Business Strategy of Google Company - Term Paper Example

Table of Contents Table of Contents 1 Introduction 3 Task 1 Strategic formulation 4 Vision 4 Core competencies 4 Mission Statement 5 Stakeholder Analysis 5 Environmental and Organizational Audit 5 PESTEL 5 Political 5 Economic 6 Sociological 6 Legal 7 Environmental 7 Porter’s Five Forces Model 7 Bargaining Power of Buyers 7 Bargaining Power of Suppliers 8 Threat of New Entrants 8 Threat of Substitutes 8 Competition among Existing Players 8 SWOT 9 Strengths 9 Weakness 9 Opportunities 9 Threats 10 Value Chain Analysis 10 Strategic Positioning 10 Task 2 11 Ansoff Growth/Vector Matrix 11 Planning systems 13 BCG growth-share matrix 14 Task 3 Strategy evaluation and selection 16 Market entry strategies 16 Disinvestment strategies 16 Task 4 17 Roles and responsibilities for strategy implementation 17 Resources Required 18 Evaluation of Outcomes 19 References 20 Bibliography 23 Introduction The present age of business markets is termed as the age of competition. Globalisation has led to the creation of a situation where firms are desperately trying to generate a distinction for their products and services. The present study would analyse the business strategies of Google in the wake of the turbulence in the markets. The internet search engine industry has an oligopolistic market structure with only three major players namely Google, Yahoo and Microsoft having a majority market stake (Fabos, 2005, p.189-192). The value of this attractive industry segment has been pegged at 16.6 billion US dollars as of 2010 in the North American market alone (SEMPO, 2010, p.1) Task 1 Strategic formulation Vision Corporate vision statement largely displays the direction of a company that it seeks to intent for achieving its set of objectives. The vision statement largely defines the possible future strategies of the organization. A good vision statement not only helps shareholders and customers but also seeks to induce a motivating effect on the employees of the organization (Fitzroy & Herbert, 2009, p.157). Google’s vision statement is reflected as a ten point strategic framework named as ten things. The ten point vision framework largely includes ensuring simplicity, innovation and ethics (Google-a, n.d.). Core competencies The core competency of Google is based on the aspect of the simplistic yet innovative nature of the product offering of the organization. Google core competencies lie in its ability to produce diverse product with large scale innovations that delights the users by the simple yet effective performance. The core competence of Google also comes from its unique search engine algorithm that has made it the most popular search engine of the web (Sugano, Goncalves & Figueira, 2009, p.57). Mission Statement The mission statement is a single and short statement that describes the purpose of existence of an organization (Kaplan, Norton & Barrows, 2008, p.3-4). The mission statement of Google is stated as follows: “Google’s mission is to organize the world’s information and make it universally accessible and useful” (Google, n.d.). Stakeholder Analysis Google is a public company which has its shares listed on the bourses of the NASDAQ stock exchange. The stakeholders of Google include suppliers, government, trade associations, employees as well as the employee unions. The company aims to ensure the continuous welfare of the shareholders and ensures a good return on their investments (Morrow, 2008). Environmental and Organizational Audit PESTEL PESTEL is a tool that can be used to analyse the external environment of an organization. PESTEL is an acronym that stands for Political, Economic, Sociological, Technological, Legal and Environmental factors (Johnson, Scholes & Whittington, 2008, p.65). Political Political factors largely include government polices and legislations. Google is based in USA but it also has operations and business units spread around the globe. Google is being continuously affected by legislations related to censorship of its contents and advertisements as well as privacy issues. A favourable and friendly political climate largely helps the organization to sustain and expand its business operations (Morrow, 2008). Economic Economic factors include aspects like economic growth largely helps in determining the business prospects of Google. However the relative nature of the products of Google makes its less susceptible to the aspects of economic business cycles. However the growth of an economy leads to a growth in the advertising revenues of the firm (Morrow, 2008). Sociological This element has very wide implications on the business prospects of the organization as the business model of the company is largely dependent upon the social behaviour of the firm. Google has become an integral part of the day to day lives of every individual who has access to the internet. Individuals use it for searching almost everything right from pizzas to doctors using the search engine. Hence it can be easily stated that the growth of the business model of Google requires a favourable sociological environment (Morrow, 2008). Technological The sustainability and success of Google’s business model is almost entirely dependent on the use of technology. Aspects like search engine optimisation and search engine algorithm are technological implications. Moreover with a large number of internet users across the world technological innovations seem to undertake a positive effect on the firm’s business prospects (Morrow, 2008). Legal Legal factors include as aspects of copyright laws and their infringement. Acceptance of jurisdiction of the International courts of Justice by foreign nations also assumes importance for the organization. Nations like India and UK have largely accepts this jurisdiction along with USA (CIA, 2011). Environmental Environmental aspects do not have many implications for an organization like Google that primarily has its presence in the services industry. However environmental aspects like eco- friendly offices are being adopted by Google so as to maintain environmental sustainability. Porter’s Five Forces Model The competitive framework of an organization can be evaluated using the five forces model proposed by Michael Porter. The five forces include bargaining power of buyers, bargaining power of suppliers, threat of new entrants, threat of substitutes and finally competition among the existing players (Hill & Jones, 2009, p.42). Bargaining Power of Buyers The unique search engine algorithm of the company helps in generating advertising revenues for the firm on one hand and also helps in including both large and small players in its search results. This helps in generating customer interest which makes the bargaining power of buyers low in effect (Morrow, 2008). Bargaining Power of Suppliers Suppliers largely include the organizations that generate revenue by putting up advertisements. Considering the popularity of the search engine the company has a high barraging power that eventually leads to very low power of the bargaining power of suppliers (Morrow, 2008). Threat of New Entrants High entry barriers and a formidable brand image helps in generating difficulties for new players to establish themselves in the market (Morrow, 2008). Hence it can be concluded that the threat of new entrants is low in nature. Threat of Substitutes Internet has become a powerful tool for searching and gathering information and there are very little substitutes that can be used as an alternative to the internet. Hence its can be easily concluded that the threat of substitutes is very low in nature. Competition among Existing Players Google’s main competitors include Microsoft and Yahoo in the search engine domain. Considering the mammoth share of Google in the search engine business (57 %) the company has a favourable position in the industry. Hence the extent of influence of competition in the market has a medium influence on the business model of the organization. SWOT SWOT is an acronym for Strengths, Weakness, Opportunities and Threats and is used for analysing the internal environment of an organization (McMurtry, 2003, p.260). Strengths Formidable brand image Technology backed innovations Simplicity in products (Datamonitor, 2007, p. 38). Weakness Absence of integration in product lines Considerable number of loss making business units (Datamonitor, 2007, p. 38). Opportunities Increase in usage of internet Diversified product offering Mobile computing and internet on mobile (Datamonitor, 2007, p. 38). Threats Extensive competition Copyright and Frauds (Datamonitor, 2007, p. 38). Value Chain Analysis The emergence of internet has led to the creation of an alternative value chain where the aspects of logistics do not have a large scale importance. Internet has enabled a readymade set up of that allows interrelation of different elements of the value chain. Firms like Google operate on a virtual value chain that allows them to add greater value to their service offering (Daniels, Radebaugh & Sullivan, 2009, p.365). Strategic Positioning The strategic positioning strategy taken up by Google includes a mix of growth, efficiency, market leadership, mergers and acquisitions as well as expansion. Google’s growth strategy would include inclusion of programs and applications like Google ad words and ad sense that would help boost up the advertising revenues of the organization. Google also acquired You tube that made its entry in the lucrative online video streaming segment (Google-c, 2006).The strategic positioning strategy chosen by Google assumes significance considering its diversification strategy. Goodle wants to have a diversified product and service offering that helps capture the needs of a large section of the market. The company in this aspect also launched its own browser named ‘Chrome’ to challenge its arch rival Microsoft. This diversification strategy has been undertaken by the organization largely to challenge its competitors and maintain its dominance in the search engine market. Task 2 Ansoff Growth/Vector Matrix The Ansoff Matrix has been used as the strategic tool for explaining the future direction of the business of Google Inc. The generic strategies before the companies have been categorized into four different alternatives in the model. The four generic options can be elaborated using the following figure. Figure 1: The Ansoff Matrix (Source: Luck, 2008, p.346) Using the Ansoff Matrix companies are able to decide what would be the future direction fo its business. A company which have been showing declining sales could use the matrix for evaluating the four alternatives, i.e., the company could penetrate the existing market via price strategies or increasing brand loyalty. Google is considered to be one of the most widely used search engines in the globe. It holds more than 60% of the market share of the entire world search engine requests. It also holds a major portion of the market share in both USA and the United Kingdom. The company has more than 70 office locations in USA and across the world. It has been able to emerge an immensely popular brand in the world. The simplicity of their user interface and the scalability of their back end solutions have been effective in making their growth rapid. This implies that the company already has widely established market share. However it could diversify its products at this stage. Product development would be the ideal strategy for the organization. This means that the company could offer new features and facilities in the services that it provided. As the world has been witnessing rapid technological advancement, it would have to upgrade its services using the latest of technologies to remain competitive in the market and to ensure that its present users were not attracted towards the product offerings of competitor organizations. The key strength would lie in its ability to satisfy its present users and gain users from competitors through the offering of new and unique varieties of products using the latest technologies. Realizing the need for the internet media provider, the company could extend its range of services which would then have to be translated and be exportable internationally (Saee, 2007, p.98). Planning systems The generic strategy for the company would be a top-down approach initiated from the company’s headquarters in California. As per the decisions of the top management, the company seeks to enter into a series of partnerships with companies like eBay, MTV and MySpace. The core idea was to enter into partnerships with such companies that represented the different initiatives which they had wanted to implement (Caplan, 2006). The main aim of Google would be to focus on the system of distribution by employing the strategies of the other companies for reaching their customers that Google does not own. The idea is to emerge as the better provider of solution and a better player by sharing the success and getting the benefit of hard work that others have put in (Caplan, 2006). The reasons for choosing the strategic partners are different. A demographic look at the people who Dell sells to reveals that they are predominantly Google users. Thus they would logically be a big partner for the software distribution of Google. MySpace is better known as the breakout in terms of social networking. Also they have been a greater growth rate than most other competitors. Intuit has more than 80% or 90% share of the market at the present stage that they are in. Adobe has around 80% or 90% of their market space. The strategy would be planned financially. The company would develop three year financial plan and and submit the same to the board for approval. The company would have to model their financials and cash flow and would be in a position to predict their position strategically in the next year. The company would be fixed about implementing their immediate plan and identifying where they would be in the next year (Caplan, 2006). BCG growth-share matrix An effective way of communicating a complex and difficult concept would be then use of the BCG matrix. The BCG matrix is an analytical tool for used for product portfolio analysis. The design is developed to place the products into one of the four grids or quadrants as presented in the figure below. Figure 2: The BCG Matrix (Source: WetFeet, 2010, p.10) Due to the company’s high market share and high rate of growth, it would be placed in the first quadrant, i.e. star. By measuring the market share and the market growth rate of the company, it would be in a position to evaluate the attractiveness of venturing into new markets or acquisition of target companies. Being in the first quadrant, Google identifies itself to be in a position to acquire companies. The company’s policies to enter into partnerships with other major competitors is also driven by the company’s dominance in the market as having a huge number of users and also its growth potential. It has been keen to enter into partnerships with web based competitions like yahoo and use the market of the latter to the company’s advantage (WetFeet, 2010, p.10). Task 3 Strategy evaluation and selection Market entry strategies Market entry strategies for Google would largely include entering into new and diversified market segments. The company recently moved into the mobile computing segment with the launch of Google Android which is a mobile based applications software targeted towards mobile phone internet based applications. The company in an attempt to challenge Microsoft launched its new browser chrome. Future potential segments for the organization would include entry into the operating system industry segment that offers large scale potential in the future. Effective market entry strategies would also include launching products that would target mobile as well as computer based web users. Disinvestment strategies The analysis of the business model of Google reveals that it has a large number of product offerings in diversified industry segments. However not all of these units generate revenue streams for the organization. It has been stated that certain business units like You Tube are largely cash burning units that do not generate extensive revenue but also result in a drain of resources (Paidcontent.org, 2011). Hence Google must undertake a proper evaluation of the large number of its products in the market and should divest some of its loss making units that do not have a future potential. This would help the firm generate focus towards specific segments and would help the firm to divert valuable resources from units that do not have suitable opportunities. The most feasible strategy for Google at the present stage should be a disinvestment strategy. A market expansion or product expansion does not seem feasible considering the fact that Google already has a large number of products under its portfolio and any increase would only lead to shift of focus. Moreover considering the fact that there are certain business units that do not have much options for revenue generation hence it would be feasible to divest some of the potential loss making units so as to focus its resources on the profitable business units that would help generate sustainable advantage for the organization. Task 4 Roles and responsibilities for strategy implementation Strategy implementation might be a complex issue and can be as important in a small enterprise as in a large organization. This is especially applicable for the information and technology sector. Small enterprises are characterised with limited resources and high costs. This is the reason why small enterprises struggle to survive in the competitive market and are required to function under tight budget restrictions. The small IT services need to be specifically innovative in their approach and need to be feeding into any business opportunity that comes their way. On the other hand the large enterprises have a number of opportunities to choose from in their endeavours. They can use ample resources to fight against competition in the market. A large enterprise can easily sell its products as it already has an established market, however, the smaller one requires making its presence felt in the market and create demand among the masses. Also the functional groups and their roles and responsibilities are well identified and are set against targets, while small organizations tend to change objectives frequently and thus the responsibilities of functional groups also are not fixed. Small organizations also take up target marketing using the electronic media as their human resource or work force might be small. On the other hand larger organizations can easily use their huge sales force to reach their customers or for expanding their markets (Taylor & Macfarlane, 2006, p.17). Resources Required The future strategies of the company would require the optimum allocation of resources, in terms of its human resources, finance, materials and time. The company aims to seek significant improvement in the overall utilization of resources. The users had been induced towards making their service more mobile, to make disk or memory and network tradeoffs as was appropriate in various clusters and also to completely use every resource dimension, among the other desirable outcomes. The company would emphasize greatly on its research team for attaining greater efficiency in the services and products they provided. The company would also focus on the development of its sales team which would cater to the changing requirements of users using relevant solutions. The company could allocate greater human resource in the development of its sales team which could focus on expanding and supporting its global publishers, advertisers, and users in more than forty languages and also provide them with the highest quality of services (Google-b, n.d.). The company would a major portion of their time on innovation and creativity and the development of new products. The company would provide their utmost support towards collaboration among the engineers in projects and development of their abilities and expertise. The company would invest in innovative search technologies to connect the numerous people across the globe (Google Press Centre, 2010). Evaluation of Outcomes Outcome evaluation is referred to as the systematic process of examination of the outcomes, changes and benefits which has resulted from a set of activities implemented to achieve a particular goal or objective. The intention is to examine the degree to which the activities have been effective in terms of the benefits generated, the improvements achieved and the need for further improvements in the process. In this case the human resource management practices would be evaluated in terms of the performance of employees. The performance of employees would be measured against the performance set and the performance actually achieved. The most effective way of measuring the outcome is to identify the increase in the revenue generated after implementation of the new strategy. The change in revenue can be directly attributed to the new strategy adopted. In addition to this, the company would need to make an assessment of the quality of service that was provided to the customers. For this, the company could collect the feedback generated from its users to know if they were satisfied with the services. The extent of their satisfaction would reveal the extent of improvement of quality of services offered by the company (Valias, 2009, p.2). References Caplan, J. (2006). Google's Chief Looks Ahead. [Online]. Available at: http://www.time.com/time/business/article/0,8599,1541446,00.html. [Accessed on May 28, 2011]. CIA. (2011). The World Factbook. [Online]. Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/uk.html. [Accessed on May 28, 2011]. Daniels, Radebaugh & Sullivan. (2009). International Business,11/e. Pearson Education India. Datamonitor. (2007). Google Inc. [Pdf]. Available at: http://favormall.net/clientimages/38996/media-googleinc.pdf [Accessed on May 28, 2011]. Fabos, B. (2005). 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