Google in China’s World
Lauri Mak
Ottawa University
October 19, 2012

Abstract
This paper will discuss Google, one of the largest internet search engines decision to enter the China internet market and the deviation against their very own corporate ethics policies. It will identify the key stakeholders involved and will look at the primary non-marketing issues and analysis each issue.

Introduction
In 1996 Larry Page and Sergey Brin began developing a search engine called BackRub while enrolled at Stanford University. In 1998 the company was renamed Google Incorporated and launched their search engine from a garage in Santa Margarita California. First held as a private company, they went public in August of 2004. Google grew extremely quickly by taking their single language website and adding different products including but not limited to the development of various forms of advertising and web applications from a variety of different tasks as found on the company website http://Google.com. Google.com quickly grew to be the most popular search engine in the world. “Their technology used an algorithm to find possible Web pages with search criteria provided by the user. Google’s PageRanktm technology measures the importance of different Web pages by solving an equation with more than 500 million variables and 2 billion terms.” (Martin, 2011) Google’s decision to enter the Chinese market was based on greed and increased market share rather than their company’s highly publicized philosophies. In Google’s 2004 Founders IPO letter, Larry Paige and Sergey Brin include the message “Don't be evil. We believe strongly that in the long term, we will be better served-as shareholders and in all other ways-by a company that does good things for the world even if we forgo some short term gains. This is an important aspect of our culture and is broadly shared within the company.” (Brin & Page, 2004) Larry and Sergey also declare in this letter that they “aspire to make Google an institution that makes the world a better place. In pursuing this goal, we will always be mindful of our responsibilities to our shareholders, employees, customers and business partners. With our products, Google connects people and information all around the world for free.” (Brin & Page, 2004) Google first entered the Chinese market by creating a Chinese version of Google that was based in the United States. By being based in the US, Google was not subject to the Chinese strict censorship rules for companies based within China. Google’s attempt was minimal at best; China’s great firewall would normally block Chinese citizens from the site or make the process so slow by restricting the content of the conducted searches. Elliot Schage, the VP of Google’s Global Communications confirms that the Chinese government blocked the website from all Chinese universities and the download times were seven times slower than Baidu, the leading Chinese search engine. (Martin, 2011) In January 2006 Google launched Google.cn in China to attempt to gain increased market share in China. Human Rights activists logged on immediately to see how the censorship would work. For example, the Chinese government banned Falun Gong for the spiritual movement known as Falun Dafa, which is based on ancient Chinese meditation and exercise for the mind and body. The government banned these sites a few months after a peaceful protest in 1999 Beijing, which was the largest gathering since the massacre at Tiananmen Square in 1989. If one typed in a search for Falun Gong the only websites that were available to citizens were Anti Falun websites. |
China with a population of over 1 billion people has become more and more attractive to U.S. companies. China’s traditional Communist model of socialism is well outside the model of any US company and most other societies worldwide. There have been many events that China is been found in violations of many human rights. Such actions include torture and mistreatment of prisoners, restrictions of freedom of speech, religion, worker rights and coercive birth limitations. China attempted to move away from the Communist model in 2006 declaring that they were firmly committed to economic reform and opening to the outside world by privatization. (China, 2011) In 2001, China joined the World Trade Organization (WTO) agreeing to lower tariffs and abolish market impediments. The membership in the WTO also opened the door to China hosting the 2008 summer Olympic Games. China’s market reform improved the lives of many Chinese people, and gave them more exposure to the world and increased personal freedom. However, China remained very much entrenched in their totalitarian regime. Even though they opened the market to reform they still maintained a harsh environment of political and religious regulations. All US companies that entered their country were restricted by many of these regulations including the restriction of citizen’s access to what the government deemed restricted information.
The internet is normally an unrestricted and uncensored by most countries and allows many people to search for information without censorship. China does not believe in the same philosophy. Officials immediately developed rules that regulated conduct and content on the internet. This was possible only due to the limited optic cables in China. The government literally set up gatekeepers to monitor all information coming into and out of China. China is known to have the Great Firewall of China which is one of the world’s largest and most efficient firewalls.
Numerous Human Rights activists worldwide maintain a litany of grievances against the Chinese government. Controversial human rights in China include policies such a capital punishment, one child policy and the political status of Tibet. In February 2006 The House of Representatives convened to discuss China and the internet. Rep. Tom Lantos, co-chairmen of the Congressional Human Rights Caucus specifically asked the executives from Google, Yahoo, MicroSoft and Cisco if they were ashamed about their decisions to proceed into the China market and the willingness to cooperate with the Chinese Communist Party.(McCullagh, 2006) All executives said it was a difficult company decision to proceed into the Chinese market and be forced to compliance with China’s restrictions but would continue to monitor any changes in the Chinese policy. Were these companies motived strictly by profit, certainly the censorship of China doesn’t specifically allow Google to meet several of their founding philosophies.
The key stakeholders are listed below however; several organizations have an interest in this project but are not directly affected by the outcome. The U.S. Government and the Chinese government technically have no benefit in the success or failure of this endeavor nor do the human rights activists.
The below chart a list of stakeholders and the positive or negative impact Google’s decision to enter China will have. Primary Stakeholders | Positively Affected | Negatively Affected | Google Executives & Shareholders | The Chinese citizens | | Google's image for social responsibility | | Baidu - China's #1 search engine | | Yahoo's market share & profit loss to Google | Secondary Stakeholders | Positively Affected | Negatively Affected | Chinese Companies advertising with Google | Google's employees hired in China - if they fail | Google's employees hired in China | | | | | | Nonmarket Issues
The purpose of this paper is to analyze the nonmarket issues facing Google when they decided to open and operate their U.S. verse of Google.com to China via Google.cn. It will analyze the social, legal, cultural and political influences that Google encountered during their strategic planning to operate from within China and go against their founding principles. There are two primary issues related to this case, Human Rights: Censorship and the Human Rights: Freedom of Speech and Privacy. Interest groups involved a mainly Human Rights Activist Groups and the government involvement is primarily the Chinese government but the U.S. government was also involved. Human Rights - Censorship
Google began to offer a Chinese-language version of Google.com in 2000 and by maintain their server outside of China they were attempting to avoid the strict communistic censorship of the Chinese government. Chinese citizens often found that the Chinese version of Google.com was unavailable or extremely slow which would deter users from using the website. Google was losing its share of the market and decided that to achieve success in the Chinese market they would need to operate from within China. Google was faced with public criticism from many human rights groups for making the discussion to launch their website from within China.
There were two stages of this process. During the first phase, Google took a true utilitarian approach. Classical utilitarianism may be classified as a hedonistic act. This means that classical utilitarianism is a theory in which the right actions are defined as those bringing about as consequences the greatest net happiness. New World Encyclopedia breaks down classic utilitarianism into two components: a theory of value (or the “good”), and a theory of right action. “A theory of value is meant to specify what things are valuable or good: These are the things, which we would like to have promoted or increased in the world. A theory of right action is meant to specify which actions are right and wrong, or in other words, provide action-guiding rules for moral agents.” (Utilitarism, 2011) Hedonism as a theory of value and is meant to dictate what is good. Assessing consequences of an action and what happiness is brought about from that action. In other words, what actions will bring the greatest amount of happiness to the greatest number of people. One could believe that when Google launched Google.cn a website for China it stemmed from the utilitarian approach. By choosing to not have nexus in China, Google was attempting to follow this theory. They wanted to allow the citizens of China to have access to any information available on the internet without the restrictions imposed by the communistic Chinese government. Utilitarianism theory is summed up to answer one question; what ought a man do for the greatest amount of happiness? The answer: He ought to act so as to produce the best consequences possible.
Stage two: Once Google realized that the Chinese government was blocking their website and on occasion completely blocking access all together, is when they had to make the ethical decision that stirred up controversy and shifted the effect on the primary stakeholders. When Google decided to have physical presence in China they caved into the restrictions of the Chinese government and their communistic policies. When Google made this decision, they appeared to only be concerned about gaining market share and earning more money for the stockholders. Not only did this go against their principles, it meant they caved into the pressure of a communist government, which was not the way to make the world a better place. The Chinese citizens would not have free access to unrestricted information. Google would now be restricted on what information the Chinese government deemed acceptable. Based on the utilitarian theory this was not the greatest way to provide the greatest good to all people in fact, it is the opposite. By restricting what information the Chinese citizens could view, Google was not operating its company on its founding principles specifically their “Don’t be Evil” statement in their 2004 IPO letter.(Google.com, 2012) The meaning of “Don’t be Evil” could be viewed with a variety of meanings. At best it is a vague or weak statement for a company’s guiding principle. One could say that giving into the communist government is giving into evil depending upon your views of quality of life. People should have access to information on the website to make their own decision about a topic. Western society strongly believes in human rights and the ability to have one’s own opinion about any topic. For example the Chinese block websites with any links or related to articles about the 1989 Tiananmen Square pro-democracy movement in which the government declared martial law and killed hundreds of protestors. By prohibiting access to this information the Chinese government again is restricting the human rights of its citizens. They do not want the citizens to have knowledge of a democratic system because it goes against the communistic views of the Chinese government; they have taken away the fundamental right of humans to form their own opinion. Human Rights – Privacy & Freedom of Speech
According to Baron, “internet companies that operated within China where not only subject to censorship but they also could be required to turn over emails to the Chinese government.” (Baron, 2010) As an example, Yahoo! provided email communications to the government that led to the arrest and imprisonment of journalist Shi Tao. Human rights provide everyone the right to privacy and by allowing the Chinese government access to private information was a violation of their rights. While the Chinese government claim that no Chinese citizens have been arrested simply because they posted something on the internet, Reporters without Borders claimed of 62 individuals were in prison for posting articles that criticized authority. (Reporters, 2012) Google decided to avoid the possibility of turning over its users by not providing Chinese citizens the ability add content to their site. They did not offer email or allow the ability to make blogs since user generated material was subject to governmental seizure. This allowed Google the ability to protect the individuals and avoid arrest. While this proactive step to not allow users to email or posting blog, Google would still become subject to the restrictions of the Chinese government on what topics were going to be made available to the Chinese citizens and Google was not allowing freedom of speech by blocking their content features.
In December of 2009, Google experienced a cyber-attack on its operations. They determined that the attack was based from inside China and their security and well as many other business security systems were breached. Google found evidence that someone in China was attempting to gain access to human rights activist’s email accounts to censor information. These attacks and the surveillance they have uncovered – combine with the attempts over the past several years to further limit free speech on the web. (Skynews, 2010) As a result of these attacks Google began to review their position in China. They decided that they no longer wanted to participate with the censorship or future attacks on their system. In March 2010, this issue’s lifecycle came an end when Google decided to pull the plug on Google.cn and redirected China citizens to the uncensored search engine through Hong Kong but later found that this site also being blocked by the Chinese firewall. Beijing responded by stating the Google violated a written agreement and proceeded to launch a campaign against Google stating that they were attempted to export western culture into China. It would have been best for China to let Google’s departure fad into history, by launching their campaign they brought further attention to their internet censorship.
Google made the right move to pull out of China. They followed threw and went back to their founding principles and ethics. From a business standpoint, this demonstrates that big companies don’t always need to make more money and there are ethical people within the company who made the determination that it was the best course of action for the company’s image and security to discontinue the relationship. The Chinese citizens unfortunately again lost in their battle to expand their human rights. Google took the moral and ethical road to terminate their agreement and not just focus on the profits for the shareholders. What we have learned is that not all big companies strive only for profits, some actually do the right thing. More companies need to continue to follow Google’s lead when it comes to standing up for what is right.

References
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