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google entry in Chinese market assessment. brief timeline with descriptions of privacy issues faced by the U.S. company.Presentation of Chinese market scenario: competitors and clients need. Assessment of different entry models. evaluation of different alternatives strategies that the company may consider for the Chinese market entry. Solution to the case, providing one strategy for future success.
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Group D -Group D - Nicola Morelli, Han Zhou, Tiana Seymore, Jakob Mose Olesen, Luca Pignatelli, Franziska Zindl
AGENDA
Hold“We made
“Foreign enterprises in Chinaneed to adhere to China‘s lawsand regulations……and shoulder correspondingresponsibilities“
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HoldValuesOverProfits
“We madethe decision to enterthe market becausewe believe in makinginformation availableand accessible“
(Google Communication and Public Affairs)
responsibilities“
(Ma Zhaoxu Foreign Minister spokesman)
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COMPANY DATA
• Founded by Larry Page and Sergey Brin
• August 1996: first version of Google
• September 1998: first office in California
• 2000: largest search engine in the world
• 2010: $ 600 million revenues in China• 2010: $ 600 million revenues in China
– Revenues from 2004 to 2010 increased about 830% worldwide
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THE CHINESE SEARCH ENGINE MARKET IN 2000
Dimension:One of the largest Internet markets in the world
Growth:High degree ofexpectedgrowth
Competition:Fragmented market, but sensitive to advertising
Barriers:Highly protective government
Cultural diversity:Lack of language knowledge
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the world
ENTER
GOOGLE IN CHINA
Sept.: Entering Chinese market (24 million web pages in Chinese)
�Exit OR server located in China� Market share: <30%; Baidu: 46%
2003: #1 in search engine market� Share: 34.8%; Baidu 2.5% End 2009: Google was faced
with a cyber attack
Jan.: No censoring of Google‘s search resultsanymore
Mid 2005: Ownserver but censoredresults
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Aug. 2002: Redirectionto local search whentyping www.google.com Nov. 2004: Blocking
of Google News �forced to switch toChinese version
2000 2005 2010Jun. 2006: google.cn was blocked
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Sept. 2002: Set up of filtering system �
blocked access to Google
Jun. 2009: -Remove `suggest` feature from google.cn- google.com + gmail were blocked- Research results only from within China
Sept. 2004: Start of Google News
2008: Baidu had problems �try to regain market share
MAIN ISSUES
Stay
RevenuesPhilosophy
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GovernmentCompetition
� Making information available and accessible� Making information universal
GOOGLE‘S PHILOSOPHY
Strategy for China
� Providing censored results was better than not providing any detail� Providing more information for the Chinese and be a more effective service � It will be better for Chinese web users, because ultimately they would get more
information, though not quite all of it- Sergey Brin, founder of Google
MAIN ISSUES
Stay
RevenuesPhilosophy
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GovernmentCompetition
REVENUES AND MARKET SHARE - CHINA
64
123
212
332
436
600
0
100
200
300
400
500
600
700
- Revenues from China were around 2% of Google's total global revenues- Revenues increased significantly from 2004 to 2010 (estimated)
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0%
10%20%
30%40%50%
60%70%80%
90%100%
2003 2005 2006/ Q4 2007 2008 2009/ Q1
Others
Baidu
02002 2004 2006 2008 2010 2012
- Market share started to drop in 2004 and 2005 from 34.8% (2003)
- It lost its lead position in 2005 while Baidu became the top search engine
- Market share increased gradually from 2006 to 2009
MAIN ISSUES
Stay
RevenuesPhilosophy
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GovernmentCompetition
THE MAIN COMPETITOR
• Chinese search engine (2000)
• Amazing market growth– 2003: 2.5% market share– 2005: 46% market share
• Extensive advertisement
• Works with the government
• Online music service
• Mainly students
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MAIN ISSUES
Stay
RevenuesPhilosophy
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GovernmentCompetition
CHINESE GOVERNMENT
Second layer control- Prevent some websites from entering, e.g. facebook, youtube-Block certain portions of websites, e.g. popular US news
First layer control- Internet police: 50,000 people (2007) - Monitor the Internet usage- Using filtering system
- Through emails, websites and blogs, discussion forum
Google‘s Case
• 2002: New filtering system that makes Google.com slow and unrealiable• 2009:
• Threaten Google to remove ‘suggest feature`• Accuse Google of spreading obscenecontent
• 2004: Block Google News in English• Google was unreachable about 10% of the time• 2009:
• Stop Google's blog• Block google.com and gmail for severalhours
MAIN ISSUES
Stay
RevenuesPhilosophy
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GovernmentCompetition
THE SITUATION OF GOOGLE IN 2005
• Google faced a lot of blocking actions by the Chinese government since its entry in 2000 with google.com
Exit StayOR
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- Continuous blocking of information by the Chinese government is againstGoogle‘s philosophy- Significant loss of marketshare
- Following its mission tospread as much informationto everyone as possible- Do not lose China because itis an important market- Revenues
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THE SITUATION OF GOOGLE IN 2005
• Google faced a lot of blocking actions by the Chinese government since its entry in 2000 with google.com
exit stayORFrom 2005, Google had its own server, a representativeoffice and R&D Center in China and decided to censor the
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-Continous blocking of information by the Chinese government is againstGoogle‘s philosophy- significant lost of marketshare
- following its mission tospread as most as informationto everyone- do not lose China asimportant market- revenues
office and R&D Center in China and decided to censor theresearch results by itself� www.google.cn
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THE SITUATION OF GOOGLE IN 2010
• Google still faced blocking actions by the Chinese government despite its censoring of the search resultson google.cn
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Exit StayOR
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EXIT OR NOT?
Yes
Exit Completely
Withdraw google.cnbut keep engineers and
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Exit China?
No
but keep engineers and programmers in China
CRITERIA
RevenuesPhilosophy
1 2
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GovernmentCompetition
34
ADVANTAGES FOR GOOGLE
Stay
Philosophy:•Make information accessible•Become the best search engine
Partly exit Exit
Philosophy:•Uphold reputation
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Government:•Provide transparency to users
Competition:•Keep market share
Government:•Minimum interference
Revenues: •Increasing globally
Competition:•Close presence to Chinese Market
DISADVANTAGES FOR GOOGLE
Stay
Philosophy:• Loss of reputation �Users’ perception of Google as unstable•Adhere to Chinese standards
Partly exit Exit
Philosophy:•Less information provided!
Revenues: •Loss of Revenue
Philosophy:•Less information provided!
Revenues: •Loss of revenue
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Government:•Continuous censorship
standards •Loss of Revenue•Loss of jobs•Loss of future growth•Loss of current investment
Competition:•Loss of Chinese market share •Loss of future growth•Best search engine?
•Loss of revenue•Loss of jobs•Loss of future growth•Loss of current investment
Competition:•Loss of Chinese market share•Loss of future growth•Best search engine?
RECOMMENDATION
StayWhat should Google do now?
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Government
Market Mission
Establish good relationship with the Chinese government- Adapt to the specific condition in China: culture, value, government policy, state law
Effectiveness
RECOMMENDATION – HOW TO STAY
Partners
Quality
Continue to build local strategic cooperation partnerships- Mobile search service by working with China mobile - Cooperate with Sina and Tencent for alliance
Make integrated and high quality search engine- Music, books, pictures, video, news- Google map, gmail, translation, photo, schedule software- High quality advertising service
China - Exit or Stay
We made the decision to stay in the market because we believe in making information
available and accessible
Google in China – main events
2000 (Entrance) 2005 (Stay??) 2010 (Stay??)
Chinese Government – control
TO SUM UP
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Censored results
Baidu – 2009 largest search engine in China
Market share 2.5% � ≈ 60%
Market and Revenues – growth
Revenues from China are growing with the number of users
Stay – Final decision
Cooperations + Service
