Google in china case study analysis answers

Assignment 2: Case Analysis—Google In China

Governments play an important role in business decisions and business operations. The case study in this assignment provides a fascinating view of the business environment in China.Read the following case study:

Google in China: Finding Creative Solutions to Cultural Differences
Analyze the case. In a 3 page case analysis, address the following questions:

What is the basic situation described in the case? Summarize the Google experience.
There are many cultural differences between the US and China, one highlighted in the paper is on censorship. Discuss the meaning of the Pew Internet & American Life Project about internet censorship in China.
What do you see as potential issues with the Chinese policy of censorship when it comes to access of information?
Hofstede’s cultural dimensions model present an interesting way to evaluate the cultural differences between societies. Using the information in the article and Chapter 2 of your text discuss how use of such a tool would be of benefit to business, especially in a country such as China.
Google’s philosophy of “do no evil” seems to be greatly challenged by the Chinese policy of censorship. Present an argument either for or against Google’s chosen course of action.

As globalization continues to transform the world of business, companies that decide to expand into other countries are faced with many challenges. The markets in developing nations hold great promise; however, any com- pany that wishes to operate in them must often overcome both relatively minor problems, such as dealing with cul- tural differences, as well as larger problems, such as serious human rights abuses. Google, the world’s largest internet company, has to contend with both cultural differences and human rights abuses while operating in China. An analysis of Google’s actions in China shows how creative solutions can be found to complex ethical problems.

The challenges Google has faced in China primarily stem from the Chinese government’s controversial policy of censoring the internet. Censorship is currently enacted through what is officially known as the Golden Shield Project; however, in the West it is more often referred to by its unofficial nickname, the Great Firewall of China. This policy was enacted in 1998 and has drawn much criticism from Western governments and human rights organizations like Amnesty International and Reporters Without Borders (Clinton 2010; Amnesty International 2006; Reporters Without Borders 2009). Despite inter- national pressure, the Chinese government adamantly supports the censorship, and in early 2010 it released a white paper addressing internet freedoms in China. In the white paper, the government spelled out its official policy, which is to block:

[Anything] against the cardinal principles set forth in the Constitution; endangering state secu- rity, divulging state secrets, subverting state power and jeopardizing national unification; damaging state honor and interests; instigating ethnic hatred or discrimination and jeopardizing ethnic unity; jeopardizing state religious policy, propagating heretical or superstitious ideas; spreading rumors, disrupting social order and stability; disseminat-

ing obscenity, pornography, gambling, violence, brutality and terror or abetting crime; humiliat- ing or slandering others, trespassing on the lawful rights and interests of others; and other contents forbidden by laws and administrative regulations. (Information Office of the State Council 2010)

This policy is clearly broad enough that it gives China’s Ministry of Public Security the power to block anything it wants.

The Chinese government often uses this power to quench criticism and suppress information about human rights abuses (Amnesty International 2006). In order to enforce the policy, China employs tens of thousands of people to monitor forums, chat rooms, and bulletin boards. It also filters all internet traffic coming into China from other countries and requires all internet companies in China to self-censor their content (Elgin and Einhorn 2006). Despite all of this, the Chinese government insists that “Chinese citizens fully enjoy freedom of speech on the internet” (Information Office of the State Council 2010). The censorship has certainly not affected demand for the internet among China’s citizens; throughout the last decade the number of internet users in China has grown rapidly. In 2008 China became the country with the most internet users in the world, and by 2010 it had over 420 million users (China Internet Network Infor- mation Center 2010).

Given this huge and rapidly growing market, operating in China is of immense strategic importance for internet companies like Google. However, Google is also known for its strong moral culture and corporate mantra of “Don’t be evil.” Herein lies the ethical dilemma for Google: it needs to operate within China, but in order to do so it must obey the self-censorship policy that runs counter to its core values. In 2000 Google made its first move in the Chinese market by launching a Chinese version of

Google in China: Finding Creative Solutions to Cultural Differences

C h r i S t o p h e r e . e b y S h i p p e n S b u r g u n i v e r S i t y

Christopher E. Eby is a senior Computer Science major, Business minor, and member of the Academic Honors program at Shippensburg University. He currently works as an Applications Developer Intern at Global Data Consultants.

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google.com (Schrage 2006). At that time the Chinese market was still relatively small; although google.com was operated outside the country, it was still able to meet its Chinese users’ needs. In 2004 Google was criticized for the Chinese version of its Google News service. Google was omitting some sources that would be blocked by the Chinese internet filter from appearing on the Google News page within China (The Google Team 2004). Google responded that there was nothing they could do about these sites being blocked in China: if it included these sources, its entire Google News site might end up blocked. By 2005 the potential of the Chinese market was obvious, so Google opened a research and development (R&D) office in China (Google Inc. 2005). Its objectives were twofold: one was to recruit from the huge pool of computer science graduates in China, and the second was to build a team to develop products for the Chinese market (K. Lee 2007).

In 2006 Google’s problems started when the company began receiving reports from its Chinese users about problems accessing and using google.com (McLaughlin 2006). The users reported that google.com was constantly slow, sometimes painfully slow, result pages had broken links, and the site was completely unavailable about 10% of the time. Google News was completely unavailable and Google Image Search only worked about half the time. Google determined that this was caused by ISP filtering. As a result of this bad user experience, it was rapidly los- ing market share to the Chinese search engine Baidu.com. Google decided that the only way to provide a good user experience in China was to launch google.cn. Google.cn would be hosted in China and subject to Chinese censor- ship laws, but it would provide a fast and consistent user experience to the Chinese. Google admitted that coop- eration with the Chinese government on censorship went against its corporate values, but it justified the decision by pointing out that google.com would remain available and uncensored in China, that Google would alert users when a query was censored, and that providing some informa- tion was more consistent with its mission to organize the world’s information than providing no information at all. It also expressed hope that by continuing to be a major player in China it would be able to exert pressure to lessen censorship.

Google’s justification was not enough for critics who declared that Google was assisting the Chinese govern- ment in violating the fundamental human right of free speech (Reporters Without Borders 2006). Later in 2006, Google, like other major internet companies operating in the Chinese market, including Yahoo! and Microsoft, was called to a hearing before the Congress where their cooperation with China was compared to IBM’s coopera- tion with Nazi Germany (U.S. Congress 2006). Google defended its position in the U.S. government and in 2009 had to defend its position to the Chinese government. Leaked U.S. diplomatic cables revealed that the Chi- nese government pressured Google to remove the link to google.com from google.cn after a member of China’s Politburo Standing Committee discovered that google.com

was uncensored and searching for his name brought up results critical of him (Glanz and Markoff 2010). Google’s staunch refusal to remove the link may have contributed to what occurred in early 2010.

In January of 2010 Google went public with the news that its servers had been hacked by a highly sophisti- cated attack originating in China (Drummond, “A New Approach to China” 2010). Leaked U.S. diplomatic cables revealed that the attack was coordinated by the Chinese government (Glanz and Markoff 2010). Google did not publicly accuse the Chinese government, but it did reveal that the objective of the attack was to access the e-mail accounts of Chinese human rights activists. Its investiga- tion revealed that at least twenty other large companies had been targeted in the same attack and that e-mail accounts of other human rights activists that were compromised by means other than direct attack had been routinely accessed by third parties. As a result of this attack, Google’s execu- tives made the decision to stop censoring their searches on google.cn. They declared their intent to work with the Chinese government to reach a compromise; however, they recognized that violating Chinese law might require closing down google.cn or even their offices in China.

For several months Google remained in negotiations with the Chinese government, and on March 30, 2010 it announced that it would begin redirecting searches on google.cn to their Hong Kong-based site, google.com.hk (Drummond, “A New Approach to China: An Update” 2010). Although Hong Kong is part of China, it is not subject to the same censorship laws as mainland China. The Chinese government did not agree to this arrange- ment, and so a few days later Google changed from redi- recting search results to providing a link on google.cn to google.com.hk. Google continued to offer other services, like Google Translate, Google Music Search, and Google Product Search from google.cn. The Chinese government apparently found this acceptable, and on July 9, 2010, Google announced that its Internet Content Provider (ICP) license in China had been renewed (Drummond, “An Update on China” 2010).

Although Google continues to operate google.cn and its R&D facilities in China, its conflict with the Chinese government has had a price. Today Google has only about 25% of the search market in China, compared to the 73% owned by its main competitor Baidu.com (M. Lee 2010). Google’s CEO Eric Schmidt summarized the experience in China in an interview with Charlie Rose:

Rose: What did you learn from Google’s expe- rience in China?

Schmidt: The thing you learn about China is… Chinese citizens are very clever, very creative, and the Chinese government is very, very powerful.

Rose: So you didn’t change government censor- ship policies by being there?

Schmidt: The evidence is clear that our entry did not alter censorship policies whatsoever. Negotiating, Charlie, doesn’t work with the Chi- nese. (Rose 2010, 39)

Christopher E. Eby: Google in China 5 9

Culture and Censorship While Google and most Westerners roundly condemn

the Chinese government’s censorship as a violation of human rights and a tool to suppress debate and maintain power, the Chinese government strongly defends its posi- tion and it is supported by most Chinese. A series of sur- veys by the Pew Internet & American Life Project about internet use in China from 2000 to 2007 found that “over 80% of respondents say they think the internet should be managed or controlled, and in 2007, almost 85% say they think the government should be responsible for doing it” (Fallows 2008). Although there is a vocal minority, includ- ing Nobel laureate Liu Xiaobo, that opposes the censor- ship policy, the apparent popularity of the policy among the majority suggests that there may be some aspects of Chinese culture that makes them view censorship favor- ably. As in the case of all cross-cultural conflicts, care must be taken to avoid the bias of the self-reference criterion, which is the unconscious reference to one’s own cultural values ( J. A. Lee 1966).

Geert Hofstede’s cultural dimensions offer an objec- tive method of comparing cultural differences in regard to censorship (Hofstede n.d.). Hofstede’s individualism scale measures how much a culture focuses on individuals and their accomplishments as opposed to an emphasis on group membership and loyalty to one’s in-group. All Asian countries rank below average on this scale, indicating a collectivist society, and the Chinese culture ranks lower than any of its neighbors. Chinese culture expresses this through the concept of guanxi, a term that describes a complex network of influence which creates a strong aver- sion to conflict and an emphasis on harmony between all members of Chinese society (Robertson, et al. 2008). The government justifies the censorship of criticism by appeal- ing to the need to maintain harmony between themselves and Chinese citizens.

A second cultural dimension that could affect the Chinese views on censorship is power distance. Power distance measures the level of acceptance of unequal dis- tribution of power, and the Chinese culture has a much higher than average power distance (Hofstede n.d.). This means that in China power is concentrated in the hands of a small group of authorities, and questioning the author- ity’s decisions is discouraged. This reflects the traditional Confucian values that prescribe a strict social hierarchy and emphasize complete fealty to those in authority that Chinese companies are apt to draw on when dealing with ethical issues (Lu 2009). The combination of collectivism and deference to authority probably contributes greatly to Chinese society’s tolerance of internet censorship. As Robin Li, CEO of Baidu.com, said, “If the law clearly prohibits certain types of information, be it porn, or anti- government information, then I’m sure there’s a reason for it” (Stone and Einhorn 2010, 63).

One final aspect of Chinese culture that is relevant to Google’s problems in China is a tradition of Chinese ethnocentrism (De Mente 1993). For thousands of years China had the most advanced culture of any of its neigh-

bors, and at times the world. This led to deeply ingrained views that Chinese culture is superior to all others, that non-Chinese are barbarians, and that China has little to no need to interact with the rest of the world. Historically, this led to China being closed, sometimes completely, to trade for centuries. The industrial revolution has forced China to open up to the world; however, the ethnocen- trism remains. Many Chinese strongly resent Western calls for reform and international pressure when it comes to issues like Tibetan or Taiwanese independence. A state- sponsored newspaper’s characterization of United States Secretary of State Hillary Clinton’s call for freedom of information on the internet as an attempt at “information imperialism” is indicative of the Chinese government’s attitude (BBC News 2010). This pressure has created a situation where the Chinese government would lose face if it were to loosen restrictions on censorship and give way to the demands of foreigners. Thus, Chinese culture has created the conditions for internet censorship to remain entrenched in the Chinese government’s policy for the foreseeable future.

As an American company, Google approaches the issues for censorship from an entirely different cultural perspective. According to Hofstede, America is the most individualistic country in the world. Individualist cultures do not shy away from conflict as do collectivist cultures. Therefore, Google has focused on the problem of cen- sorship as a violation of the individual right of Chinese citizens to information. America also has a low power distance, signifying a willingness to challenge authority (Hofstede n.d.). Unlike the Chinese, Americans do not focus on harmony between citizens and government. In fact, Americans regard criticism of the government as a vital duty of its citizens for the maintenance of a healthy democracy. As inheritors of a philosophical tradition that focuses on the “inalienable rights of life, liberty, and the pursuit of happiness,” Americans are much more likely to frame the issue of censorship as a violation of human rights. What a Chinese might consider a small sacrifice in the interest of peace and harmony, an American would see as a violation of the fundamental right to free speech. Combining these factors leads most Americans to the conclusion that since human rights are being violated by the Chinese government, the government is wrong and should be opposed until the situation is rectified. The disparate cultural attitudes summarized in Table 1 make it unlikely that any change in the underlying conflict over censorship will happen soon. Therefore, since Google is no longer willing to censor its searches, its options for providing search to mainland China are limited.

ethics of google’s new solution Even though cultural differences are important, the

situation involves a violation of a fundamental human right, and so its ethical implications must also be consid- ered. Although cultural factors make American compa- nies like Google focus more on the fact that the Chinese government’s censorship is a violation of human rights, the Chinese government cannot use ethical relativism to

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justify its actions (Donaldson and Dunfee 1994). Nei- ther should Google appeal to the fact that censorship is required by Chinese law to justify its cooperation with the government (Dann and Haddow 2008). However, in some cases it may be appropriate for business to make moral compromises when cultural values conflict (Bren- kert 2009). Therefore, it is useful to apply existing ethical decision-making models that combine both the cultural and ethical factors to evaluate whether Google is acting ethically with its current solution.

One model, proposed by Buller, Kohls, & Anderson (1997), gives a decision tree based on the three critical questions listed in Table 2. In answer to these questions Google’s situation involves human rights violations and, therefore, is high in moral significance. Google’s failed attempts to negotiate the Chinese government into allow- ing uncensored search shows that it does not have much influence over the situation’s outcome. Finally, Google’s decision to stop censoring search and the impending expiration of its ICP license led to urgency in resolving

the conflict. Buller et al.’s model suggests that an avoid- ance strategy, where Google ignores the conflict, is the best. Therefore, for Google to move its Chinese search to google.com.hk to avoid the censorship policy is an ethical action according to the model.

Another model that can be applied is the HKH model devised by Hamilton, Knouse, and Hill (2009). This model consists of a decision tree with six questions (see Table 2). The HKH model was originally applied to Google’s launch of google.cn in 2006, and it recommended that Google not do business in China. However, Hamilton et al noted that if, in the phrasing of the “questionable practice,” the definition of censorship was limited to “limiting searches without the customer’s knowledge,” then Google’s actions could be justified by the model (152). In 2010 the situ- ation remained largely the same except for the hacking incident. Google’s statement that, “These attacks and the surveillance they have uncovered—combined with the attempts over the past year to further limit free speech on the web—have led us to conclude that we should review

Table 1 - Culture and Censorship

China United States of America

Collectivist – Rights of group most important

High Power Distance – Unlikely to challenge authority

Views censorship conflict as a cultural difference

Individualist – Rights of individuals most important

Low Power Distance – Likely to challenge authority

Views censorship conflict as a violation of human rights

Table 2 – Questions in ethical Decision making models

Buller et al. Model HKH Model

1. Is this situation high in moral significance?

2. Do I have a high level of influence over the outcome of the situation?

3. Is there a high level of urgency to resolve the situation?

1. What is the questionable practice (QP)?

2. Does the QP violate laws that are enforced?

3. Does the QP simply reflect a cultural difference or is it a potential ethics problem?

4. Does the QP violate the firm’s core values or ethics code, an industry-wide code, or an international convention?

5. Does the firm have leverage to do business the firm’s way?

6. Will doing business the firm’s way improve practice in the host’s market?

Christopher E. Eby: Google in China 6 1

the feasibility of our business operations in China,” shows that they decided to expand the definition of censorship in a way that made them go along with the original rec- ommendation of the HKH model (Drummond, “A New Approach to China” 2010). Thus, according to both mod- els Google’s current solution to the cultural conflict over censorship is ethical. However, is it a good business move

Analysis One view of Google’s effectual withdrawal from the

search market in China, which essentially takes them back to where they started from in 2006, is that it is a defeat for Google. This view certainly has some merit; it is highly unlikely that Google would be essentially with- drawing from the Chinese search market if it had 80% of the market instead of less than 30%. Google’s main competitor in China, Baidu.com, has shown few signs of slipping from its dominant position, and so Google’s withdrawal can be seen as a savvy business move which allows them to exit a market where they were losing to the competition while claiming to be taking the moral high ground. However, this view is contradicted by Google’s claims that it has entered China for the long term. In 2007 Eric Schmidt said that “The Chinese have 5,000 years of history. Google has 5,000 years of patience in China” (K. Lee 2007). This view also ignores some of the positive aspects of the current situation.

For Google, one of the most important positive out- comes of the compromise is that it resolved the conflict with the Chinese government, at least temporarily. One of the most important rules for operating in China is to “understand the market, but work with the state” (Paine, “The China Rules” 2010, 2). Google’s stance against the censorship policy puts the Chinese government in a hard place; on one hand, Google is a large corporation that can bring large amounts of capital and technology into the country, but on the other hand it does not want to let a Western company dictate its domestic policy. The current solution allows the Chinese government to save face by permitting Google to continue to operate google.cn and not censor searches, while letting the government maintain that Google does not influence its decisions.

Even though Google has withdrawn from the Chi- nese search market, its offices in China are still open and it can still host non-search services on google.cn. If it were to host service on an external site, they would have to run through the Chinese filters and might suffer the same slowness problems that were crippling google.com in 2006. Furthermore, it still has access to the extremely important mobile market and can still employ talented Chinese computer science graduates. Thus, Google can concede the search market to Baidu while still maintaining an important presence in the Chinese market.

Perhaps most importantly, the current solution allows Google to maintain the integrity of its core values. Google’s Vice President of Global Communications and Public Affairs admitted that self-censorship “runs counter to Google’s most basic values and commitments as a company”

(Schrage 2006). This dissonance between Google’s stated values and its actions is dangerous since self-governance according to chosen standards is essential to maintaining a strong ethical culture (Paine 1994). By no longer cen- soring its searches from China, Google’s core values and its actions have been realigned.

Perhaps the most important lesson that can be learned from Google’s experiences in China is that cultural con- flicts over ethical issues do not have to result in mutually exclusive situations. While it may appear this way, Google is not faced with a choice of operate in China and “be evil” or don’t operate in China and uphold the corporation’s ethical culture. Although Google’s current solution is not ideal, it is a creative compromise that allows it to maintain a significant presence in China while also upholding its ethical culture. When faced with similar cultural conflicts, other multinational organizations would do well to also seek creative compromises like the one that Google has found.

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