HBS case: Google in China

The case:

Google in China (A)

Introduction –

Google, the internet giant, made a decision in 2006 to censor search results in China which raised serious questions on whether it was honest in its philosophy of “Do no evil”.

IT Issues –

Google established its local presence in China to provide better experience to Chinese users. Previously, Google users struggled with a not so good service such as the server being down 10% of the time or when users can reach it, it was slow. Moreover, the news service was never available and the Google Images was accessible only half the time. To launch Google.cn and to have the Chinese government’s approval and acceptance, the company censored many search terms for instance “Falung Gong”. This created negative image and its stock fell. The company defended its position by pointing out that it served the greater advantage to a larger number of people. However, the top management was disturbed by growing negative publicity of the company and there was a growing realization whether their decision was against their motto of “Do no evil”.

Business Model and Financial Position of Firm –

Google used a pay-per-click method of earning advertising revenue through AdWords which placed ads depending upon the relevance determined by user interaction. In addition, Google provided a system for external sites to use Adsense to link its ads and share the revenue. In 2005, the net income per share was $5.31 (basic).

Alignment –

The issue of search censorship in China was completely against its management philosophy of “do no evil”. Certainly, they had the technology and the operational process of doing so but however it was against their core value. Definitely, their Chinese operation was misaligned with respect to its strategy (Management-Organizational-Technological).

Summary–

When Google established its local presence in China by basically muzzling the free speech, it created lots of negative image elsewhere. The top management contemplated whether it was the right move. In Jan 10, 2010, Google’s top executives decided to end Google’s support for Chinese censorship.