Yahoo! HK’s Dilemma
The globalization of business has created opportunities in marketing that had been
unimaginable just a decade ago. U.S. based brick and mortar industries such as fast food restaurants and other hospitality related entities, and architectural and consulting firms (such as the McKenzie Group), are now firmly entrenched in foreign countries and many are well in to the marketing implementation stage (the advanced level of the marketing plan) (Kotler & Keller, 2007, pp.340-341). The companies that are leading the transformation of civilization itself, however, the information technology firms such as Microsoft, Goggle and Yahoo!, have been making particularly significant strides in staking out a claim in emerging and developing countries (Friedman, 2006, pp. 86-92).
One company in particular, Yahoo! HK (the China arm of Yahoo!’s main U.S. office) , entered the Chinese market about a decade ago and in recent years has begun a significant expansion in to this, the fastest growing consumer market in the world. But with this promising relationship with the Chinese government has come consequences not initially expected in a country that has shown signs of making promising movements toward human rights reforms in this post-Tiananmen Square era. Most recently, Yahoo! was put in the untenable position of having to identify outspoken Chinese journalists who had used the Internet Service Provider as a main tool of propaganda to denounce the lingering draconian elements of the government. Because of its business relationship with the government, the company was left with no choice but to do this. The result was that the journalists were arrested and Yahoo! HK (visa v the main U.S. office) took a major public relations hit domestically (Kirchgaessner, 2007).
This paper will discuss the history of the controversy surrounding China’s human rights’ position; it will provide a review of Yahoo! HK’s foray into the Chinese market, and lastly there will be an assessing of the consequences and international marketing implications derived from the critical incident of China’s arrest of the journalists using Yahoo! HK as a culpable source.
China, Human Rights and Yahoo! HK’s Consequence for Marketing Success There
During the first term of the Clinton administration in the early 1990s, there had
been considerable controversy over whether China should have been awarded MFN
(Most Favored Nation) trade status. This coveted status helped expedite the facilitating of policy and administrative provisions necessary to provide a country maximum latitude in receiving tax breaks and other benefits when it came to engaging in trade with the United States. A factor that weighed heavily in China obtaining this economic trade designation was that its leaders were making ardent overtures that the country was making progress on human rights reforms (A Corporate Struggle to do the Right Thing in China, 2007).
Historically, the modern Chinese era has been filled with reports about its government being a repressive regime that dealt harshly with dissent of its policies. These reports date back beyond modern history but most notable have these conditions become part of the Chinese culture’s makeup is in its embracing of communism during the early part of the 20th century. This political choice (and its allegiance to what would come to be known as the Soviet Union) led China in to being very much a key player in the Cold War that existed up until the early 1980s (a time that marked the official fall of communism in the form it had been practiced).
One of China’s darkest moments in modern history in regards to being a politically repressive regime was in the 1980 Tiananmen Square incident in Beijing. It has been reported that thousands of students protesting the government’s anti-democratic practices were killed by soldiers. It is often referred to as the Tiananmen Square Massacre. The incident continues to linger as the most vivid reminder of the extents to which China is willing to go to maintain control of its people; is also emblematic of the country’s continued ties to the darker side of communism.
Inversely, modern communism did officially fall in the early 1980s, and the Soviet Union officially dissolved at that time. The Chinese government, however, did not fully relent. The leadership ranks continued to be heavily populated by unrepentant communists who were determined to not allow western influence to change what it considered its intrinsic national identity—that of a state run government system. What did change, however, (or soften) was the position these leaders took when it came to doing business with western nations.
As the computer and digital technological revolutions took root in the 1980s and 1990s, both Russia and China began to make overtures to western nations that they were interested in developing some degree of business relationship in these areas. China particularly had stepped up investment in research and education in computer technology.
What China had not done, however, was to fully address what western countries considered to be human rights abuses.
It is important to make clear that the crux of the discussion about human rights is one involving semantics; that is, China views its hardnosed scrutiny of dissenters in the paternalistic context of doing what it believes is for the betterment of its people (i.e. the classic communist model that self determination of the nation is best left in the hands of the “all knowing and all wise” government leaders, and not the workers). Conversely, western views on human rights abuses are built upon tenets that are derived from a pluralistic (democratic) framework and are outlined in some of the tenets of the watchdog group Amnesty International’s definition of human rights abuses…
• Overt social policies or direct actions and conditions that suppress dissent about government conduct.
• Having a limited (or no) free press.
• Having a political culture that is unwilling to allow open scrutiny of human rights by the world community.
To the latter point, it was only until the early 1990s when China began lobbying in earnest for MFN that it had begun to allow western scrutiny of its human rights record. Even then, it would periodically revert back to its paternalistic position as being the rationale for questionable practices in this area.
China, in fact, did prevail, and did win MFN status. In concert with this development, major industries such as the automotive, fast food (hospitality), and computer technology industries engaged a full court press to enter the Chinese market.
Enter: Yahoo! HK
It was President Bill Clinton in 2000 in the final year of his last term where it was noted him saying: “There is no question China has been trying to crack down on the internet….Good luck. That’s sort of like trying to nail Jell-O to the wall.”
This statement was precipitated from concerns even then that, despite having received MFN status (and, subsequently, equivalent versions of international trade relationships with other western countries), China was still given to keep a heavy hand on those who spoke out to the world community about policies they disagreed with. And it apparently (and rightly) recognized the internet as being the most progressive and effective vehicle to help dissenters accomplish this.
It was also at this time that Yahoo! HK had launched a major aggressive campaign to beat rivals Goggle and Microsoft at capturing this market; a market that is worth multi-billion dollars of potential revenue due to its huge population and that population’s hunger for western media technology (both in functional form and entertainment form).
The years following China’s earning of MFN status saw significant growth in business for Yahoo! HK. Conversely, internet use in China tripled between 1990 and 2000. And the fastest growing demographic of users was the Millennial Generation, those born between 1980 and 1985 that are intuitively tech savvy. When Yahoo! HK’s competitor, Goggle, introduced the media marvel, YouTube, as one of its offerings, the online tool became an immediate hit in China.
It was the Millennial Generation that became one of the strongest voices for political reform in China. Empowered by the internet, those of this demographic group and their bolstered in numbers by their predecessors, Generation Xers (those born between 1970 and 1975 who have actual “on-the-scene” memory of the Tiananmen Square Massacre and may have lost family members and friends in the incident), a pro-democracy political movement has taken on a life of its own via the internet’s availability.
But as these circumstances developed, there were other developments occurring in lockstep that were designed to counter the higher ideals of this movement.
The presence of internet companies in China was serving as a powerful inspiration for the creation of many local internet operations that had begun custom fitting the technology to meet cultural and social needs. One company that emulated Google's YouTube by offering online video hosting was found being required by the government to scrutinize every submission it received for anti-government content.
This condition became the status quo in a very short time following the emergence of widespread internet use resulting from Yahoo! HK and Google’s presence in China.
One entrepreneur said his internet service provider was required by the government to screen every submission and needed to take particular care in watching out for content that promoted independence for Taiwan or Tibet and for mention of the Tiananmen incident. “We know not to let anything on the site about ‘The Three Ts’,” the business owner said.
Other examples of how these dynamics are continuing to play themselves out today…
• Local arms of the State Council Information Office or the Communist party's shadowy propaganda department frequently contact internet companies with more detailed guidance on what is permissible or with orders for the removal of objectionable content already online. "They usually call pretty often to say what information cannot be distributed, or to point out information that violates the government's rules," says a manager at another video hosting site.
• The same approach is taken with blog services, discussion boards and even online fantasy games, where company "game masters" must watch for any discussion of banned political topics between characters playing warriors, mages or monsters. Surveillance extends to internet cafes, with authorities pushing operators to keep watch on customers' activities by using technology that records their every key stroke.
• The penalties for breaking the deliberately vague boundaries set by the censors vary greatly. An online game player who discusses a recent public protest is likely to receive no more than a warning from his game master or at worst see his avatar sentenced to a few hours in a virtual prison. Blog posters have their blogs disabled and discussion board contributors see their posts deleted. The authorities sometimes order the dismissal of managers and editors of internet portals that let suspect content through.
• Controls are tightened around the sensitive anniversaries of incidents - such as June 4 for the Tiananmen crackdown - and political events including the recent congress of the Communist party. In a show of force ahead of the five-yearly congress, authorities ordered whole internet data centers to shut, abruptly forcing thousands of their customers' websites offline.
• Censors can also call on more traditional tools of authoritarian rule. Web users who persist in posting highly sensitive views or information can expect a visit from the police or the state security agency. Dozens of people are in detention around China because of political writings they distributed online. Shi Tao [one of the Yahoo email users who were the focus of the Yahoo! HK controversy] was jailed for 10 years in 2005 for forwarding information about June 4 internet news controls to an overseas website. (Dickie, 2007 [November 13])
The consequence of this overt type of censoring is that China’s internet users (now estimated to be 162 million strong) are increasingly unlikely “to be exposed to anything the state might consider politically dangerous” (Dickie, 2007).
Worth noting, however, is that to some degree this censorship has been quite effective (ironically so, in fact) in continuing the Chinese government’s efforts to show itself as a reformed, more moderate entity in the post-Tiananmen era.
Professor Zhang Junhua of Zhejiang University pointed out that the country’s communist leaders have been successful in creating “a ‘collective memory’ among young people that means the official versions of events such as the Tiananmen Square crackdown go largely unchallenged.” Chinese bloggers who tend to have political leanings in their content routinely engage in being proactive in censoring their work without making much of a fuss, said Junhua. It is this deference to the government’s wishes that creates the impression that there is some degree of stability in the government, even where there is dissent. And given the government’s desire to continue fostering lucrative business relationships with foreigners, this impression is not an unwanted one (Dickie, 2007 [November 13]).
It is important to note as well that Yahoo! HK’s cooperation in providing evidence against the journalists who were using the site as an instrument to espouse anti-government content—and when viewed from the larger, existing culture of internet users routinely complying with the government’s requirement—was not really as egregious a “crime” as was made out to be by the western media. In fact, when viewed from the context of being a foreign company that was existing within the required parameters outlined by the host country, Yahoo! HK did exactly what it was supposed to do. The company was complying with a 2006 law that required internet service providers to keep a record of the online activity of all their users - including log-in names, passwords and every website visited - for at least two months (and more, at the government’s discretion). And this information, at any time, could be called upon to be turned over to the government (Dickie, 2007 [November 2 & November 13]; The China premium, 2007).
Rules of the road. Yahoo! HK’s entrance in to China followed the classic requirements of a western company entering a foreign market. According to Kotler and Keller (2007), there are five decisions that a company should address when considering entering a foreign market:
• Deciding whether to go abroad-This seems like a basic, even simple, decision to make but it is not. One important caveat here is that the company has enough self-insight, enough understanding about its own culture, to make the most accurate assessment to determine if its culture can stand the disruption that can occur when entering a foreign market. [For Yahoo! HK, the decision to go to China was part of the long term plan of the mother company to extend its reach globally. Going to China had always been part of both its business and marketing plan.]
• Deciding which markets to enter-The most dangerous decision a company can make when deciding to go global is to enter the wrong market. Close scrutiny of not only the potential customer base has to be conducted, but also close scrutiny of political and cultural conditions that could be in flux and that could have some influence on the business climate. [Yahoo! had assigned early on representatives from its legal and international business factions to monitor progress on the MFN deliberations that took place in Washington and in Beijing the 1990s.]
• Deciding how to enter the market-This requires much research and delicate diplomacy. Ideally, any foray into a foreign market must be facilitated with, not only the local government’s cooperation, but also some partnering with a local business (or two). [Early on, Yahoo! HK cultivated a community of entrepreneurial relationships whereby its technology was franchised into the form of local internet service providers.]
• Deciding on the marketing program-It is at this stage that the aforementioned business relationships that have been formed then morph into collaborative initiatives that will determine how to move the product or service to the consumer most likely to purchase it. [Yahoo! HK depended on this mapping out of strategy to come forth from those “on the ground” who were close to the potential customers.] (pp. 332-337) (Pande; Neuman & Cavanaugh, 2000, pp. 33-34)
Yahoo! HK spent years cultivating business relationships with government officials and local business leaders prior to entering that market. And it brought with it a clearly defined position of goodwill that sought to strike a balance between being able to turn a profit and with being a support tool for helping China refine and enhance its foray into being a more pro-democratic regime.
In this sense, the company faced a challenge that every U.S. company has faced from the time the first initiatives were undertaken to build business relationships with companies outside of its borders (Cort, Griffith, & White, 2007; Nelson & Paek, 2007; Marketing, 1995; Robbins, 2005, 99. 17-20). [It is important to note that, as this matter regarding China is being reviewed, the U.S. continues to have a close and quite profitable business relationship with the country of Canada. This despite the fact that, during the U.S. frontier years a decisive war was fought with Canada, and in these more recent times Canada has been an outspoken critic of U.S. policy in Iraq and in the War on Terror. Somehow, though, the two countries have continued to find and nurture common ground upon which to maintain their business relationship.]
The complexities of engaging this delicate balance of commerce initiatives within the confines of sociopolitical tensions is aptly noted in the following observations made by one analyst:
While Beijing's censorship methods are broad-based and multi- layered, its
success in part depends on not trying to control too much. The internet remains
by far China's freest public media space. Online discussion can have important
social and political consequences, as when the controversy over the killing of
a migrant in 2003 led to the scrapping of rules that allowed police to detain
vagrants at will.
The party long since gave up any attempt at the kind of total ideological
thought control sought by Mao Zedong after the 1949 revolution. Relative
cultural freedom is seen as a way to keep the population happy and entertained.
Limited and positive public "supervision" of government work is welcome
(Dickie, 2007 [November 13]).
Ultimately this means that companies entering the Chinese market should not expect to experience anything different from other companies are already experiencing; that is, they should expect that the government is going to scrutinize its activities closely. Yet, the company should also be on notice that Beijing is very much interested in doing business, and is willing to modify its more hard line approach just for this reason (E-Hinterland: Technology in China and India, 2007; For all the PCs in China , 2007).
Final Thoughts and Observations
From the onset, it was risky for U.S. companies to begin a major expansion in to a
country that was still clearly having socio-political instability that ran counter to the pro-democracy tenets the companies were bringing with them. Yes, it was risky, but in the long run it will be worth it. There have been major unfortunate breakdowns in the domestic U.S. business environment (i.e. a national government that is losing credibility for being competent; grid lock in policymaking that would be able to fast track the population toward educational preparation for knowledge economy participation) that make international markets the only hope for survival. Essentially, this means that business leaders and policymakers are going to have to support expansion efforts in to these markets while also learning to be more effective in making a case for democratic principles as a tool for economic success in these markets.
This is not something that can be done now, however. This will have to be one of
the top To Do items on the list of the new presidential administration that takes office in 2008. While Iraq and Iran will certainly need immediate attention, creating an effective model of economic expansion in to foreign markets that will strongly persuade countries doing business with us to respect our commitment to human rights should be just as important.
Meanwhile, Yahoo! HK should become a case study for such policy making in both the public and private sectors. There are numerous lessons to learn from this tragic turn of events and those lessons should be derived quickly, while the wounds are still open and painful (Woods & King, 2002, pp 19-23).
Post script: Reflections. For this writer, analyzing these developments in the Yahoo! HK incident brought back some powerful memories. As an editor for a local newspaper during the 1990s, the writer wrote extensively about issues relative to MFN (Most Favored Nation) and NAFTA (the North American Free Trade Agreement). At the time, gaining clear and accurate information about trade issues from secondary sources was difficult because there was great momentum in the majority media for passage of both of these legislations. Adding strength to this momentum was a presidential administration that saw as its legacy the expansion of American business (particularly its technological businesses) into foreign markets as essential to positioning the country for keeping its leadership role as a super powered nation.
What could not have been foreseen, of course, was the enormous economic and sociopolitical devastation that came about as a result of the global-wide war on terrorism that was launched after the September 11, 2001 attacks on the continental United States.
No one country has been spared experiencing to some extent the shock to its economy as a result of this war. Oil prices are affected as is general confidence in national leaders. What seems to continue to be a common thread clung to by all, however, is that of fostering closer business relationships with other countries. It was, in fact, the lure of establishing amicable trade relations with the U.S. that prompted Moammar Khadifi of Libya to stand down from his pro-terrorist position. The same can be said about the former Soviet Union, although it continues to saber rattle on occasions when it considers the U.S. is being to heavy handed in its approach to pushing its pro-democracy position on countries it has ties with (Iran, for instance).
It would be an inaccuracy to label this common thread as something as simplistic as these countries simply beginning to be swayed toward democratic positions. The writer believes this is far from the case. If anything, the visceral response toward the U.S. regarding its invasion and subsequent occupation of Iraq, and the resulting quagmire it continues to be, is evidence there is stark departure from walking lockstep with some aspects of U.S. policy. No, rather this common thread seems to be that these countries seem increasingly capable of functioning at a critical thinking level whereby, on the one hand it fully intends to keep its identity and the core tenets of its political philosophy, but on the other hand, it can and will modify some of those tenets in exchange for having access to American consumers as customers and obtaining American products and services for its citizens. Rather than a quid pro quo, however, this seems more of Survival 101 in the world of geopolitics in the early 21st century. If it had to be summed succinctly and neatly, this, in essence, is what Beijing is doing in its convoluted commerce dance with U.S. companies doing business there.
What is being considered here is not a new supposition. Journalist Thomas Friedman has written about this eventuality extensively in his column in the New York Times. He has also chronicled it in two books. For this writer, though, it is most important that this reality has finally fully sunk in on him. As an educator-writer-publisher, understanding this important emergence into the sociopolitical culture will be immensely useful in helping others to prepare themselves for how best to capitalize on these developments for the improvement of one’s quality of life, and that of the community one lives and serves.
References
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unimaginable just a decade ago. U.S. based brick and mortar industries such as fast food restaurants and other hospitality related entities, and architectural and consulting firms (such as the McKenzie Group), are now firmly entrenched in foreign countries and many are well in to the marketing implementation stage (the advanced level of the marketing plan) (Kotler & Keller, 2007, pp.340-341). The companies that are leading the transformation of civilization itself, however, the information technology firms such as Microsoft, Goggle and Yahoo!, have been making particularly significant strides in staking out a claim in emerging and developing countries (Friedman, 2006, pp. 86-92).
One company in particular, Yahoo! HK (the China arm of Yahoo!’s main U.S. office) , entered the Chinese market about a decade ago and in recent years has begun a significant expansion in to this, the fastest growing consumer market in the world. But with this promising relationship with the Chinese government has come consequences not initially expected in a country that has shown signs of making promising movements toward human rights reforms in this post-Tiananmen Square era. Most recently, Yahoo! was put in the untenable position of having to identify outspoken Chinese journalists who had used the Internet Service Provider as a main tool of propaganda to denounce the lingering draconian elements of the government. Because of its business relationship with the government, the company was left with no choice but to do this. The result was that the journalists were arrested and Yahoo! HK (visa v the main U.S. office) took a major public relations hit domestically (Kirchgaessner, 2007).
This paper will discuss the history of the controversy surrounding China’s human rights’ position; it will provide a review of Yahoo! HK’s foray into the Chinese market, and lastly there will be an assessing of the consequences and international marketing implications derived from the critical incident of China’s arrest of the journalists using Yahoo! HK as a culpable source.
China, Human Rights and Yahoo! HK’s Consequence for Marketing Success There
During the first term of the Clinton administration in the early 1990s, there had
been considerable controversy over whether China should have been awarded MFN
(Most Favored Nation) trade status. This coveted status helped expedite the facilitating of policy and administrative provisions necessary to provide a country maximum latitude in receiving tax breaks and other benefits when it came to engaging in trade with the United States. A factor that weighed heavily in China obtaining this economic trade designation was that its leaders were making ardent overtures that the country was making progress on human rights reforms (A Corporate Struggle to do the Right Thing in China, 2007).
Historically, the modern Chinese era has been filled with reports about its government being a repressive regime that dealt harshly with dissent of its policies. These reports date back beyond modern history but most notable have these conditions become part of the Chinese culture’s makeup is in its embracing of communism during the early part of the 20th century. This political choice (and its allegiance to what would come to be known as the Soviet Union) led China in to being very much a key player in the Cold War that existed up until the early 1980s (a time that marked the official fall of communism in the form it had been practiced).
One of China’s darkest moments in modern history in regards to being a politically repressive regime was in the 1980 Tiananmen Square incident in Beijing. It has been reported that thousands of students protesting the government’s anti-democratic practices were killed by soldiers. It is often referred to as the Tiananmen Square Massacre. The incident continues to linger as the most vivid reminder of the extents to which China is willing to go to maintain control of its people; is also emblematic of the country’s continued ties to the darker side of communism.
Inversely, modern communism did officially fall in the early 1980s, and the Soviet Union officially dissolved at that time. The Chinese government, however, did not fully relent. The leadership ranks continued to be heavily populated by unrepentant communists who were determined to not allow western influence to change what it considered its intrinsic national identity—that of a state run government system. What did change, however, (or soften) was the position these leaders took when it came to doing business with western nations.
As the computer and digital technological revolutions took root in the 1980s and 1990s, both Russia and China began to make overtures to western nations that they were interested in developing some degree of business relationship in these areas. China particularly had stepped up investment in research and education in computer technology.
What China had not done, however, was to fully address what western countries considered to be human rights abuses.
It is important to make clear that the crux of the discussion about human rights is one involving semantics; that is, China views its hardnosed scrutiny of dissenters in the paternalistic context of doing what it believes is for the betterment of its people (i.e. the classic communist model that self determination of the nation is best left in the hands of the “all knowing and all wise” government leaders, and not the workers). Conversely, western views on human rights abuses are built upon tenets that are derived from a pluralistic (democratic) framework and are outlined in some of the tenets of the watchdog group Amnesty International’s definition of human rights abuses…
• Overt social policies or direct actions and conditions that suppress dissent about government conduct.
• Having a limited (or no) free press.
• Having a political culture that is unwilling to allow open scrutiny of human rights by the world community.
To the latter point, it was only until the early 1990s when China began lobbying in earnest for MFN that it had begun to allow western scrutiny of its human rights record. Even then, it would periodically revert back to its paternalistic position as being the rationale for questionable practices in this area.
China, in fact, did prevail, and did win MFN status. In concert with this development, major industries such as the automotive, fast food (hospitality), and computer technology industries engaged a full court press to enter the Chinese market.
Enter: Yahoo! HK
It was President Bill Clinton in 2000 in the final year of his last term where it was noted him saying: “There is no question China has been trying to crack down on the internet….Good luck. That’s sort of like trying to nail Jell-O to the wall.”
This statement was precipitated from concerns even then that, despite having received MFN status (and, subsequently, equivalent versions of international trade relationships with other western countries), China was still given to keep a heavy hand on those who spoke out to the world community about policies they disagreed with. And it apparently (and rightly) recognized the internet as being the most progressive and effective vehicle to help dissenters accomplish this.
It was also at this time that Yahoo! HK had launched a major aggressive campaign to beat rivals Goggle and Microsoft at capturing this market; a market that is worth multi-billion dollars of potential revenue due to its huge population and that population’s hunger for western media technology (both in functional form and entertainment form).
The years following China’s earning of MFN status saw significant growth in business for Yahoo! HK. Conversely, internet use in China tripled between 1990 and 2000. And the fastest growing demographic of users was the Millennial Generation, those born between 1980 and 1985 that are intuitively tech savvy. When Yahoo! HK’s competitor, Goggle, introduced the media marvel, YouTube, as one of its offerings, the online tool became an immediate hit in China.
It was the Millennial Generation that became one of the strongest voices for political reform in China. Empowered by the internet, those of this demographic group and their bolstered in numbers by their predecessors, Generation Xers (those born between 1970 and 1975 who have actual “on-the-scene” memory of the Tiananmen Square Massacre and may have lost family members and friends in the incident), a pro-democracy political movement has taken on a life of its own via the internet’s availability.
But as these circumstances developed, there were other developments occurring in lockstep that were designed to counter the higher ideals of this movement.
The presence of internet companies in China was serving as a powerful inspiration for the creation of many local internet operations that had begun custom fitting the technology to meet cultural and social needs. One company that emulated Google's YouTube by offering online video hosting was found being required by the government to scrutinize every submission it received for anti-government content.
This condition became the status quo in a very short time following the emergence of widespread internet use resulting from Yahoo! HK and Google’s presence in China.
One entrepreneur said his internet service provider was required by the government to screen every submission and needed to take particular care in watching out for content that promoted independence for Taiwan or Tibet and for mention of the Tiananmen incident. “We know not to let anything on the site about ‘The Three Ts’,” the business owner said.
Other examples of how these dynamics are continuing to play themselves out today…
• Local arms of the State Council Information Office or the Communist party's shadowy propaganda department frequently contact internet companies with more detailed guidance on what is permissible or with orders for the removal of objectionable content already online. "They usually call pretty often to say what information cannot be distributed, or to point out information that violates the government's rules," says a manager at another video hosting site.
• The same approach is taken with blog services, discussion boards and even online fantasy games, where company "game masters" must watch for any discussion of banned political topics between characters playing warriors, mages or monsters. Surveillance extends to internet cafes, with authorities pushing operators to keep watch on customers' activities by using technology that records their every key stroke.
• The penalties for breaking the deliberately vague boundaries set by the censors vary greatly. An online game player who discusses a recent public protest is likely to receive no more than a warning from his game master or at worst see his avatar sentenced to a few hours in a virtual prison. Blog posters have their blogs disabled and discussion board contributors see their posts deleted. The authorities sometimes order the dismissal of managers and editors of internet portals that let suspect content through.
• Controls are tightened around the sensitive anniversaries of incidents - such as June 4 for the Tiananmen crackdown - and political events including the recent congress of the Communist party. In a show of force ahead of the five-yearly congress, authorities ordered whole internet data centers to shut, abruptly forcing thousands of their customers' websites offline.
• Censors can also call on more traditional tools of authoritarian rule. Web users who persist in posting highly sensitive views or information can expect a visit from the police or the state security agency. Dozens of people are in detention around China because of political writings they distributed online. Shi Tao [one of the Yahoo email users who were the focus of the Yahoo! HK controversy] was jailed for 10 years in 2005 for forwarding information about June 4 internet news controls to an overseas website. (Dickie, 2007 [November 13])
The consequence of this overt type of censoring is that China’s internet users (now estimated to be 162 million strong) are increasingly unlikely “to be exposed to anything the state might consider politically dangerous” (Dickie, 2007).
Worth noting, however, is that to some degree this censorship has been quite effective (ironically so, in fact) in continuing the Chinese government’s efforts to show itself as a reformed, more moderate entity in the post-Tiananmen era.
Professor Zhang Junhua of Zhejiang University pointed out that the country’s communist leaders have been successful in creating “a ‘collective memory’ among young people that means the official versions of events such as the Tiananmen Square crackdown go largely unchallenged.” Chinese bloggers who tend to have political leanings in their content routinely engage in being proactive in censoring their work without making much of a fuss, said Junhua. It is this deference to the government’s wishes that creates the impression that there is some degree of stability in the government, even where there is dissent. And given the government’s desire to continue fostering lucrative business relationships with foreigners, this impression is not an unwanted one (Dickie, 2007 [November 13]).
It is important to note as well that Yahoo! HK’s cooperation in providing evidence against the journalists who were using the site as an instrument to espouse anti-government content—and when viewed from the larger, existing culture of internet users routinely complying with the government’s requirement—was not really as egregious a “crime” as was made out to be by the western media. In fact, when viewed from the context of being a foreign company that was existing within the required parameters outlined by the host country, Yahoo! HK did exactly what it was supposed to do. The company was complying with a 2006 law that required internet service providers to keep a record of the online activity of all their users - including log-in names, passwords and every website visited - for at least two months (and more, at the government’s discretion). And this information, at any time, could be called upon to be turned over to the government (Dickie, 2007 [November 2 & November 13]; The China premium, 2007).
Rules of the road. Yahoo! HK’s entrance in to China followed the classic requirements of a western company entering a foreign market. According to Kotler and Keller (2007), there are five decisions that a company should address when considering entering a foreign market:
• Deciding whether to go abroad-This seems like a basic, even simple, decision to make but it is not. One important caveat here is that the company has enough self-insight, enough understanding about its own culture, to make the most accurate assessment to determine if its culture can stand the disruption that can occur when entering a foreign market. [For Yahoo! HK, the decision to go to China was part of the long term plan of the mother company to extend its reach globally. Going to China had always been part of both its business and marketing plan.]
• Deciding which markets to enter-The most dangerous decision a company can make when deciding to go global is to enter the wrong market. Close scrutiny of not only the potential customer base has to be conducted, but also close scrutiny of political and cultural conditions that could be in flux and that could have some influence on the business climate. [Yahoo! had assigned early on representatives from its legal and international business factions to monitor progress on the MFN deliberations that took place in Washington and in Beijing the 1990s.]
• Deciding how to enter the market-This requires much research and delicate diplomacy. Ideally, any foray into a foreign market must be facilitated with, not only the local government’s cooperation, but also some partnering with a local business (or two). [Early on, Yahoo! HK cultivated a community of entrepreneurial relationships whereby its technology was franchised into the form of local internet service providers.]
• Deciding on the marketing program-It is at this stage that the aforementioned business relationships that have been formed then morph into collaborative initiatives that will determine how to move the product or service to the consumer most likely to purchase it. [Yahoo! HK depended on this mapping out of strategy to come forth from those “on the ground” who were close to the potential customers.] (pp. 332-337) (Pande; Neuman & Cavanaugh, 2000, pp. 33-34)
Yahoo! HK spent years cultivating business relationships with government officials and local business leaders prior to entering that market. And it brought with it a clearly defined position of goodwill that sought to strike a balance between being able to turn a profit and with being a support tool for helping China refine and enhance its foray into being a more pro-democratic regime.
In this sense, the company faced a challenge that every U.S. company has faced from the time the first initiatives were undertaken to build business relationships with companies outside of its borders (Cort, Griffith, & White, 2007; Nelson & Paek, 2007; Marketing, 1995; Robbins, 2005, 99. 17-20). [It is important to note that, as this matter regarding China is being reviewed, the U.S. continues to have a close and quite profitable business relationship with the country of Canada. This despite the fact that, during the U.S. frontier years a decisive war was fought with Canada, and in these more recent times Canada has been an outspoken critic of U.S. policy in Iraq and in the War on Terror. Somehow, though, the two countries have continued to find and nurture common ground upon which to maintain their business relationship.]
The complexities of engaging this delicate balance of commerce initiatives within the confines of sociopolitical tensions is aptly noted in the following observations made by one analyst:
While Beijing's censorship methods are broad-based and multi- layered, its
success in part depends on not trying to control too much. The internet remains
by far China's freest public media space. Online discussion can have important
social and political consequences, as when the controversy over the killing of
a migrant in 2003 led to the scrapping of rules that allowed police to detain
vagrants at will.
The party long since gave up any attempt at the kind of total ideological
thought control sought by Mao Zedong after the 1949 revolution. Relative
cultural freedom is seen as a way to keep the population happy and entertained.
Limited and positive public "supervision" of government work is welcome
(Dickie, 2007 [November 13]).
Ultimately this means that companies entering the Chinese market should not expect to experience anything different from other companies are already experiencing; that is, they should expect that the government is going to scrutinize its activities closely. Yet, the company should also be on notice that Beijing is very much interested in doing business, and is willing to modify its more hard line approach just for this reason (E-Hinterland: Technology in China and India, 2007; For all the PCs in China , 2007).
Final Thoughts and Observations
From the onset, it was risky for U.S. companies to begin a major expansion in to a
country that was still clearly having socio-political instability that ran counter to the pro-democracy tenets the companies were bringing with them. Yes, it was risky, but in the long run it will be worth it. There have been major unfortunate breakdowns in the domestic U.S. business environment (i.e. a national government that is losing credibility for being competent; grid lock in policymaking that would be able to fast track the population toward educational preparation for knowledge economy participation) that make international markets the only hope for survival. Essentially, this means that business leaders and policymakers are going to have to support expansion efforts in to these markets while also learning to be more effective in making a case for democratic principles as a tool for economic success in these markets.
This is not something that can be done now, however. This will have to be one of
the top To Do items on the list of the new presidential administration that takes office in 2008. While Iraq and Iran will certainly need immediate attention, creating an effective model of economic expansion in to foreign markets that will strongly persuade countries doing business with us to respect our commitment to human rights should be just as important.
Meanwhile, Yahoo! HK should become a case study for such policy making in both the public and private sectors. There are numerous lessons to learn from this tragic turn of events and those lessons should be derived quickly, while the wounds are still open and painful (Woods & King, 2002, pp 19-23).
Post script: Reflections. For this writer, analyzing these developments in the Yahoo! HK incident brought back some powerful memories. As an editor for a local newspaper during the 1990s, the writer wrote extensively about issues relative to MFN (Most Favored Nation) and NAFTA (the North American Free Trade Agreement). At the time, gaining clear and accurate information about trade issues from secondary sources was difficult because there was great momentum in the majority media for passage of both of these legislations. Adding strength to this momentum was a presidential administration that saw as its legacy the expansion of American business (particularly its technological businesses) into foreign markets as essential to positioning the country for keeping its leadership role as a super powered nation.
What could not have been foreseen, of course, was the enormous economic and sociopolitical devastation that came about as a result of the global-wide war on terrorism that was launched after the September 11, 2001 attacks on the continental United States.
No one country has been spared experiencing to some extent the shock to its economy as a result of this war. Oil prices are affected as is general confidence in national leaders. What seems to continue to be a common thread clung to by all, however, is that of fostering closer business relationships with other countries. It was, in fact, the lure of establishing amicable trade relations with the U.S. that prompted Moammar Khadifi of Libya to stand down from his pro-terrorist position. The same can be said about the former Soviet Union, although it continues to saber rattle on occasions when it considers the U.S. is being to heavy handed in its approach to pushing its pro-democracy position on countries it has ties with (Iran, for instance).
It would be an inaccuracy to label this common thread as something as simplistic as these countries simply beginning to be swayed toward democratic positions. The writer believes this is far from the case. If anything, the visceral response toward the U.S. regarding its invasion and subsequent occupation of Iraq, and the resulting quagmire it continues to be, is evidence there is stark departure from walking lockstep with some aspects of U.S. policy. No, rather this common thread seems to be that these countries seem increasingly capable of functioning at a critical thinking level whereby, on the one hand it fully intends to keep its identity and the core tenets of its political philosophy, but on the other hand, it can and will modify some of those tenets in exchange for having access to American consumers as customers and obtaining American products and services for its citizens. Rather than a quid pro quo, however, this seems more of Survival 101 in the world of geopolitics in the early 21st century. If it had to be summed succinctly and neatly, this, in essence, is what Beijing is doing in its convoluted commerce dance with U.S. companies doing business there.
What is being considered here is not a new supposition. Journalist Thomas Friedman has written about this eventuality extensively in his column in the New York Times. He has also chronicled it in two books. For this writer, though, it is most important that this reality has finally fully sunk in on him. As an educator-writer-publisher, understanding this important emergence into the sociopolitical culture will be immensely useful in helping others to prepare themselves for how best to capitalize on these developments for the improvement of one’s quality of life, and that of the community one lives and serves.
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posted by Robert McTyre Sr. at 4:45 PM
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