The graph demonstrates how the internet in china becomes one of the largest internet markets in the world. This in itself would be a huge opportunity for Google as a brand to expand.
The business model
In 2005, Google’s business model was based almost entirely on revenue from paid advertising. The company made money in two main ways AdWords and AdSense. These program placed advertisements on the websites of other content providers, with the website operator and Google sharing resulting revenue. Participants in what the company called the “Google Network” ranged from major companies such as America Online to small businesses and even individuals who operated websites devoted to personal interests or hobbies. From a business point of view operating in china would be a huge economic opportunity for Google’s ADWords and AdSense programmes as China specialise in textiles, garment making, toys, footwear, travel and sports articles. It is also a key source of high-tech electronic products, electrical machinery, office machinery, telecoms and sound equipment. China offers a huge advertising campaign that would be beneficial to Google and increase revenue as in 2005, 99% of Google’s revenue came from advertising. 52% came from AdWords and 47% came from AdSense if Google operated china this would increase vastly.
On the other hand the Google China saga could represent a big setback for foreign investment in China. China’s business environment is not as friendly to foreign companies as it appears to be; even if the companies are renowned and successful outside China. Look at how many Internet companies have run on the rocks in China, including EBay, Yahoo!, MySpace, Facebook and Twitter. Google is just another to add to the list and could lose credibility. Also Google's motto is do no evil, it cannot support the oppressive regime that china expects.
Also Google users in China struggled with a service that to be fair wasn’t very good, due to it being down around 10% of the time and even when it did work it was very slow and sluggish. “Google news service is never available and Google images are only accessible around half of the time.” (Lawrence, 2007). This creates a bad name for Google, as internet search engines are supposedly quick and reliable. However these results show otherwise, considering one of Google’s ten point philosophies “fast is better than slow,” (Our philosophy, 2011) shows that Google tries to create a search engine that provides results within seconds nevertheless this isn’t the case in China. Most individuals in China, infact around 70% of them were using Baidu as oppose to Google. This made it quite hard for Google to make an impact on the Chinese population. In an economic sense, it is down to consumer preference; therefore they are going to choose their home search engine, Baidu, as they know it’s reliable and quick. Therefore it proves difficult to break into that threshold.
Evaluate the arguments for and against Google operating in China from an ethical perspective.
- Ethics refers to the moral standards that are set by a society; usually they included the guidelines of how people should behave. Business ethics however is defined as “the study of business situation, activities and decisions where issues of right and wrong are addressed.” (Crane, 2007). There are five reasons stated to be ethical in business these are; to meet the demands of stakeholders, To enhance business performance, To comply with legal requirements, To prevent or minimize harm, To promote personal morality. Did Google stick to these five statements from withdrawing from china? The answer is no by withdrawing from china Google’s ethics didn’t enhance business performance and it didn’t comply with Chinas legal requirements.
Although by 2005 many Chinese were online, their access to information and freedom of expression were restricted by a sophisticated and comprehensive system of government censorship. The authorities enforced this system on three interconnected levels: Firewall devices at the border Government-mandated self-censorship by Internet service and content providers Self-discipline exercised by individual users.
The Great Firewall of China
Serious ethical questions remained unresolved. China operated the most far-reaching and sophisticated system of Internet censorship in the world. Any Internet company doing business there would have to filter content that the Communist regime considered offensive. Moreover, the Chinese government had demanded that other U.S. companies identify individuals who had used the Internet to criticize the authorities, and at least one dissident had been jailed as a result. Would it be possible for Google to enter China, while remaining true to its informal corporation motto ‘don’t be evil?’
Right Based Approached
Consumers have a right to be treated fairly by large businesses and consumer protection laws are in place ‘designed to protect consumers and give them rights when buying goods and services’ (HN Computing, 2008). The rights based approach states that a person or group is entitled to something or to be treated in a certain way. Examples of basic human rights are right to life, safety, and due process. China was surrounded by the world’s most sophisticated information barrier, which the government provided in order to block a number of black listed websites that were banned due to their unethical standards. This therefore goes against any individuals human rights act. Consumers have their own rights to choice what they want to search on the Internet; this is seen as morally unjust.
Corporate social responsibility
Corporate social responsibility can be described in various different ways, however arguably the most relevant with regards to Google considering the number of social responsibility questions their China disaster raises is ‘how businesses take account of the economic, social and environmental impacts of their activities’ (Post, 1996).
Corporate social responsibility is when an organisation voluntarily goes beyond the legal requirements to ensure they are benefiting society as whole, taking into account both the interests of wider stakeholders and shareholders. Economic, social and environmental are all key areas in which a business's activities can impact on society, therefore corporate social responsibility aims for organisations to take them into consideration. Google had a social responsibility to deliver all information to the Chinese society, a human rights issue occurred in which Google seen it not to be benefiting the society as a whole and Google de-censored Google images. Whether or not the Chinese government decides to censor Google, this bold move will likely appeal to the younger masses who are more inclined to tolerate or champion free speech and free search. So even if it has to sit on the sidelines for a while, it has potential to get back in the game in the future.
However Acting against the ideal wishes of the Chinese government, Google may be losing some market internet share if the government decides to shut access to Google in China altogether. This means huge potential loss in Google paid search advertising as well as monetisation on other Google properties such as Gmail and Picasa.
(NEWS, 2011)
Given what you have read Do you think Google was right to withdraw from mainland China in March 2010? Give reasons based on your own independent research
Was Google right to withdraw from Mainland China?
Google’s decided to stop censoring its Chinese search engine and redirected mainland users to its servers in Hong Kong instead. A reason why they pulled out of the deal was because they held an estimated 30% of China’s search engine market in 2009, compared with their home grown rival, Balidu, who had around 60% of the market share from a business perspective Google had lost face and were right to withdraw from china as the brand wasn’t doing well. Baidu, its main Chinese rival, “had been successful in attracting younger users, many of them students. They did this by offering a full range of services including entertainment, and there server was seen as superior to Google’s. The Chinese used Google for researching things outside of China, whereas they used Baidu, for searching sources inside of China.” (Lawrence, 2007)
Due to the highly competitive market in China, Google was not achieving aims, as Chinese citizens were not using Google as their main search engine. Google’s however researched into this. These results showed that Google was perceived as an international brand and technology leader but “a little distant to average Chinese users.” (Lawrence, 2007). A large amount of Chinese could not spell the word Google and therefore believe it should have a Chinese name. Whereas they believe Baidu was seen as being a Chinese brand with good technology. Therefore Baidu created ideas that were in the interest of many Chinese individuals.
Another reason to why Google, withdrew from China is because they are known for their censorship of web material, named the “Great Firewall of China” (Lawrence, 2007), because it limits access to the information that groups individuals around the world choose to post on the internet. China restricts access to the web content through various means. The chief method is using service providers to block access to certain sites. Recently technology firms, like Google, have assisted China in meeting these censorship aims by providing search engines where content is also blocked, meaning that not all sources of information are available to Chinese users on the web.
Also the US Congress considers this censorship an affront to freedom of speech. Restricting freedom of speech is considered an assault on human rights. At an ideological level, reasons for Google to stop doing business with China are concerned with the right and wrong of censorship as it goes against freedom of speech as an important human right. At a practical level the reasons for Google to stop doing business with China revolved around profits and losses of competitors in a supposedly free market.
Where Google wrong to withdraw from China
On the other hand Google operating in China was deemed a massive business opportunity for Google, with China’s rapid growth and continually growing population. China’s economy dramatically grew at a fast rate after 1978; this was after years of state control of all productive assets. The Chinese Government decided to embark on a change that would provide massive growth and the Chinese would see a change within the economy. It encouraged the formation of rural enterprises and private businesses, liberalised foreign trade unions and investment. As we can see over the years, this change has had a gigantic impact not only on the Chinese economy but on the Chinese people too. An increase in the manufacturing and exports sector has been the driving force behind the economic boom in China. Many people were shocked by Google pulling out of China however due to its intense censorship programme; it caused problems, both with consumers and other stakeholders.
Technically Google haven’t fully pulled out of their business deal with China, instead they have moved their services to the area of Hong Kong. Although Hong Kong is part of China, the “one country, two systems” framework means it operated under different laws. Google already had a search service there using the territory’s traditional characters, but has added a simplified Chinese service for mainland users.
Also Google are still under the attack today, with limitless amounts of arguments behind the scenes. According to this week’s Guardians, “Google have recently accused the Chinese government of interfering with their popular Gmail email system. However many people believe that Google should follow and abide by the laws set by the Chinese Government, if it was to carry on business in China.” (Rushe, 2001). Quite a few people believe that Google is using this chance as a bargaining point to further tap into a quickly growing but competitive market.
"Triple Bottom Line"
The triple bottom line is the theory that an organisation must acknowledge organisational objectives which will benefit the company as well as the wider stake/shareholders. These objectives work to sustain a business through implementing social, environmental and economic changes. “It operates so that its business interests and the interests of the environment and society intersect.” (Sustainable Business Strategies , 2009). These of course are changes which will have a positive effect in long term, something Google failed to ensure by withdrawing from china. The decision to withdraw from china would not benefit the company as the loss of advertisement and loss of internet users wouldn’t be in the best interest of the stakeholders
Conclusion
In conclusion after looking at the argument from a business perspective and a ethical perspective I personally think Google was wrong to withdraw from China from a business. China’s economic growth over the last 20 years, it provides Google with a massive opportunity. However due to the censorship problems, Google’s ten point philosophy is being rejected by Chinese consumers. All the outcomes that Google set out to achieve are proving difficult. Trying to provide a fast and reliable search engine with China has its problems, not only due to the Great Firewall, but also because of its highly competitive environment that they are faced with. It clearly shows it’s not easy for a foreign company to do business in China, where the philosophy and mindset are quite different due to a difference in political views.
Bibliography
Chris Mulhearn, H. R. (2001). Economics for Business. Palgrave.
BBC News (2011)
Crane, A. a. (2007). Business Ethics.
HN Computing. (2008, n.p. n.p.). Outcome 1: Describe the Legislation that Applies to the IT Profession. Retrieved November 30, 2010, from http://computing.ed-coll.ac.uk: http://computing.ed-coll.ac.uk/elearnhncomputing/ITLaw01CD/page_12.htm
Lawerence Anne T, W. J. (2010). Business and society, stakeholder, ethics and public policy.
Lawrence, A. T. (2007). Google In China.
Post, J. E. (1996). Business and society : corporate strategy, public policy, ethics.
Our philosophy. (2011). Retrieved from Google : http://www.google.com/corporate/tenthings.html
Rushe, D. (2001, March 20). Google in China. Retrieved from Guardian: http://www.guardian.co.uk/technology/2011/mar/20/google-gmail
Stecher G, A. a. (2009). Business, Government and Society: a managerial perspective.
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