Google is Destined to Fail in China
We all heard about Google's continuous attempts to enter the Chinese market and get hold of its internet population. However, these attempts, unfortunately to Google, turned out to be a failure simply because Google is not a Chinese company! According to the article "Google Is Destined to Fail in China" by Perry Wu, the search engine market is not a weak sector in China, and Google probably saw that. Perry Wu goes on and emphasizes in his article how different Google is from Chinese internet companies and explains the main features that may deter Google from being able to enter the Chinese market.
As I went through the article, it was difficult for me not to notice how some of the five competitive forces discussed by Associate Professor, Michael Porter, stood out. In fact, before I knew about Porter's competitive forces, I never noticed how companies and governments have different strategies when it comes to real life.
First of all, we see that there is an expected retaliation from the existing Chinese companies like Sohu, Sina, and Netease. History has shown that many companies like Yahoo and Lycos tried to enter China to win, but ended up investing their money in the country and then leaving "poor, confused and embarrassed". Wu, in his article, explains how Chinese internet companies act in "cooperation" rather than in "competition". They have a mutually beneficial relationship where they try to remain of the same size and try not to grow too big, because it is known that they might end up falling hard. This fact can lead to a slow growth in the industry, and according to Porter, slow industry growth signals that there is a strong likelihood of the local competitors to retaliate. In addition, the history of Lycos and Yahoo for instance is a good indication that there has been retaliation in the past. Otherwise, why would these companies leave a county with a big internet population?! Moreover, the Chinese companies are well-established and are probably supported by their government. This brings government policy into action as a barrier to entry for the foreign internet companies.
Since the Chinese companies are more into socialism, they are more likely to remain in the same market position, as they do not plan to grow. However, a company like Google has a major objective of growing and that is the main reason it is entering the Chinese market in the first place. Therefore, even though Porter does not discuss that, I think it is a major barrier to entry for Google. The stockholders at Google want it to grow, but if it enters China, it will have to remain in the same market position for one of two reasons: either that the competitors will retaliate (which is reflected in Porter's competitive forces) or Google will risk being a "Titan" and "falling hard".
Moreover, government policy (discussed in Porter's barriers to entry) appears when Wu implies that China is a socialist nation. This means that they companies in China are owned collectively by a centralized government that often plans and even controls the economy. Google is a global internet search engine! According to Wu, it is an open company, and many things that happen in China can seem to be fine in the country, but not in Wall Street. Now that can be a serious barrier to entry for Google, and, in this case, it is also about ethical and corporate governance. I agree with Porter as to how vital government policy is when it comes to market entry, but I think he also should have emphasized on the importance of corruption as part of government policy when he talked about the five competitive forces. Chinese companies got into lawsuits that merely appeared in 60-minute shows, and some of them have gotten away with firing a top executive without giving notice to the press! Is that possible for Google, a company operating in the global marketplace, to indulge in? Maybe not, and this becomes a barrier to entry from my point of view.
In addition to that, towards the end of the article, Wu states that Google has agreed to censor its search results, and with that government policy comes into play again. However, I can also see bargaining power. The Chinese population is the buyer, while the Chinese government is the supplier, and in this case, the Chinese government possesses the bargaining power of the supplier, which is a competitive force discussed by Porter. The government is exerting that power by reducing the quality of the searches that are provided by Google, since they will be censored. Google is not such an important customer to Chinese government, especially that there are other internet companies available in the country.
In conclusion, I think that Google needs to defend itself by taking into consideration Porter's five competitive forces. For example, Google can differentiate its search engine in a certain way that the Chinese government cannot refuse. Google should turn the "bargaining power of the supplier" to its side, because, at the end of the day, Google is the company providing the differentiated service.
As I went through the article, it was difficult for me not to notice how some of the five competitive forces discussed by Associate Professor, Michael Porter, stood out. In fact, before I knew about Porter's competitive forces, I never noticed how companies and governments have different strategies when it comes to real life.
First of all, we see that there is an expected retaliation from the existing Chinese companies like Sohu, Sina, and Netease. History has shown that many companies like Yahoo and Lycos tried to enter China to win, but ended up investing their money in the country and then leaving "poor, confused and embarrassed". Wu, in his article, explains how Chinese internet companies act in "cooperation" rather than in "competition". They have a mutually beneficial relationship where they try to remain of the same size and try not to grow too big, because it is known that they might end up falling hard. This fact can lead to a slow growth in the industry, and according to Porter, slow industry growth signals that there is a strong likelihood of the local competitors to retaliate. In addition, the history of Lycos and Yahoo for instance is a good indication that there has been retaliation in the past. Otherwise, why would these companies leave a county with a big internet population?! Moreover, the Chinese companies are well-established and are probably supported by their government. This brings government policy into action as a barrier to entry for the foreign internet companies.
Since the Chinese companies are more into socialism, they are more likely to remain in the same market position, as they do not plan to grow. However, a company like Google has a major objective of growing and that is the main reason it is entering the Chinese market in the first place. Therefore, even though Porter does not discuss that, I think it is a major barrier to entry for Google. The stockholders at Google want it to grow, but if it enters China, it will have to remain in the same market position for one of two reasons: either that the competitors will retaliate (which is reflected in Porter's competitive forces) or Google will risk being a "Titan" and "falling hard".
Moreover, government policy (discussed in Porter's barriers to entry) appears when Wu implies that China is a socialist nation. This means that they companies in China are owned collectively by a centralized government that often plans and even controls the economy. Google is a global internet search engine! According to Wu, it is an open company, and many things that happen in China can seem to be fine in the country, but not in Wall Street. Now that can be a serious barrier to entry for Google, and, in this case, it is also about ethical and corporate governance. I agree with Porter as to how vital government policy is when it comes to market entry, but I think he also should have emphasized on the importance of corruption as part of government policy when he talked about the five competitive forces. Chinese companies got into lawsuits that merely appeared in 60-minute shows, and some of them have gotten away with firing a top executive without giving notice to the press! Is that possible for Google, a company operating in the global marketplace, to indulge in? Maybe not, and this becomes a barrier to entry from my point of view.
In addition to that, towards the end of the article, Wu states that Google has agreed to censor its search results, and with that government policy comes into play again. However, I can also see bargaining power. The Chinese population is the buyer, while the Chinese government is the supplier, and in this case, the Chinese government possesses the bargaining power of the supplier, which is a competitive force discussed by Porter. The government is exerting that power by reducing the quality of the searches that are provided by Google, since they will be censored. Google is not such an important customer to Chinese government, especially that there are other internet companies available in the country.
In conclusion, I think that Google needs to defend itself by taking into consideration Porter's five competitive forces. For example, Google can differentiate its search engine in a certain way that the Chinese government cannot refuse. Google should turn the "bargaining power of the supplier" to its side, because, at the end of the day, Google is the company providing the differentiated service.
posted by Lina Osman @ 3:31 AM
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