Pesacaleta

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CHRISTOPHER GROGAN AND JEANNE BRETT

Google and the Government of China:
A Case Study in Cross-Cultural Negotiations
The team of Google executives assigned to negotiate with Chinese government officials began to arrive at San Francisco International Airport two hours before their scheduled departure. The seasoned team had been briefed on Chinese culture throughout the past two weeksby a special consultant retained for the negotiations. They had also been provided with an executive summary of press coverage on China and China’s most recent policy announcements regarding the Internet. The flight across the Pacific would give the executives valuable time to prepare for the negotiations concerning the acquisition of a Chinese domain name for Google and to reflect on just howfar the company had come. By the summer of 2005, Google had matured from a cutting-edge Silicon Valley start-up to emerge as one of the world’s Internet titans. In only eight years the brainchild of two Stanford University graduate students had transformed an industry and was generating impressive earnings from advertising and the licensing of its search engine technology. Google’s publicly tradedstock had skyrocketed since it began trading a year before (Exhibit 1). The company was admired for its audacious goals (nothing short of organizing and providing access to “the world’s information”1), its corporate principles (famously and succinctly encapsulated in three words: “Don’t be evil”2), and its healthy balance sheet. By combining a Microsoft-like aggressiveness, an Apple-esque zest forinnovation, and seemingly rigid adherence to utopian ideals, Google had captivated its users, customers, and investors. The company’s flagship Web site, Google.com, stood among the most visited sites on the Internet (Exhibit 2). A company that sought to organize “the world’s information” would never be content with limiting its presence to the U.S. market. As Internet usage in other countries hadgrown, so had Google’s presence in those countries (for estimates of Internet usage in various countries, see Exhibit 3). Google had gradually expanded its geographic presence and established itself as one of the most visited sites in the world. During this expansion, it had added other domain names to assist non-American customers with their searches. These names, such as Google.fr for Frenchusers, could be viewed as brand extensions of the original Google.com, and captured a great number of international users. This in turn netted Google additional revenue. By 2005 nearly 40 percent of Google’s revenue and more than half its user traffic came from outside the United States (see Exhibit 4 and Exhibit 5). Google had also added a number of complementary services to its core search enginebusiness, including both consumer and commercial applications (see
1 2

Verne Kopytoff, “Google Bows to China Pressure,” San Francisco Chronicle, January 25, 2006. Ibid.

©2006 by the Kellogg School of Management, Northwestern University. This case study originated as a paper drafted by Christopher Grogan ’07 and Lindsey Pohlmann, Northwestern University School of Law ’06; it was later adaptedinto a case by Professor Jeanne Brett and Christopher Grogan ’07. Cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. To order copies or request permission to reproduce materials, call 800-545-7685 (or 617-783-7600 outside the United States or Canada) ore-mail custserv@hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Kellogg School of Management.

GOOGLE AND CHINA

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Exhibit 6 for a partial list of Google’s other products and...