Chapter 1 Introduction to Global Business Management
What’s in It for Me?
What is international business?
Who has an interest in international business?
What forms do international businesses take?
What is the globalization debate?
What is the relationship between international business and ethics?
What is the role of a global manager?
This chapter introduces you to the study of international business and global management. While international business generally focuses on the policies, regulations, and processes that a firm encounters globally, global management focuses on the professional roles that lead and operate these international businesses. After reading a short case study on Google Inc., an American multinational technology company, you’ll begin to learn what makes global management such an essential subject for students around the world. Because global management is a vital ingredient in strategic management and entrepreneurship, this book uses these complementary perspectives to help you understand international business. Managers, entrepreneurs, workers, for-profit and nonprofit organizations, and governments all have a vested interest in understanding and shaping global business practices and trends. Chapter 1, Section 1 “What Is International Business and Global Management?” gives you a working definition of international business and helps you see which actors are likely to have a direct and indirect interest in it. You’ll then learn about some of the different forms international businesses take. Chapter 1, Section 2 “Who Is Interested in International Business?” explores the various stakeholders who have an interest in global business. Chapter 1, Section 3 “Debate on Globalization” provides an understanding of the current and evolving globalization debate. This debate centers on interconnected and competitive markets and whether differences across countries and markets are more significant than the commonalities. We’ll also review how the debate on globalization is giving rise to populist governments challenging the notions of global trade. What you’ll discover from the discussion of this debate is that countries and companies have always traded with each other, and global trade has been a key factor in achieving peace between countries and improving the economic and social well-being of the greatest number of people in a single century. While still ripe for improvement, global trade offers the best prospects. As we’ll begin to review in this chapter, ethical, responsible, and capable global managers are key drivers for the success of globalization. Chapter 1, Section 4 “Navigating Ethics and International Business” provides an introductory discussion of the relationship between international business and ethics. We’ll conclude the chapter in Chapter 1, Section 5 “Understanding the Roles and Function of a Global Manager” by looking at the evolving roles of global managers around the world.
Opening Case: Google’s Steep Learning Curve in China
Of all the changes going on in the world, the internet is the one development that many people believe makes our world a smaller place—a flat or flattening world, according to Thomas Friedman, Pulitzer Prize–winning author of The World Is Flat: A Brief History of the Twenty-First Century and The Lexus and the Olive Tree: Understanding Globalization. Because of this flattening effect, internet-focused businesses should be able to cross borders easily and profitably with little constraint. However, with few exceptions, cross-border business ventures always seem to challenge even the most able of competitors, internet-based or not. Some new international ventures succeed, while many others fail. But in every venture the managers involved can and do learn something new. Google Inc.’s learning curve in China is a case in point. Google is technically a unit of Alphabet Inc., an American multinational technology conglomerate holding company which was created through a restructuring of Google in 2015. Alphabet is the world's third-largest technology company by revenue and one of the world's most valuable companies. To understand why Google has not been available in China, it’s helpful to review the company’s complicated history in China.
In 2006, Google announced the opening of its Chinese-language website amid great fanfare. While Google had access to the Chinese market through Google.com at the time, the new site, Google.cn, gave the company a more powerful, direct vehicle to further reach the then approximately 137 million individuals with internet access in China, enabling Google to grow to a 36.2 percent market share of the Chinese market by 2009. Fast forward a decade-plus later to 2023—there were almost one billion internet users in China, but Google’s market share was less than 1 percent. What happened? Let’s look at Google’s cautionary tale for global managers on balancing growth with global business ethics.
Initially, the hopeful company founders Larry Page and Sergey Brin said at the time in support of the new site, “Unfortunately, access for Chinese users to the Google service outside of China was slow and unreliable, and some content was restricted by complex filtering within each Chinese ISP. Ironically, we were unable to get much public or governmental attention paid to the issue. Although we dislike altering our search results in any way, we ultimately decided that staying out of China simply meant diminishing service and influence there. Building a real operation in China should increase our influence on market practices and certainly will enhance our service to the Chinese people.”
A Big Market, Bigger Concerns
Google’s move into China gave it access to a very large market, but it also raised some ethical issues. Chinese authorities are notorious for their hard-line censorship rules regarding the internet. They take a firm stance against risqué content and, for example, objected to the computer game The Sims, fearing it would corrupt their nation’s youth. Any content that was judged as possibly threatening “state security, damaging the nation’s glory, disturbing social order, and infringing on others’ legitimate rights” was also banned. When asked how working in this kind of environment fit with Google’s informal motto of “Don’t be evil” and its code-of-conduct aspiration of striving toward the “highest possible standard of ethical business,” Google’s executives stressed that the license was just to set up a representative office in Beijing and no more than that—although they did concede that Google was keenly interested in the market. As reported to the business press, “For the time being, [we] will be using the [China] office as a base from which to conduct market research and learn more about the market.” Google likewise sidestepped the ethical questions by stating it couldn’t address the issues until it was fully operational in China and knew exactly what the situation was.
Google in China
Google appointed Dr. Kai-Fu Lee to lead the company’s new China effort. He had grown up in Taiwan, earned BS and PhD degrees from Columbia and Carnegie Mellon, respectively, and was fluent in both English and Mandarin. Before joining Google in 2005, he worked for Apple in California and then for Microsoft in China; he set up Microsoft Research Asia, the company’s research-and-development lab in Beijing. When asked by a New York Times reporter about the cultural challenges of doing business in China, Lee responded, “The ideals that we uphold here are really just so important and noble. How to build stuff that users like, and figure out how to make money later. And ‘Don’t Do Evil’ [referring to the motto ‘Don’t be evil’]. All of those things. I think I’ve always been an idealist in my heart.”
Despite Lee’s support of Google’s utopian motto, the company’s conduct in China during its first year seemed less than idealistic. In January, a few months after Lee opened the Beijing office, the company announced it would be introducing a new version of its search engine for the Chinese market. Google’s representatives explained that in order to obey China’s censorship laws, the company had agreed to remove any websites disapproved of by the Chinese government from the search results it would display. For example, any site that promoted the Falun Gong, a government-banned spiritual movement, would not be displayed. Similarly (and ironically), sites promoting free speech in China would not be displayed, and there would be no mention of the 1989 Tiananmen Square massacre. As one Western reporter noted, “If you search for ‘Tibet’ or ‘Falun Gong’ most anywhere in the world on google.com, you’ll find thousands of blog entries, news items, and chat rooms on Chinese repression. Do the same search inside China on google.cn, and most, if not all, of these links will be gone. Google will have erased them completely.”
Google’s decision didn’t go over well in the United States. In February 2006, company executives were called into congressional hearings and compared to Nazi collaborators. The company’s stock fell, and protesters waved placards outside the company’s headquarters in Mountain View, California. Google wasn’t the only American technology company to run aground in China during those months, nor was it the worst offender. However, Google’s executives were supposed to be different; given their lofty motto, they were supposed to be a cut above the rest. Google’s management was facing the business challenges of trying to meet investor expectations for the stock alongside the public’s expectations for corporate ethical behavior.
When the company went public in 2004, its founders wrote in the company’s official filing for the U.S. Securities and Exchange Commission that Google is “a company that is trustworthy and interested in the public good.” Now, politicians and the public were asking how Google could balance that with making nice with a repressive Chinese regime and the Communist Party behind it. At a 2006 Congressional Hearing, Rep. Tom Lantos (D-CA) and Google vice president Elliot Schrage exchanged sharp words. At the hearing, Schrage, then vice president for corporate communications and public affairs, discusses Google’s competitive situation in China. Rep. James Leach (R-IA) subsequently accused Google of becoming a servant of the Chinese government.
Google Ends Censorship in China
In 2010, Google announced that it was no longer willing to censor search results on its Chinese service. The world’s leading search engine said the decision followed a cyberattack that it believes was aimed at gathering information on Chinese human rights activists. Google also cited the Chinese government’s restrictions on the internet in China during 2009. Google’s announcement led to speculation about whether Google would close its offices in China or would close Google.cn. Human rights activists cheered Google’s move, while business pundits speculated on the possibly huge financial costs that would result from losing access to one of the world’s largest and fastest-growing consumer markets—reflecting the at times contradictory global business ethics challenge facing global executives.
The Chinese government’s first response to Google’s announcement was simply that it was “seeking more information.” In the interim, Google “shut down its censored Chinese version and gave mainlanders an uncensored search engine in simplified Chinese, delivered from its servers in Hong Kong.” These actions led to a sharp decrease in Google's market share and gave further rise to the Chinese web services giant, Baidu—which has now become the second-largest search engine in the world, and holds a 76 percent market share in China’s search engine market.
Google Blocked in China
The Chinese government often adds or removes restrictions on global firms at its political and economic discretion. Today, the Chinese government blocks access to Google’s search engine and a number of other Western media sites to both censor information and promote Chinese companies, like Baidu. The position of the Chinese government remains that all companies in China must operate according to Chinese law. But for Google’s management, abiding by Chinese rules risks potentially harming the firm’s own global operational rules and its image as a fair and open platform. We’ll talk further about these operational challenges throughout the chapter and book.
Like most firms that venture out of their home markets, Google’s experiences in China and other foreign markets have driven the company’s management to reassess how it does business in countries with distinctly different laws. Reflecting the constantly changing business environment and the fact that China is the world’s largest internet market with nearly one billion users, Google is once again in talks with the Chinese government to reenter the mainland Chinese market, an objective that has no clear timetable or guarantee of success. The Chinese crackdown in Hong Kong in 2020 further complicated and limited access to Google by mainland Chinese users.
Case Questions
(AACSB: Ethical Reasoning, Multiculturalism, Reflective Thinking, Analytical Skills)
Can Google afford not to do business in China?
Which stakeholders would be affected by Google’s managers’ possible decision to shut down its China operations? How would they be affected? What trade-offs would Google be making?
Should Google’s managers be surprised by the China predicament?