BREITZERONZ

“INVENTED TO INSPIRE”

TEAM 4
KISHORE V - 9UTB15

KRISHNA RAJA NS - 9UTB16

RAJ KUMAR M - 9UTB25

SWATHI S - 9UTB35

VINODHINI S - 9UTB41

KAZHAL VENDHAN M - 9UTB44

SAHITHYA D - 9UTB48

IMAYA G - 9UTB49

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“OPERATION AURORA”
CASE ANALYSIS

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MISSION STATEMENT:

"To organize the world’s information and make it universally accessible and useful."

In mid-December, Google detected a highly sophisticated and targeted attack on their

corporate infrastructure originating from China that resulted in the theft of intellectual
property from them. This one was officially released on Jan 12, 2010 in the official blog site of
Google. The main goal of the attackers was to access the Gmail accounts of Chinese human
rights activists. And this achievement was not completed according to the investigation

And also have discovered that the accounts of dozens of U.S-China and Europe based
Gmail users who are advocates of human rights in China seem to be routinely accessed by third
parties. They have not accessed through any security breach at Google, but mostly by phishing
scams or malware placed on the user’s computer. The opening for the hacking has been
because of the security weakness in Microsoft Corp’s Internet Explorer Web browser.

The digital assault was serious enough to prompt Google to confront China's
government about censorship rules that weed out politically and culturally sensitive topics from
search results in the country. Google says it's prepared to shut down its China-based search
engine and possibly shut down all of its offices in the country unless the ruling party loosens its
restrictions on free speech.

The threat to leave China triggered speculation that Google suspected the country's
government might have been involved in the computer attacks. Google has only said it believes
the attack originated from within China. China's government has denied any involvement while
continuing to insist publicly that Google must obey its restrictions against showing links deemed
to be subversive or pornographic. Some of its computer code and tried to break into the accounts
of human rights activists opposed to China’s policies.

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 Google is ranked as the second best search engine in China next to Baidu. China is a
booming market in the search engine industry estimating nearly 150 million users and still have
a high growth potential in the future. But due to the strict Chinese laws and regulations Google
is not able to provide the best search experience to the users. Cyber-attacks in addition still
worsened Google’s relation with China which led to controversies. Google is in an oscillation
whether it should continue operating in china remaining flexible under Chinese law or should it
shut down its operations and come out of china which would lead to a fall in market share.

 CENSORSHIP PROBLEMS:
According to the great firewall of china, Google censored certain contents based on the
keywords. Because of network traffic, Google was redirected from China (google.com.cn) to
Hong Kong (google.com.hk) .When Google was redirected via Hong Kong the censored contents
were displayed. For instance a search on the keyword Tiananmen on Google China censored
protested pictures which was not filtered when search was made through Google
Hong Kong. A sample screen shot given below displays the uncensored protest picture at the
bottom-right corner when searched through Google Hong Kong.

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 Search from google.cn Search from google.hk

A Sample screenshot for the search of a keyword “Tiananmen”

 GMAIL ATTACKS:
Gmail accounts was also been hacked by the attackers which posed a security threat in
china. The primary goal of the hackers was to access the accounts of Chinese human rights
activists. On investigation it was found that two Gmail accounts have been attacked. Even
though the attacked mails were limited only to accessing account information such as date,
when the account was created and subject line rather than e-mail contents. But still Google was
under security pressures.

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 Screenshot showing the contents of hacked mails due to cyber-attacks

 GOOGLE’S PERFORMANCE :
Even though Google is a superior search engine, when it comes to the performance in china
it is been ranked only next to Baidu, which is a Chinese search engine. People in China find
Baidu better in terms of search performance; mp3 downloads and think Google is an advantage
only to educated and money-spending users. Another crucial factor was that e-commerce is not
still developed in china but Google’s applications mostly depend on credit card applications.
Lack of advertising is also a strong reason where Google has not influenced much in the china
markets. Even targeting of customers also favored Baidu where Google targeted global users
but Baidu only the china market.

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  EMPLOYEE RELOCATION :
Due to the various problems between Chinese government and Google in regard to the
cyber-attacks, issues also prevailed regarding the employees. If Google withdraws from china
due to the firewall pressures, fear aroused regarding the plight of employees whether on
relocation or withdrawal of jobs.

 DECLINE IN MARKET SHARE:

Pulling out Google from China would result in a decline of market share. It
would also lead the company thereby to leave behind a massive market of internet
users to china’s homegrown competition as well as Google rivals like Microsoft and
Apple.

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STRENGTH

 It has established a brand name for itself and is considered to be the number one search
engine on the web. It is considered to be among the top 10 brands in the U.S.
 The speed and simplicity of its search engine is quite reliable and user friendly.
 It gets reputation by its popularity which proceeds by its word of mouth publicity, so it
doesn’t need to put much effort in marketing its search engine.
 It offers many products and services i-e; Desktop products, Mobile products, Web
products, Hardware products.
 The search engine also provides localized searching where the users get results
according to their regions.
 Google provides an interface to 88 languages to make it comfortable to search for its
users in different countries.

WEAKNESS
 It is dependent mostly on its search based advertising.
 It is the top player regarding the search engines yet it answers search queries with
50 to 60% accuracy.
 It has weak presence regarding the social-networking space.
 Google’s localized search algorithms too sometimes result in errors due to
automated indexing.
 Google doesn’t have “sticky” like Yahoo! And MSN have which can attract users.

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OPPOURTUNITIES
 It can relive the trend like Yahoo! and MSN and become a mass market portal for
users that will increase switching costs for its potential users.
 It can add localized vendors paid advertisements on the localized search. So that
Google might attract more customers through advertisement.
 It can merge with an already existing mass market portal to cover more ground
regarding its users.
 It can provide more services to the hand-held devices to capture more market that
goes past the conventional internet.
 It can enhance its security algorithm for the services it provides to overcome hacking
issues.

THREATS
 Competitors like Yahoo, Baidu, MSN; they can emerge with better interface and new
ideas regarding the search mechanism.
 There is no long time entry barrier in this business. Many competitors can emerge in
coming years with same services, better interface and names and can catch up Google’s
market.
 Portals like yahoo provide more services and solutions with conventional search than
Google do. Google would start losing its users due to added attractions in such portals.

Like many other well-known organizations, Google also face cyber-attacks of varying degrees on
a regular basis.

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Google lnc
Google is a global technology leader focused on improving the ways people connect
with information. Innovation in web search and advertising has made the web site a top
internet property. Google maintain a large index of web sites and other online content, which is
made freely available through search engine to anyone connected with an internet connection.
The automated search technology helps people obtain nearly instant access to relevant
information from our vast online index. The company was first time incorporated in California
in September 1998 and reincorporated in Delaware in August 2003. The company generates
revenue by delivering relevant, cost-effective online advertising. In addition, the third-party
web sites that comprise the Google Network use the AdSense programs to deliver relevant ads
that generate revenue and enhance the user experience.
The company’s performance can be reviewed by its liquidity, profitability, solvency and
market test ratios.
Liquidity of the company:
Liquidity (the company’s ability to pay its short term debts on immediate basis) of the
company is very stable. As the current ratio of the company is gradually increasing from 8.49 in
2007 to 10.62 in 2009 This can be evident from the below graph Further, the company can
collect its ales in 44 to 51 days. This represents the efficiency of the collection department of
the company.

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Profitability of the company:
The company is in continuous growth. The sale of the company has increased by $7,056
million in 2009 from 2007 sales of $16,593 million. Also, gross profit has increased by $4,861
million in 2009 from $9,944 million in 2007. Moreover, the gross profit has increased from 60%
of sale in 2007 & 2008 to 63% in 2009. Further, operating income of the company has also
increased from $5,084 million in 2007 to $8,312 million in 2008 recording an increase of $3,227
million.
These are depicted as below

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Market test of the company:
Moreover, return on equity and return on assets have a stable look. Return on equity
move from $0.19 in 2007 to $0.15 in 2008 and later on have recorded improvement to $0.18 in
2009. Also, return on assets decreased from $0.17 in 2007 to $0.13 in 2008 and later on
improved itself to $0.16 in 2009.

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Solvency of the company:
The company is very solvent as evident from the financial leverage ratio or debt to
equity ratio. The financial leverage ratio of the company was 11.66% in 2007 and increased to
12.48% in 2009. This very nominal leverage depicts that the company is not going for external
borrowings. This can be plotted as follows:

Market Share of Google

The market price of the share was $492.98 on May 07, 2010 and I start to monitor the
performance of the company on April 19, 2010 when the price of the share was $552.70. During
the end of December the share price was around $650 and when Google announced that it is
going to shut down its operation in China, its market share dropped down to $550 in one
month. And at present its value is $495.
At the same time the market share of its competitor Baidu went up from $42.01 in
January to $73.52 in end of May. This can be explained in the chart below:

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Market share of Google

Market share of Baidu

Google’s Contribution
Google in china contributes only 2% of its Total Revenue during 2009. Leaving China will
be a negligible hit to 2010 revenue, but will be a long-term strategic issue. The company’s
inability to participate in China’s growth will be seen as a long-term negative. The following
table shows that clearly:

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There are only three options for Google regarding their issue with China.

Google should leave China

completely.

Google should stay in China.

Google shall stay in China with

some of its services blocked.

1. Google should leave China completely:

The current market share is very insignificant. But in the future if they gain a large amount of
market share, Google might become dependent on China for a large share of revenue and
profit to the point where China might ask them to block all the anti-china websites throughout
the world. Also Chinese government did not pay any heed to the cyber-attacks and they dint
take any actions against the hackers. If they move out of China they can fulfill their mission
completely and also they won’t offend the human rights and freedom of press in China.

2. Google should stay in China and continue its service there with the censorship:

Google can prosper well in China as their growth opportunity is high and they have gained the
creditability of the people. Google has a huge customer base in china. Once the Chinese people
start using Google they can never shift to another search engine. Similarly Google’s entry and
expansion in China will contribute to better International Relations & Foreign Trade.

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3. Google shall stay in China with some of its services blocked:

Google has already blocked some of its services like you tube and blogger in China. Google
doesn’t gain revenue only out of the search engine; they have a variety of products and services
which contribute to the revenue. So we can block the search engine in China. Also the security
algorithm of Gmail should be improved to prevent hacking.

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 The serious issue facing by the Google in china is that they were not able to withstand in
its mission “organize the world's information and make it universally accessible and useful”.
Chinese government allowed almost all the companies to trade and participates in their market
and economy and also to exercise on their profits. At the same time, they don’t want
companies to provide Holistic information to the people. They enforce companies to provide
the censored information to their country people. This was against Google’s mission. Therefor
Google plans to quit china.

Actions performed by Google:

 Google is making a principled stand against the Chinese government’s censorship and
repression of free speech at the cost of its bottom-line.
 Google is pursuing a strategy that appears costly in the near term but will benefit its
business model in the long run.
 Google was tired of being pushed around by what it saw as an increasingly hostile
foreign government.

By seeing all these, we give 2 suggestions to Google.

1. Google should stay in China

2. Google can stay in China with some of its services blocked

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FACTORS FAVOURING GOOGLES STAY IN CHINA:

 Shutting down in china may not hit short term revenue, will be a long term strategic issue.
 Will not be a part in world`s potential growing market.
 China is the fastest growing cell phone market, with about 700 million customers.
 Its android mobile phone operating system, chrome browser business and also runs a host
of web services in china will be affected.
 Google has begun to make a big push with its Android platform, as major wireless providers
China Mobile and China Unicom have begun selling phones that run Android. If Google
quits, it will lose its new market for new products.

Therefore both Google and Chinese government realize they need each other, so some sort of
compromise will come from this in the long run. Since the people of the nation and the
education will get affected. It can improve its security level in search engines so that it cannot
be hacked again. So Google can stay in China and can provide its service on some terms and
conditions.

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FACTORS FAVOURING GOOGLES STAY IN CHINA WITH SOME OF ITS SERVICES BLOCKED:

Google in china contributes only 2% of its revenue. Leaving China will be a negligible hit
to 2010 revenue, but will be a long-term strategic issue. Shutting down China would be a
strategic loss for Google as China is one of the largest and the fastest growing online markets in
the world (already the largest in terms of Internet users.) The company’s inability to participate
in China’s growth will be seen as a long-term negative. Therefore Google can change its search
engine alone and can And it also has a wide market in Asian countries and the highest in China
where the usage internet users are increasing to a great extent. The following table shows that:

Internet Usage (millions of

World Regions % of Population
users)
Africa 54.2 5.6%

Asia 657.2 17.4%

Europe 393.4 48.9%

Middle East 45.9 23.3%

North America 251.3 74.4%

Latin America and the Caribbean 173.6 29.9%

Australia 20.8 60.4%

Total 1,596.3 23.8%

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 The above table shows clearly that Google has its controversies only with the services
like Search Engine, YouTube, and Blogger remain unaffected with the other products they offer.
Google Leaving china for few of its controversial service is Unfair. Therefore it can stay in China
with some of its services alone blocked.

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