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Collaboration Between Google and China Mobile Company

Project presentation

Google is today the leading technology and innovation company and has the biggest search engine in the world. The company was started in 1998 by Sergey Brin and Larry page that made an investment capital of $ 100,000. The company traded its shares in 2004 marking as the stepping stone towards the company’s success (Fox 2010). By the year 2008, Google Company had accumulated its revenue to a $21 billion mark with a net profit of an outstanding $4 billion. The two owners who are computer science graduates are today worth $6 billion (Vise 2008).

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China mobile company began its operations in 1997 and was originally known as China Telecom. The company traded its shares in the same year generating investment of $ 2.5 million. In 2004, the company added to its capital by investing $600 million into the business. In China, the company trades in over 31 provinces where it provides mobile services. The company makes its money through voice calls, text messages, and e-mail services. The company has the largest market share in China of about 67.5% and is the world-leading company in the production of digital mobile services. The company has expanded through acquisitions and mergers; it acquired Jiangsu Mobile Limited in 1997 and Shanghai, Hebei, Tianjin, and Beijing mobile companies in 2000. In 2007 the company was ranked fifth top brand in the world by Millward Brown because of its strong brand. The company set a record in China since none of the companies had achieved this over the last 10 years (Lu and Zhao 2005).

Google has a well-established brand name in the world and has the fastest and easy-to-use search engine. The company conducts over 300 million searches daily and it’s perceived to be the fastest-growing search engine globally (Vise 2008). Google Company derives a majority of its income through online marketing and it uses e-marketing as a tool to communicate, sell and deliver products to potential customers. The company does so through digital technology and other communication electronics, for example, mobile phones (Fox 2010).

The application proposed is mobile operating software which will be designed by Google Company for China Mobile company phones. The software will embed Google company’s search engine to enable mobile phone users to access Google services through their mobile phones.

The Chinese economy is one of the fastest-growing economies of the world with a steady growth rate of 10% over the last 30 years. In June 2009, internet users in China hit a 338 million mark (Hollensen 2009).

Opportunities for the sustainability of Google Company lie in the use of mobile phone services and this application aims to capture more market beyond conventional computer users in China and the world at large. Moreover, the dire need of Google Company to have its applications and search tools incorporated in mobile phones has not been that easy. This collaboration will in doubt be a major strategic plan towards the company achieving its goals.

Context

According to Cardoso and Castells (2007), network society refers to the political, social, cultural, and economic changes as a result of the extent of a certain network, communication advancement, or digitalized technology. Wakefield, McNally, and Mayne (2007) moreover, stated that mobile technology advancements, in particular, allow us to communicate and share information with ease. Hassan (2004) observed that the use of smartphones has risen steadily and with this technology spreading to India and China this technology is expected to capture the global market

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Although Google Company is the leading internet provider in the world, the company faces stiff competition from other key players. The industry has low barriers to entry over the long run which may attract more competitors. To continue dominating the market, opportunities lie in a change of its business strategies. The company’s rivals and competitors in the market include Yahoo, MSN, and Baidu.com for its Chinese market among others (Fox 2010).

Baidu.com is the major competitor of Google in China. Baidu.com was started in 2000 and enjoys a market share of 63% compared to Google’s market share of 24% (Wakefield, McNally, and Mayne 2007). The growth of the company has also been hampered by new entrants in the industry and other existing internet providers hence the substitution of its services limiting opportunity for the company’s growth. Social network sites like Facebook are blocked in China, the Chinese have resulted to Renren.com which is an equivalent and this has negatively affected Google as it has resulted in a loss of its customers to the competitor. Google has also lost customers in a bid to protect its corporate image. Some companies e.g. Baidu.com has some web pages that allow access to illegal information e.g. MP3 music, something Google would not dare as a corporate responsibility to protect its reputation globally. In addition, the company’s search engines are not so powerful in accessing information in China compared to Baidu.com (Fox 2010).

Google has faced confrontations with the Chinese government over censorship laws and received a license of operation after 18 months of its launch in China. Chinese censorship of network sites has been in force since 1993 and has grown to 60 laws that the government has in force today. The laws regulate what should or should not be offered to Chinese internet users. Until 2005, Google operated in China exclusive of a censorship certificate. The company, therefore, launched Google China which had censored search results. This contributed to a loss in some of its customers as they regarded it as not worthy to continue using it under the proximities of censorship considering it was a very simple search engine (Hassan 2004).

Although Google China is located in China, its users have found it to be much slower compared to Google.com which has its servers located in the United States. This was as a result of Google China having been hosted by China Netcom which uses inferior technology. In contrast, Baidu.com operates through a different more efficient telecom allowing its users to access information at an instance hence its preference by internet users compared to Google (Vise 2008).

In China, Google china is referred to as Guge, which is difficult to pronounce and spell. In contrast, Baidu.com is much easier for the Chinese as it uses Pinyin hence its preference to Google which is spelled in English (Fox 2010). Google Company has also suffered cyber attacks on some of its accounts belonging to some humanitarian groups in China; this almost led the company to withdraw its operations in China, but the company has recently renewed its license indicating its dire need to continue its operations in China (Vise 2008).

According to Wakefield, McNally, and Mayne (2007) Mobile web refers to the use of internet application tools via the mobile phone, for example, a smartphone or laptop through an independent device, for example, modems. They also note that before 2008, internet access was through fixed lines, thereafter mobile phone use exceeded desktop computer use necessitating the use of the mobile web. Hassan (2004) observed that the mobile web has been growing tremendously from touch screen smartphones to today’s tablet touch PCs. The major challenge in the use of mobile web arises as a result of the small user interface hence a problem in an adjustment of the screen resolution and data input limitations (Cardoso and Castells 2007). There have been recent attempts to set up standards for improved technology for the mobile web to ensure more accessibility and reliability (Lu and Zhao 2005).

According to Hassan (2004), Mobile web advertisements have increased gradually during recent years, in 2007, total revenue generated from mobile web advertisements reached an outstanding $ 2.2 Billion. Google Company which derives a majority of its income through online advertising has, therefore, great potential and opportunity to take advantage of this increase to diversify its services to the mobile web.

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Tehrani (2008) described two models which are employed by companies in laying out strategies for growth, these are; BCG and Ansoff matrix models. The BCG matrix model focuses mostly on the life cycle of a company’s product and helps determine which part of a company’s product portfolio should be given more priority. This ensures that a company focuses on producing those products which will ensure a high growth rate. This ensures that a company captures a majority of the market share and hence a fast growth in its products.

Ansoff’s matrix model is concerned with the market and product development. Market diversification and market penetration of new and existing markets also form part of the matrix model. Market penetration of either a new or existing market entails carrying out persuasive measures to retain existing customers or attract new ones. Product development and diversification focus on the production of products and services tailored for a specific market segment.

Product development refers to the process of coming up with new improved and innovated merchandise in the market. Two paths can be followed when introducing a new product in the market. These include; coming up with an idea, design, and engineering of the product. The other path involves; researching the market and analysis of the market thereafter. This product follows the first path in the process of its development.

Market development is the strategy of creating more customers either in a new or an existing market. The product under review is targeted at potential customers in existing and new markets.

Diversification strategy aims at increasing the market and products of an existing company. It entails a company entering into new lines of production which are diverse from the current ones.

Rainey (2010) stated that strategic alliance is one of strategy that a business uses to achieve growth and ensure its suitability, feasibility, acceptability, and sustainability in the market. It involves more than one independent company agreeing to pursue the same objectives. The main aim of a strategic alliance is to ensure synergy, whereby each partner perceives to achieve more benefits as compared to personal efforts. This partnership involves sharing of risks, specialization, and exchange of skills and technical know-how.

Tehrani (2008) added that companies entering into a strategic alliance must pass some stages, are; development of the strategy-this involves lying out of the objectives and assessing the feasibility and sustainability of the alliance. Assessment of the partner-this involves an analysis of the weakness and strengths of the partner and assessment of his strategies to ensure they have similar objectives. Negotiation of the contract- this involves laying out the criteria under which the partnership will operate. Operation of the alliance-this involves laying out and combining resources devoted to the alliance. Once the objectives are achieved the partnering companies may terminate the alliance relocating the resources elsewhere.

When choosing a partner to enter into a strategic alliance with, a company should consider the following; depth and breadth-the partner should have experience in his operations and have a wide customer share in the market, a capital-the partner should have a rich financial base, technological level-the partner company should have similar technological knowhow (Rainey 2010).

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Google Company and China mobile company will enter into a strategic alliance in this new product development.

Project design

Target

According to Eric Schmidt, the CEO of Google, the company’s long-term strategy is to be the leading internet provider in China (Vise 2008), the company can achieve this through a partnership with China Mobile Company to capture a wider market share in China. According to Cardoso and Castells (2007), China’s rampant economic growth has increased the use of mobile phones and other technological devices and has about 520 million users of cell phones. They also observed that by the end of this year, this number is expected to reach 600 million. China mobile Company is reported to have made a net profit of £3.4bn in 2008 and has grown significantly since then indicating the extent of mobile users in China.

China has a population of over I.3 billion; the country has 22 provinces and 4 municipalities namely: Beijing, Chongqing, Shanghai, and Tianjin. In its strategies for growth, China Mobile Company acquired Tianjin, Shanghai, and Beijing Mobile companies to enjoy economies of Scale. These companies are located in the three big municipalities’ of the extensive country and the strategic alliance between Google Company and China Mobile Company will boost the new product to access all regions of the country. Moreover, China has a good diplomatic rapport with most countries and allows free trade with other countries. The absence of political differences between the US and China will boost new market development of the new product across the country’s boundaries hence reaching all Chinese citizens.

Since the metropolitan market of China is saturated, opportunities lie with the rural Chinese residents which will be the main market target for this product development.

Collaboration

Wakefield, McNally, and Mayne (2007) stated that all mobile phones have similar basic components; manufacturers, however, attempt to differentiate their mobile phones from those of their rivals and competitors in the market through value addition of features to attract more customers.

In this collaboration, Google Company will develop the mobile operating software while China mobile company will use this software as an operating system for its smartphones. Google Company will modify an operating system that supports a wide range of services par with current technology and customer needs. The operating system will be modified to provide users with games and a wide range of Google applications tools including; Adwords, Google calendars, social network sites, Google messages, Google maps, Translator, Google shopper, Mp3, Mp4, e-mail, Wi-Fi, and 4G internets connectivity. 4G connectivity will ensure speed in the use of the mobile web. The operating system will be able to establish Java ME and SE standards to ensure compatibility across all platforms and use with different screen resolutions. This will also allow users to access all available pages on the web, for example, PDF files. The operating system will also be designed to support the use of Bluetooth which is important in the exchange of information and use of hands-free services tool. The operating system will also be modified to allow mobile phone users to charge their handsets using USB cables as an alternative to battery chargers to enhance convenience.

To avoid problems of screen resolution adjustment, the operating system will be designed with the ability to use a big screen output system to allow users to view graphics and texts with ease. The application will also allow multitasking of applications to enable users to perform more than one task at a time. The two companies will also ensure that the application allows the flexibility of users in navigating the window by use of a computer-like pointer.

Additional features will, however, depend on the target market.

Advantages of the collaboration

Diversification is one of the marketing strategies as described by Ansoff’s model. For diversification to take effect, a company must acquire new techniques, facilities, and skills. As a result of this diversification, Google company will increase its revenue as a result of trading the new product and access to new market segments.

Google is a foreign company and has found difficulties in establishing itself in China. The strategic alliance between the company and China mobile company will allow it to overcome such geographical differences.

The exchange of information between these two companies will allow Google company gain more information on the business environment in China which the company can utilize in the other units of its business operations in China.

Adwords is the marketing tool of Google Company. Advertisers create keywords for their products and bid for advertising space on this application. This marks the highest source of income for the company. In addition to Google’s use of Adwords as an online marketing tool, the company also uses the tool to carry out its promotional campaigns. Several links are available on this tool whereby upon click, they direct the user to the company’s services. The incorporation of Adwords as an application in the operating system will allow more access to Google services and resultant market development for its services. This will in turn encourage more advertisers into the company hence higher revenue for the company.

4G internet connectivity will enhance fast access to the internet and will add value to China Mobile company’s phones which have been using 2G connectivity. This will create more market for their mobile phones and in return increase the users of Google services.

The strategic alliance between the two companies will allow specialization, each company concentrating on what it can produce best and at a lower cost. This will reduce production cost hence a lower cost for the final product.

Outcome

Hollensen (2009) stated that for a company to compete effectively in the global market a company must have a huge capital outlay. A company, therefore, takes advantage of forming a partnership with other companies to share costs by merging their resources. This ensures faster growth of a company in its global market. Hollensen adds that technology and consumer needs are changing at a fast rate, to keep pace with this, a company partners with another as a global strategy towards its feasibility, suitability, and accessibility in the market. This also enables partnering companies to combine customer preferences from different parts ensuring customer satisfaction regardless of the location of production.

The strategic alliance between Google and China Mobile Company in new product development will doubtfully be a feasible, acceptable, suitable, and sustainable marketing strategy in the Chinese market. The collaboration will ensure specialization as each company will focus on the production of what it can produce best and at a lower cost thereby saving on production cost. This will in return result in a more affordable handset in the market and resultant higher use of Google services. The collaboration will also allow the companies to exchange information in a bid to understand the market. This will in return allow the companies to understand their weaknesses and strengths which will be a remedy towards the company’s success in the unforeseeable future.

The outcome of the strategic alliance between Google and China Mobile Company will therefore be a modern smartphone par with changing technology and customer needs. The product developed will allow conventional users and Chinese citizens living in rural areas to access Google services hence expansion of its customer base. China mobile company will in return get more market for its mobile phones and build on its image to its publics.

References

Cardoso, G & Castells, M 2007, The Media in the Network Society: Browsing, News, Filters and Citizenship, Lulu.com and CIES-ISCTE, Lisboa.

Fox, V 2010, Marketing in the Age of Google: Your Online Strategy Is Your Business Strategy, Wiley, San Francisco.

Hassan, R 2004, Media, Politics and the Network Society, Open University Press, Buckingham.

Hollensen, S 2009, Essentials of Global Marketing, Prentice Hall, London.

Lu, X & Zhao, W 2005, Networking and Mobile Computing, Springer, New Mexico.

Rainey, D 2010, Sustainable Business Development: Inventing the Future through Strategy, Innovation, and Leadership, Cambridge University Press, London.

Tehrani, N 2008, Contemporary Marketing Mix For The Digital Era, Author House, Indiana.

Vise, D 2008, The Google Story: For Google’s 10th Birthday, Delta, Brooklyn.

Wakefield, T, McNally, D & Mayne, A 2007, Introduction to Mobile Communications: Technology, Services, Markets (Informa Telecoms & Media), Auerbach Publications, New York.

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