GOOGLE EXIT FROM CHINA

Case study:-

STUDIED BY:-
ANIKET GAWANDAR – 31
AKSHAYA GAWDE- 32
NIKET GHARAT- 33
CHAITNYA GOTEKAR- 34
NITU GUPTA-35

IN our management classes, we used to listen to the statements from our Professors that if you
want to be successful in this competitive arena then you should mould yourself according to the
changing needs of the customers. These customers may range from an individual, a group, a state or
even a country. Earlier we used to believe these statements by nodding our heads in consent without
any counter-questioning. But now after hearing the case of Google's exit from China, one definite
question that comes to mind is how much a company can change? What a company should change in a
different country; its products, language, features, designs or the most important its Moral values?
Should the company continue to change just for the profits that it can earn from a market as big as china
(384 million net users) to the extent that the confidentiality of its clients is at a stake? This case explains
the censorship process enforced in China and the extent to which an authoritative government like
China can go to take advantage of this surveillance? This case again calls for a strong need of PESTLE
analysis especially the Legal component of it. It also tells us how submission to a legal censorship by a
company can put the confidentiality of its clients at stake. Is it ethical to invade the privacy of the clients
of world renowned company by taking the name of legal censorship? Who can be benefitted if Google
exits from China? Has observant dragon engulfed the censored evil? Before answering the question, we
need to look at the Internet censorship in the People's Republic of China and journey of Google in China.
Internet censorship in China is conducted under number of laws and administrative regulations. More
than sixty Internet regulations have been made and implemented by the Chinese government. The
government not only blocks website content but also monitors the internet access of individuals. Several
government bodies are involved in reviewing and enforcing laws related to information flowing within,
into, and from China, but the most powerful monitoring body is the Communist Party’s Central
Propaganda Department (CPD), which coordinates with GAPP and SARFT to make sure that content
promotes and remains consistent with party doctrine. Google, the world’s largest internet search engine
company has been facing the Chinese bites since 2000. In 2000, the company developed the Chinese
interface for its google.com website. In 2002, the company search engine became unavailable for
Chinese users. In 2005, Google hired the ex- CEO of Microsoft Lee Kai Fu as head of Google China.
Microsoft sued Google saying that Lee will disclose the propriety information to the company. In
December, 2005 both the companies reached at the settlement. In 2006, Google rolled out google.cn,
china based search page that censors the results as per the Chinese rules. Critics viewed announcement
of Google to comply with the internet censorship laws in China as the submission to the Golden shield
Project (a censorship and surveillance project operated by the Ministry of Public Security (MPS) division
of the government of China in 1998 and implemented in 2003.). Due to this censorship, whenever
people search for prohibited Chinese keywords on a blocked list maintained by the Chinese government,
google.cn will display the “In accordance with local laws, regulations and policies, part of the search
result is not shown”. Or “Search results may not comply with the relevant laws, regulations and policy,
can not be displayed”.
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Case study:-

In August, 2008 Google launched the free music downloads to the users to better compete with
the market leader Baidu.cn. In March, 2009, China banned the Google’s YouTube. In June, 2009, Gmail,
google.com and other online services of Google became unavailable and Chinese government accused
Google of spreading obscene content over the internet. In September, 2009, Lee Kai Fu resigned from
the post and in October, 2009, many of the Chinese authors accused Google of violating the copyrights
with its digital library. Finally in January, 2010 the company said it’s no longer willing to censor the
results in the country and may pull out of the country.
A blog posted by Google explained exactly that like many other well-known organizations it faces
regular cyber attacks. In the middle of December it detected huge and deep hacks into the “corporate
infrastructure” resulting in “theft of intellectual property”. Google uncovered a “highly sophisticated
and targeted attack” designed to steal information from its Gmail service of a few human right activists
advocating for freedom of speech in China and at least 20 other large companies. Basically some very
sophisticated attackers were trying to get into Google’s code - possibly with the intention of using it to
power their own search technology. Google also revealed similar attacks on at least 20 other companies
in the financial, technology, media, and chemical industries. The issue was not at all small and attracted
the attention of Secretary of State Hilary Clinton -who issued a brief press memo on the topic to air her
“very serious concerns”.
Although Google has fixed the security issues but it has chosen to air the problems in public to
shine a spotlight on them - which is a pretty unusual move. Answering to the question why Google
decided to reveal the problem publically the chief legal officer David Drummond said, “We have taken
the unusual step of sharing information about these attacks with a broad audience not just because of
the security and human rights implications of what we have unearthed, but also because this
information goes to the heart of a much bigger global debate about freedom of speech”. But this reason
is not as unusual as the next one. Google has decided to call off its business in China after these attacks
and the surveillance that they have uncovered. That decision means Google is no longer willing to
censor Google.cn results in accordance with the strict censorship demands of China's government. The
evil corporate giant Google is saying “no more!” to a domineering governmental regime. And, it’s clear
from the tone of the piece (and particularly the loaded word “surveillance”) that it’s actually blaming the
Chinese authorities for the cyber attacks and Gmail hacks.
Google’s decision of leaving China would give a massive blow to the revenue stream of the
company as it will cost around $ 600 million of the company sales this year. China was one of the largest
Asian markets where Google was creating inroads. The company’s market share in China increased to
36% in the fourth quarter of year 2009 as compared to 31% in the third quarter. Baidu, the main
competitor and local search engine in China had 58.6% share of country’s online search market. Google
is very popular and strong player in western countries like UK, Germany and France where it claims 75%
market share, but in Asia the story is not very impressive. Company handles less than 50% searches in
Japan, 8% in Korea and 27% in Taiwan. Although in India, company has a remarkable record of having
88% market share. Asia accounts for $ 23.7 billion in annual revenue for the company. So, parting from
the biggest market by users, China is a costly affair for Google. But this bold step may enhance the
image of the company in other markets because of its moral stance against censorship.
Chinese government downplays the Google’s threat of exit by saying that this is the latest
manifestation of western imperialism - this time a private player. They can also blame company for not
having the potential to compete with the domestic player Baidu.cn. Chinese government holds its point
that there are many ways to resolve a problem but every foreign company including Google will have to
abide by Chinese laws. But a company like Google, it could hardly be a reason as it also competes with
Navor.com in South Africa but nobody is talking about that. Actually the reasons are that company is
feeling frustrated in doing business in a country whose ethos are vitally contradictory with the
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Case study:-

company’s moral values. The company is agonized about the extent to the right to control the
information by the Chinese government. The company believes that the attacks that it has faced in the
country are sponsored by the government.
Google’s exit from china would be valuable for another fast developing economy of the world
and that economy is India. India can make its position strong by demonstrating that we are different
from an economy where there is a high degree of call for the control over information. Here in India,
main focus is on transparency rather than focusing on control over information or hiding the
information. The scale of transparency in India has been stamped by the decision taken by High court in
which it has said, no one in India not even its peers on Supreme court are exempt from the needs for
transparency . This is such an example that China can’t display. This case throws an uncomfortable
spotlight on all the other companies, particularly those involved in the information and knowledge
industries, who are complying with Chinese control. What makes the situation very interesting is the
status of China in world economy and its relationship with US. As China is one of the major global player
it has to balance the need for more information with their goal of controlling content as a means to
maintain power. Chinese government is in a state of confusion about censorship policy as it goes back
and forth, test the line, they know they need freedom related to content, press etc but worried about
opening the door to the type of freedoms that could lead to the regime’s downfall. US is unhappy with
its second largest trading partner (trade of worth $409 billion in 2008) and accuses China of selling US
weapons to Taiwan and violating human rights. Given the array of issues this Google’s incident may act
as a catalyst in fueling growing tension between US and China.

OVERVIEW:-
 1999 - Google is founded. One of its corporate mantras is: “Don’t Be Evil”.
 2000 - Google begins offering a Chinese-language version of Google.com. But the website, which
cannot be accessed about 10 per cent of the time, is slow and unreliable, apparently because of
the extensive filtering performed by China’s licensed internet service providers.
 Autumn 2002 – Google.com becomes completely unavailable in China. Access is largely restored
within about two weeks. The company claims it has stood by its principles and has not subjected
itself to Chinese laws and regulations.
 December 2003 – Google.com is again blocked in China
 July 2005 – Kai-Fu Lee, a former Microsoft executive, joins Google as a global vice-president in
charge of China, and announces a plan to establish a research centre in China
 January 2006 – Google.cn is launched amid widespread criticism. Google agrees to block certain
websites in return for being able to run a local Chinese service. It promises to tell Chinese users
when search results are censored and not to maintain any services that involve personal or
confidential data, such as Gmail or Blogger, on the mainland. The unfiltered Chinese-language
Google.com remains available.
 June 2006 – Google.com is again blocked in China while Google.cn continues to work
 April 2007 – Eric Schmidt, chief executive, gives an upbeat assessment of Google’s outlook in
China, saying that that the company is on track to lead the country’s internet market in spite of
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challenges including censorship issues and fierce competition from Baidu.com, its larger home-
grown rival
 September 2007 – Google.cn finally receives a licenSe from the Chinese government that
officially allows it to operate its website in China – more than 18 months after it set up
Google.cn
 February 2008 – Guo Quan, a Chinese human rights activist, vows to sue Yahoo and Google
for excising his name from its local search results. Mr Guo writes that “to make money, Google
has become a servile Pekinese dog wagging its tail at the heels of the Chinese Communists”. Guo
is sentenced to 10 years in jail in 2009.
 October 2008 – Google, Microsoft and Yahoo sign a set of voluntary guidelines designed to
reduce the risk that their actions will lead to human rights abuses in China and other countries.
The document, written together with human rights advocates, calls for companies to comply
with censorship only when they receive a formal legal request to do so
 December 2008 – Beijing widens a media campaign against Baidu, China’s biggest internet
search engine, to target the entire industry. Companies, including Google, are criticised for
running advertisements from non-licensed medical websites. The move threatens to throw the
Chinese online ad market into disarray
 January 2009 – Chinese regulators criticise Google for making pornography available through its
search engine
 March 2009 – Google launches a free music download service in China
 April 2009 – Chinese regulators repeat their criticism of Google over pornographic content
 June 2009 – Chinese regulators announce that they are “punishing” Google China for failing to
remove pornographic content from its search results. The punishment includes a suspension of
its ability to search foreign websites and its associative-word search function – a move that
drives Google users away to rival Baidu
 June 2009 – Google’s global website is blocked in China for the first time in years after the
company appears to resist the order to suspend some functions. Official media accuse Google of
allowing pornographic content
 June 24 2009 – No access to Google.com, Gmail for hours
 August 2009 – China Mobile prepares to launch customised smartphones based on Google’s
Android operating system, putting the search company head-to-head with Apple in China
 September 2009 – Kai-Fu Lee quits following a controversial four-year tenure that has seen the
company use a censored version of its search engine to gain a foothold in the world’s most
populous internet market
 October 2009 – A Chinese copyrights group demands talks with Google over compensation for
Chinese authors who have had their books scanned into the company’s electronic library
 December 2009 – Chinese state media again accuse Google of allowing pornographic content in
its search results
 December 2009 – A Chinese court agrees to hear a case brought by Mian Mian, a novelist,
against Google for scanning her works, posing a fresh challenge to the company’s digital books
project
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 January 2010 – Google says it will end censorship of its search service in China and is prepared
to pull out of the market
 January 2010 – Eric Schmidt, chief executive, says Google aims to stay in China even if it was
forced to close down its local search services as the company has a range of other business
opportunities on the mainland
 January 2010 – Hillary Clinton, the US secretary of state, calls on Beijing to carry out a
“thorough” and “transparent” investigation into the cyberattacks that Google said were
triggered by its announcement to stop censorship in China
 March 2010 – Google is “99.9 per cent” certain to go ahead with plans for the closure of its
Chinese search engine, according to a person close to the company. China, meanwhile, says it is
not prepared to compromise on internet censorship to stop Google leaving
 March 2010 – Google announces it has stopped censoring its search services on its local Chinese
service after talks with Chinese authorities over whether it could continue to operate an
uncensored service from inside the country failed. All search requests on Google.cn are now
being redirected to its Hong Kong arm
 June 2010 – Google says it is making a final attempt to maintain a presence in China, after the
government threatens to shut it down by the end of June. The internet group will place a
voluntary link to its Hong Kong site on the Google.cn home page, rather than automatically
redirecting users, in a bid to appease the authoritiesahead of a licence renewal due at the end of
the month
 July 2010 – The Chinese government renews Google’s licence to operate in the world’s largest
internet market, appearing to accept a compromise offered by the US search engine over
internet censorship Google initially redirected all its traffic from China to a Hong Kong based site
outside the reach of censors.
 2013 - Google stopped displaying warning messages that had shown up for mainland Chinese
users who were attempting to search for politically sensitive phrases.
 2014 - Google's Internet mail service, Gmail, and Chrome and Google-based search inquiries
have not been available to mainland China.