Since Google's recent news of security breaches and its reversal on censoring materials in China, Yahoo has come forward to say that it knew of similar security issues that originated in China. The company also said that it is aligned with Google's position on the matter. Yahoo's main partner in China, Alibaba, is calling Yahoo's public comments "reckless" and unfounded, and the Chinese government is defending its position and denying responsibility for the breaches. Nonetheless, this issue highlights the way in which government policies can have a major impact on the ability of foreign companies to do business successfully in China and other emerging markets. In this case, Google actually threatened to pull out of China altogether; it now says it is "committed to China."
Most international policy issues faced by technology companies are less publicized than this one, but they can be equally important to the profitable growth of multinational corporations. For example, China's encryption policies require that any kind of encrypted code, from BIOS to application software, be placed in an escrow account with the Chinese government. The potential impact on foreign companies in China is as significant for hardware and software manufacturers as the Google negotiations are for online companies.
The Director of International Affairs at the Semiconductor Industry Association, Anne Craib, recently told Vital Wave Consulting's CEO, "Companies need to have a well-articulated strategy and knowledgeable resources focused how they are going to handle governmental and bureaucratic challenges as they arise." Companies may have a code of conduct for international operations, but for real impact, one has to go deeper into country-specific policy and government affairs. Companies of all sizes that operate internationally would benefit from proactive and regular assessments of relevant public policies and their potential impact on continued business growth around the world.
