Industry Trends of Google Inc - Case Study Example

Google Case Analysis Table of Contents Page Number 0 Introduction…………………………………………………………………………3 2.0 Situational analysis/ Industry Trends………………………………………………. 3 2.1Corporate strategy…………………………………………………………………...3 2.2 Business strategy……………………………………………………………………4 2.3 Functional strategy…………………………………………………………………..4 3.0 Porter’s five forces…………………………………………………………………..4 4.0 Internal analysis……………………………………………………………………..5 4.1 SWOT…………………………………………………………………………….…6 5.0 Competitive Analysis/Industry Group/Perceptual Map…………………………….8 6.0 Ethical Issues………………………………………………………………………..9 7.0 Finance……………………………………………………………………………....9 8.0 Alternative Actions Considered…………………………………………………….9 9.0 Recommendations………………………………………………………………….10 10.0 Conclusion………………………………………………………………………...11 11.0 References…………………………………………………………………………14 Google Inc Case Analysis 1.0 Introduction Google Corporation was founded by Brin and Page in 1999 in order to organize the world’s information and make it universally accessible and useful (Eldeman & Eisenmann, p 2). The company has attained high growth due to its ability to develop superior search solutions and monetize the content them through advertising. The company has extended its product offerings through acquisitions since it IPO and some of the recent products include the Android operating system, You Tube, DoubleClick and Google Checkout (Eldeman & Eisenmann, p 1). The company is headquartered in Mountain View, California and commands about 65.6 percent of all the US searches. The company has diversified and integrated product and service portfolio that include web search, Google Chrome, Google News, Google Scholar, Google Docs, Google Analytics, Google Apps, Google AdSense, Google Adword, You Tube, Google Maps, and Google Earth (Eldeman & Eisenmann, p 1). 2.0 Situational analysis: Industry trends The factors that determine the paid listings provider’s revenues include the coverage rate, the average cost per click, the click-through-rate and revenue split (Eldeman & Eisenmann, p 4). Google has an extensive coverage rate and has improved the click-through rates through innovation of the keywords. The revenue split is the percentage of revenues paid to network affiliates and ordinary partners receive about 60 percent of revenue share (Eldeman & Eisenmann, p 3). Google now controls approximately 90 percent of the internet searches and has diversified its operations to other products such as mobile and cloud computing, music and video distribution (Eldeman & Eisenmann, p 8) 2.1 Corporate strategy The corporate strategy of Google is aimed at organizing world’s information in a manner that makes it more accessible and useful. The company is committed to informing, educating and entertaining the users through diversified products and services. The company is currently attaining growth through vertical integration with suppliers and diversification strategy that has led to addition to new different products to its mix (Daft, 2009). 2.2 Business level strategy The business strategy of Google is aimed at ensuring consistent technological innovation and sustained acquisitions that will lead to revenue growth and satisfy emerging customer needs (Daft, 2009). The business strategy is geared at developing distinctive competencies and identifying new market niches such as the Google Checkout and Google TV (Google, 2014). 2.3 Functional strategies Google has deployed several functional strategies such as innovation and use of superior search engine technology, implementing effective human resource policies and extending the distribution channels across all markets in the world (Daft, 2009). The company is committed at efficient utilization of its research capabilities and integrating activities in the functional areas such as advertisements and promotion in order to control operating costs (Daft, 2009). 3.0 Porter’s five forces Porter’s five forces analysis is useful in determining the competitiveness and attractive of an industry. The marketing tool consists of five forces that include the threat of new entrants in the industry, the bargaining power of buyers in the industry, the bargaining power of suppliers in the industry, the threat of substitutes, the degree of rivalry in the industry (Daft, 2009). The threat of new entrants in the internet and telecommunications industry is low due to the high capital required to establish operations and absolute cost advantages of the established companies. The established companies have many proprietary products, large economies of scale and wide brand recognition. The threat of substitutes is high due to availability of similar and undifferentiated products that are offered by competitors and low switching costs (Daft, 2009). The bargaining power of suppliers such as content suppliers, software suppliers and partners is high, but Google has responded to this threat through creating long-term partnerships with equipment suppliers and content suppliers (Daft, 2009). The company has also continued to deal with substitute threat through acquiring small players in the market. The bargaining power of buyers is high since advertisers complain of improper charges on ads appearing in inappropriate sites. The publishers and video content providers have alternative platforms where they can sell their content while the threat of backward integration is high. The degree of rivalry in the industry is high due to high exit barriers, fixed costs of the industry, industry concentration and diversity of rivals (Daft, 2009). Large competitors such as Yahoo and Microsoft present high competition due to their established brand identity and ability to offer similar products. According to the five forces analysis, the industry is highly competitive and Google should differentiate its product offering in order to attain competitive edge in the industry. The company should acquire related companies and diversify its product portfolio in order to maintain growth (Daft, 2009). The company should target niche markets such as e-commerce transactions through use of Checkout product and Google TV that provides premium TV channels (Google, 2014). 4.0 Internal analysis The company has more than 20,000 employees that are spread in numerous markets of operations and recorded $ 21.2 billion in gross revenues in 2008 (Eldeman & Eisenmann, p 1). Google launched Nexus One Mobile device and Android operating system in order to diversify its operations (Eldeman & Eisenmann, p 1). The company has a flexible organizational structure that facilitates decision-making and innovation. 4.1 SWOT (strengths, weaknesses, opportunities and threats) analysis Strengths Google has attained global brand recognition and customer loyalty due to its innovative offering to its customers. The marketing strategy has differentiated the company from competitors such as Yahoo due to ability to concentrate on the customers’ perceived value and integration of the various products (Daft, 2009). The company has an effective and efficient search engine that has made the company attain leadership position in global internet searches due to the modern webpage indexing technologies that enhance the accuracy of the search results. Google has the ability to generate revenues from third party partners since the company has dominated the internet ecosystem with various products. The Android operating system can run on various hardware platforms while the open source software has increased the usage across various platforms (Google, 2014). Google culture is another strength that has been critical in recruiting and retaining talented staff that are committed to the mission and vision of the company. The company provides excellent training and opportunities for self-actualization through enabling each employee to undertake their own creative project thus facilitating innovation in the company. The company is focused on strengthening partnerships with hardware and software manufacturers and has partnered with NASA Ames Research Center in order to develop capabilities in distributed computing and nanotechnology (Google, 2014). Weaknesses The company experiences weaknesses in its business model since advertisers have on various occasions complained on charges that they deem improper especially the click fraud. The company mainly depends on its Adwords and AdSense for revenues rather than mobile commerce and e-comerce which are the emerging revenues streams (Google, 2014). Opportunities There are various opportunities that Google should exploit in order to remain competitive and sustain its business revenues. For instance, Google TV offers high growth potential due to the current changing dynamics that favor Pay TV services, movies and premium channels. The TV customers are moving from the conventional cable and satellite platforms to digital platforms that include pay-per-view and internet TV programming (Eldeman & Eisenmann, p 9). The high penetration of Smartphone and internet provides high growth prospects since many users will be able to attain convenience in enjoying Google services such as e-books, Google Maps. For instance, more than 1 billion people use Android operating in their mobile devices (Google 2014). Another opportunity for is the improvement in computing technology that will enable Google to address customer concerns on ads pricing. For instance, Google Analytics and Estimated Total Conversion technology will enable the company to ensure efficiency and create transparent billing system. Threats Google faces threat of costly lawsuits on content such as infringement of copyrights of the e-books and trademarks of advertisers. Google has faced book scanning litigation in various countries including France. The company faces a failure in its information communication infrastructure due to increase in global terrorism attacks and threats. The company is facing a threat of counterproductive legislation due to concerns about e-commerce security, online pornography and privacy breaches. Google is facing competition from emerging technologies such as social media platforms like Twitter and Facebook that offer advertisement services and enable users to connect to their friends. Advertisers find social media sites more attractive due to the ability to engage the target audience and receive instant feedback (Daft, 2009). 5.0 Competitive Analysis/ Industry Group/Perceptual map Google dominates the internet online advertising market, but there other competitors such as Yahoo, Microsoft, eBay, and Amazon. Yahoo offers products that match Google’s Gmail, Maps, Picasa applications, Local search and Google Finance. Microsoft offers Bing search engine while eBay offers Pay Pal Service that competes with Google Checkout. Hulu offers online videos while Facebook provides services such as ads, app platform and picture hosting (Eldeman & Eisenmann, p 11). 6.0 Ethical issues The company has implemented strict ethical guidelines that ensure that ads are displayed when they are relevant and ensures that advertising does not compromise the search results. The company has banned pop-up advertising while security, and privacy tools ensures that customer confidentiality is not compromised. The company focuses on the user needs and believes that time is valuable. The company welcomes democracy on its web works while avoiding doing any evil (Eldeman & Eisenmann, p 6). 7.0 Finance Google records high gross revenues and high operating income growth due to sustained growth in new revenues streams. The company recorded $ 21.2 billion in gross revenues in 2008 and an operating income of $ 5.5 billion in the same year. The company share price was more than $ 600 in January 2010 and the market capitalization of the company was more than $ 189 billion the same year (Eldeman & Eisenmann, p 3). 8.0 Alternative Actions Considered There are three alternatives that Google Inc should consider that include cost leadership, differentiation and focus strategy in order to remain competitive and sustain superior performance (Daft, 2009). The first alternative is to increase profits through becoming the low cost provider in the market. The aim is to sell the products below the industry average in order to benefit from growth in market share. The alternative can be fulfilled through accessing required capital in order to benefit from economies of scale in the production of the mobile devices and implementing low-cost and efficient distribution channels (Daft, 2009). The second alternative is differentiation strategy that entails utilizing research and development capabilities to provide innovative products that offer additional value to the customers (Daft, 2009). Google has high skilled and creative teams that have sustained the corporate reputation for innovation and thus should pursue this strategy (Daft, 2009). The third alternative is focus strategy that will entail concentrating on a narrow segment where it can ensure cost advantage or differentiation. In this case, Google will enjoy customer loyalty in this niche segment (Daft, 2009). Google should focus on serving the emerging Smartphone market, the online transactions market and Pay TV market. Google should pursue a differentiation-focus strategy that will enable the company to pass high costs to the consumers and minimize the threats of substitutes (Daft, 2009). 9.0 Recommendations Google should continue with the current innovation and aggregation of the content in to thematic channels in order to differentiate itself from the competitors. The company should develop superior search solutions that target those thematic channels such as the print, video, mobile and information sources in order to effectively monetize them through targeted advertising. The company relies mainly on online advertisements for its revenues and thus diversification efforts should focus on growing revenues in online commercial transactions and Google TV services (Google, 2014). The company should take advantage of the popularity of Smartphone in order to create customer convenience in delivering these products to its customers. The company should differentiate its products through consistent integration and addition of added value services in order to create switching costs for the consumers. In this case, the company should partner with hardware and software manufacturers such as Sony and Motorola to deliver Google products through their platforms and share revenues (Daft, 2009). 10.0 Conclusion Google is a multinational corporation that is geared at organizing the world’s information is order to make it more useful and accessible through offering internet-related products, advertising technologies, cloud computing and various operating software. Google has attained market leadership and high financial growth due to its consistent innovation and ability to monetize new products. The company has a diversified product portfolio and high brand recognition across the world. The company should deal with the privacy and security issues and abide with the copyright regulations in order to avoid costly law suits. The company has the competencies and capabilities to exploit new opportunities such as diversify revenue streams to online commercial transactions and pay TV services. Evaluation Guide Criteria N/A Poor Satisfactory Good Very Good Excellent Writing 1 Introduction (purpose and key issues) 2 Statements supported (i.e. examples, data) 3 Clarity 4 Concepts integrated 5 Grammar 6 Formatting, headings 7 Information is cited 8 References 9 Questions (if provided) answered 10 Overall Coherence Analysis and description 11 Introduction 12 Org Defined 13 Situational analysis (Industry/Trends) 14 Corporate strategy 15 Business level strategy 16 Functional strategies 17 Porter’s 5 forces 18 Internal analysis 19 SWOT 20 Competitive Analysis (Industry group/perceptual map) 21 Ethical issues 22 Finance 23 Other Frameworks 24 Other Concepts 25 Other Frameworks 26 Alternatives actions considered 27 Recommendations 28 Recommendations consistent with analysis 29 Recommendations are specific and actionable 30 Measurement (possible/described) 31 Additional Material 11.0 Reference: Eldeman, B & Eisenmann, T.K. (2011). ‘Google Inc’, Harvard Business School, April 11, 2011, pp 2-17. Google. ‘Our products and services’, (web): http://www.google.com/about/company/products/. Daft, R. (2009). Management. New York: Routledge. Read More