“Strategies that Fit Emerging Markets” – Google and China
In 2010 Google announced its plans to exit the search engine market in China after operating in China for over 4 years[i]. For 4 years Google complied with the China government, censoring search results. After increasingly demanding requests to censor search materials and hacking attempts to identify Chinese protestors by the Chinese government, Google decided to entirely take down its search engine in China.[ii] I agree with this move of staying away from the Chinese market all together instead of adapting the search engine even more.
Although the Chinese peoples favor and are open to foreign and American products and services,[iii] the opposite can be said about the government. The central Communist Party of China controls most of the political power in the country and not only does the central government regulate businesses but there are many state-owned enterprises as well, many of them in the Fortune 100.[iv] To maintain China’s price competitiveness, the Chinese government often subsidizes Chinese businesses[v] like Baidu, a Chinese-based search engine that partnered with the government. Although Google has sufficient capital, China’s political systems and lack of openness does not favor foreign businesses like Google.
On the user side, Google’s search engine is supposed to be a platform that is easily accessible and connects users with their desired information. However, this value proposition is considerably altered in the Chinese market. All relevant search results are never shown due to censorship, and should Google refuse to censor, the Chinese government blocks Google search. In China, Google search’s value proposition cannot be fulfilled for users, which will prevent businesses from purchasing ads, ultimately affecting the bottom line of their business proposition.
Although there are other institutional limitations such as inadequate supply of mangers and local banking systems, I believe that the political tension and lack of market openness in China was affecting the development of a strategy that aligned with Google search’s user value proposition.
Among Google Search, Youtube, Facebook, Twitter are also not operating or banned from China. A uncensored Google Search will reveal criticisms of the Communist Party which is strictly banned, and Youtube, Facebook, and Twitter are modes in which free speech can be expressed which is not a inalienable right in China. However, Google Search is only one offering of the company’s full range of services. Other services such as Google maps, music and other application that do not relate to censorship and free speech still continue to operate in China today.
[i] Helt, Miguel; Barboza, David. “Google Shuts China Site in Dispute Over Censorship.” The New York Times. March 22, 2010. Web. April 27, 2016. <http://www.nytimes.com/2010/03/23/technology/23google.html>
[iii] Khanna, Tarun; Palepu, Krishna G.; Sinha, Jayant. “Strategies That Fit Emerging Markets.” Harvard Business Review. Jun 2005, Vol. 83 Issue 6, p63-76.
[iv] Cendrowski, Scott. “China’s Global 500 companies are bigger than ever – and mostly state-owned.” Fortune. July 22, 2015. Web. April 27, 2016. <http://fortune.com/2015/07/22/china-global-500-government-owned/>
[v] Haley, Usha; Haley, George. “The Hidden Advantage of Chinese Subsidies.” The World Financial Review. September 26, 2014. Web. April 27, 2016. < http://www.worldfinancialreview.com/?p=2942>