By: Pankaj Joshi MBA IB

China- A Largest republic

Google pulled out its business from China, Dec 2009

The world's top Internet search engine, threatened to shut its Chinese-language Google.cn website and offices in China.

Google’s decision & its impacts on global economy

Why…? What next…?

Before that….

• Google launched google.cn in 2006, agreeing to some censorship of the search results, as required by the Chinese government.

• It currently holds around a second of the Chinese search market, far behind Baidu with more than 60%.

Reasons• because Google no longer willing to accept censorship

of its search results.• They announced that citizens in other countries do not

gain access to an uncensored Web.• A massive cyber-attack from China had resulted in theft

of its intellectual property taken place in December 2009.

• Google said it had uncovered a sophisticated attack on the email accounts of Chinese human rights activists using its Gmail service, and that more than 20 other companies were similarly attacked.

Inside storyIn a blog post announcing its decision, Google's chief legal officer David Drummond said: "A primary goal of the attackers was accessing the Gmail accounts of Chinese human rights activists.“

The company said its investigation into the attack found two accounts of its online mail service - Gmail - appeared to have been accessed. However, the attack was limited to accessing account information such as the date the account was created and subject line, rather than e-mail content, it said, and that more than 20 other companies were similarly attacked.

Impacts on global economy

• Heightened awareness of the potential damage from cyber-attacks.

• some firms that do not operate in China could see themselves as more at risk than they previously thought.

• That could help drive demand for the services of security companies such as McAfee Inc, Symantec Corp and Trend Micro

• The European Union Chamber of Commerce in China said that with rising government intervention in industrial policy and restrictions on foreign investment making China less and less attractive to European companies.

• Microsoft has high hopes for its Bing Internet search engine in China, which has only a small share of the market but could benefit if Google, the No. 2 player behind dominating local rival Baidu Inc, pulls out.

• Google Inc's threat to exit China could create a big headache for its cell phone partners, especially Motorola Inc, which has bet its turnaround on Google's mobile software and China.

Motorola enables users immediate access to Google on millions of Motorola handsets worldwide

Opportunity for Nokia & Apple

• The possible withdrawal of Google from the world's most populous country could also provide new growth opportunities for Nokia and Apple Inc in phone sales, and for Microsoft Inc in Web search, analysts said.

Source: economictimes.indiatimes.com

Previous position

31.3%

63.9%

4.8%

Market Share

googleBaiduMicrosoft and Yahoo

• Warren Cowan, founder and CEO of Greenlight, explains "If Google quits china, it leaves Microsoft, Yahoo, and Baidu as

the primary sources for accessing the Chinese searching audience. Without Google, assuming Yahoo and Bing remain, that 30 percent share will re-distribute--most likely to Baidu, which will further cement its leadership position.“

The Chinese-based rival search engine stands to gain a virtual monopoly--or possibly a real monopoly--on Internet-based advertising in China

Future position

80%

20%

Market Share

BaiduMicrosoft & Yahoo

• Shares of Google fell 1.3 percent in after-hours trading following the news that it might withdraw from China, while shares of Baidu jumped 6.8 percent.

Baidu Google0.0%

10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%

63.9%

31.3%

68.25%

30.89%BeforeAfter

Source: Reuters India

• China – always an attractive market.• Think of another situation where Google has a 60%

market share in China as Baidu is having now, they won't quit from that market.

• Baidu has the same restriction as Google is facing.• Baidu performs far more better than Google in the

same market. • Don’t you think that the decision is rather based on

business than a human right.• The Chinese government says foreign internet firms are

welcome to do business "according to the law“• Even Yahoo has also declared regarding hacking &

security failure.

Should the company leave China?

• Last year, the search engine market in China was worth an estimated $1bn and analysts previously expected Google to make about $600m from China in 2010.

• I think that Google NEEDS to stay in China. Any company that can bring $2.5b into the United States in three years, in my eyes, should remain in that prosper market.

Google has faced a rocky road in China, where its video site YouTube has been inaccessible since March. Many of Google's primary services, such as Gmail and Google.com, became briefly inaccessible to many Chinese users last year.

Thank You