Google in China: Market Entry Analysis

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Abstract

In today’s ever-changing marketplace, many companies have been forced with a challenge to reinvent themselves and alter their core values in the interests of profit and market share. As we move into the second decade of the twenty-first century, many critics argue whether it is possible for Google Inc., a major innovator and leader within the search engine industry, and China, a communist country, to co-exist. China in 2005, with its estimated 134 million Internet users, has been subjected to the country’s Great Firewall, which restricts citizens from accessing certain websites deemed inappropriate by the Chinese Government (Lawrence & Weber, 2011, p. 471, 473). As a result, Google must now decide whether it wants to be an active participant in the oppression of Chinese citizens or remain consistent to its core value of not being evil for increased profits (Lawrence & Weber, 2011, p. 470). There is no question that Google’s presence in China could bring substantial growth and revenue to the company; however, will it ultimately be worth the risk of compromising their core values and dealing with these unpopular censorship conditions? Question #1: For Google in 2005, from a business perspective, what are the arguments for and against entering China? When business transactions take place across international borders, they carry additional risks not present in domestic transactions. Foreign Direct Investment is the most risk bearing way of entering into a market. A foreign direct investment entails sole responsibility to the proprietor. From a political and economic standpoint, the CCP, Chinese Communist Party, has been known as an autocratic party that has imposed strict control over the country (Lawrence & Weber, 2010, p 470). Within the past thirty years, the CCP allowed for the free flow of money while maintaining a tight control of all institutions. With the imposing regulations of the censorship regime by the CCP, Google will be put in a position in which it will need to carefully monitor these censorship laws. The CCP will intervene by imposing through a multitude of ways to protect the nation, which may cause many delays for Google in China. From a financial aspect, when entering into a foreign market, the risks are tenfold. There will be a higher resource commitment from Google and if there are any potential problems with the CCP, the exit costs would be very significant in a direct investment. Google must also overcome its cultural differences when introducing its product/service into China. Internet giant Google's success relies on its users’ freedom to search for whatever they like, whether news, email, chat, video or games and entertainment. However, in China, censorship laws pose a serious threat to Google’s business model. Subjects that do not follow the Chinese government's political stance, or are of pornographic nature, are blocked from access entirely. The argument for Google entering China is all about numbers; China’s enormous population makes it the world’s largest internet market, an almost bottomless pool of customers, eager to buy the products and use the services that, as of just a few short years ago, were out of reach for many. With the popularity of internet cafés (Lawrence & Weber, 2010, p.471) and increasing internet users, Google can have great success in China, thus satisfying its market stakeholder’s interests (Lawrence & Weber, 2011, p. 8). . However, Google’s entry into China could be seen by many as a demonstration of how companies are willing to bend to be able to build a business in one of the world’s fastest growing economies. For Google who declared one of its core values: “to organize the world’s information and make it universally accessible and useful (Lawrence & Weber 2011, p 469),” to actually bring this to pass in China would be a challenge. From a business perspective, the argument against Google entering China is Google’s...
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