Strategic Analysis of Google Company - Research Paper Example

Strategic Analysis: Google BY YOU YOUR SCHOOL INFO HERE HERE Strategic Analysis: Google 0 The External Environment Google is a multinational technology leader providing a diverse variety of Internet-based services and Web-based products. The majority of these products and services include cloud computing opportunities, Internet search platforms, and advertising. The company boasted over 50 billion dollars in revenue in 2012 (Google, 2012), with the majority of these revenues stemming from Adwords, featuring pay-per-click pricing as well as offerings for traditional banner-style advertisements. Google has expanded its business presence internationally so that by 2012, Google operated approximately one million different servers across the world. There are risks and advantages, however, to Google’s broad multinational presence related to the external business environment. 1.1 Google’s Customers Google’s target markets are broad due to the complexity of the business model that sustains multiple products and service catering to professional and household consumers. Google operates G-Mail, a webmail service with massive storage capabilities and accessibility to access G-Mail from virtually any mobile device (Google, 2012). Additionally, Google acquired YouTube, the social media service promoting user-generated video content, a service with 800 million different users domestically and internationally. Other products including cloud computing attract professionals in multiple industries while Adwords is targeted to consumers and business professionals alike. Google maintains mass market appeal in operating environments sustaining differing cultural preferences because the products and services the company provides are relevant to sustain the Web-based and software-based needs of diverse markets. However, to assess how customer markets impact business strategy development and operational direction, certain target markets can be deconstructed to better determine their impact on Google’s strategic direction. Google, for YouTube, had to develop its own segmentation strategy rather than following established marketing models. This is due to the fact that YouTube maintains 800 million users daily, making it nearly impossible to establish a singular, homogenous segmentation and targeting model. This segmentation strategy is based on behavior, taking into consideration important factors regarding the tangible purpose of patronage at YouTube, including for entertainment purposes, for education, for music appreciation, or for simply watching television (MSMR, 2010). Having such a massive, geographically-dispersed set of consumers with varying needs creates a need for innovation when attempting to target any variety of diverse integrated marketing communications in a mass market environment. PowerSites (2013) identifies one primary market that is relevant for companies such as Google that operate in social media. This market is referred to as Fashionista Professionals, a younger market ranging from 25 to 34 which generally sustains very high disposable incomes (Powersites, 2013). The estimated market size for the Fashionista Professional is 47.2 million and this particular market segment wants to establish long-term relationships with their favorite brands in a social online community. Zhang & Chan (2009) identifies that when a product or service provides ample opportunities to build self-expansion opportunities in consumers (i.e. cognitive growth or social growth), markets are likely to develop strong brand attachments. YouTube, by design, offers these opportunities for self-expansion with a variety of different opportunities for education or how-to instructional video access. A recent survey of 25 to 34 year-old markets identified that the majority of this market is content with their lives and tend to prefer premium products and services as a means of justifying their identities (Executive Digest, 2008). These psychographic market characteristics are what drives Google’s adaptability and competitive strategy development. For instance, Google is able to isolate specific channels which cater to the 25 to 34 year old market (or the Fashionista Professionals) with integrated communications aligned with their social values, such as confidence, group membership, or expressing how Google can satisfy needs for self-expansion. The main competitive strength as aligned with meeting specific market values and characteristics is transparency in the social media environment, benchmarked after Apple’s humanistic model, building trustworthiness in important revenue-building markets by engaging target markets with communications relevant and similar to the lifestyle and social values of these consumers. Diversity of market availability domestically and internationally essentially infuses a need for adaptability and flexibility in the business model that is not easily replicated by competition. Michael Porter (2012), a renowned business and strategic theorist, identified a risk from the external environment related to consumers, which is buying power of markets. For Google customers, switching costs for defecting to other companies (such as Yahoo!) are extremely low, giving them much more influence in how Google chooses to implement different pricing structures or innovation development. Some markets are highly price-sensitive, whilst others demand more differentiation in product and service variety in order to maintain long-term loyalty to Google. Therefore, it should be recognized that there is a plethora of varying sociological and psychological characteristics in multiple, diverse markets that are best identified through market research, both qualitative and quantitative, to determine what models of marketing, social relationship development, pricing, and time-to-market for innovations are required to create barriers for brand defection to other competition. Volume of consumers and variations of market characteristics make Google compete using human capital as a significant competitive advantage to identify, through communities of practice, the best short- and long-term strategies to remove brand defection risks in multi-national markets. 1.2 Competition Analysis Competitive forces are intense domestically and internationally for Google. One main competitor, Microsoft, is currently gaining ground with many target markets for its ability to replicate many services and products that once had first-mover advantages for Google. Microsoft is currently investing considerable promotional capital to advertise its Bing search engine software, a significant competitive threat for Google’s search engine service. Recently, Microsoft enhanced Bing with more image search options, mapping applications, and the Bing has built recent partnerships and contracts with many social media sites such as Twitter and Facebook. The success of gaining market attention for Bing has forced Google to create new, timely market launches of innovations including a Google dictionary, photo search capabilities, and even a language translator to facilitate more innovative search options (Buzzom, 2011). Google must continuously scan the competitive environment to understand the competitive rivalry tactics of Microsoft and its innovation development prowess to outperform this aggressive search engine trendsetter. Another significant competitor of Google is Apple, Inc. Apple’s iTunes, an online music service that allows downloads of paid and free music content for smartphones, consistently outperforms Google’s music search options accessible through the search engine. As such, Google sought out recent alliances and partnerships with MySpace and Pandora to provide more broad music content and improve market share in an effort to steer consumers away from iTunes in favor of Google’s music-related business units. Microsoft and Apple are Google’s most significant competitors, though other companies such as Amazon and Facebook continue to provide innovations in book-reading access, social networking, and ease of music streaming (such as that with Yahoo!). Again, the ease of product and service replication in this industry forces Google to consistently rely on its human capital advantages to identify new market opportunities and new innovative product and service launches to avoid being outperformed by aggressive competitive forces. 1.3 Economic Forces Google operates in domestic and international regions where labor capital is a significant advantage and a necessity to maintain the innovations needed to compete successfully. Changes in consumer incomes associated with regional recessions and inflation directly impact disposable income levels of many different target markets, which impacts pricing policy for a variety of different consumer-oriented and industry-oriented products and services. The relevancy of local unemployment rates and the consumer price index in domestic and international markets strongly impacts pricing in the marketing mix for Google. Additionally, the business identifies that it has developed a risk management system for the threat of currency exchange rates across the world. Google provides products and services, with different pricing structures, to consumers in many foreign territories. Significant fluctuations between U.S. currency and foreign currencies impacts net income for the company. Because of this, Google must develop appropriate investment hedging strategies to attempt to offset losses due to unpredictable currency devaluation (Google, 2012). Therefore, there is considerable pressures put onto executive-level leadership at the firm to identify strategies to maintain cash and capital advantages through hedging and other investment opportunities due to the legitimate danger of currency fluctuations. 1.4 Technological Forces Advancements in small to large companies with prowess in software development and web application development continue to pose competitive risks to Google. Google is not the only company in this highly competitive industry that rely on strategic alliances with software and other technology developers to assist in differentiating many of their products and services. Google maintains what is referred to as Wave and Voice, a low cost innovation to enhance a user’s existing phone service. Companies such as Cisco, major technology players in many different industries and markets, have been enhancing their video conferencing capabilities which provides significant value to industrial purchasers. This detracts from Google’s ability to market its supplementary technologies, such as Wave and Voice, forcing the company to adopt new promotional strategies or build new innovations to differentiate technology-based products and services. 2.0 Internal Scanning Google operates under a decentralized organizational structure, one in which there is a flat hierarchy of top management control and where information moves horizontally rather than vertically through the organization. This decentralized structure is present in the methodology by which Google organizes and establishes communications systems. Founders Sergey Brin and Larry Page wanted to develop an organizational structure that reflected personal beliefs and values about team importance and lifestyle in an effort to make Google a lively and interesting place to perform work. Google organizes its subordinate and management staff into expert teams, rotating different accountability of project leadership to enhance skill-sets and competencies with different group leaders. Twenty percent of daily job responsibilities at Google include self-directed team management and projects (Weber, 2007). 2.1 Resources Clearly, human capital advantages borne of job rotation and the many motivational strategies utilized by the firm provide advantages competitively. Trusted and respected models of human behavior and motivation describe the importance of establishing a sense of social belonging in the workplace in order to foster growth in individual or group self-esteem (Morris & Maisto, 2005). Therefore, it should be acknowledged that the soft approach to human resources is one of the strongest resource strengths of Google as the majority of motivational strategies are aligned with reliable models of psycho-social needs that, long-term, provides better organizational cohesion. Google also maintains nearly 100 billion USD in assets (Google Finance, 2013). These assets include technologies, facilities, common and preferred stock, and royalties and associated revenues from various licensing agreements. Coupled with extreme asset availability, Google is able to draw on its strong cash position and credit worthiness to expand at a faster pace than competing firms and ensure reorganization of manufacturing/operations to achieve first mover advantages for domestic and international product and service innovations. Google is also able to draw on the brand-building capabilities of its strong focus on corporate social responsibility to differentiate the firm from other conglomerates of this size. Google participates in providing consumers and industry leaders on climate change knowledge, promoting global health, and reducing poverty domestic and international (Google.org, 2013). Google promotes its Google.org non-profit business division, valued at approximately $1 billion, that provides more brand development opportunities, offering additional supplementary services as the Google Person Finder to help disaster victims find missing relatives and also creating a community forum by which scientists and researchers can collaborate on renewable energy developments (Google.org, 2013). Corporate social responsibility and its ability to improve lifestyles both domestic and foreign provide considerable brand recognition and brand loyalty in multiple, diverse market demographics. Despite the aforementioned resource advantages, Google does maintain weaknesses that need addressing. Google does not rely effectively on promotion for all of its diverse services and products. Kumar (2011) suggests that there is limited consumer knowledge of lesser-known innovations such as Google Maps, Google Picnic, and even Google Book Search (to name only a few) which does not maximize the potential revenues that could be earned through targeted promotional strategies to build brand recognition for these services and products. Google appears, much like its competitor Apple, to believe that the word-of-mouth advertising strategy is enough to build additional brand awareness for supplementary services and products rather than devoting capital to intensive short-term promotions to build multi-market awareness. Additionally, Google maintains weaknesses in integration of technologies to improve accessibility. Planes (2011) identifies that Google has not invested enough resources or human capital into developing an integrated platform. “A platform is basically a consistent structure that ties together multiple services in a unified way. This makes it easier for other developers to create layers on top of it, and it makes it easier for users to have a stable experience” (Planes, 2011, p.2). Google is not taking advantage of benchmarking opportunities against such companies as Apple, Microsoft and Amazon that have well-developed platforms that allow for better integration of products and services and faster Web development through this software and technology incorporation. Having no integrated platform gives many opportunities for major competitors to establish more accessibility for end users and other consumers, adding efficiency that is lacking in the Google technology model. 2.2 Culture The liberal and decentralized organizational structure consists of unique internal innovations to facilitate dedication, loyalty and motivation. Such innovations include flexible working hours, recreational facilities including gyms and ping pong, as well as free food centers in-house (Weber, 2007). It is through the flat hierarchy where communications are horizontal that Google is able to utilize interpersonal relationship development as a key competitive strategy. Having this open and non-interventionist leadership style provides ample opportunities for employees and managers to engage more effectively in special projects to facilitate faster time-to-market for new product and service innovations. Essentially, the cohesive and dedicated organizational culture founded on shared mission, vision and social conditions provides the human capital advantages necessary to compete with major competition such as Microsoft, Cisco and Apple. It is the motivational outcomes of providing liberal in-house innovations in job design that forbids significant human resources problems. Google has established an open door communications policy to facilitate better management and leadership and also to address concerns with existing employee populations. Fairholm (2009) identifies a comparable leadership structure known as transformational leadership, in which desired behaviors are role modeled by senior leadership, vision and mission are consistently reiterated to gain commitment, and where coaching and development are primary goals. Google maintains its cohesion by fulfilling psycho-social needs and promoting opportunities for shared decision-making and job role autonomy regularly which provides more value for creating dedication with employees and managers. 3.0 Generic Strategies Google maintains a generic strategy referred to as broad differentiation strategy. This is an effort to seek opportunities to differentiate from rival companies product offerings in a way that provides extended value to mass markets (Thompson, 2008). Success in differentiation in an environment where products and services are easily replicated by competitive knowledge experts is necessary to achieve revenue advantages. Success in this effort include opportunities to provide premium pricing structures and also gain consumer and other buyer loyalties due to the differentiated features and benefits promoted (Thompson, 2008). Product and service research and development are most impacted at Google under this generic strategy of broad differentiation. Improvements of existing product quality and reliability are fundamental business strategies for Google, such as adding new applications to search engine software or creating new versions of technologies with enhanced capacity and new features. Technological changes in the external and competitive markets is extremely fast-paced in this industry and rapid product/service innovations are consistently being released by major competitors such as Microsoft and Cisco. Differentiation as a generic strategy maintains opportunities for Google to create new demand in key target markets and also establish a brand personality based on competence, sophistication and quality in a way that is not achievable by competition. 3.1 Corporate-Level Strategies Corporate level strategies take a look at the enterprise holistically, determining the specific resources and activities that can best contribute to fulfillment of mission. Google’s mission is “to organize the world’s information and make it universally accessible and useful” (Google, 2013, p.1). Therefore, the business’ corporate level strategy is to focus primarily on the user as a template or guide for operational changes and technology changes to ensure that information is properly aligned with end user needs. Expansion of the business portfolio, as one example, is the corporate level strategy utilized by Google. By offering a broader product line, it removes risks of brand defection with certain products and services; a sort of contingency. This also improves opportunities for expansion into new market territories for revenue growth. The business aligns human resources, operations, marketing and innovation through research and development to achieve the goal of organizing global information online. 3.2 Tactics and Objectives One tactic of ensuring success in the generic strategy process is adding new features to existing search engine technologies. To avoid reaching the decline stage of the service life cycle, Google adds new mapping imagery, enhances image searches, or adds translation matrices to improve and differentiate products. Additionally, marketing on such sites as YouTube and Facebook provides opportunities to illustrate how the company’s products and services are unique from competition, focusing on tangible and intangible benefits of product and service changes aligned with the broad differentiation strategies. Google does not, due to competitive rivalry in this oligopolistic market, promote its specific milestones and objectives as publicizing this information could detract from risk management for replication of the business model. However, qualitative analysis of secondary research materials, including the company’s most recent annual report, indicates that asset procurement is one of the fundamental objectives to achieve the mission goals. Aggressive investment in data center operations, facilities development, and data systems illustrates how capacity improvements lead toward the ultimate goal of better competitive differentiation. 4.0 Evaluation and Control The importance of the sale of securities to build capital that can be allocated to the needed assets to achieve corporate level goals aligned with mission require evaluation and controls. Google recently restructured its governance system to include more stringent financial reporting for shareholders, including the implementation of an internal auditing committee (Google, 2012). Capital procurement achieved through revenue growth and shareholder investment funds is a significant objective to ensure sufficient asset procurement to enhance product line diversity and differentiation of altered, existing products and services. Effective and compliant financial reporting ensures more trust with important shareholders in terms of investment opportunities. There is no evidence that Google has had problems with meeting corporate objectives, rather its main focus of asset procurement is improved through adequate financial reporting controls. 5.0 Governance and Responsibility The business devotes considerable labor capital and training aligned with human resources to achieve construction of a dedicated and cohesive organizational culture. It was previously identified that Google values group affiliation as a primary organizational component, as it is teamwork that provides faster and more relevant innovation releases into domestic and foreign markets. The governance system operates under the stewardship theory, or the basic assumption that managers in the organization are equipped and knowledgeable to attain corporate profits and satisfy stakeholders with minimal high level governance oversight (Le Blanc & Gillies, 2005). This gives managers more autonomy and also is properly aligned with the transformational model of leadership present at the organization. Despite this liberal governance system that provides opportunities for autonomous management practice, Google does not appear to promote the specific methodologies by which communications move throughout the business model. However, maintaining a flat organizational structure allows information to move horizontally, using support such as the company intranet and team meetings occurring regularly in the organizational model. Other community programs at Google include recent donations of one million Euros to the International Mathematical Olympiad and philanthropy programs to facilitate support for gay rights. The business also developed its own hybrid-electric vehicle prototype that achieved 100 miles per gallon in an effort to promote sustainability and renewable energy focus internationally. Google is engaged in many different activities aligned with its strong focus on corporate social responsibility and philanthropy objectives to give the business a better brand reputation domestically and internationally. Other community-minded programs include Google China Social Innovation Cup for College Students, a program to attempt to promote China’s youth population to become active agents of social improvement. Google has also engaged its internal staff and managers to assist in procuring donations for earthquake victims across the world as part of its cohesive humanitarian efforts. The business even offers a variety of grants for a variety of public and private recipients to advance education, scientific research, and reduce prevalence of certain diseases across the world. References Buzzom. (2011). 10 Toughest Competitors of Google in 2010. Retrieved February 18, 2013 from http://www.buzzom.com/2010/01/10-toughest-competitors-of-google-in-2010/ Executive Digest. (2008). 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