Google’s strategies Case Study
After years of working hard to meet the core of its mission statement which is to organize oral’s Information and make It accessible to everyone, Google diversified for the purpose of growth through using Its resources and capableness in creating innovative products and services. Analyzing Google’s external environment is thoroughly accuses In tens paper. It snows ten toughness AT Google’s competition, as well as naming Google’s competitors and showing how Google is competing in different fields.
Google’s threats are also investigated in this part through the lawsuits Google is facing regarding antitrust laws, and the possibility of having more rivals in its internet business as accessing the internet market is not that costly for small investors to enter the internet market. Concerning Google’s internal environment, this paper explains the financial growth of Google from a small search engine to a big company, and the various financial phases it went through.
Internally there is also the interesting value chain of Google that is also covered in this part.
The competitive advantages of Google are mainly explained in terms of value, rarity, limitability, and sustainability. As for Google’s SOOT analysis, the strengths, weaknesses, opportunities, and threats, are explained through examining the internal and external environment of Google. The part of Google’s strategies shows how Google is adapting different strategies to compete effectively in the market. In this part the business, corporate, and functionally strategies of Google are thoroughly inspected.
The challenges facing Google, the future of the company, and the recommendations for it are also highlighted in the last part of this research paper. Introduction Strategic analysis is the comprehensively discussion on the past, current, and future situation of the targeted firm. Strategic analysis helps in describing and exploring the asks, profitability and competitive advantages of a firm. It presents a permanent source for predicting the future performance and a suggestion of how to measure the success of a firm’s actions and activities.
The current case study is proposing the strategic analysis of the giant search engine (Google Inc.
) based on recognizing its industry and competitors, Justifying its significant strengths and weaknesses relative to the external strategic opportunities and threats, and analyzing the different business strategies adopted by the company. The case includes also a description for he challenges that Google faced and facing with its potential solution, and presenting an idea about the future expectations of the firm.
At the end, the case is offering some recommendations of the different strategic alternatives available to Google. “Obviously everyone wants to be successful, but I want to be looked back on as being very innovative, very trusted and ethical and ultimately making a big difference in the world. ” Sergey Bring. Google the giant and most popular search engine in the world began in 1995 with an idea from two Stanford University students, Larry Page and Sergey Bring.
Although there way of thinking is totally different, but they found a common interest in data-mining and repossessing relevant information from large teen started to thank auto ten relations among Wooster on the internet, which led them to create a software system called “Backup”. Backup was a search engine that checked backline’s to identify one site’s importance over another. Later on, Page and Bring changed their search engine name to Google referred to a play on words of “googol”, a mathematical term meaning a 1 followed by 100 zeros. After using Stanford University website as a host for their program, on
September 1997, www. Google.
Com was officially registered. After one year, on September 1998 Page and Bring started the foundation of Google as a private company in a garage and with word of mouth advertising only they were serving over 10,000 users. When Google launched in 1998, Larry Page and Sergey Bring entered the industry with new technology which is Pageant algorithm- the ability to rank links on the web- and they tried to shop this technology to attract both users and investors, gaining competitive advantage, and to compete with other rivals such as Yahoo!! And Microsoft.
At the end of year 1998 Google received $100,000 fund from Sun Microsystems Company and in the following year Klein Perkins and Sequoia Capital paid $25 million for 20% of Google. That helped the firm to expand its resources and capabilities to move into an office in Palo Alto, California in 1999 with more staff and users numbers.
Google continued its successful and growth through using its resources and capabilities efficiently in creating and developing innovative products and services such as, Google search, translation, maps, images, adds, Chrome, Gamma, and others.
At the same time, to be successful, Google made many different acquisitions like Applied Semantics (2003), Where (2004), Youth (2006), Doublethink (2007) Motorola Mobility (201 1), Farmer’s Travel Guides (2012), and Channel Intelligence (2013). The main goal of all these developments and acquisitions is not only to gain profits and competitive advantages, but also to fulfill the company’s mission which both Larry Page and Sergey Bring made Google for, that is “To organize the world’s information and make it universally accessible and useful. When describing Google mission statement, although it is direct in explaining the main reason that the company exist for, clear and simple enough so that anyone can understand it whoever users or the employees. It could be described as a narrow mission statement that restricts the company in certain industry, which is the internet search industry.
Since Google started its business, this statement was appropriate as a guidance that helps the management and employees to stay in the right track in achieving the company goals and objectives, and it still followed to the current time.
On the other hand, there are some critical doubts that if this statement s fit enough the company growth in both its original industry and other different industries, as that is leading Google to vertical integration- growing in the industry value chain- by producing products containing its software and internet services. Such as Google Nexus which is a line of mobile devices using the Android operating system produced by Google.
As a result, there are two points of view, one of them proposes that Google could change its mission statement or adding to it to be more accurate guidance throw changes and growth that the company going through resulting from the changing technologies and environment. The other believed that this mission statement has no conflict at all with the company success and growth even if it entered different industries and expanding in the value chain, that all serves at ten Ana ten meaning AT Google Nilsson statement wince Is organizing ten world’s information and make it accessible to everyone.
There are 10 principles that Google relies on, in its policy: 1 . Focus on the user and all else will follow. 2. It is best to do one thing really, really well. 3. Fast is better than slow.
4. Democracy on the web works. 5. You don’t have to be at your desk to need an answer. .
You can make money without doing evil. 7. There is always more information out there. 8. The need for information crosses all borders.
External and Internal Environments External Environment Google Inc is an innovative, rapid growing conglomerate that has diversified product portfolio.
It owns number of unique selling propositions such as Google Search, Google Ads, Gamma, Pageant, Google Mapping, Google APS, Android phone and applications and Google TV… Etc.
Its major core competency could be summed mainly as a culture of innovation from its inception. Through analyzing Google Inc. External environment, it enjoys major opportunities that keep its position as one of the wealthiest conglomerates worldwide and it encounters as well major threats to its various businesses. Competition Google has many tough competitions from Internet and software giants such as Yahoo, Microsoft and Backbone.
However, the competition seems to be in Google’s favor through revising the last 2 quarters of AY 2012. As Google employs thousands of top notch engineers and owns billions of US Dollars in assets, it has managed to make it expensive for any potential competitor to try and compete.
They have grown their dominant position in search to offer a host of supplementary services which cover almost all of the major reasons for which people use the internet, as would be stated below: Yahoo Competition Yahoo does not have the strong search business to fall back on like Google.
Yahoo Mail and Yahoo News are both popular products, but they do not offer the same competitive advantage as a profitable search business. For years Yahoo and Google have fought back and forth, and yet Google has been able to grow a larger product suite and provide more operating income growth. Microsoft Competition On the consumer front, Google’s Android has much greater market share than Microsoft’s smart phone offerings. Also, the adoption rate of Windows 8 appears to be less than expected.
The state of Microsoft in the online search market is not that encouraging as in the last two quarters of 2012 Microsoft’s online services division posted an operating loss that is less than the last two quarters of 2011. However, after years of experience in this market it is disconcerting that Microsoft is still unable to turn a profit. Backbone Competition Backbone effectively meets people’s need to communicate and share content, but is sacking in other areas. A new graph search has been announced, which is stirring up major privacy concerns.
This new search product is not a wide reaching search engine, but instead is focused on using user’s data in a new way. The news feed offers news Ana updates out Facedown does not nave a serious news product Like Google News or Yahoo News.
Backbone profit margin is low compared to the competition. Although Backbone promises growth and earnings as Passbook’s social network gives the company a unique and powerful asset, Google still has a major advantage over Backbone with their dominant position in the search market. Finally, till AY 2011, the main income for Google was through mainly advertisements on its well-known search engine.
However, It is obvious that Google Inc. Is expanding its income through other means such as Google Android phone and applications.
As the mobile business can provide more services targeted to mobile users, it is expected that the market’s volume may rise to 3. 1 billion users by the end of 2015. Antitrust laws and Competition Although Google Inc. Encountered various lawsuits and investigations, it managed to go off the hook when the Federal Trade Commission (FTC) verified that Google didn’t buses its dominance in the Internet search market. Google managed to overcome successfully various legal inquiries inside the United States such as: 1.
Federal Trade Commission decided by the beginning of 2013 to close its antitrust investigation of Google Mobile APS without charges as the speed of change in the technology industry made it impossible for regulators to impose restrictions without stalling future innovations. 2. The Federal Trade Commission dropped its 19-month inquiry into Google harming its consumers case and that Google’s search practices did not elate any antitrust law as Google , as stated by the FTC, had actually helped them. However, Google is more vulnerable to lawsuits under other nations’ different laws.
For example, Google’s share of the United States search market was 67 percent in November 2012 while its share in Europe was 83 percent in the same period.
As European monopoly power seeks to keep competitors in the market, Google faces with nearly $4 billion in possible penalties and restrictions on its business in Europe in June 2012 as mentioned by the European Commission. On the other hand, Google Inc. , learning from Microsoft Inc. Revises mistakes, worked with authorities in both the United States and Europe to reach a deal rather than fight a desperate legal action.
That approach appears to have paid off in easing the differences in views between the European Commission and Google. Access to the Market The internet is a very competitive market.
For less than $1 50, anyone can buy a small shared hosting package and start a website. With such low barriers it is easy to think that Google Inc faces a great amount of competition. The reality is that the amount of financial capital and human capital required to make an operation which can moment with Google is enormous. Furthermore, Google purchases thousands of patents each year to cover its inventions and the use of various inventions.
For example, Google picked up 17,000 patents including many relating to wireless devices through the purchase of Motorola Mobility in a $12. 5 billion deal that Motorola, a pioneer in the wireless phone business.
Google acquired Motorola partly to defend itself and the smart-phone makers that use its Android software after rivals had already loaded up on patents. Internal Environment Financially Google NAS grown Trot a small sleep search engine to a Log company provoking numerous services such as, Google Docs, Calendar, Shopping, Gamma, and Maps in addition to many other services.
Google also playing an important role in the web advertising using its growing popularity, as the company used to get most of its revenues from selling advertising spaces on the top of search results and advertising on the other website. At the same time, Google has the rights to the Android operating system for mobile devices, and currently started to have its own smart phone devices that contain this operating system. Google compared to its competitors is a young company that became public since 2004 when a share of the tock was sold for $85.
In 2007, it boosted to nearly $750.
After that it dropped to about $300 in 2009 due to the recession period in United States as Google’s growth ratios, activity ratios receivable turnover, profit margin and return on assets were all down but at healthy levels. Even when that happened these ratios were much higher than Yahoo! ‘s ratios. February, 2013, Google’s stock price reached $785. Google’s growth rate for the past five years was almost three times the industry average while its growth rate for this year is nearly eight times the industry average.
Its projected growth rate for next year and the next five years are less than the industry average. Google’s value chain The traditional model of the value chain is where the raw material is brought to process into finished goods to deliver for the customer, through this process each step is adding value.
While Google does not produce physical products, it has different value chain. Google’s raw materials are the web users who gathered by attracting them to use its superior and rapid search product.
Then it directs those web users by the text advertisements to its advertising partners to end with sales on heir sites which are the finished goods. Google adds value not only by managing the quantity of web users to particular sites, but also by categorizing the pre-qualified visitors via keyword connection and search history to be familiar with users’ interests. In this manner, Google make sure that the users who are heading for to a partner site are more probably to purchase a product there.
Google’s primary activities in its value chain are greatly dependent on the support activities of administration and human resources.
Google has always tried to hire the most qualified and proficient individuals to ensure that it stand out at the research and development of its technology and systems. In fact the company often gives skill challenges and tests to help recruiters filter through the enormous amounts of resumes they receive. In addition to the employees, a large percentage of the cost structure is the infrastructure and systems. Google’s servers and internal software permit it to manner operations, distribution, sales, and service.
Each activity adds to the value chain by raising the firm’s profit.
Google is allocated in all over the world to concentrate Illustration, marketing, Ana service wince In order guarantees enlist refit on a global range. Profit is increased by the company’s cultural knowledge and social capability to adapt products to the regional needs of its users. By transferring activities geographically, Google can also take advantage of the variety from a human resources perception and also maybe lower salaries in countries other than the United States. Google has even made outsourcing some of its copycatting to firms in India.
Competitive advantages Google has maintainable competitive advantages resulting from the significant scores appeared in measures of value, rarity, limitability, and substitutability.
Value Google’s search products provide value to their customers as they offer relevant websites punctually. Google has reached the top market share in the search industry specifically because their product is rare. They are able to grant exceptional links in the first few results for both well-known issues such as “Dallas Cowboys” and unusual searches like “cerebration’s fluid”.
Rarity Google’s search offerings are rare because of the applicable results. Microsoft and Yahoo, Google’s main competitors, simply are not providing links that are as useful as Google’s.
Google’s website features a uncommon design. Most websites feature some fairly standard advertising and are littered with hundreds of words. The Google home page can only include 28 words as a policy established by the company’s founders Sergey Bring and Larry Page. This remains the disorder to a minimum which is a harsh distinguish to Yahoo and Microsoft’s search home pages.
Immutability Google’s results are difficult to be imitated because of the huge infrastructure requirements to supply the appropriate pages quickly.
Google has servers all over the world all operating on a very large quantity of RAM, quick computer memory. With each search Google filters its results in order that the search engine gets smarter and provides to people’s individual favorites. While Google has the largest market share, their search engine can effectively learn rapidly than rivals’ products.
Substitutability There are different ways of categorizing and ordering information, and right now searching the internet is possibly the best for recovering information efficiently. Google does not imprison itself to the search product it is most well known for and has particular applications for perusing different sorts of information such as its mopping, BOOKS, Ana Music applications. Google snouts De addle to protract Its competitive advantages through the predictable future, but it will need to carry on creating new methods to vary its advertising business so the company is not relaying only on the Towards service.
Google SOOT analysis SOOT analysis is an acronym for (Strengths, Weaknesses, Opportunities, And Threats) that specifying the strategic strengths and weaknesses resulting from scanning the internal environment of the firm, relative to the significant opportunities and threats identified by scanning the firm’s external environment. It is a popular teeth a lot of companies use to support determining their objectives and strategies. Strengths Market Leadership, Google is a leading player in the global Internet software & industry services market.
Own 3. 1% share of the market value, and 66.
8% share of the global search market. Healthy financial, Google’s Yearned net income increase of 14. 5% and gross profit increase of 30. 75%. Strong brand image/ awareness, SYNC ranked Google as the number one brand for 2011 and Millard Brown ranked Google as the number two brand in the world for 2011.
Strong infrastructure base, Google has a strong technological infra structure base allows the many to introduce new innovative products and services to gain a competitive advantage.
Sustainable and reliable, the momentum ; ease of navigation of Google’s search engine is consistent & reliable. Strong social networking/media segment market share, Rust & Gamma are very popular social networking sites in addition to Youth – online video services – is a leading media platform. Google controls 89% of the global mobile search market, has $45. 72 billion in cash and only $3 billion in long term debts, and provides an interface that is available in over 100 languages. Weaknesses Google is too dependent on advertising revenue.
More 68% of Google’s income is generated through online advertising. The company has a lack of product integration as it has been focused on launching new products in recent years and less on integrating products into a whole to deliver a more integrated system for the end consumer Competitors like Yahoo have done a better Job of product integration, which puts Google at a competitive disadvantage Opportunities The ability to innovate new products ; services such as Android phone, applications, and Google TV.
Make various strategic acquisitions as 57 acquisitions ere undertaken by Google in 2011 (14% increase in 2011 VS. 2010) such as Motorola acquisition. Entered fast growing mobile advertising market. It can provide more services targeting mobile users.
The market’s volume is expected to rise to 3. 1 billion users by the end of 2015 (55% increase from 2010) Increase ad spending in foreign markets Concentrate on growing the Asia-Pacific market. This is the largest area with the most potential.
This area accounts for 43% of the global internet software & services market value Threats Strong competition as France Telecoms owns 2. 6% of the global market share in the Internet software & industry services market. The market is highly fragmented even with the attendance of large, international incumbents, who together account for less than 10% of global revenues.
Brand loyalty is doubtful to be a considerable factor Tort commercial Dryers, compared Walt quality Ana speculation Kelly to De AT enlarge importance.
Exchange rate fluctuations, hacking & related security issues, under attack from key competitors such as France Telecoms, Yahoo, & Microsoft, and recession eras. Google’s strategies It is hard to enter any industry with new company, compete with the existing firms, ND became successful. But what is more difficult is to remain and increase this success. Since Google founded, the management is following lower-cost as business strategies, diversification growth strategy as a corporate strategy, and marketing, research and development, human recourses and information technology strategies as function strategies.
All these different strategies are supporting and completing each other in order to be efficient enough to achieve the objective and goals of the company. Business strategies Lower-cost strategy The competitive rivalry is strong and increasing in the internet searching industry cause the large amounts coming from advertising to the website that has achieved the largest number of searches.
Google taking advantage of that by following the low- cost strategy as its competitive business strategy, it is providing the internet services to users for free (which adding value to theses services) and covering the costs by offering an attractive marking model that generating billions of dollars every year, and such strategy brought to Google a strong competitive advantage that support its market position.
Although is a successful strategy and way of thinking but, it could e not safe for the company to be too depending on advertisers as most of the financial success of Google came from ad sales, and that could be a serious problem when new competitors enter the industry and providing more effective ad service with better options, that can attract the advertisers to deal with them and leaving Google, or in the probability that in the future people begin to ignore internet-based advertisement.
A risk like that could be decreased by enhancing the product integration, and that what Google does when took advantage of its successful Android phone and application by launch Google Nexus Smartened (updating footwear on its own line of phones and tablets, called Nexus and produced in combination with other manufacturers) and Google+ as a multinational social network described by Google as “social layer”. Google’s strategy is built on a strong base of various complementary products.
Complementary products help to raise the use of each other products and enhancing brand awareness. Many examples of these products includes Google’s Docs and spreadsheets productivity suite, Google Earth and Maps. These products are the main tools of enlarging the Company’s advertising and expanding the extent of the brand. Google strengthen its brand image by keeping its name in almost all its products. From its prospective, the more a person using Google services, the more opportunity to see their ads.
Cooperative arrangements Google also has strong and close value chain partnership by forming alliances with different mobile devices manufacturers such as ETC, Samsung, and LEG to produce Nexus smart phones and tablet computers supported by Google’s famous software Android that is continually updating and upgrading for each device. Google made these alliances to merge its internet innovative technologies expertise with its ratters module maturating technologies expertise resulting enlarge guarantee AT the product efficiency and success as well as sharing the risk in case of its failure.
Example of these alliances, in January 2010, ETC manufactured Nexus one with Android 2. 1 ?claim that was updated in May 2010 to Android 2. 2 Forgo and was further updated until September 2011 to Android 2.
3. 6. Corporate strategy Google is following a growth strategy as a corporate strategy seeking for increasing the market share and profit, and looking for growing the overall business.
In order to accomplish this objective, Google expanding is continuing through implementing vertical and horizontal integration, as well as, going through its wide diversification to any industry including internet usage. Vertical integration Since Google started its management did not care a lot to be vertical integrated, it focused more on increasing advertising and expanding the variety of its internet product and services, until Google acquired Motorola Mobility Holding Inc in 2012 and paid $40 per share in cash.
Although the announced reason for this acquisition is in increase Google’s Patents, but actually the real reason is to be able to vertically integrating through having its own smart phone line to secure its successful smart phone software Android. When Google launched Android software for smart phones and tablets, and gained a lot of profits and success through it as it dominate 52. 2% of the U. S market (comer report 2012).
As a result, Google depended on the Android hardware partners such as ETC and Samsung which could be a future risk as Android became high challenged in the market after Apple launched its own smart phones software ISO which became the second most popular software with 33. 4% of U. S market in 2012 (commerce report). February, 2013. Microsoft unveiled its own smart phone software Windows 8 that is running through Hawaii new smart phone that will be out at the end of the month, which intense the competition with Google’s Android.
Horizontal integration The most popular example of Google in being horizontally integrated is when acquiring Youth in 2006. This acquisition merged one of the largest and fastest growing online video entertainment communities at this time with Google’s proficiency in organizing information and inventing new internet advertising models. Google acquired Youth basically because it had a strong and loyal user’s base, and o add value to its internet searching services provided for users.
Diversification Google experiencing high levels of product and services diversification. It went through both concentric and conglomerate diversification.
Concentric diversification Google have concentric diversification by providing different products and services relative to its core business. Most of Google services like Google Maps, Earth, Docs, Translation, and many others are different forms and kinds of internet tools that enabling Google to force its presence in most of people life aspects.
For example, Google created Google Map to provide a sufficient navigation tool for users around the whole world and became very successful and gained a lot of revenues besides helped in increasing the company’s market share. Conglomerate diversification Officially, Google started to be conglomerate in 2005 when purchased Android Inc. And owned Android operating system that designed primarily for smart phones and tablets computers. Its first appearance was in 2008 when the first Android-powered phone sold.
Android is open source code under permissive licensing that allows the
