The into China and capture their large market

The auspicious beginning
of Google began in the mid 90’s as a college research project by Stanford
graduate students, Larry Page and Sergey Brin. (Google) This innovative
technology obtained search query results through a quick analysis of webpages. Google
has since grown tremendously with the multitude of products and services it
offers today. Google’s mission statement is “to organize the world’s
information and make it universally accessible and useful.” (Google) While
Google began in the U.S., they have expanded into many other countries. Google
has offered fast and efficient service and continually works towards dignifying
the core message of their code of conduct; “being a Googler means holding
yourself to the highest possible standard of ethical business conduct.”
(Google) During the early 2000’s Google attempted to expand into China and
capture their large market of internet users. (Thompson 2006) It was an easy
decision for Google to enter the Chinese market. China offered a stable economy
and a sizable population that included many consumers adopting new technology
including the Internet. Despite the murky water brought about by censorship
requirements, Google jumped into the Chinese market and encountered many
challenges along the way.

1978, China was isolated under Mao Zedong’s leadership. (Li 1997) The country
saw slow growth and its people lived in poverty. After Zedong’s death, Deng
Xiaoping led the People’s Republic of China into economic growth. (Robinson
2017) Xiaoping foresaw the path to economic recovery was by allowing foreign
and new technologies into China. Chinese leader Deng Xiaoping worked to mediate
the backward ways of previous leadership by establishing an Open Door Policy. The
economic reform policies provided tax incentives attractive to foreign
companies. The success of the open door policy included additional foreign
investment to China. (Li 1997) The average GDP annual growth rate for China was
9.5% from 1980-90; making China one of the fastest growing economies. During
that time, the rest of the world showed a corresponding growth rate of only 3.1%.
(Wei 1995) In the early 21st century, China joined the WTO. (Li
1997) China was experiencing a booming economy and more Chinese people were
using technology. As China became wealthier, more computers and internet
services were purchased. China was very attractive for investment as they
offered production capabilities coupled with lower costs. Chinese internet user
market penetration grew just over 8% during the six year period between 2000
and 2006. During the next six year period, the market penetration grew
tremendously to 42.3%. (China Internet Users)

cultural values for eastern countries differ greatly from the cultural values
of western countries. Eastern countries tend to be more conservative and
traditional, like China; while western countries tend to be more liberal, like
the United States. Unlike in the U.S., Chinese citizens do not inherently
possess freedom of speech rights. Google, as an American born country,
understood the U.S. marketplace well. However, Google’s approach towards
Chinese expansion did not take these cultural differences into consideration. Google
was not the first Internet company to enter the Chinese market. Yahoo was a
pioneer in China, opening an office in Beijing in 1999. (Thompson 2006) Yahoo
quickly found the cultural differences difficult to navigate. For example,
Chinese businesspeople prefer live exchanges to email. “The most popular
feature of the Internet for Chinese users is the online discussion board.”
(Thompson 2006) These cultural nuances caused Chinese users to flock to sites
designed by Chinese entrepreneurs, as the American run sites didn’t include the
features desired by the Chinese market. Baidu was introduced to the Chinese
market in 2001, and made stiff competition to Yahoo. (Wilkins 2009) Baidu, a
Chinese search engine, built a tool into their site that allowed the creation
of discussion groups based on searches. “Baidu’s chat rooms receive as many as
five million posts a day.” (Thompson 2006) Baidu’s insider knowledge into the
wants and needs of the Chinese market positioned them for success.

attempted to learn from the mistakes of Yahoo and took a different approach to
expanding into China. In the early 2000’s Google engineers began creating a
version of the Google search engine that could understand Asian based languages
like Chinese. (Thompson 2006) By 2001, Chinese users who navigated to would be routed to a Chinese-language interface. After only a year,
Google had amassed approximately 25% of the Chinese search traffic, achieving a
level of success superior to Yahoo. (Thompson 2006) While 25% market share is
impressive, Google’s main Chinese competition, Baidu, had amassed nearly half
of the Chinese market. (Thompson 2006) Brin and Page’s reasoning for expanding
Google into China speaks back to the Google mission statement: “to organize the
world’s information and make it universally accessible and useful.” (Google)
Google realized that they would have to cooperate with the Chinese government
and censor politically sensitive web sites like those featuring religion,
democracy and pornography. Brin himself was quoted as saying, going into China
“wasn’t as much a business decision as a decision about getting people
information. And we decided in the end that we should make this compromise.”
(Thompson 2006)

uses two methods for web censoring. For any companies located inside China’s
borders, the government uses a multitude of threats to ensure clean content is
displayed on the Web. For any sites that are location based outside of China’s
borders, the Chinese government utilizes a tool commonly referred as “The Great
Firewall of China”. (Wilson) The internet is a vast network of underground
cables. When surfing the internet in China, an internet browser will send out a
request when you attempt to navigate to a webpage. The request will travel
through these underground cables and when it reaches the routers at the border,
is examined. If the request corresponds with a site on the government’s
blacklist, the site will be blocked. If the request isn’t already on the
blacklist, it will be scanned for content. The router will determine if the
site will be blocked or allowed through. Obeying Chinese censorship laws
required the company to purge Google search results of any websites not
approved by the Chinese government. Banned sites and searches included those
promoting free speech or pornography. A Google search of free speech in the
United States provides 101,000,000 search results. The same search on
would yield very different results. Most pages, Google has erased completely.

The Chinese government does not make any qualms about its
censorship. “Some 50,000 Chinese authorities do nothing but monitor traffic on
the internet.” (Anderson 2005) China’s Ministry of Public Services introduced
the Golden Shield project in early 2000. (Wilson) This technology acted as a
firewall to control the information available to Chinese citizens. Two Internet
police mascots were created by the Shenzhen Public Security Bureau named
“Jingjing” and “Chacha”. These mascots include a blog and a chat window where
users can talk with them. (Thompson 2006) The Beijing Youth Daily reported a
Shenzhen officials comment that “the main function of Jingjing and Chacha is to
intimidate”. (Qiang 2006) Intimidation seems to be a main tactic used to ensure
Internet companies follow censorship rules. “Since 2002, internet service
providers in China have had to sign pledges to monitor and censor traffic on
their networks before they can operate.” (Anderson 2005) Noncompliance
with censorship regulations can include stiff punishment. Fines or jail time
can be imposed, while web-sites risk being shut down or blocked. (Wilkins 2009)
These penalties have resulted in likely more censorship than is needed.
Requiring that each private company self-censors, eliminates the unobtainable
task of the government formally monitoring the sizable internet content that is
circulated on a daily basis. Each company is left to determine what content is
acceptable. While occasionally, the government will send demands of websites to
be taken down due to violation of their censorship guidelines.

September 3, 2002 Google vanished from Chinese servers. (Thompson 2006) Any
user that attempted to access Google that day simply received an error message.
The Google site had become blocked by the Chinese government. Google never
become completely aware of the reasoning for the block of their site. However,
two weeks after the blackout, their website became unblocked. (Thompson 2006)
Google still experienced difficulty operating in China. Due to the Great
Firewall, China web traffic speeds from outside China’s borders can be slow.
Google, even after being unblocked, was often available due to data jams. After
the website blackout, Google search queries for censored sites would often
cause the Google site itself to shutdown, thereby causing frustration by customers.
Google and other search engines work on the premise of delivering search
results quickly. These search delays and issues caused many Google customers to
flock to Baidu and other competitors. (Thompson 2006) Google’s competitor
Baidu, did not experience many of these issues due to their servers were
located in China and not subject to the Great Firewall.

timing to enter the Chinese market was unfortunate. The political environment
for tech and internet firms had been soured. It was revealed by Reporters
Without Borders that in 2004 Yahoo provided a user’s personal email account
information to the Chinese government. (Thompson 2006) This particular user
leaked a document detailing government press restrictions to a pro-democracy
web site through his Yahoo account. A ten year prison sentence was the penalty
imposed by the Chinese government. Microsoft also honored a government request
to delete the writing of a free-speech blogger, Zhao Jing. (Thompson 2006)
During Congressional hearings, Google was asked how a company with the slogan,
“Don’t Be Evil” could cooperate with Chinese censorship restrictions. Google
felt that under the circumstances, with the unethical dealings of both Yahoo
and Microsoft, they were portraying a much more ethical and responsible front.

             Google executives
now needed to determine which compromises they would be willing to make to
continue Chinese operations. They decided that unlike their Yahoo and Microsoft
counterparts, they would decline to offer email or blog services.  Google decided that the most ethical solution of
offering some services to the China market, even restricted by Chinese
censorship, was better than leaving the Chinese people with limited information
access. (Waddell 2016) Brin’s solution to Chinese censorship included adding a
disclaimer to the top of search results. He said, “they can notice what’s
missing, or at least notice the local control.” (Thompson 2006) Google’s effort
to notify their customers in advance about the censorship, spoke to their
commitment to high ethical standards. Google executives decided that they would
offer two Chinese search engines. The first being the original,
uncensored and slowed by the Great Firewall. The second site being,
which would include self-censorship by Google, thereby offering the quick
search results Google customers navigate to their site for. Google hired Kai-Fu
Lee to head up (Wilson) Lee is extremely accomplished and well known
in the China region, and this addition to the Google team speaks to Google’s persistence
to succeed amidst the censorship controversy. Google struck a deal with the
People’s Republic of China and launched in 2006. (Wilson) Google’s move into China required them to register as
an official Internet Service Provider (ISP). Chinese ISP’s are required to
self-censor content that is classified illegal by the Chinese Communist
government. Censored content included certain political, religious and social
subjects banned by the government. As there was no master list of sites that
required blocking, Google created their own blacklist. They set up a computer
inside Chinese firewall and programming the computer to visit Web sites. Any sites
that were blocked by the firewall were added to Google’s blacklist. In December
2005, Google signed a license to become a Chinese Internet Service. (Thompson

decision to operate in China did not sit well with U.S. officials. “Company executives
were called into Congressional hearings and compared to Nazi collaborators.”
(Thompson 2006) Protestors gathered outside the company’s headquarters in
Mountain View, California and the company’s stock price fell. Google was not
alone in expanding into the Chinese market. However, Google claimed to be
different than other companies. Brin and Page wrote, in Google’s official
Securities and Exchange Commission filing, that Google is “a company that is
trustworthy and interested in the public good.” (Thompson 2006) U.S. protestors
perceived the situation as difficult for the company’s young founders to stand
up that message of honoring public good while pacifying the Communist Party and
the Chinese regime fueled by repression. Google shareholders voted against an
anti-censorship proposal in May of 2007. (Wilson) Google asked that
shareholders vote against the bill. Google’s Senior Vice President for
Corporate Development, David Drummond said, “Pulling out of China, shutting
down, is just not the right thing to do at this point, but that’s
exactly what this proposal would do.” (Wilson)

of Google’s options in continuing to navigate the China marketplace included
complying with the current Chinese requirements and regulations. By complying
with current Chinese regulations, Google might have hoped that the future would
bring changes to censorship requirements. Also, as for Google’s bottom line,
staying in China and complying with censorship guidelines, allows them to
profit from one of the fastest growing world internet markets. If Google was
serious about wanting to have a Chinese presence, they needed to be willing to
abide by local rules and regulations.  By
remaining in China and abiding by censorship requirements, over time Google
could have gained the trust of the foreign Chinese government. This trust would
work to increase the likelihood of influencing change in the future.
Unfortunately, simply complying with the censorship requirements of the Chinese
government, would continue to earn them unpopularity with the democratic United
States. For Google to continue to run their Chinese version of their site in
the U.S., they would continue to receive firewall slowdowns and effectively
continually lose market share to Baidu or other competing search engines.
Google could choose to open a Chinese office and move its servers to Chinese
soil. This approach would mitigate the Great Firewall issue, and service speeds
would improve. However, now Google would be subject to the self-censorship laws
that apply to Chinese businesses. Brin and Page’s had the option resisting
Chinese censorship regulations completely. This option would have shown
Google’s stance against the repressive censorship policies of the Chinese
government. Most of the criticism Google faced back on American soil, would be
eliminated by taking a stance towards resisting the privacy and censorship
requirements. Google likely would have also received press coverage on their
decision to stay and resist censorship. This press coverage Google could have
used in their favor in the fight against these injustices. Another option that
Google executives could have gone with would be ceasing Chinese operations
completely. This option appears to inflict the most harm. Withdrawing without a
fight would allow the Chinese government to continue their censorship policies
without resistance. China’s internet market is more than $300 million,
encompassing 300 million users and 670 million mobile users. (Heskett 2006) In addition,
withdrawing from the Chinese market, provides Baidu with a straight shot
towards a Chinese internet market monopoly. They are already a dominant search
company in Japan. (Fannin 2010) A fourth possible strategy is for Google to
transfer their business dealings to a local company who better understands the
market and government regulations. Yahoo used this strategy successfully in
giving control to Alibaba. (Thompson 2006) A local company would likely be well
versed in the ins and outs of Chinese business. Opting this route, however,
Google would have to be willing to let go of some control and allow an outsider
to make business decisions.

Google’s options, they choose the resist and stay approach. This approach
failed. The Google site, during the time it was live, experienced slow service
and security breaches. Google’s frustration led to them stopping censoring
altogether. It was shortly thereafter that the Chinese government shut down
Google altogether. Google choose to leave and subsequently redirected any traffic to their uncensored Hong Kong site Unfortunately,
China is not the only country where Google services are blocked.  “Google
products — from search and Blogger to YouTube and Google Docs — have been
blocked in 25 of the 100 countries where we offer our services,” Google
writes. (Siegler 2010) Google had many options when considering their entry in
the China market. However, as they approached the situation blind and operated
without much of a strategy, they encountered many issues along the way. A New
America Internet-privacy advocate, Rebecca MacKinnon, says that “companies
should start thinking about how they will deal with free-speech issues before
they start doing business in a repressive state.” (Waddell 2016)

occurs over the entire globe. Google’s downfall began with their failure to
understand Chinese culture. Google attempted to defy Chinese censorship
guidelines and in turn their users received slow services, which caused lost
market share in a country with the largest amount of web users in the world. Google’s
decision to do business in China was not an immoral act. While their primary
motivation was likely to take advantage of a booming economy, they proved they
were not willing to do anything solely for profit sake. Google did initially
sign a pledge to monitor and censor internet traffic that went against their
democratic values. However, they attempted to mediate this decision by
resisting Chinese censorship guidelines after the fact. Google’s move into
China while benefiting Google, did also create jobs and provide millions with
internet access. Google’s jump into China also worked to prevent Baidu from
monopolizing the Chinese market. I believe Google’s decision to resist
censorship restrictions while attempting to remain in China was the most moral
decision they could have made at the time. Simply complying with privacy and
censorship would have conveyed the wrong message to Google’s shareholders.
While ceasing business altogether also allows the Communist regime to continue
their censoring ways. A partnership between Google and China could be
favorable. Google is known as one of the best at providing internet technology
while China has the largest demand for internet technology than anywhere else
in the world. For Google to succeed in China, they will have to be willing to
contradict some of their core values and censor their website. These political
differences will likely include rocky roads to any future partnership.

Google does not have a website in China. A solution for Google to remain in
China while staying committed to their high ethical standards was not found.
However, Kaveh Waddell, reporter for the Atlantic writes that as of 2016 “Google
is hiring for dozens
of positions there as it prepares its reentry.” (Waddell
2016) For Google’s second approach to entering the Chinese market, hopefully
they have learned from prior mistakes and have a strategy for navigating the
government censorship guidelines. A successful move into China will allow
Google to make a presence, build trust with the Chinese government and
hopefully influence future changes, while profiting from one of the largest
internet marketplaces in the world.


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