Business Strategies of Google and Yahoo - Case Study Example

?Business Strategy-Google and Yahoo In this internet driven world, Google and Yahoo are the two dot.com companies which have made imprints in maximum‘domains’ or segments of Web or Virtual World. Starting from the segment of Search engines, one of these two companies have presence in various internet enabled segments including emails, video content sharing and hosting, social networking and other virtual social group, etc, etc. and hardware segment in the case of Google. Both the companies have a kind of omnipresence in the web world, and so users in the web will be ‘touched’ by one of their services or even products anytime. Established by Larry Paige and Sergey Brin in 1998, Google has become one of the well-known brands of the world, with offices world over employing around 25,000 employees. Yahoo was founded by Jerry Yang and David Filo in 1994, mainly as a website which featured a directory of other websites. From that beginning, it spread its operations extensively, making strong presence in certain segments, but still lay behind Google in majority of the segments, as well as in relation to market share and revenue. Actually, in 2000, Yahoo and Google had a working association, with Yahoo using Google for search results. However that was short-lived, and both the companies parted ways and importantly started competing against each other in various segments. Porter’s ‘five forces framework’ Threat of Entrants Any industrial sector will have threat from new entrants, and dot.com sector will be no exception. Actually, the dot.com sector, used to denote the companies that mainly do their operations over the internet with a website and a domain ending with .com, got originated due to the entry of new entrants particularly in Silicon Valley. This being the case, there will be a constant threat of new entrants in this sector. New entrants are always attracted to industry sectors that are flourishing and that seem to offer the potential for healthy profits, dot.com industry fits that bill aptly. (“Consulting Tools”). They are targeting various segments in the dot.com industry from emails, video sharing and hosting, etc., Although, Google and Yahoo have consolidated their positions in these segments and hold larger market share, these new entrants by giving widespread services are minor threats. Threat of Substitutes The threat of substitutes will be found more in the dot.com industrial sector, because the lines of control and authority are blurred in the virtual world. With no worldwide authority to detect and stop copyrights infringement and other violation of trademark services, substitutes can come with similar services or slightly modified services, negatively impacting pioneers like Google and Yahoo. However, the fact is, these two companies were also accused of coming up with substituting services, violating the rights of other players, but that were only minimal. With Internet coverage increasing, the competition for online business also increases, and using this opportunity many players are coming up with substitute services. For example, Google’s Iphone has been substituted by other local mobile phone makers, likewise Youtube has many substitutes like Dailymotion, Yahoomail has been substituted by many pan-national as well as local players. “The Internet creates new substitution threats by enabling new approaches to meeting customer needs and performing business functions” (Shin). Power of Suppliers In the dot.com industry, quite uniquely, the supplier of product or services as well as user or customer of service will be maximally one and the same. That is, most of the products or services offered by the companies, like websites in search engine results, videos in Youtube, Google Adsense feature, etc., are not created ‘in-house’, instead they are sourced from the suppliers outside. Those same suppliers along with sizable common people will also utilize those services as customers. Thus, the companies by aptly hosting or collecting or arranging those things and even through ‘targeted advertising’ are earning their revenues. However, as the companies including Google and Yahoo only ‘control’ the flow from the suppliers, like by removing or suppressing certain search results, controlling the flow of mails, Cloud Computing environment, etc, etc, they maintain power over the suppliers. As long as Google and even Yahoo, maintain its market dominance “with the search product, supplier bargaining power will remain low.” (Burrow). Power of Buyers In any industry, the power of buyers will be equated to the customers’ influence, and that is minimal in the case of dot.com industry, with Google and Yahoo being the main reason. That is, as pointed out above, in the dot.com industry, where there is a thin line between customer and the suppliers, if the supplier power is low, the customer or buyers’ power will also be low. In addition, as majority of the services are offered freely from search engines, mails to video sharing and hosting, and customers readily using it, their power will be substantially reduced. Although they complain and make the companies change their strategies and tune their services, and importantly there are paid services, the power of the buyers is not sizable in regards to the dot.com industry. Competitive Rivalry From the above discussion of Porter’s other forces, it can be assumed that dot.com industry has opportunities for new entrants and also for coming up with substitute products. This being the case, it heightens the competitive rivalry. In addition, as the companies in this sector operate in various ‘domains’, there are many ‘domain’ specific competitors apart from the common competitors. This nature of competitive rivalry can be understood, when one focuses on Google and Yahoo, and how they themselves compete in various domains from search engines, email service, virtual social groups, online maps, etc. Then, each competes with other set of competitors. For example, Google’s Orukut and Google Plus compete with Facebook in social networking, Chrome browser with Microsoft’s Internet Explorer, while Yahoo Answers compete with wiki Answers, etc. Thus, it is clear there is intense competitive rivalry in the dot.com industry, with both Google and Yahoo facing among themselves and with others. Google and Yahoo’s core competences and competitive advantages A comparison of Google’s and Yahoo’s competencies and advantages can be started from the ‘domains’ in which they compete directly against each other. The two key domains, in which both compete maximally is the search engine and email service. However, when one first focuses on search engine service, Google is leaps ahead of Yahoo. By 2011 Google possessed 84.72% of the global search engine market share, whereas Yahoo possessed just 6.42%. Thus, Google’s main core competency and advantage is its strong hold in the search engine sector. Although, Yahoo as well as Microsoft through Bling tried to reduce that strong market share, they are not able to do it, as Google provides a user friendly interface with many features in its search engine. Fig 1: (“Search Engine Market Share”) However, when the email services of both these companies are focused, the number of active Gmail accounts still falls short of Yahoo mail. “In August 2011, Yahoo reported independent statistics giving it 302 million unique users globally, while research from Return Path suggested Gmail ended 2010 with some 193 million users.” (Brownlow). Yahoomail services are used throughout the world, and so it provides good opportunities for Yahoo to feature both local as well as pan-national advertisements, thus earning sizable revenues. The reach of Yahoomail can be considered as a key advantage of Yahoo. Other than these two domains, they compete minimally in domains like video hosting and sharing. In that segment, Google with Youtube as well as Google Videos has a very strong presence, when compared to only a minimal presence of Yahoo. Youtube offers Google not only a competitive advantage, but also quite good opportunities in the multimedia segment. In addition, Google also started striking partnerships with other companies and even government agencies to tap the opportunities that are in available to it, to provide optimum services. For example, Google’s partnership with Sun Microsystems could help both of them share and distribute each other's capabilities and technologies in an effective manner. Then, Google’s partnership with Time Warner's AOL will provide both of them opportunities to enhance each other's online video content and also search services. Likewise, in the segment of social networking, Google with its successful Orkut and the recently launched Google Plus have strong core competencies. With Orkut, “Google has turned into a social butterfly” and can reach more territories of the world - both the ‘visible’ and ‘invisible’ territories (Stross). That is, with the world becoming a global village, people from all over the world want interaction, and so Orkut has great opportunities in those quarters, notwithstanding tough competition from Facebook. However, Yahoo has no presence in commercial social networking sector, and that provides Google sizable competitive advantage over Yahoo. Although, Yahoo has social groups like Yahoo groups, Google has countered it with Google groups. The other domain in which Google has edge over Yahoo is online Global mapping, with Google Map being more popular and features rich than Yahoo Map. Google Earth, apart from being used for common ‘exploration’ purposes by the people, is also used for commercial purposes, thereby earning Google good revenues. That is, many of the advertising customers are continuously using Google Earth by providing access to location based information. Likewise companies can also provide reference data to help their customers find their product locations and services offered, using Google Earth (“Business Opportunities and Google Earth”). Its Google Street, an extension of Google Earth, provide three dimensional photo view of various streets and places of importance, while Yahoo has no such feature. Thus, Google earth and its extensions are crucial core competencies of Google, which can be optimally tapped by it in future. When one focuses on Yahoo’s core competency in the social networking domain, particularly informative social networking, its Yahoo Answers is key competency. “The Answers community counts more than 179 million users. That’s more than half the population of the United States, and is available in 26 markets and 12 languages.” (“Yahoo! Answers”). Google’s acquisition of Upstartle, the company which created the online word processor, Writely, has provided it opportunities to create many form of online documents. It is presently using Writely processor only, to create Google Docs & Spreadsheets and has opportunities to create various other forms of documents using it. While Yahoo does not have those internet based services, thus limiting its search engine capabilities. The concept of Cloud Computing is on the increase, with many large and also small companies are hosting ‘Clouds’ and giving various cloud-based application services to various firms, and Google has also entered that sector. Conclusion and Recommendation From the above analysis of both Google’s and Yahoo’s core competencies and competitive advantages in various domains, it is clear that Google emerges the front runner in majority of the domains. This trend may continue in future as well, thus making Google the favorite among the investors, when compared to Yahoo. In addition, Yahoo faces economically tough times for the past few years coinciding with the 2008 Economic Meltdown, even laying off, sizable number of employees. Crucially as well as critically, Yahoo faces takeover bids from major corporations including Microsoft and importantly even by Google. Thus, Yahoo appears to be shaky when one views on long term basis. On the other hand, Google because of the above mentioned competencies and advantages has many opportunities in the interactive form of communications. That is, with Internet and the World Wide Web transforming from an information ‘vending’ platform to a more interactive or communicative medium, Google has opportunities because of its existing products and services as well as in its acquisitions and partnerships. Importantly, revenue wise, Google has been showing tremendous growth garnering revenues close to 30 billion dollars, with profits itself is in the range of 8 billion. (U.S. Securities and Exchange Commission 2010). All this financial growth has been achieved within 12 years of its inception, and importantly with its’ share price always on the upswing, it will be best company to invest in. Works Cited Brownlow, Mark. “Email and webmail statistics”. Email Marketing Reports, Oct 2011. Web. 17 Nov 2011. Morrow, Ben. “External Analysis of Google Inc.” Ben Morrow, n. d. Web. 17 Nov 2011. “Business Opportunities and Google Earth”. Google Earth Blog, 2005. Web. 17 Nov 2011. Stross, Randall. “Digital Domain: Why Google Turned Into a Social Butterfly.” New York Times, 2007. Web. 17 Nov 2011. “Search Engine Market Share.” Net Market Share, Nov 2011.Web. 17 Nov 2011. “Consulting Tools: Porter's Five Forces Model.” n. p, n. d. Web. 17 Nov 2011. Shin, Namchul. Strategies for Competitive advantage in Electronic Commerce. Journal of Electronic Commerce Research, 2.4 (2001). U.S. Securities and Exchange Commission. Form 10-K, Washington, D.C.: United States of America. Part II, Item 6, 2010. Web. 17 Nov 2011. 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