Google is a virtual company case study
While recognizing the importance of thinking ahead and especially of the need for retrieve vision In this pedantic world, I wish to propose an additional view of strategist-as a pattern recognizer, a learner If you will-who manage a process In wince strategist (Ana villous)can emerge as well as De alternately conclave (Lynch 6th edition 2012). The hyper competition and high changeability in the search engine market (high rate of change) require an Emergent strategy in order to stay ahead in front of competitors and to keep the organizations’ sustainable competitive advantage over time.
As demonstrated in figure 1. 2, compared to its competitors, Google dominates the global search engine market by far (crankcase. Mom 2012). The reasons for that will be discussed further ahead on the environmental and resources capabilities analysis. Figure 1. 2 The third strategy is the green strategy. “Green strategy concerns those objectives of the organization that are focused on both sustaining the earth’s environment and developing the business opportunities that will arise from such additional activities.
” (Lynch 6th edition 2012). Google is creating a better web that’s better for the environment. We’re greening our company by using resources efficiently and supporting renewable power. That means when you use Google products, you’re being better to the environment. ” (Google Green).
Google eliminated their impact on climate change. Since 2007, it invested over 91 5 million dollars in renewable energy and Google data centers use 50% less energy than the typical data center. Currently, very little of the world’s power is produced from renewable energies like wind and solar (Google green).
Google tests new renewable energy technologies on its campuses and evaluates them against two criteria: They must make good business sense and have long-term potential to ransom the industry. For example, in 2007, Google installed the largest corporate solar panel installation of its kind?I .
7 MM?at their Mountain View campus. It generates enough electricity to power 30% of the buildings on which it sits. (Google green) To the author’s opinion, an organization which is an environmental leader will be in a better position against its competitors in the market and accordingly succeed financially.
Although Google is a virtual company, their data centers are among the largest consumers of electricity in the United States. Cheap renewable energy is not only critical to the environment but also vital to economic development in many places where the available energy of any kind is limited. In addition to that, an organization that requires its suppliers along the supply chain to take bigger steps in measuring and reducing carbon dioxide (for example) produces for itself four main opportunities: risk reduction, cost reduction, new revenue sources and increasing the brand value of the organization.
In order to evaluate Google’s current strategic position, the author points out that because of the turbulent market and the constant hanged of the environment there have been some differences from the case study (different competitors, threats etc. ) For the consideration of the factors surrounding the organization, the author used PASTEL check list which consists of the Political, Economic, Socio cultural, Technological, environmental and Legal aspects of the environment. Exhibit 2. 0. The prescriptive approach favors the development of projections because they are often implied in major strategic decisions in any event.
Emergent strategists believe in the turbulence of the environment makes projections of limited value. (Lynch 6th edition 2012). The author suggests that as for Google, it is possible to combine the two approaches. Past experience can give us an idea about the threats that exist and may be overcome in the future but also the understanding that the situation can be opposite. Google as a market leader attracts unwanted attention.
As of lately, the E. IS as well as the FTC is launching investigation with regards to Google’s antitrust practices of acquisition spree. Add to it the withdrawal of Google from china and Google’s role in the uprising in the Middle East. Google attracts much wanted attention as well. Google’s social and economic power is substantially leveraged due to the recognition it receives, including its top ranking in the global brand index and its being the first priority on a list of desired employers. Yet, it is less popular than Backbone, which was the most popular website of 2010.
Google ought to take the threat of Backbone into consideration and action. Economically, despite its departure from China Google still produces big profits, nevertheless it must take into account the investigation conducted against the company, that if Google is found guilty at the E. IS and the FTC investigation it faces significant fines. Google is also known for its acquisition of Youth, Flogger, and of course the takeover of Motorola‘s patents which allow us to identify a trend in Google’s future conduct.
Google as a company based on a technology that invests in technology, deals with competitors such as HP, Apple, Oracle, which are constantly in pursuit of the latest technology with massive development budgets. Google must make sure that it remains a technology leader. An industry analysis usually begins with a general examination of the forces influencing the organization. The objective is to develop the competitive advantage of the organization to enable it to defeat its rival companies. The author used Porter’s five forces Model because he identifies five basic forces that can act on the organization .
Geiger 1. 3(Lynch 6th edition 2012). Hogue . Porter’s five Forces Analysis of Google’s Competitive Environment 1 . Entrants Economies of Scale Potential Economies of scale are a common characteristic of the leading companies in the online search engine industry.
These companies managed to not lose profitability, while charging very low advertising fees. In the 2012 market, Google is positioned first with 88. 8% M. S. Microsoft possesses 4. 2% M. S and Yahoo has 2. 4% M. S. The first major entry barrier which new entrants face is the immense brand loyalty of Google and Being, the two leading companies.
These two leaders have strong brand recognition and they dominate the market with a combined market share of over 90%. Rivals have to offer valuable advantages in order to enter. Another significant entry barrier the search engine business’ operation costs, which are comparable. Therefore, smaller competitors may not succeed in reaching the cost effectiveness of he 3 major search engines. This fact decreases the threat that new entrants pose on the major companies in the industry.
The next barrier entry is the switching costs for costumers.
These are comparatively low in the internet search engine industry, since advertisers can easily switch from Google to Being to any other portal, including a new entrants’ one, without significant differentiation in the advertising fees. However, in opportunity costs are high. The returns on investments decrease when moving from a trafficked search engine to a less busy one. This is important for advertisers, and is keel to make the entry very difficult on new competitors. The last entry barrier in discussion is government regulation.
This is significant in some markets, like China. This is because of the strict censorship and regulation rules that the Chinese government imposes on its internet domains in order to prevent Chinese internet users from reaching unwanted contents such as pornography or controversial political issues. Google adapted to the Chinese market by launching its China-based Google. CNN search engine in 2005, in which results were being regulated according to the Chinese governments’ demands. Due to further regulation, in 2012 Google decided to exit the Chinese market.
. The Bargaining Power of Buyers The bargaining position of buyers facing Google is weak, due to its market leadership. Thanks to its vast market share, Google has the largest target audience and therefore its value is naturally higher than others. The bargaining position of buyers facing the rest of the search engine companies is much stronger, since buyers can use the competition between the companies in order to force lower prices, especially given the low switching costs in the industry. 3.
The Bargaining Power of Suppliers The importance of the Internet Service Suppliers (Sips) for the search engine companies is very high, since they are suppliers of innovative broadband infrastructure which is used to create the connection between the portals and their users. The Sips’ vitality is combined with a small variety of infrastructure alternatives. Therefore, they are in a strong bargaining position. However, their Darling position Is weakened when It comes to Google, Owe to Its powerful market position. 4.
The Threat of Substitutes Porter’s threat of substitutes definition is the availability of a product from another industry that the consumer can purchase instead of the industry product. Threat of substitutes shapes the competitive structure of an industry and affects its profitability because consumers can choose to purchase the substitute instead of the industry product. The most imminent threat of substitutes posed on the search engines are social networks. For example, Backbone also offers internal search options and is an attractive option for advertisers due to its large scaled target audience.
Switching costs are negligible due to the identical technology used in both platforms.
Advertising fees are comparable across the two platforms, due to an identical pay-per-click pricing method. The social networking platform gains an advantage over the search engines owing to higher performance value which makes it worthwhile for advertisers to switch from search engines to the social networking sites. 5. The Intensity of Rivalry among Established Companies The main rivalry in the industry is among Yahoo, Microsoft’s Being, Baud and other smaller companies which compete on global market shares.
Due to its domination over the market, Google has no suitable competition.
Internet search demand is high and will continue to grow as more developing markets will be exposed to the Internet. The search engine market will require rapid and better response, and more search options not available through the search engines will be manufactured by using emerging social networks such as Backbone and Twitter. This growing demand could moderate competition and lower the rivalry among establish companies as innovation works to continually expand the market.
To be a major player in the search engines market requires high investment in hardware and software.
Velocity and shape of the search are significant features that are most important to the end user, it is also speculated that Google who leads the market has over one million servers that support its search engine compared to competitor Microsoft’s Being which has only about 250,000 servers as of 2010. Therefore, the players in the search engine market seek to increase their market share and as a result from that also their revenues in order to recoup capital costs.
Exit barriers in the Internet search engines market are very high. Investment in technology is very expensive, a huge amount of servers, response, legal issues and the cost of the brand are making the search engine market exit irrelevant for the key players. For these reasons, the rivalry between the companies is high and the driving force in this rivalry is the need to survive.
In summary, the author’s conclusion is that Google’s future strategy should be based on its main components: capabilities and resources.
Framework and main identity of this strategy will consist of either one of these parameters and the effect will be the main ingredient in creating the company’s competitive advantage and profitability in the coming years. However, the key to a resource-based strategy is the understanding of the relationships between the organization’s existing resources to its capabilities in order to create a sustained competitive advantage and profitability in particular. 2 critically Locus ten Key strategic Issues presented In ten case study Ana t impact on the success of organizational strategy of the case study organization over the long term.
The author discusses the following key strategic issues: Survival base theories of strategy-“survival based strategies regard the survival of the fittest company in the market place as being the prime determinant of strategic management”” (Lynch 6th edition 2012).
When the environment is highly competitive, shifting and changing it is much better to dodge and weave as the market changes, letting the strategy emerge in the process. Survival based theory are needed in order to prosper in such circumstances. Henderson suggested that most companies needed in order to survive in these highly competitive circumstances were differentiation” “(Lynch 6th edition 2012). Google in order to remain market leader for the long term must continue create these differentiations if by continuing to innovate new products, new services or to buy new companies. In order both to fully exploit Google stock of resources, and to develop competitive advantages for the future, the external acquisitions of complementary resources may be necessary. As long as it will keep continuing then it will remain sustainable for the long term.
The survival based view in strategic management emphasized on the assumptions that in order to survive, Google has to deploy strategies that should be focused on running very efficient operations and can respond rapidly to the changing of competitive environment. “Human resource based theory-Human based theories of strategy emphasis the people element in strategy development and highlight the motivation ,the politics and the culture of organizations and the desire of individuals”” (Lynch 6th edition 2012). “Google has good senior managers.
Importantly, it has managed to retain and motivated its senior people over the past few years-particularly vital for accompany relies on innovation and “out of the box” thinking. (Google case study Lynch 2012).
“Google employees in Mountain View, south of San Francisco, and if you’re an employee here you’re encouraged to spend 20% of your time on a project of your choosing. It’s no surprise Google places fourth on the U. S. Fortune ‘100 Best Companies to Work For’ list. “(CNN 2011-Appendix 1.
3) For the long term this is a very crucial point for Google according to Business Insider, with the help of Glissando. Mom Google went down to the 6th place and Backbone was upgraded to 3rd place. (Appendix 1. 2) As long as the company will keep growing it will be harder to keep the same condition as before. (Motivation, salary etc. ) Other competitors will try to seduce Google employees in order to gain some of their knowledge and decrease Google resources.
Innovation and knowledge based theories -“based theories of strategy privilege the generation of new ideas and sharing of these ideas and knowledge as being the most Important aspects AT strategy development. (Lynch o Google has to keep innovate in order to succeed for the long term.
The company R budget is high and enable the company to continue innovate. As the author mentioned before 20% of the employees is dedicated for innovation. So as long as the company will continue to do so than the long term strategy remains sustainable. Market Growth -“from a strategy perspective, the importance of growth relates to the organizations objective”.
(Lynch 6th edition 2012). Internet use over time from non-computer devices such as smartness will continue to grow and combine with technology emerging markets will also increase the global search engine market.
According to a report by budded. Com in 2012 around third of the global population will use the internet. More growth is predicted a head as the internet economy continues to develop particularly in the developing markets. 3.
Develop arrange of suggestions of how these issues need to be address giving considerations for rational, impact, timescale and ownership within the organization. Strategy has to do with the future, and the future is unknown . This make strategy a fascinating, yet frustrating topic” (Bob De Wit, Ron Meyer 2010). From a strategic management viewpoint, the major issue is to identify the influence of stakeholder power on the direction of the organization” (Lynch 6th edition 2012). Following the above, Google depends on support from a wide range of stakeholders whether they are individuals or organizations.
The stakeholders can be divided into five categories: 1 . Shareholders, including owners, partners, employees or anyone who has a uncial interest in the business. 2. Customers including clients, purchasers, consumers and end users. 3. Employees including temporary and permanent staff and managers.
Suppliers including manufacturers, service providers, consultants and contract labor. 5. Society including people in the local community, the global community and the various organizations set up to govern police and regulate the population and its interrelationship. Each stakeholder brings something different to ten organization In pursuit AT tenet own Interest, takes rolls In along so Ana receives retain benefits in return but also is free to withdraw support when condition is no longer favorable. As was stated above, no organization can accomplish its purpose and mission without the support of others.
Google ought to keep attracting, capturing and retaining the support of its shareholders because it depends on them for its success. The author also refers to the fact that unlike other organizations (Apple and more), the co founders of Google (Bring ; Page) are still part of the company and together with the strong management controlled by Executive Chairman Eric Schmidt re in charge of the company’s great performance over the last decade (Google 2012). It will be good for the company that this management will continue to control the company.
Shareholders will continue to provide financial support, customers will provide revenue in return of the product or service brings, employees will provide labor in return for good pay and conditions, suppliers will provide products and services in return for payment on time, society will provide license to operate in return for benefits to the community. “In fast-moving markets, the dynamic process is dominated by innovation”(Lynch 6th edition 2012). Strategy innovation requires changing or bringing new values propositions, services and productions process.
To the author’s opinion, markets and technology based innovation which involves combining value proposition new to the industry or creating a new market with the help of technology and new ideas are crucial for Google’s future growth. As for Google, innovation must start with understanding that without it there can be no growth over time. With the understanding of the competitive market coupled with technological knowledge accumulated over the years and with a big R&D department he possibility to produce innovation can grow in the near future.
As the author mention earlier Google must keep innovating, must seek for new markets and must resume the cultural environment that enable constant innovation. Although most companies that already controlled their markets and have committed resources are less likely to innovate (the sunk cost effect and the replacement effect) Google have to keep innovate.
“In addition to competing against rivals, most organization also co- operate with other organization . Such co-operation can deliver sustainable competitive advantage”(Lynch 6th edition 2012).
It is assumed under this view that competition and cooperation are interconnected, and competition will force a business to be more cooperative. Hence, virtues and values of doing good and ethical business, such as through friendship, trust, loyalty, and cooperation are encouraged in order to survive the competitive market. It is very important for Google to keep conducting co-operation such as the research partnership with NASA that was established on 2005 and included a big R&D center, large scale data management, bio-info-nana convergence etc.