Great Land College

MBA Program
Strategic Management case analysis (40%)
Google’s Mission, Ethical Principles, and Involvement in China

Google, the fast-growing Internet search engine company, was established with a clear mission in mind:
to organize the world’s information and make it universally acceptable and useful. This mission has
driven Google to create a search engine that, on the basis of key words entered by the user, will scan the
Web for text, images, videos, news articles, books, and academic journals, among other things. Google
has built a highly profitable advertising business on the back of its search engine, which is by far the
most widely used in the world. Under the pay-per click business model, advertisers pay Google every
time a user of its search engine clicks on one of the paid links typically listed on the right-hand side of
Google’s results page.

Google has long operated with the mantra “Don’t be evil.” When this phrase was originally formulated,
the central message was that Google should never compromise the integrity of its search results. For
example, Google decided not to let commercial considerations bias its rankings. This is why paid links
are not included in its main search results, but listed on the right-hand side of the results page. The
mantra “Don’t be evil,” however, has become more than that at Google; it has become a central
organizing principle of the company and an ethical touchstone by which managers judge all of its
strategic decisions.

Google’s mission and mantra raised hopes among human rights activists that the search engine would be
an unstoppable tool for circumventing government censorship, democratizing information, and allowing
people in heavily censored societies to gain access to information that their governments were trying to
suppress, including the largest country on earth, China.

Google began a Chinese language service in 2000, although the service was operated from the United
States. In 2002, the site was blocked by the Chinese authorities. Would-be users of Google’s search
engines were directed to a Chinese rival. The blocking took Google’s managers totally by surprise.
Reportedly, cofounder Sergey Brin immediately ordered half a dozen books on China and quickly read
them in an effort to understand this vast country. Two weeks later, for reasons that have never been
made clear, Google’s service was restored. Google said that it did not change anything about its service,
but Chinese users soon found that they could not access politically sensitive sites that appeared in
Google’s search results, suggesting that the government was censoring more aggressively. (The Chinese
government has essentially erected a giant firewall between the Internet in China and the rest of the
world, allowing its censors to block sites outside of China that are deemed subversive.)By late 2004, it
was clear to Google that China was a strategically important market. To exploit the opportunities that
China offered, however, the company realized that it would have to establish operations in China,
including its own computer servers and a Chinese homepage. Serving Chinese users from the United
States was too slow, and the service was badly degraded by the censorship imposed. This created a
dilemma for the company given the “Don’t be evil” mantra. Once it established
Chinese operations, it would be subject to Chinese regulations, including those censoring information.
For perhaps eighteen months, senior managers inside the company debated the pros and cons of entering
China directly, as opposed to serving the market from its U.S. site. Ultimately, they decided that the
opportunity was too large to ignore. With over 100 million users, and that number growing fast, China
promised to become the largest Internet market in the world and a major source of advertising revenue
for Google. Moreover,

Google was at a competitive disadvantage relative to its U.S. rivals, Yahoo! and Microsoft’s MSN,
which had already established operations in China, and relative to China’s homegrown company, Baidu,
which leads the market for Internet search in China (in 2006, Baidu had around 40% of the market for
search in China, compared to Google’s 30% share.

In mid-2005, Google established a direct sales presence in China. In January 2006, Google rolled out its
Chinese homepage, which is hosted on servers based in China and maintained by Chinese employees in
Beijing and Shanghai. Upon launch, Google stated that its objective was to give Chinese users “the
greatest amount of information possible.” It was immediately apparent that this was not the same as
“access to all information.”

In accordance with Chinese regulations, Google had decided to engage in self-censorship, excluding
results on such politically sensitive topics as democratic reform, Taiwanese independence, the banned
Falun Gong movement, and references to the notorious Tiananmen Square massacre of democratic
protestors that occurred in 1989. Human rights activists quickly protested, arguing that Google had
abandoned its principles in order to make greater profits. For its part, Google’s managers claimed that it
was better to give Chinese users access to a limited amount of information than to none at all or to serve
the market from the United States and allow the government to continue proactively censoring its search
results, which would result in a badly degraded service. Brin justified the Chinese decision by saying
that “it will be better for Chinese Web users, because ultimately they will get more information, though
not quite all of it.” Moreover, Google argued that it was the only search engine in China that let users
know if search results had been censored (which is done by the inclusion of a bullet at the bottom of the
page indicating censorship).

Case Discussion Questions:

1. How does Google’s mission drive strategy at the company?

2. Is Google’s stance toward Internet search in China consistent with its mission?
3. Do you think that Google should have entered China and engaged in self-censorship, given the
company’s long-standing mantra “Don’t be evil”? Is it better to engage in self-censorship than to have
the government censor for you?
4. If all foreign search engine companies declined to invest directly in China owing to concerns over
censorship, what do you think the results would be? Who would benefit most from this action? Who
would lose the most?