Background
Google is a multinational company, and it servers millions of customers around the globe, including the Chinese. Recently, the company raised concerns following hacking attacks by the Chinese. Like any other company, Google also adopts different strategies on its attempt to remain competitive in the market. However, their efforts are surrounded by several setbacks; for instance, the Japanese market.
Porter’s Five Forces
Porter five forces can be applied in evaluating market rivals, opportunities and other market condition. The model can be summarized using the following terms i.e. rivalry, customers, suppliers, substitutes, entry/exit obstacles.
Rivalry
The essence of Google extending its services to the Chinese was a strategy to reduce the potential market, for its competitors. Google faces stiff competition from Baidu, and thus wanted to acquire the company so as to monopolize the market. The brilliant move was, however, unsuccessful and thus resorted to sell all its Baidu shares.
Incase the strategy had been successful, and thus the company could have dominated china’s market share by over 80% share. The Chinese government poses several conditions that have to be met by both local and foreign companies. These conditions complicate the business environment for foreign companies, which in turn boost the local companies. This is, to a certain degree, influenced by the close relationship that Baidu has with its government.
Customers
As noted in the year 2002, the company expanded its market coverage to Korea China and Japan. This move by Google targeted market share domination i.e. by increasing the number of its customers (bearing in mind china’s population).
Despite the effort, Google still faces stiff competition from Baidu, which dominates the Chinese market share with an overwhelming 64% (Quelch & Jocz, 2010). Google has raised concerns that some of its websites and accounts were hacked by the Japanese. This concern is of great magnitude to Google, since it may lose a number of its customers on lack of privacy grounds.
Suppliers
These latest developments in the Chinese government can enormously affect Google suppliers and supplies. Incase Google lose some of its customers due to privacy threats, its suppliers will also feel the impacts of the loss. This is because; lesser customers translate to minimum supplies for Google, and thus reduced sales for suppliers. Additionally, Google will have to reduce its customer supplies following the reduced number of buyers.
Substitutes
The unfavorable Chinese political environment discourages Google’s growth. Furthermore, it directs the company to the option of quitting the Japanese market. This makes the company vulnerable to substitution i.e. by other local companies in the same business. Unfavorable business environment i.e. for foreign companies reduces competition for local companies.
Exit/entry obstacles
Google is facing a number of obstacles after entering Chinese market; this is because, Chinese practices compromise the principles of the company. Google finds it unreasonable for the Chinese government, to sensor some of its information’s and website (Quelch & Jocz, 2010).
This, in fact, even threatens other interested companies that want to venture in the Chinese market. For instance, the blockage of commonly used social networks (facebook and twitter), disheartens any search engine that intends to invest on Japanese market. Such discouragements limit the entry of other similar businesses, which in turn protects the local companies from new competitors.
Conclusion
Google is a multinational company serving millions of customers around the globe. However, the company is facing a lot of difficulties with its Chinese market, which poses an unfavorable environment. This threat creates several negative implications to the company. The extent of the effects can be evaluated by the use of porter’s model, which consists of five forces.
Reference
Quelch, J. & Jocz, K. (2010). Google in china (A). A journal of Harvard business school, 510(071), 1-13.