquo China

Internet Network Information Center website

David Drummond ldquoA new approach to China an updaterdquo March 3 2010 post on blog

ldquoPolicy and issuesrdquo The official Google blog

Fang T (2006) ldquoNegotiation the Chinese stylerdquo Journal of Business amp Industrial

Marketing 21 (1) 50-60

httpgoogleblogblogspotcom accessed May 2010

httpwwwchinacultureorggben_aboutchina2003-0924content_26129htm accessed

April 2010

httpwwwcnniccnuploadfilespdf2010315142705pdf accessed April 2010

IMF ldquoGross domestic product growth in the advanced economies accumulated for the

periods 1990 - 1999 and 1990 - 2006rdquo International Monetary Fund website

httpwwwimforgexternalpubsftweo200501datadbginimcfm accessed May 2010

Johnson G Scholes K Whittington R (2008) Exploring Corporate Strategy 8th

ed

London Prentice Hall

Liu J ldquoBaidu and Google at logger heads in China Business Asia by Bloombergrdquo

International Herald Tribune (July 26 2007) LexisNexis Duke University Library 6

Nov 2007

National electronic Library for Health (Updated 16 Jan 2005) ldquoCan walking make you

slimmer and healthierrdquo (Hitting the headlines article) [Online]

Available at httpwwwnhsukhthwalking [Accessed 10 April 2010]

Reuters (16th

January 2010) ldquoChina affirms control over Internetrdquo [Online] Available

at httpwwwreuterscomarticleidUSTRE60D0CA20100114 [Accessed 3rd

April

2010]

The official Google blog [Online] Available at httpgoogleblogblogspotcom

[Accessed 3rd

April 2010]

MGT6041 - Strategic Management

Google in China

Page 6 of 15

In China any business negotiation would occurs at a slow pace The Chinese business culture

has a very strong influence in the negotiation process and patience is the need of the hour

during negotiation But Google issued the Chinese government an ultimatum stating that it

would pull out its operations from China if the government did not agree to their terms in a

month‟s time which is completely a non-Chinese way of business negotiation ldquoThe Chinese

negotiator will typically not force you into accepting the Chinese terms but rather signals that

your competitors are waiting next door prepared to present a better offerrdquo (Fang 2006)

That‟s what‟s precisely the Chinese government did

Business meetings in china would take place with appointments fixed a lot earlier It would

not be held during meals and social events whereas most of the meetings in Google would

take place during the lunch Chinese social structure is very hierarchical and those in the

hierarchy follow certain protocol whereas the structure of Google is flat with just one line of

top management (no hierarchy) The Google environment is very informal in that it neither

does have any departments as such nor are there any mandatory protocols to be followed

This certainly reflected in the way in which Google held negotiations with the Chinese

government

ldquoThe Chinese believe that interrelations with things and others are continuous Once a

relation is established it can hardly be brokenrdquo (Yau 2007) He also says that Chinese are

considered to be the most loyal customers in the world They often try to conform to group

norms and therefore are more like to buy the product from a certain brand recommended by

the group members

Baidu could owe its success to the above characteristic of Chinese but Google could have

made good use of its customer base when it had a commendable market share earlier

It‟s pretty apparent that Google went into China advocating the American values that

certainly did not go well with the Chinese

MGT6041 - Strategic Management

Google in China

Page 7 of 15

Source Adapted from (Johnson amp Scholes 2008)

Stakeholderrsquos analysis of Google china issue

Google has always been such a company who not only revolutionizes the traditional online

industry but also excelled in corporate social responsibility (CSR) and ethics through their

bdquoDon‟t be Evil‟ motto (Google Blog) But since the time Google has launched googlecn in

China in 2005 (Wu 2007) there have been numerous forces that consistently influenced

Google‟s decision making process in China and hindered them from sticking onto their

organizational motto

Even though China has the second largest internet market but from the cultural analysis it

became clear that the Chinese market is not only regulated by the Chinese government but

also controlled by the bdquoGreat Firewall‟ of China (Wilson et al 2010) Google has been

struggling since 2002 and have gone a long way of change from googlecom (unrestricted) to

googlecn (restricted) and finally to googlehk (unrestricted) Due to the lack of clarification

- High influence ofcommunism-No freedom of speech

- government decides and people obey the law

- Trust and relationship matters more than profit

-Standard dress for communist party officials- Language

Hierarchical

-Bureaucratic-Highly formal

The Paradigm

StoriesSymbols

Rituals and routines

Power structures

Control systems Organisational

structures

MGT6041 - Strategic Management

Google in China

Page 8 of 15

of intention Google has been meeting with the consistent furies and outcries from different

groups (Thompson 2006 cited in Yardey 2006) There has been observed a serious cultural

clash between Google and China starting from the very beginning (ie 2002) Finally due to

the heavy restriction to publish the restricted information followed by cyber attack and to

keep up with their organizational belief of being not evil in 2010 Google decided not only to

move to Hongkong (China) but also started their unrestricted bdquogooglehk‟ (Google Blog)

Google‟s decision of being in Chinese internet market but not being in Beijing (China) needs

more clarification and is yet to be defined Even after knowing the possible pitfalls of this

decision which may finally lead to leave the fastest growing internet market when they were

enjoying the second largest share after bdquoBaidu‟(Chinese search engine) cannot be justified

only on the basis of their organizational motto and can be further understood through

stakeholders analysis

Strategically the type of pressure from the stakeholders that exist behind Google‟s decision

to leave Beijing (China) has been explained by the bdquoStakeholder‟s identifying and positioning

model (SIP) In the process of decision making it is not important to know only about the

different stakeholders but to know about the stakes they hold and how much influential they

are (Wu 2007) In a dynamic system stakeholders contend conflict and compete with each

other and finally try to pull the organization in their direction The tug-of-war not only creates

pressure on Google‟s decision making team but also affects their decision to a large extent

Base on the study of Google‟s stance in bdquoGoogle Blog‟ various newspapers and articles

some of the attributes of the stakeholders like power of influence direction of influence

consistency and visibility are noted which will be of great help to construct the SIP model

MGT6041 - Strategic Management

Google in China

Page 9 of 15

Optimization model ndash stakeholder analysis

Source adapted from (Wu 2007)

We can clearly see in the optimization model that there has been arrows‟ signifying the

stakeholders and with the extremity of their power and effectiveness there is a difference in

the boldness of the arrow The model further has some stakeholders like employees who has

got a divided position and some neutral stakeholders like U S Government who just supports

Google in all cases (ie whether to leave or enter China)

From the study of the model it has been quiet clear that bdquoEnter China‟ portion is collectively

stronger not only because of their close association with the decision making team but also

because of their consistency in their push

Although there has been a maximum coverage of the overall decision making process but this

is not an exhaustive depiction of the whole process and there are many more issues and

Go

og

les

De

cis

ion

Ma

kin

g T

ea

m

US Government

Users outside China

Advocacy Group

Googlersquos Investors

Googlersquos Chinese Employees

Users outside China

Chinese Government

Googlersquos InvestorsChinese Search Engines

American Internet Providers

Chinese end users

Googlersquos Employees

LEAVE

CHINA

ENTER

CHINA

Media

Vis

ible

No

t V

isib

le

Symbols directory

bullArrow = Stakeholders

bullDirection of arrow = Position on whether to enter China or leave China

bullSize of arrow = The power and strength of influence

bullSolid or broken arrow = Consistency and continuity of influence

bullArrow starting point = Extremity Sincerity of the position

bullUp or below surface line = Salience and Visibility of influence

MGT6041 - Strategic Management

Google in China

Page 10 of 15

patterns which can also influence the whole decision process For example the mass media

has not considered as one of the stakeholder because of the increased bias of media inside and

outside China Chinese media supports Chinese government decision of restriction of the free

flow of information whereas if we talk about media of US and UK they follow Google‟s

decision of free flow of information and freedom of speech As a result of this study it‟s clear

that media mostly acts as a mediator of information to all different stakeholders rather than

acting as one in reality

Google‟s decision of continuing with the unrestricted Googlehk from Hongkong came as a

result of Google‟s strong organizational belief of bdquoDon‟t be Evil‟ strong world market

position extreme profit and finally due to the support from the customers worldwide But it is

also important to note that understanding the structures and struggles among the stakeholders

may not always guarantee the success of the policy because of the dynamics of the whole

process which is greatly dependent on the changing stakeholder‟s needs and position in

future With the help of the bdquoSIP model‟ there is an attempt of simplifying the complicated

reality and also to enhance the robustness of the whole process of Google‟s decision making

PESTEL and its use in Scenario analysis

The problem faced by Google in China and its dilemma about whether to stay in the Chinese

market or not is a good example of needing to devise a strategy in action This is not an

examination of the past but an attempt to identify some strategic action choices for the

future Walsh (2005 p119) suggests that ldquoThe process of strategy formation is a dynamic

one that corresponds to the dynamic conditions that drive itrdquo If that is so then we need to

examine the changing factors behind Google‟s position in China

Google‟s operating environment in China seems to be constantly changing There are clearly

drivers for change at work and the need to identify these drivers is by a PESTEL analysis

(standing for Political Economic Social Technological Environmental and Legal)

The use of the cultural web analysis has highlighted that a main problem facing Google is the

unpredictable attitude of Chinese officialdom (Political) allied to strong local competition in

a rapidly-growing and otherwise profitable market (Economic) In the Social sector the

cultural web suggested that Google has not reacted well to the Chinese local needs which it

MGT6041 - Strategic Management

Google in China

Page 11 of 15

needs to do in a market where Technological change is rapid Other drivers for change can

also be identified

This PESTEL analysis is useful for classifying the drivers for change and it can be rather

static However it is a useful starting point for further strategy development Stakeholder

analysis can be used to suggest how some of these drivers might change and can also

identify those that might be correlated either negatively or positively

The drivers can also be used for the next stage in the process of strategy development which

is Scenario Planning

Scenario Planning is helpful when the environment is highly complex or is rapidly changing

(as it is here) It tends to be especially useful when

There are a limited number of key drivers influencing the success of the strategy

There is a high level of uncertainty about such issues

Outcomes could be radically different

All these factors apply to a greater or lesser extent to Google in China The numbers of key

drivers are not high With regard to one of the key drivers the Chinese political attitude it is

difficult to predict what their future attitude will be but there‟s no doubt that a positive

attitude would probably ensure success for Google while a stronger negative attitude could

well stop Google from trading in China at all

Given this degree of uncertainty the use of scenario planning could well be a help to Google

Typically starting from the drivers with the greatest uncertainty managers could prepare

different scenarios to give plausible views of how the business environment may change in

the future Interrelated drivers and scenarios must be consistent eg it is possible that very

low economic growth in China might produce an unstable political situation but it‟s highly

unlikely that high economic growth would Scenarios tend to be bdquooptimistic‟ middling‟ or

bdquopessimistic‟ and normal procedure is to create between 7-9 initial scenarios which would

then be reduced to between 2-4 most likely positions

The use of this technique could help Google but there are problems associated with it The

choice of the most likely scenarios will probably still contain a strong element of value

judgement and managers will have to guard against the temptation to so weight the scoring

as to pick an option which may have been initially prepared anyway The flexibility of the

MGT6041 - Strategic Management

Google in China

Page 12 of 15

system and its ability to react to changing situations is attractive but it may not always be

advisable to try to change strategy on a regular basis However when used in conjunction

with the cultural web and stakeholder analysis it is another technique that might help to give

Google a clearer indication of what strategy they need to follow

Conclusion

The aim of this investigation has been to find a strategic structure that will help Google in its

assessment of its operation serving the Chinese market The economic attraction of such a

large and growing market is obvious but the difficulties involved in the continued operation

(and the rapid rate of change in the internet service industry anyway) make the certainty of

future activities unclear The situation is fluid and the direction of change uncertain To take

account of this we need a theoretical approach (or more likely a combination of theoretical

approaches) that will not only help to clarify the situation but also give some guidance as to

how to approach strategy in the future

Many international organisations attempting to set up operations in China have struggled so

an analysis of the cultures involved using the Cultural Web was a logical starting point This

has highlighted several features such as the position of the Chinese Government with regard

to control and the importance of being in tune with the Chinese culture and market demands

when providing a service something that Google did not do well in the initial stages of its

operation in China Another important point is that the approach of the Chinese Government

with regard to censorship is in direct conflict with Google‟s stance on freedom of

information and willingly accepting such censorship would damage its brand image and

reputation

The major factors produced by the Cultural Web have then been taken and input the other

theoretical models used in this report namely Stakeholder Analysis and PESTELScenario

Planning Both these models have the degree of flexibility required in that they can both help

to explain the existing situation but also be used to indicate what might happen if the details

of the drivers for change alter to any degree Thus the Stakeholder Analysis emphasises the

importance of Google‟s shareholders and the economic pull of the Chinese market but this

could change Should Google continue to lose market share to Baidu then the shareholders

might decide this no longer fits with Google‟s desire to be market leader in its chosen

markets and their support for Google in China might weaken

MGT6041 - Strategic Management

Google in China

Page 13 of 15

Such possible changes could then be tested on the scenario planning model which would

take the drivers for change identified by the Cultural Web and Stakeholder Analysis and see

how changes in these drivers would affect the overall operating situation for Google

What we need is therefore a strategic model that links these techniques together Such a

model is shown below

Strategic Development Model adopted from (Walsh PR 2005)

This strategy development model shows how the theories we have examined can help

improve the analysis of the present situation and also be sufficiently flexible to help update

Google‟s management team as and when needed However it also emphasises that there are

other factors to be taken into account when making a final decision The three theories we

have looked at have helped to explain the rapidly-changing environment that surrounds

Google‟s operations in China and there is no doubt that these are important but just as

important is the internal operation of Google as a company its core competencies and beliefs

and the other factors that might be affecting its global operations

MGT6041 - Strategic Management

Google in China

Page 14 of 15

References

China Daily ldquoHow Many Internet Users Are There in Chinardquo Ministry of culture

Peoples Republic of China website

Chinese negotiations(18th

January 2010) ldquo A stakeholder analysis of Chinese

negotiationrdquo [Online] Available at httpwwwchinesenegotiationcom2010

[Accessed 3rd

April 2010]

CNNIC ldquo25th Statistical Survey Report on the Internet Development in Chinardquo China

Internet Network Information Center website

David Drummond ldquoA new approach to China an updaterdquo March 3 2010 post on blog

ldquoPolicy and issuesrdquo The official Google blog

Fang T (2006) ldquoNegotiation the Chinese stylerdquo Journal of Business amp Industrial

Marketing 21 (1) 50-60

httpgoogleblogblogspotcom accessed May 2010

httpwwwchinacultureorggben_aboutchina2003-0924content_26129htm accessed

April 2010

httpwwwcnniccnuploadfilespdf2010315142705pdf accessed April 2010

IMF ldquoGross domestic product growth in the advanced economies accumulated for the

periods 1990 - 1999 and 1990 - 2006rdquo International Monetary Fund website

httpwwwimforgexternalpubsftweo200501datadbginimcfm accessed May 2010

Johnson G Scholes K Whittington R (2008) Exploring Corporate Strategy 8th

ed

London Prentice Hall

Liu J ldquoBaidu and Google at logger heads in China Business Asia by Bloombergrdquo

International Herald Tribune (July 26 2007) LexisNexis Duke University Library 6

Nov 2007

National electronic Library for Health (Updated 16 Jan 2005) ldquoCan walking make you

slimmer and healthierrdquo (Hitting the headlines article) [Online]

Available at httpwwwnhsukhthwalking [Accessed 10 April 2010]

Reuters (16th

January 2010) ldquoChina affirms control over Internetrdquo [Online] Available

at httpwwwreuterscomarticleidUSTRE60D0CA20100114 [Accessed 3rd

April

2010]

The official Google blog [Online] Available at httpgoogleblogblogspotcom

[Accessed 3rd

April 2010]

MGT6041 - Strategic Management

Google in China

Page 7 of 15

Source Adapted from (Johnson amp Scholes 2008)

Stakeholderrsquos analysis of Google china issue

Google has always been such a company who not only revolutionizes the traditional online

industry but also excelled in corporate social responsibility (CSR) and ethics through their

bdquoDon‟t be Evil‟ motto (Google Blog) But since the time Google has launched googlecn in

China in 2005 (Wu 2007) there have been numerous forces that consistently influenced

Google‟s decision making process in China and hindered them from sticking onto their

organizational motto

Even though China has the second largest internet market but from the cultural analysis it

became clear that the Chinese market is not only regulated by the Chinese government but

also controlled by the bdquoGreat Firewall‟ of China (Wilson et al 2010) Google has been

struggling since 2002 and have gone a long way of change from googlecom (unrestricted) to

googlecn (restricted) and finally to googlehk (unrestricted) Due to the lack of clarification

- High influence ofcommunism-No freedom of speech

- government decides and people obey the law

- Trust and relationship matters more than profit

-Standard dress for communist party officials- Language

Hierarchical

-Bureaucratic-Highly formal

The Paradigm

StoriesSymbols

Rituals and routines

Power structures

Control systems Organisational

structures

MGT6041 - Strategic Management

Google in China

Page 8 of 15

of intention Google has been meeting with the consistent furies and outcries from different

groups (Thompson 2006 cited in Yardey 2006) There has been observed a serious cultural

clash between Google and China starting from the very beginning (ie 2002) Finally due to

the heavy restriction to publish the restricted information followed by cyber attack and to

keep up with their organizational belief of being not evil in 2010 Google decided not only to

move to Hongkong (China) but also started their unrestricted bdquogooglehk‟ (Google Blog)

Google‟s decision of being in Chinese internet market but not being in Beijing (China) needs

more clarification and is yet to be defined Even after knowing the possible pitfalls of this

decision which may finally lead to leave the fastest growing internet market when they were

enjoying the second largest share after bdquoBaidu‟(Chinese search engine) cannot be justified

only on the basis of their organizational motto and can be further understood through

stakeholders analysis

Strategically the type of pressure from the stakeholders that exist behind Google‟s decision

to leave Beijing (China) has been explained by the bdquoStakeholder‟s identifying and positioning

model (SIP) In the process of decision making it is not important to know only about the

different stakeholders but to know about the stakes they hold and how much influential they

are (Wu 2007) In a dynamic system stakeholders contend conflict and compete with each

other and finally try to pull the organization in their direction The tug-of-war not only creates

pressure on Google‟s decision making team but also affects their decision to a large extent

Base on the study of Google‟s stance in bdquoGoogle Blog‟ various newspapers and articles

some of the attributes of the stakeholders like power of influence direction of influence

consistency and visibility are noted which will be of great help to construct the SIP model

MGT6041 - Strategic Management

Google in China

Page 9 of 15

Optimization model ndash stakeholder analysis

Source adapted from (Wu 2007)

We can clearly see in the optimization model that there has been arrows‟ signifying the

stakeholders and with the extremity of their power and effectiveness there is a difference in

the boldness of the arrow The model further has some stakeholders like employees who has

got a divided position and some neutral stakeholders like U S Government who just supports

Google in all cases (ie whether to leave or enter China)

From the study of the model it has been quiet clear that bdquoEnter China‟ portion is collectively

stronger not only because of their close association with the decision making team but also

because of their consistency in their push

Although there has been a maximum coverage of the overall decision making process but this

is not an exhaustive depiction of the whole process and there are many more issues and

Go

og

les

De

cis

ion

Ma

kin

g T

ea

m

US Government

Users outside China

Advocacy Group

Googlersquos Investors

Googlersquos Chinese Employees

Users outside China

Chinese Government

Googlersquos InvestorsChinese Search Engines

American Internet Providers

Chinese end users

Googlersquos Employees

LEAVE

CHINA

ENTER

CHINA

Media

Vis

ible

No

t V

isib

le

Symbols directory

bullArrow = Stakeholders

bullDirection of arrow = Position on whether to enter China or leave China

bullSize of arrow = The power and strength of influence

bullSolid or broken arrow = Consistency and continuity of influence

bullArrow starting point = Extremity Sincerity of the position

bullUp or below surface line = Salience and Visibility of influence

MGT6041 - Strategic Management

Google in China

Page 10 of 15

patterns which can also influence the whole decision process For example the mass media

has not considered as one of the stakeholder because of the increased bias of media inside and

outside China Chinese media supports Chinese government decision of restriction of the free

flow of information whereas if we talk about media of US and UK they follow Google‟s

decision of free flow of information and freedom of speech As a result of this study it‟s clear

that media mostly acts as a mediator of information to all different stakeholders rather than

acting as one in reality

Google‟s decision of continuing with the unrestricted Googlehk from Hongkong came as a

result of Google‟s strong organizational belief of bdquoDon‟t be Evil‟ strong world market

position extreme profit and finally due to the support from the customers worldwide But it is

also important to note that understanding the structures and struggles among the stakeholders

may not always guarantee the success of the policy because of the dynamics of the whole

process which is greatly dependent on the changing stakeholder‟s needs and position in

future With the help of the bdquoSIP model‟ there is an attempt of simplifying the complicated

reality and also to enhance the robustness of the whole process of Google‟s decision making

PESTEL and its use in Scenario analysis

The problem faced by Google in China and its dilemma about whether to stay in the Chinese

market or not is a good example of needing to devise a strategy in action This is not an

examination of the past but an attempt to identify some strategic action choices for the

future Walsh (2005 p119) suggests that ldquoThe process of strategy formation is a dynamic

one that corresponds to the dynamic conditions that drive itrdquo If that is so then we need to

examine the changing factors behind Google‟s position in China

Google‟s operating environment in China seems to be constantly changing There are clearly

drivers for change at work and the need to identify these drivers is by a PESTEL analysis

(standing for Political Economic Social Technological Environmental and Legal)

The use of the cultural web analysis has highlighted that a main problem facing Google is the

unpredictable attitude of Chinese officialdom (Political) allied to strong local competition in

a rapidly-growing and otherwise profitable market (Economic) In the Social sector the

cultural web suggested that Google has not reacted well to the Chinese local needs which it

MGT6041 - Strategic Management

Google in China

Page 11 of 15

needs to do in a market where Technological change is rapid Other drivers for change can

also be identified

This PESTEL analysis is useful for classifying the drivers for change and it can be rather

static However it is a useful starting point for further strategy development Stakeholder

analysis can be used to suggest how some of these drivers might change and can also

identify those that might be correlated either negatively or positively

The drivers can also be used for the next stage in the process of strategy development which

is Scenario Planning

Scenario Planning is helpful when the environment is highly complex or is rapidly changing

(as it is here) It tends to be especially useful when

There are a limited number of key drivers influencing the success of the strategy

There is a high level of uncertainty about such issues

Outcomes could be radically different

All these factors apply to a greater or lesser extent to Google in China The numbers of key

drivers are not high With regard to one of the key drivers the Chinese political attitude it is

difficult to predict what their future attitude will be but there‟s no doubt that a positive

attitude would probably ensure success for Google while a stronger negative attitude could

well stop Google from trading in China at all

Given this degree of uncertainty the use of scenario planning could well be a help to Google

Typically starting from the drivers with the greatest uncertainty managers could prepare

different scenarios to give plausible views of how the business environment may change in

the future Interrelated drivers and scenarios must be consistent eg it is possible that very

low economic growth in China might produce an unstable political situation but it‟s highly

unlikely that high economic growth would Scenarios tend to be bdquooptimistic‟ middling‟ or

bdquopessimistic‟ and normal procedure is to create between 7-9 initial scenarios which would

then be reduced to between 2-4 most likely positions

The use of this technique could help Google but there are problems associated with it The

choice of the most likely scenarios will probably still contain a strong element of value

judgement and managers will have to guard against the temptation to so weight the scoring

as to pick an option which may have been initially prepared anyway The flexibility of the

MGT6041 - Strategic Management

Google in China

Page 12 of 15

system and its ability to react to changing situations is attractive but it may not always be

advisable to try to change strategy on a regular basis However when used in conjunction

with the cultural web and stakeholder analysis it is another technique that might help to give

Google a clearer indication of what strategy they need to follow

Conclusion

The aim of this investigation has been to find a strategic structure that will help Google in its

assessment of its operation serving the Chinese market The economic attraction of such a

large and growing market is obvious but the difficulties involved in the continued operation

(and the rapid rate of change in the internet service industry anyway) make the certainty of

future activities unclear The situation is fluid and the direction of change uncertain To take

account of this we need a theoretical approach (or more likely a combination of theoretical

approaches) that will not only help to clarify the situation but also give some guidance as to

how to approach strategy in the future

Many international organisations attempting to set up operations in China have struggled so

an analysis of the cultures involved using the Cultural Web was a logical starting point This

has highlighted several features such as the position of the Chinese Government with regard

to control and the importance of being in tune with the Chinese culture and market demands

when providing a service something that Google did not do well in the initial stages of its

operation in China Another important point is that the approach of the Chinese Government

with regard to censorship is in direct conflict with Google‟s stance on freedom of

information and willingly accepting such censorship would damage its brand image and

reputation

The major factors produced by the Cultural Web have then been taken and input the other

theoretical models used in this report namely Stakeholder Analysis and PESTELScenario

Planning Both these models have the degree of flexibility required in that they can both help

to explain the existing situation but also be used to indicate what might happen if the details

of the drivers for change alter to any degree Thus the Stakeholder Analysis emphasises the

importance of Google‟s shareholders and the economic pull of the Chinese market but this

could change Should Google continue to lose market share to Baidu then the shareholders

might decide this no longer fits with Google‟s desire to be market leader in its chosen

markets and their support for Google in China might weaken

MGT6041 - Strategic Management

Google in China

Page 13 of 15

Such possible changes could then be tested on the scenario planning model which would

take the drivers for change identified by the Cultural Web and Stakeholder Analysis and see

how changes in these drivers would affect the overall operating situation for Google

What we need is therefore a strategic model that links these techniques together Such a

model is shown below

Strategic Development Model adopted from (Walsh PR 2005)

This strategy development model shows how the theories we have examined can help

improve the analysis of the present situation and also be sufficiently flexible to help update

Google‟s management team as and when needed However it also emphasises that there are

other factors to be taken into account when making a final decision The three theories we

have looked at have helped to explain the rapidly-changing environment that surrounds

Google‟s operations in China and there is no doubt that these are important but just as

important is the internal operation of Google as a company its core competencies and beliefs

and the other factors that might be affecting its global operations

MGT6041 - Strategic Management

Google in China

Page 14 of 15

References

China Daily ldquoHow Many Internet Users Are There in Chinardquo Ministry of culture

Peoples Republic of China website

Chinese negotiations(18th

January 2010) ldquo A stakeholder analysis of Chinese

negotiationrdquo [Online] Available at httpwwwchinesenegotiationcom2010

[Accessed 3rd

April 2010]

CNNIC ldquo25th Statistical Survey Report on the Internet Development in Chinardquo China

Internet Network Information Center website

David Drummond ldquoA new approach to China an updaterdquo March 3 2010 post on blog

ldquoPolicy and issuesrdquo The official Google blog

Fang T (2006) ldquoNegotiation the Chinese stylerdquo Journal of Business amp Industrial

Marketing 21 (1) 50-60

httpgoogleblogblogspotcom accessed May 2010

httpwwwchinacultureorggben_aboutchina2003-0924content_26129htm accessed

April 2010

httpwwwcnniccnuploadfilespdf2010315142705pdf accessed April 2010

IMF ldquoGross domestic product growth in the advanced economies accumulated for the

periods 1990 - 1999 and 1990 - 2006rdquo International Monetary Fund website

httpwwwimforgexternalpubsftweo200501datadbginimcfm accessed May 2010

Johnson G Scholes K Whittington R (2008) Exploring Corporate Strategy 8th

ed

London Prentice Hall

Liu J ldquoBaidu and Google at logger heads in China Business Asia by Bloombergrdquo

International Herald Tribune (July 26 2007) LexisNexis Duke University Library 6

Nov 2007

National electronic Library for Health (Updated 16 Jan 2005) ldquoCan walking make you

slimmer and healthierrdquo (Hitting the headlines article) [Online]

Available at httpwwwnhsukhthwalking [Accessed 10 April 2010]

Reuters (16th

January 2010) ldquoChina affirms control over Internetrdquo [Online] Available

at httpwwwreuterscomarticleidUSTRE60D0CA20100114 [Accessed 3rd

April

2010]

The official Google blog [Online] Available at httpgoogleblogblogspotcom

[Accessed 3rd

April 2010]

MGT6041 - Strategic Management

Google in China

Page 8 of 15

of intention Google has been meeting with the consistent furies and outcries from different

groups (Thompson 2006 cited in Yardey 2006) There has been observed a serious cultural

clash between Google and China starting from the very beginning (ie 2002) Finally due to

the heavy restriction to publish the restricted information followed by cyber attack and to

keep up with their organizational belief of being not evil in 2010 Google decided not only to

move to Hongkong (China) but also started their unrestricted bdquogooglehk‟ (Google Blog)

Google‟s decision of being in Chinese internet market but not being in Beijing (China) needs

more clarification and is yet to be defined Even after knowing the possible pitfalls of this

decision which may finally lead to leave the fastest growing internet market when they were

enjoying the second largest share after bdquoBaidu‟(Chinese search engine) cannot be justified

only on the basis of their organizational motto and can be further understood through

stakeholders analysis

Strategically the type of pressure from the stakeholders that exist behind Google‟s decision

to leave Beijing (China) has been explained by the bdquoStakeholder‟s identifying and positioning

model (SIP) In the process of decision making it is not important to know only about the

different stakeholders but to know about the stakes they hold and how much influential they

are (Wu 2007) In a dynamic system stakeholders contend conflict and compete with each

other and finally try to pull the organization in their direction The tug-of-war not only creates

pressure on Google‟s decision making team but also affects their decision to a large extent

Base on the study of Google‟s stance in bdquoGoogle Blog‟ various newspapers and articles

some of the attributes of the stakeholders like power of influence direction of influence

consistency and visibility are noted which will be of great help to construct the SIP model

MGT6041 - Strategic Management

Google in China

Page 9 of 15

Optimization model ndash stakeholder analysis

Source adapted from (Wu 2007)

We can clearly see in the optimization model that there has been arrows‟ signifying the

stakeholders and with the extremity of their power and effectiveness there is a difference in

the boldness of the arrow The model further has some stakeholders like employees who has

got a divided position and some neutral stakeholders like U S Government who just supports

Google in all cases (ie whether to leave or enter China)

From the study of the model it has been quiet clear that bdquoEnter China‟ portion is collectively

stronger not only because of their close association with the decision making team but also

because of their consistency in their push

Although there has been a maximum coverage of the overall decision making process but this

is not an exhaustive depiction of the whole process and there are many more issues and

Go

og

les

De

cis

ion

Ma

kin

g T

ea

m

US Government

Users outside China

Advocacy Group

Googlersquos Investors

Googlersquos Chinese Employees

Users outside China

Chinese Government

Googlersquos InvestorsChinese Search Engines

American Internet Providers

Chinese end users

Googlersquos Employees

LEAVE

CHINA

ENTER

CHINA

Media

Vis

ible

No

t V

isib

le

Symbols directory

bullArrow = Stakeholders

bullDirection of arrow = Position on whether to enter China or leave China

bullSize of arrow = The power and strength of influence

bullSolid or broken arrow = Consistency and continuity of influence

bullArrow starting point = Extremity Sincerity of the position

bullUp or below surface line = Salience and Visibility of influence

MGT6041 - Strategic Management

Google in China

Page 10 of 15

patterns which can also influence the whole decision process For example the mass media

has not considered as one of the stakeholder because of the increased bias of media inside and

outside China Chinese media supports Chinese government decision of restriction of the free

flow of information whereas if we talk about media of US and UK they follow Google‟s

decision of free flow of information and freedom of speech As a result of this study it‟s clear

that media mostly acts as a mediator of information to all different stakeholders rather than

acting as one in reality

Google‟s decision of continuing with the unrestricted Googlehk from Hongkong came as a

result of Google‟s strong organizational belief of bdquoDon‟t be Evil‟ strong world market

position extreme profit and finally due to the support from the customers worldwide But it is

also important to note that understanding the structures and struggles among the stakeholders

may not always guarantee the success of the policy because of the dynamics of the whole

process which is greatly dependent on the changing stakeholder‟s needs and position in

future With the help of the bdquoSIP model‟ there is an attempt of simplifying the complicated

reality and also to enhance the robustness of the whole process of Google‟s decision making

PESTEL and its use in Scenario analysis

The problem faced by Google in China and its dilemma about whether to stay in the Chinese

market or not is a good example of needing to devise a strategy in action This is not an

examination of the past but an attempt to identify some strategic action choices for the

future Walsh (2005 p119) suggests that ldquoThe process of strategy formation is a dynamic

one that corresponds to the dynamic conditions that drive itrdquo If that is so then we need to

examine the changing factors behind Google‟s position in China

Google‟s operating environment in China seems to be constantly changing There are clearly

drivers for change at work and the need to identify these drivers is by a PESTEL analysis

(standing for Political Economic Social Technological Environmental and Legal)

The use of the cultural web analysis has highlighted that a main problem facing Google is the

unpredictable attitude of Chinese officialdom (Political) allied to strong local competition in

a rapidly-growing and otherwise profitable market (Economic) In the Social sector the

cultural web suggested that Google has not reacted well to the Chinese local needs which it

MGT6041 - Strategic Management

Google in China

Page 11 of 15

needs to do in a market where Technological change is rapid Other drivers for change can

also be identified

This PESTEL analysis is useful for classifying the drivers for change and it can be rather

static However it is a useful starting point for further strategy development Stakeholder

analysis can be used to suggest how some of these drivers might change and can also

identify those that might be correlated either negatively or positively

The drivers can also be used for the next stage in the process of strategy development which

is Scenario Planning

Scenario Planning is helpful when the environment is highly complex or is rapidly changing

(as it is here) It tends to be especially useful when

There are a limited number of key drivers influencing the success of the strategy

There is a high level of uncertainty about such issues

Outcomes could be radically different

All these factors apply to a greater or lesser extent to Google in China The numbers of key

drivers are not high With regard to one of the key drivers the Chinese political attitude it is

difficult to predict what their future attitude will be but there‟s no doubt that a positive

attitude would probably ensure success for Google while a stronger negative attitude could

well stop Google from trading in China at all

Given this degree of uncertainty the use of scenario planning could well be a help to Google

Typically starting from the drivers with the greatest uncertainty managers could prepare

different scenarios to give plausible views of how the business environment may change in

the future Interrelated drivers and scenarios must be consistent eg it is possible that very

low economic growth in China might produce an unstable political situation but it‟s highly

unlikely that high economic growth would Scenarios tend to be bdquooptimistic‟ middling‟ or

bdquopessimistic‟ and normal procedure is to create between 7-9 initial scenarios which would

then be reduced to between 2-4 most likely positions

The use of this technique could help Google but there are problems associated with it The

choice of the most likely scenarios will probably still contain a strong element of value

judgement and managers will have to guard against the temptation to so weight the scoring

as to pick an option which may have been initially prepared anyway The flexibility of the

MGT6041 - Strategic Management

Google in China

Page 12 of 15

system and its ability to react to changing situations is attractive but it may not always be

advisable to try to change strategy on a regular basis However when used in conjunction

with the cultural web and stakeholder analysis it is another technique that might help to give

Google a clearer indication of what strategy they need to follow

Conclusion

The aim of this investigation has been to find a strategic structure that will help Google in its

assessment of its operation serving the Chinese market The economic attraction of such a

large and growing market is obvious but the difficulties involved in the continued operation

(and the rapid rate of change in the internet service industry anyway) make the certainty of

future activities unclear The situation is fluid and the direction of change uncertain To take

account of this we need a theoretical approach (or more likely a combination of theoretical

approaches) that will not only help to clarify the situation but also give some guidance as to

how to approach strategy in the future

Many international organisations attempting to set up operations in China have struggled so

an analysis of the cultures involved using the Cultural Web was a logical starting point This

has highlighted several features such as the position of the Chinese Government with regard

to control and the importance of being in tune with the Chinese culture and market demands

when providing a service something that Google did not do well in the initial stages of its

operation in China Another important point is that the approach of the Chinese Government

with regard to censorship is in direct conflict with Google‟s stance on freedom of

information and willingly accepting such censorship would damage its brand image and

reputation

The major factors produced by the Cultural Web have then been taken and input the other

theoretical models used in this report namely Stakeholder Analysis and PESTELScenario

Planning Both these models have the degree of flexibility required in that they can both help

to explain the existing situation but also be used to indicate what might happen if the details

of the drivers for change alter to any degree Thus the Stakeholder Analysis emphasises the

importance of Google‟s shareholders and the economic pull of the Chinese market but this

could change Should Google continue to lose market share to Baidu then the shareholders

might decide this no longer fits with Google‟s desire to be market leader in its chosen

markets and their support for Google in China might weaken

MGT6041 - Strategic Management

Google in China

Page 13 of 15

Such possible changes could then be tested on the scenario planning model which would

take the drivers for change identified by the Cultural Web and Stakeholder Analysis and see

how changes in these drivers would affect the overall operating situation for Google

What we need is therefore a strategic model that links these techniques together Such a

model is shown below

Strategic Development Model adopted from (Walsh PR 2005)

This strategy development model shows how the theories we have examined can help

improve the analysis of the present situation and also be sufficiently flexible to help update

Google‟s management team as and when needed However it also emphasises that there are

other factors to be taken into account when making a final decision The three theories we

have looked at have helped to explain the rapidly-changing environment that surrounds

Google‟s operations in China and there is no doubt that these are important but just as

important is the internal operation of Google as a company its core competencies and beliefs

and the other factors that might be affecting its global operations

MGT6041 - Strategic Management

Google in China

Page 14 of 15

References

China Daily ldquoHow Many Internet Users Are There in Chinardquo Ministry of culture

Peoples Republic of China website

Chinese negotiations(18th

January 2010) ldquo A stakeholder analysis of Chinese

negotiationrdquo [Online] Available at httpwwwchinesenegotiationcom2010

[Accessed 3rd

April 2010]

CNNIC ldquo25th Statistical Survey Report on the Internet Development in Chinardquo China

Internet Network Information Center website

David Drummond ldquoA new approach to China an updaterdquo March 3 2010 post on blog

ldquoPolicy and issuesrdquo The official Google blog

Fang T (2006) ldquoNegotiation the Chinese stylerdquo Journal of Business amp Industrial

Marketing 21 (1) 50-60

httpgoogleblogblogspotcom accessed May 2010

httpwwwchinacultureorggben_aboutchina2003-0924content_26129htm accessed

April 2010

httpwwwcnniccnuploadfilespdf2010315142705pdf accessed April 2010

IMF ldquoGross domestic product growth in the advanced economies accumulated for the

periods 1990 - 1999 and 1990 - 2006rdquo International Monetary Fund website

httpwwwimforgexternalpubsftweo200501datadbginimcfm accessed May 2010

Johnson G Scholes K Whittington R (2008) Exploring Corporate Strategy 8th

ed

London Prentice Hall

Liu J ldquoBaidu and Google at logger heads in China Business Asia by Bloombergrdquo

International Herald Tribune (July 26 2007) LexisNexis Duke University Library 6

Nov 2007

National electronic Library for Health (Updated 16 Jan 2005) ldquoCan walking make you

slimmer and healthierrdquo (Hitting the headlines article) [Online]

Available at httpwwwnhsukhthwalking [Accessed 10 April 2010]

Reuters (16th

January 2010) ldquoChina affirms control over Internetrdquo [Online] Available

at httpwwwreuterscomarticleidUSTRE60D0CA20100114 [Accessed 3rd

April

2010]

The official Google blog [Online] Available at httpgoogleblogblogspotcom

[Accessed 3rd

April 2010]

MGT6041 - Strategic Management

Google in China

Page 9 of 15

Optimization model ndash stakeholder analysis

Source adapted from (Wu 2007)

We can clearly see in the optimization model that there has been arrows‟ signifying the

stakeholders and with the extremity of their power and effectiveness there is a difference in

the boldness of the arrow The model further has some stakeholders like employees who has

got a divided position and some neutral stakeholders like U S Government who just supports

Google in all cases (ie whether to leave or enter China)

From the study of the model it has been quiet clear that bdquoEnter China‟ portion is collectively

stronger not only because of their close association with the decision making team but also

because of their consistency in their push

Although there has been a maximum coverage of the overall decision making process but this

is not an exhaustive depiction of the whole process and there are many more issues and

Go

og

les

De

cis

ion

Ma

kin

g T

ea

m

US Government

Users outside China

Advocacy Group

Googlersquos Investors

Googlersquos Chinese Employees

Users outside China

Chinese Government

Googlersquos InvestorsChinese Search Engines

American Internet Providers

Chinese end users

Googlersquos Employees

LEAVE

CHINA

ENTER

CHINA

Media

Vis

ible

No

t V

isib

le

Symbols directory

bullArrow = Stakeholders

bullDirection of arrow = Position on whether to enter China or leave China

bullSize of arrow = The power and strength of influence

bullSolid or broken arrow = Consistency and continuity of influence

bullArrow starting point = Extremity Sincerity of the position

bullUp or below surface line = Salience and Visibility of influence

MGT6041 - Strategic Management

Google in China

Page 10 of 15

patterns which can also influence the whole decision process For example the mass media

has not considered as one of the stakeholder because of the increased bias of media inside and

outside China Chinese media supports Chinese government decision of restriction of the free

flow of information whereas if we talk about media of US and UK they follow Google‟s

decision of free flow of information and freedom of speech As a result of this study it‟s clear

that media mostly acts as a mediator of information to all different stakeholders rather than

acting as one in reality

Google‟s decision of continuing with the unrestricted Googlehk from Hongkong came as a

result of Google‟s strong organizational belief of bdquoDon‟t be Evil‟ strong world market

position extreme profit and finally due to the support from the customers worldwide But it is

also important to note that understanding the structures and struggles among the stakeholders

may not always guarantee the success of the policy because of the dynamics of the whole

process which is greatly dependent on the changing stakeholder‟s needs and position in

future With the help of the bdquoSIP model‟ there is an attempt of simplifying the complicated

reality and also to enhance the robustness of the whole process of Google‟s decision making

PESTEL and its use in Scenario analysis

The problem faced by Google in China and its dilemma about whether to stay in the Chinese

market or not is a good example of needing to devise a strategy in action This is not an

examination of the past but an attempt to identify some strategic action choices for the

future Walsh (2005 p119) suggests that ldquoThe process of strategy formation is a dynamic

one that corresponds to the dynamic conditions that drive itrdquo If that is so then we need to

examine the changing factors behind Google‟s position in China

Google‟s operating environment in China seems to be constantly changing There are clearly

drivers for change at work and the need to identify these drivers is by a PESTEL analysis

(standing for Political Economic Social Technological Environmental and Legal)

The use of the cultural web analysis has highlighted that a main problem facing Google is the

unpredictable attitude of Chinese officialdom (Political) allied to strong local competition in

a rapidly-growing and otherwise profitable market (Economic) In the Social sector the

cultural web suggested that Google has not reacted well to the Chinese local needs which it

MGT6041 - Strategic Management

Google in China

Page 11 of 15

needs to do in a market where Technological change is rapid Other drivers for change can

also be identified

This PESTEL analysis is useful for classifying the drivers for change and it can be rather

static However it is a useful starting point for further strategy development Stakeholder

analysis can be used to suggest how some of these drivers might change and can also

identify those that might be correlated either negatively or positively

The drivers can also be used for the next stage in the process of strategy development which

is Scenario Planning

Scenario Planning is helpful when the environment is highly complex or is rapidly changing

(as it is here) It tends to be especially useful when

There are a limited number of key drivers influencing the success of the strategy

There is a high level of uncertainty about such issues

Outcomes could be radically different

All these factors apply to a greater or lesser extent to Google in China The numbers of key

drivers are not high With regard to one of the key drivers the Chinese political attitude it is

difficult to predict what their future attitude will be but there‟s no doubt that a positive

attitude would probably ensure success for Google while a stronger negative attitude could

well stop Google from trading in China at all

Given this degree of uncertainty the use of scenario planning could well be a help to Google

Typically starting from the drivers with the greatest uncertainty managers could prepare

different scenarios to give plausible views of how the business environment may change in

the future Interrelated drivers and scenarios must be consistent eg it is possible that very

low economic growth in China might produce an unstable political situation but it‟s highly

unlikely that high economic growth would Scenarios tend to be bdquooptimistic‟ middling‟ or

bdquopessimistic‟ and normal procedure is to create between 7-9 initial scenarios which would

then be reduced to between 2-4 most likely positions

The use of this technique could help Google but there are problems associated with it The

choice of the most likely scenarios will probably still contain a strong element of value

judgement and managers will have to guard against the temptation to so weight the scoring

as to pick an option which may have been initially prepared anyway The flexibility of the

MGT6041 - Strategic Management

Google in China

Page 12 of 15

system and its ability to react to changing situations is attractive but it may not always be

advisable to try to change strategy on a regular basis However when used in conjunction

with the cultural web and stakeholder analysis it is another technique that might help to give

Google a clearer indication of what strategy they need to follow

Conclusion

The aim of this investigation has been to find a strategic structure that will help Google in its

assessment of its operation serving the Chinese market The economic attraction of such a

large and growing market is obvious but the difficulties involved in the continued operation

(and the rapid rate of change in the internet service industry anyway) make the certainty of

future activities unclear The situation is fluid and the direction of change uncertain To take

account of this we need a theoretical approach (or more likely a combination of theoretical

approaches) that will not only help to clarify the situation but also give some guidance as to

how to approach strategy in the future

Many international organisations attempting to set up operations in China have struggled so

an analysis of the cultures involved using the Cultural Web was a logical starting point This

has highlighted several features such as the position of the Chinese Government with regard

to control and the importance of being in tune with the Chinese culture and market demands

when providing a service something that Google did not do well in the initial stages of its

operation in China Another important point is that the approach of the Chinese Government

with regard to censorship is in direct conflict with Google‟s stance on freedom of

information and willingly accepting such censorship would damage its brand image and

reputation

The major factors produced by the Cultural Web have then been taken and input the other

theoretical models used in this report namely Stakeholder Analysis and PESTELScenario

Planning Both these models have the degree of flexibility required in that they can both help

to explain the existing situation but also be used to indicate what might happen if the details

of the drivers for change alter to any degree Thus the Stakeholder Analysis emphasises the

importance of Google‟s shareholders and the economic pull of the Chinese market but this

could change Should Google continue to lose market share to Baidu then the shareholders

might decide this no longer fits with Google‟s desire to be market leader in its chosen

markets and their support for Google in China might weaken

MGT6041 - Strategic Management

Google in China

Page 13 of 15

Such possible changes could then be tested on the scenario planning model which would

take the drivers for change identified by the Cultural Web and Stakeholder Analysis and see

how changes in these drivers would affect the overall operating situation for Google

What we need is therefore a strategic model that links these techniques together Such a

model is shown below

Strategic Development Model adopted from (Walsh PR 2005)

This strategy development model shows how the theories we have examined can help

improve the analysis of the present situation and also be sufficiently flexible to help update

Google‟s management team as and when needed However it also emphasises that there are

other factors to be taken into account when making a final decision The three theories we

have looked at have helped to explain the rapidly-changing environment that surrounds

Google‟s operations in China and there is no doubt that these are important but just as

important is the internal operation of Google as a company its core competencies and beliefs

and the other factors that might be affecting its global operations

MGT6041 - Strategic Management

Google in China

Page 14 of 15

References

China Daily ldquoHow Many Internet Users Are There in Chinardquo Ministry of culture

Peoples Republic of China website

Chinese negotiations(18th

January 2010) ldquo A stakeholder analysis of Chinese

negotiationrdquo [Online] Available at httpwwwchinesenegotiationcom2010

[Accessed 3rd

April 2010]

CNNIC ldquo25th Statistical Survey Report on the Internet Development in Chinardquo China

Internet Network Information Center website

David Drummond ldquoA new approach to China an updaterdquo March 3 2010 post on blog

ldquoPolicy and issuesrdquo The official Google blog

Fang T (2006) ldquoNegotiation the Chinese stylerdquo Journal of Business amp Industrial

Marketing 21 (1) 50-60

httpgoogleblogblogspotcom accessed May 2010

httpwwwchinacultureorggben_aboutchina2003-0924content_26129htm accessed

April 2010

httpwwwcnniccnuploadfilespdf2010315142705pdf accessed April 2010

IMF ldquoGross domestic product growth in the advanced economies accumulated for the

periods 1990 - 1999 and 1990 - 2006rdquo International Monetary Fund website

httpwwwimforgexternalpubsftweo200501datadbginimcfm accessed May 2010

Johnson G Scholes K Whittington R (2008) Exploring Corporate Strategy 8th

ed

London Prentice Hall

Liu J ldquoBaidu and Google at logger heads in China Business Asia by Bloombergrdquo

International Herald Tribune (July 26 2007) LexisNexis Duke University Library 6

Nov 2007

National electronic Library for Health (Updated 16 Jan 2005) ldquoCan walking make you

slimmer and healthierrdquo (Hitting the headlines article) [Online]

Available at httpwwwnhsukhthwalking [Accessed 10 April 2010]

Reuters (16th

January 2010) ldquoChina affirms control over Internetrdquo [Online] Available

at httpwwwreuterscomarticleidUSTRE60D0CA20100114 [Accessed 3rd

April

2010]

The official Google blog [Online] Available at httpgoogleblogblogspotcom

[Accessed 3rd

April 2010]

MGT6041 - Strategic Management

Google in China

Page 10 of 15

patterns which can also influence the whole decision process For example the mass media

has not considered as one of the stakeholder because of the increased bias of media inside and

outside China Chinese media supports Chinese government decision of restriction of the free

flow of information whereas if we talk about media of US and UK they follow Google‟s

decision of free flow of information and freedom of speech As a result of this study it‟s clear

that media mostly acts as a mediator of information to all different stakeholders rather than

acting as one in reality

Google‟s decision of continuing with the unrestricted Googlehk from Hongkong came as a

result of Google‟s strong organizational belief of bdquoDon‟t be Evil‟ strong world market

position extreme profit and finally due to the support from the customers worldwide But it is

also important to note that understanding the structures and struggles among the stakeholders

may not always guarantee the success of the policy because of the dynamics of the whole

process which is greatly dependent on the changing stakeholder‟s needs and position in

future With the help of the bdquoSIP model‟ there is an attempt of simplifying the complicated

reality and also to enhance the robustness of the whole process of Google‟s decision making

PESTEL and its use in Scenario analysis

The problem faced by Google in China and its dilemma about whether to stay in the Chinese

market or not is a good example of needing to devise a strategy in action This is not an

examination of the past but an attempt to identify some strategic action choices for the

future Walsh (2005 p119) suggests that ldquoThe process of strategy formation is a dynamic

one that corresponds to the dynamic conditions that drive itrdquo If that is so then we need to

examine the changing factors behind Google‟s position in China

Google‟s operating environment in China seems to be constantly changing There are clearly

drivers for change at work and the need to identify these drivers is by a PESTEL analysis

(standing for Political Economic Social Technological Environmental and Legal)

The use of the cultural web analysis has highlighted that a main problem facing Google is the

unpredictable attitude of Chinese officialdom (Political) allied to strong local competition in

a rapidly-growing and otherwise profitable market (Economic) In the Social sector the

cultural web suggested that Google has not reacted well to the Chinese local needs which it

MGT6041 - Strategic Management

Google in China

Page 11 of 15

needs to do in a market where Technological change is rapid Other drivers for change can

also be identified

This PESTEL analysis is useful for classifying the drivers for change and it can be rather

static However it is a useful starting point for further strategy development Stakeholder

analysis can be used to suggest how some of these drivers might change and can also

identify those that might be correlated either negatively or positively

The drivers can also be used for the next stage in the process of strategy development which

is Scenario Planning

Scenario Planning is helpful when the environment is highly complex or is rapidly changing

(as it is here) It tends to be especially useful when

There are a limited number of key drivers influencing the success of the strategy

There is a high level of uncertainty about such issues

Outcomes could be radically different

All these factors apply to a greater or lesser extent to Google in China The numbers of key

drivers are not high With regard to one of the key drivers the Chinese political attitude it is

difficult to predict what their future attitude will be but there‟s no doubt that a positive

attitude would probably ensure success for Google while a stronger negative attitude could

well stop Google from trading in China at all

Given this degree of uncertainty the use of scenario planning could well be a help to Google

Typically starting from the drivers with the greatest uncertainty managers could prepare

different scenarios to give plausible views of how the business environment may change in

the future Interrelated drivers and scenarios must be consistent eg it is possible that very

low economic growth in China might produce an unstable political situation but it‟s highly

unlikely that high economic growth would Scenarios tend to be bdquooptimistic‟ middling‟ or

bdquopessimistic‟ and normal procedure is to create between 7-9 initial scenarios which would

then be reduced to between 2-4 most likely positions

The use of this technique could help Google but there are problems associated with it The

choice of the most likely scenarios will probably still contain a strong element of value

judgement and managers will have to guard against the temptation to so weight the scoring

as to pick an option which may have been initially prepared anyway The flexibility of the

MGT6041 - Strategic Management

Google in China

Page 12 of 15

system and its ability to react to changing situations is attractive but it may not always be

advisable to try to change strategy on a regular basis However when used in conjunction

with the cultural web and stakeholder analysis it is another technique that might help to give

Google a clearer indication of what strategy they need to follow

Conclusion

The aim of this investigation has been to find a strategic structure that will help Google in its

assessment of its operation serving the Chinese market The economic attraction of such a

large and growing market is obvious but the difficulties involved in the continued operation

(and the rapid rate of change in the internet service industry anyway) make the certainty of

future activities unclear The situation is fluid and the direction of change uncertain To take

account of this we need a theoretical approach (or more likely a combination of theoretical

approaches) that will not only help to clarify the situation but also give some guidance as to

how to approach strategy in the future

Many international organisations attempting to set up operations in China have struggled so

an analysis of the cultures involved using the Cultural Web was a logical starting point This

has highlighted several features such as the position of the Chinese Government with regard

to control and the importance of being in tune with the Chinese culture and market demands

when providing a service something that Google did not do well in the initial stages of its

operation in China Another important point is that the approach of the Chinese Government

with regard to censorship is in direct conflict with Google‟s stance on freedom of

information and willingly accepting such censorship would damage its brand image and

reputation

The major factors produced by the Cultural Web have then been taken and input the other

theoretical models used in this report namely Stakeholder Analysis and PESTELScenario

Planning Both these models have the degree of flexibility required in that they can both help

to explain the existing situation but also be used to indicate what might happen if the details

of the drivers for change alter to any degree Thus the Stakeholder Analysis emphasises the

importance of Google‟s shareholders and the economic pull of the Chinese market but this

could change Should Google continue to lose market share to Baidu then the shareholders

might decide this no longer fits with Google‟s desire to be market leader in its chosen

markets and their support for Google in China might weaken

MGT6041 - Strategic Management

Google in China

Page 13 of 15

Such possible changes could then be tested on the scenario planning model which would

take the drivers for change identified by the Cultural Web and Stakeholder Analysis and see

how changes in these drivers would affect the overall operating situation for Google

What we need is therefore a strategic model that links these techniques together Such a

model is shown below

Strategic Development Model adopted from (Walsh PR 2005)

This strategy development model shows how the theories we have examined can help

improve the analysis of the present situation and also be sufficiently flexible to help update

Google‟s management team as and when needed However it also emphasises that there are

other factors to be taken into account when making a final decision The three theories we

have looked at have helped to explain the rapidly-changing environment that surrounds

Google‟s operations in China and there is no doubt that these are important but just as

important is the internal operation of Google as a company its core competencies and beliefs

and the other factors that might be affecting its global operations

MGT6041 - Strategic Management

Google in China

Page 14 of 15

References

China Daily ldquoHow Many Internet Users Are There in Chinardquo Ministry of culture

Peoples Republic of China website

Chinese negotiations(18th

January 2010) ldquo A stakeholder analysis of Chinese

negotiationrdquo [Online] Available at httpwwwchinesenegotiationcom2010

[Accessed 3rd

April 2010]

CNNIC ldquo25th Statistical Survey Report on the Internet Development in Chinardquo China

Internet Network Information Center website

David Drummond ldquoA new approach to China an updaterdquo March 3 2010 post on blog

ldquoPolicy and issuesrdquo The official Google blog

Fang T (2006) ldquoNegotiation the Chinese stylerdquo Journal of Business amp Industrial

Marketing 21 (1) 50-60

httpgoogleblogblogspotcom accessed May 2010

httpwwwchinacultureorggben_aboutchina2003-0924content_26129htm accessed

April 2010

httpwwwcnniccnuploadfilespdf2010315142705pdf accessed April 2010

IMF ldquoGross domestic product growth in the advanced economies accumulated for the

periods 1990 - 1999 and 1990 - 2006rdquo International Monetary Fund website

httpwwwimforgexternalpubsftweo200501datadbginimcfm accessed May 2010

Johnson G Scholes K Whittington R (2008) Exploring Corporate Strategy 8th

ed

London Prentice Hall

Liu J ldquoBaidu and Google at logger heads in China Business Asia by Bloombergrdquo

International Herald Tribune (July 26 2007) LexisNexis Duke University Library 6

Nov 2007

National electronic Library for Health (Updated 16 Jan 2005) ldquoCan walking make you

slimmer and healthierrdquo (Hitting the headlines article) [Online]

Available at httpwwwnhsukhthwalking [Accessed 10 April 2010]

Reuters (16th

January 2010) ldquoChina affirms control over Internetrdquo [Online] Available

at httpwwwreuterscomarticleidUSTRE60D0CA20100114 [Accessed 3rd

April

2010]

The official Google blog [Online] Available at httpgoogleblogblogspotcom

[Accessed 3rd

April 2010]

MGT6041 - Strategic Management

Google in China

Page 11 of 15

needs to do in a market where Technological change is rapid Other drivers for change can

also be identified

This PESTEL analysis is useful for classifying the drivers for change and it can be rather

static However it is a useful starting point for further strategy development Stakeholder

analysis can be used to suggest how some of these drivers might change and can also

identify those that might be correlated either negatively or positively

The drivers can also be used for the next stage in the process of strategy development which

is Scenario Planning

Scenario Planning is helpful when the environment is highly complex or is rapidly changing

(as it is here) It tends to be especially useful when

There are a limited number of key drivers influencing the success of the strategy

There is a high level of uncertainty about such issues

Outcomes could be radically different

All these factors apply to a greater or lesser extent to Google in China The numbers of key

drivers are not high With regard to one of the key drivers the Chinese political attitude it is

difficult to predict what their future attitude will be but there‟s no doubt that a positive

attitude would probably ensure success for Google while a stronger negative attitude could

well stop Google from trading in China at all

Given this degree of uncertainty the use of scenario planning could well be a help to Google

Typically starting from the drivers with the greatest uncertainty managers could prepare

different scenarios to give plausible views of how the business environment may change in

the future Interrelated drivers and scenarios must be consistent eg it is possible that very

low economic growth in China might produce an unstable political situation but it‟s highly

unlikely that high economic growth would Scenarios tend to be bdquooptimistic‟ middling‟ or

bdquopessimistic‟ and normal procedure is to create between 7-9 initial scenarios which would

then be reduced to between 2-4 most likely positions

The use of this technique could help Google but there are problems associated with it The

choice of the most likely scenarios will probably still contain a strong element of value

judgement and managers will have to guard against the temptation to so weight the scoring

as to pick an option which may have been initially prepared anyway The flexibility of the

MGT6041 - Strategic Management

Google in China

Page 12 of 15

system and its ability to react to changing situations is attractive but it may not always be

advisable to try to change strategy on a regular basis However when used in conjunction

with the cultural web and stakeholder analysis it is another technique that might help to give

Google a clearer indication of what strategy they need to follow

Conclusion

The aim of this investigation has been to find a strategic structure that will help Google in its

assessment of its operation serving the Chinese market The economic attraction of such a

large and growing market is obvious but the difficulties involved in the continued operation

(and the rapid rate of change in the internet service industry anyway) make the certainty of

future activities unclear The situation is fluid and the direction of change uncertain To take

account of this we need a theoretical approach (or more likely a combination of theoretical

approaches) that will not only help to clarify the situation but also give some guidance as to

how to approach strategy in the future

Many international organisations attempting to set up operations in China have struggled so

an analysis of the cultures involved using the Cultural Web was a logical starting point This

has highlighted several features such as the position of the Chinese Government with regard

to control and the importance of being in tune with the Chinese culture and market demands

when providing a service something that Google did not do well in the initial stages of its

operation in China Another important point is that the approach of the Chinese Government

with regard to censorship is in direct conflict with Google‟s stance on freedom of

information and willingly accepting such censorship would damage its brand image and

reputation

The major factors produced by the Cultural Web have then been taken and input the other

theoretical models used in this report namely Stakeholder Analysis and PESTELScenario

Planning Both these models have the degree of flexibility required in that they can both help

to explain the existing situation but also be used to indicate what might happen if the details

of the drivers for change alter to any degree Thus the Stakeholder Analysis emphasises the

importance of Google‟s shareholders and the economic pull of the Chinese market but this

could change Should Google continue to lose market share to Baidu then the shareholders

might decide this no longer fits with Google‟s desire to be market leader in its chosen

markets and their support for Google in China might weaken

MGT6041 - Strategic Management

Google in China

Page 13 of 15

Such possible changes could then be tested on the scenario planning model which would

take the drivers for change identified by the Cultural Web and Stakeholder Analysis and see

how changes in these drivers would affect the overall operating situation for Google

What we need is therefore a strategic model that links these techniques together Such a

model is shown below

Strategic Development Model adopted from (Walsh PR 2005)

This strategy development model shows how the theories we have examined can help

improve the analysis of the present situation and also be sufficiently flexible to help update

Google‟s management team as and when needed However it also emphasises that there are

other factors to be taken into account when making a final decision The three theories we

have looked at have helped to explain the rapidly-changing environment that surrounds

Google‟s operations in China and there is no doubt that these are important but just as

important is the internal operation of Google as a company its core competencies and beliefs

and the other factors that might be affecting its global operations

MGT6041 - Strategic Management

Google in China

Page 14 of 15

References

China Daily ldquoHow Many Internet Users Are There in Chinardquo Ministry of culture

Peoples Republic of China website

Chinese negotiations(18th

January 2010) ldquo A stakeholder analysis of Chinese

negotiationrdquo [Online] Available at httpwwwchinesenegotiationcom2010

[Accessed 3rd

April 2010]

CNNIC ldquo25th Statistical Survey Report on the Internet Development in Chinardquo China

Internet Network Information Center website

David Drummond ldquoA new approach to China an updaterdquo March 3 2010 post on blog

ldquoPolicy and issuesrdquo The official Google blog

Fang T (2006) ldquoNegotiation the Chinese stylerdquo Journal of Business amp Industrial

Marketing 21 (1) 50-60

httpgoogleblogblogspotcom accessed May 2010

httpwwwchinacultureorggben_aboutchina2003-0924content_26129htm accessed

April 2010

httpwwwcnniccnuploadfilespdf2010315142705pdf accessed April 2010

IMF ldquoGross domestic product growth in the advanced economies accumulated for the

periods 1990 - 1999 and 1990 - 2006rdquo International Monetary Fund website

httpwwwimforgexternalpubsftweo200501datadbginimcfm accessed May 2010

Johnson G Scholes K Whittington R (2008) Exploring Corporate Strategy 8th

ed

London Prentice Hall

Liu J ldquoBaidu and Google at logger heads in China Business Asia by Bloombergrdquo

International Herald Tribune (July 26 2007) LexisNexis Duke University Library 6

Nov 2007

National electronic Library for Health (Updated 16 Jan 2005) ldquoCan walking make you

slimmer and healthierrdquo (Hitting the headlines article) [Online]

Available at httpwwwnhsukhthwalking [Accessed 10 April 2010]

Reuters (16th

January 2010) ldquoChina affirms control over Internetrdquo [Online] Available

at httpwwwreuterscomarticleidUSTRE60D0CA20100114 [Accessed 3rd

April

2010]

The official Google blog [Online] Available at httpgoogleblogblogspotcom

[Accessed 3rd

April 2010]

MGT6041 - Strategic Management

Google in China

Page 12 of 15

system and its ability to react to changing situations is attractive but it may not always be

advisable to try to change strategy on a regular basis However when used in conjunction

with the cultural web and stakeholder analysis it is another technique that might help to give

Google a clearer indication of what strategy they need to follow

Conclusion

The aim of this investigation has been to find a strategic structure that will help Google in its

assessment of its operation serving the Chinese market The economic attraction of such a

large and growing market is obvious but the difficulties involved in the continued operation

(and the rapid rate of change in the internet service industry anyway) make the certainty of

future activities unclear The situation is fluid and the direction of change uncertain To take

account of this we need a theoretical approach (or more likely a combination of theoretical

approaches) that will not only help to clarify the situation but also give some guidance as to

how to approach strategy in the future

Many international organisations attempting to set up operations in China have struggled so

an analysis of the cultures involved using the Cultural Web was a logical starting point This

has highlighted several features such as the position of the Chinese Government with regard

to control and the importance of being in tune with the Chinese culture and market demands

when providing a service something that Google did not do well in the initial stages of its

operation in China Another important point is that the approach of the Chinese Government

with regard to censorship is in direct conflict with Google‟s stance on freedom of

information and willingly accepting such censorship would damage its brand image and

reputation

The major factors produced by the Cultural Web have then been taken and input the other

theoretical models used in this report namely Stakeholder Analysis and PESTELScenario

Planning Both these models have the degree of flexibility required in that they can both help

to explain the existing situation but also be used to indicate what might happen if the details

of the drivers for change alter to any degree Thus the Stakeholder Analysis emphasises the

importance of Google‟s shareholders and the economic pull of the Chinese market but this

could change Should Google continue to lose market share to Baidu then the shareholders

might decide this no longer fits with Google‟s desire to be market leader in its chosen

markets and their support for Google in China might weaken

MGT6041 - Strategic Management

Google in China

Page 13 of 15

Such possible changes could then be tested on the scenario planning model which would

take the drivers for change identified by the Cultural Web and Stakeholder Analysis and see

how changes in these drivers would affect the overall operating situation for Google

What we need is therefore a strategic model that links these techniques together Such a

model is shown below

Strategic Development Model adopted from (Walsh PR 2005)

This strategy development model shows how the theories we have examined can help

improve the analysis of the present situation and also be sufficiently flexible to help update

Google‟s management team as and when needed However it also emphasises that there are

other factors to be taken into account when making a final decision The three theories we

have looked at have helped to explain the rapidly-changing environment that surrounds

Google‟s operations in China and there is no doubt that these are important but just as

important is the internal operation of Google as a company its core competencies and beliefs

and the other factors that might be affecting its global operations

MGT6041 - Strategic Management

Google in China

Page 14 of 15

References

China Daily ldquoHow Many Internet Users Are There in Chinardquo Ministry of culture

Peoples Republic of China website

Chinese negotiations(18th

January 2010) ldquo A stakeholder analysis of Chinese

negotiationrdquo [Online] Available at httpwwwchinesenegotiationcom2010

[Accessed 3rd

April 2010]

CNNIC ldquo25th Statistical Survey Report on the Internet Development in Chinardquo China

Internet Network Information Center website

David Drummond ldquoA new approach to China an updaterdquo March 3 2010 post on blog

ldquoPolicy and issuesrdquo The official Google blog

Fang T (2006) ldquoNegotiation the Chinese stylerdquo Journal of Business amp Industrial

Marketing 21 (1) 50-60

httpgoogleblogblogspotcom accessed May 2010

httpwwwchinacultureorggben_aboutchina2003-0924content_26129htm accessed

April 2010

httpwwwcnniccnuploadfilespdf2010315142705pdf accessed April 2010

IMF ldquoGross domestic product growth in the advanced economies accumulated for the

periods 1990 - 1999 and 1990 - 2006rdquo International Monetary Fund website

httpwwwimforgexternalpubsftweo200501datadbginimcfm accessed May 2010

Johnson G Scholes K Whittington R (2008) Exploring Corporate Strategy 8th

ed

London Prentice Hall

Liu J ldquoBaidu and Google at logger heads in China Business Asia by Bloombergrdquo

International Herald Tribune (July 26 2007) LexisNexis Duke University Library 6

Nov 2007

National electronic Library for Health (Updated 16 Jan 2005) ldquoCan walking make you

slimmer and healthierrdquo (Hitting the headlines article) [Online]

Available at httpwwwnhsukhthwalking [Accessed 10 April 2010]

Reuters (16th

January 2010) ldquoChina affirms control over Internetrdquo [Online] Available

at httpwwwreuterscomarticleidUSTRE60D0CA20100114 [Accessed 3rd

April

2010]

The official Google blog [Online] Available at httpgoogleblogblogspotcom

[Accessed 3rd

April 2010]

MGT6041 - Strategic Management

Google in China

Page 13 of 15

Such possible changes could then be tested on the scenario planning model which would

take the drivers for change identified by the Cultural Web and Stakeholder Analysis and see

how changes in these drivers would affect the overall operating situation for Google

What we need is therefore a strategic model that links these techniques together Such a

model is shown below

Strategic Development Model adopted from (Walsh PR 2005)

This strategy development model shows how the theories we have examined can help

improve the analysis of the present situation and also be sufficiently flexible to help update

Google‟s management team as and when needed However it also emphasises that there are

other factors to be taken into account when making a final decision The three theories we

have looked at have helped to explain the rapidly-changing environment that surrounds

Google‟s operations in China and there is no doubt that these are important but just as

important is the internal operation of Google as a company its core competencies and beliefs

and the other factors that might be affecting its global operations

MGT6041 - Strategic Management

Google in China

Page 14 of 15

References

China Daily ldquoHow Many Internet Users Are There in Chinardquo Ministry of culture

Peoples Republic of China website

Chinese negotiations(18th

January 2010) ldquo A stakeholder analysis of Chinese

negotiationrdquo [Online] Available at httpwwwchinesenegotiationcom2010

[Accessed 3rd

April 2010]

CNNIC ldquo25th Statistical Survey Report on the Internet Development in Chinardquo China

Internet Network Information Center website

David Drummond ldquoA new approach to China an updaterdquo March 3 2010 post on blog

ldquoPolicy and issuesrdquo The official Google blog

Fang T (2006) ldquoNegotiation the Chinese stylerdquo Journal of Business amp Industrial

Marketing 21 (1) 50-60

httpgoogleblogblogspotcom accessed May 2010

httpwwwchinacultureorggben_aboutchina2003-0924content_26129htm accessed

April 2010

httpwwwcnniccnuploadfilespdf2010315142705pdf accessed April 2010

IMF ldquoGross domestic product growth in the advanced economies accumulated for the

periods 1990 - 1999 and 1990 - 2006rdquo International Monetary Fund website

httpwwwimforgexternalpubsftweo200501datadbginimcfm accessed May 2010

Johnson G Scholes K Whittington R (2008) Exploring Corporate Strategy 8th

ed

London Prentice Hall

Liu J ldquoBaidu and Google at logger heads in China Business Asia by Bloombergrdquo

International Herald Tribune (July 26 2007) LexisNexis Duke University Library 6

Nov 2007

National electronic Library for Health (Updated 16 Jan 2005) ldquoCan walking make you

slimmer and healthierrdquo (Hitting the headlines article) [Online]

Available at httpwwwnhsukhthwalking [Accessed 10 April 2010]

Reuters (16th

January 2010) ldquoChina affirms control over Internetrdquo [Online] Available

at httpwwwreuterscomarticleidUSTRE60D0CA20100114 [Accessed 3rd

April

2010]

The official Google blog [Online] Available at httpgoogleblogblogspotcom

[Accessed 3rd

April 2010]

MGT6041 - Strategic Management

Google in China

Page 14 of 15

References

China Daily ldquoHow Many Internet Users Are There in Chinardquo Ministry of culture

Peoples Republic of China website

Chinese negotiations(18th

January 2010) ldquo A stakeholder analysis of Chinese

negotiationrdquo [Online] Available at httpwwwchinesenegotiationcom2010

[Accessed 3rd

April 2010]

CNNIC ldquo25th Statistical Survey Report on the Internet Development in Chinardquo China

Internet Network Information Center website

David Drummond ldquoA new approach to China an updaterdquo March 3 2010 post on blog

ldquoPolicy and issuesrdquo The official Google blog

Fang T (2006) ldquoNegotiation the Chinese stylerdquo Journal of Business amp Industrial

Marketing 21 (1) 50-60

httpgoogleblogblogspotcom accessed May 2010

httpwwwchinacultureorggben_aboutchina2003-0924content_26129htm accessed

April 2010

httpwwwcnniccnuploadfilespdf2010315142705pdf accessed April 2010

IMF ldquoGross domestic product growth in the advanced economies accumulated for the

periods 1990 - 1999 and 1990 - 2006rdquo International Monetary Fund website

httpwwwimforgexternalpubsftweo200501datadbginimcfm accessed May 2010

Johnson G Scholes K Whittington R (2008) Exploring Corporate Strategy 8th

ed

London Prentice Hall

Liu J ldquoBaidu and Google at logger heads in China Business Asia by Bloombergrdquo

International Herald Tribune (July 26 2007) LexisNexis Duke University Library 6

Nov 2007

National electronic Library for Health (Updated 16 Jan 2005) ldquoCan walking make you

slimmer and healthierrdquo (Hitting the headlines article) [Online]

Available at httpwwwnhsukhthwalking [Accessed 10 April 2010]

Reuters (16th

January 2010) ldquoChina affirms control over Internetrdquo [Online] Available

at httpwwwreuterscomarticleidUSTRE60D0CA20100114 [Accessed 3rd

April

2010]

The official Google blog [Online] Available at httpgoogleblogblogspotcom

[Accessed 3rd

April 2010]

MGT6041 - Strategic Management

Google in China

Page 15 of 15

Volkswagen (2010) available at

httpwwwvolkswagencomvwcmsmaster_publicvirtualmasteren2aktuelleshtml

accessed on 2nd April 2010

Wall Street Journal (2010) Google Business Reasons for Leaving China 6th April 2010

Walsh PR (2005) ldquoDealing with the uncertainties of environmental change by adding

scenario planning to the strategy reformulation equationrdquo Management Decision 43 (1)

113-122

Wilson K Ramos Y Harvey D amp Norman W (2010) ldquoGoogle in China the great

firewallrdquo Case Study in Ethics Duke University

Wu X (2007) ldquoStakeholder identifying and positioning (SIP) models from Google‟s

operation in China to a general case-analysis frameworkrdquo Public Relations Review Vol

33 No 4 pp 415-425

Yardley J (April 12 2006) Google chief says it won‟t fight Chinese censorship New

York Times (online edition)

Yau O H (2007) ldquoChinese Cultural Values Their Dimensions and Marketing

Implicationsrdquo European Journal of Marketing 22 (5) 44-57

ZDNet (22nd

March 2010) ldquoGoogle nixes China search site sales and R amp D to stayrdquo

[Online] Available at httpwwwzdnetcomblogbtlgoogle-nixes-china-search-site-

sales-and-r-d-to-stay32171 [Accessed 3rd

April 2010]