Business and Market Analysis of Google Company - Case Study Example

Google Company Analysis Introduction and product/service analysis Google is a multinational firm originating from America. It specializes in internet related products and services such as, cloud computing, search engine, technologies for online advertising and software. As of now, most of Google’s profits come from AdWords. Google was founded in 1998 by Sergey Brin and Larry Page. Since its inception, the firm has shown steep growth and rapid expansion (Google, 2014). After the successful launch of Google search engine, the company started introducing various services and products. The company has also been involved in a chain of partnerships and acquisitions. The company is increasingly moving into hardware and communications. Google employs around 50000 individuals across various branches spread all over the world. The company has dominated the market of search engine and has been constantly criticized over issues like, censorship, privacy and copyright. However, the company has successfully carved a niche for itself in the market of IT, telecom, communications as well as search engine (Google, 2014). The objective of the current project is to perform business and market analysis of Google. The project will throw light on internal and external business and environmental factors governing the various functions of Google. This encompasses observation of various trends and demand patterns shaping the IT industry and its overall effect on present and future marketing strategies of Google. Product and services offered Google’s services and products include web-based products such as, Google search tool, publishing and communication tools, products that are map-related, statistical tools, development tools and hardware. Mobile web and mobile standalone applications, operating systems, desktop applications as well as associated services are provided too. So far, Google search engine, Gmail, Google maps, android, Youtube and Google chrome have been considered as best products launched by the multinational company. Besides that, the company has been giving tough competition to other technology and software companies by launching products such as, Google Glass (Google, 2014). Role of technology, product life cycle and price elasticity For companies in the internet and technology business, the only way to stay ahead is to keep innovating. As a result, technology has played a crucial role in determining success of Google. With the help of high-end technology, Google has been able to produce innovative products and services. Google’s service and product category is wide. For instance, Google search engine is one of its earliest products, which is presently at a saturated phase. Even so, constant innovation and development have ensured Google’s dominance in the search engine market. In general, elastic demand is faced by those products and services, which have numerous substitutes or are available abundantly. On the contrary, in case of inelastic demand, consumers are not sensitive to any change in price of that particular service or products. This occurs because of scarcity or unavailability of the product or service while demand is high. So, for inelastic service or products, companies can increase price and gain higher revenue margins. Thus, it is extremely crucial for organizations to evaluate elasticity or inelasticity of their services or products offered. 2. Market analysis Market trends and Consumer behavior Market trends and consumer behavior determine the difficulty or ease with which companies market their services and products. There is a dramatic device shift from household personal computers to mobile and touch devices. The market is also shifting from voice to video and data. Customers are becoming multi-taskers and expect hyper-efficiency in their work. Super-personalized market is another growing trend aimed towards new-age customers. All the above trends have a direct impact on the strategy and management of Google. Indifference curves Indifference curves are graphical representation of consumer preferences. In an indifference curve, consumer finds all attributes and features to be desirable in a similar manner. The graph drawn below shows that customer satisfaction is similar at both points A and B. (Source: Author’s Creation) Similarly, indifference curve has been implemented to address substitutes, complementary relevant and irrelevant products categories, which are competing against Google. The major application of indifference curve is in pinpointing features and attributes deemed similar by customers. Subsequently, these attributes can be enhanced for gaining competitive edge. Shifts in demand and supply curves Shifts in demand curve occur mainly because of changes in consumer behavior as well as market circumstances. Demand shift is influenced by various economic factors, demographic shifts, cultural changes, environmental concerns and factors as well as substitute availability. On the other hand, shifts in supply indicate excess availability of a specific service or product, lowering the price and increasing volume. It can also be said that underlining fact behind shift curve is that scarcity of a service or product increases its price as people are willing to pay more. Products such as, Google Glass and Gmail, have arrived because of high customer demand. Whereas, the search engine market is increasingly being filled with new search engines such as, AOL, Bing, Baidu and MSN. Market forecasts for selected products/industries As discussed earlier, top ten products and services offered by Google continue to dominate their respective markets. With successful launch of Google Glass and Nexus, the company has also entered the technology market. According to analysts, the company is expected to grow at a rate of 14.5 percent in next five years. Other Google products that have stimulated the market are Google Fiber, Google Play, Chromebook and Driverless Car. 3. Production and supply process Marginal analysis is used by IT companies like, Google, for evaluating business models as well as tracking factors affecting the decision making process. Apart from tracking profits and levels of performance, Google also uses marginal analysis for determining break-even sales. Input procurement at Google occurs from distributors and dealers and most of them are hired on a long-term contract basis. In order to maintain high quality of its products, Google ensures that it conducts business with accredited and top suppliers. While products such as, Gmail, Google Chrome, Google search engine and YouTube, are free to users, Google also provides consulting and business programming services. 4. External environment analysis Structure and nature of the industry/market Google is primarily an information technology provider. The industry is highly competitive with many big and small players. Nonetheless, the market is dominated with few large players. For example, the search engine market is dominated by companies such as, Google, Bing and Yahoo. Firms are open to multiple experiments and overall nature of the industry is inclined towards extensive research for development of innovative services and products. Overall contribution of IT industry in the global market has increased manifold. Google predominantly falls in the IT and communications industry, which is innovation intensive. Market favors those companies who are fastest in terms of accessing the right information. Patents and copyrights basically include software and technology. With availability of technology as well as easy access to critical customer information, threat of new entrants is high in this industry. Industry concentration, main players and competition The information technology market is highly concentrated with both big and small players. However, holistic nature of IT sector makes the evaluation extremely complex. For instance, Google search engine dominated the search engine market with about 67 percent market share. It is followed by newly launched, Bing with about 20 percent market share and Yahoo with around 12 percent share. Other players in the search engine market are Ask with 1 percent and AOL with about 8 percent market share. The total share of market is also widely distributed on basis of regions. For instance, China has its own search engine, Baidu (Search Engine Watch, 2013). In terms of IT products, Google’s main competitors are Microsoft and Apple. Both these companies have almost all service and products, which are served by Google. In addition, Google’s major revenue comes from AdSpends. With launch of Facebook, a large chunk of these AdSpends have been transferred to the social networking site. So, it can be said that competition is tough for Google and the intensity in on the rise. Every new product or service produced by the company is quickly replicated and sometimes excelled by other companies, eating away Google’s market share and popularity. For example, many Google Glass competitors have evolved in the market such as, Meta Pro, Vuzix Smart Glasses and Optinvent (Hoovers, 2014). 5. Political and economic overview Political and region specific regulations are important constraints or enablers in context of resource access required for growth and development of IT organizations such as, Google. The major political governmental and legal regulations faced by Google are in areas such as, tax policies, labor and environmental laws. Other factors that influence Google’s working in different regions are political stability, government restrictions as well as tariffs. The role of state, regional and state government influence the way Google functions in a particular region. For instance, many countries are sensitive to political and cultural revelation and in these nations, Google has blacklisted various URLs and IP addresses related to the government. The company has also faced copyright and information infringements issues in various countries. The strategic plans of the company depend on latest economic forecasts as well as market patterns and trends. At present, the economy is suffering from recession and economic downturn. However, being a technology company, Google has been able to isolate itself from the damaging impact as search engine companies have become a necessity for the economy and society as a whole. Internet based online advertisements have become greatly essential for revenue generation at Google. The company focuses on highly measurable and targeted advertising tactics, which helps to build greater resistance to recession compared to other technologically oriented businesses. For its search engine, Google follows the standard pay-per-click advertising strategy. Most of Google’s products are unique and offer better features compared to the competitors. As a result, the company’s products and services are placed at a relatively higher position in the industry. Taxes, incentives and special programs Being one of the most respected companies across the globe, Google follows a strict tax policy. In addition, Google is considered as one of the best employers. The Google work environment is extremely flexible and employee friendly. Google falls in a labor intensive sector with a demand for high skilled employees. So, Google is one of the highest paying companies in the world. The company offers numerous fringe and flexible benefits for its employees. A cost or benefit motivates resource allocation decision or other action by consumers, businesses or other participants in the economy. Incentives can be monetary or non-monetary. A few of the more important incentives affecting economic decisions are prices, taxes, and government regulations. In order to further distinguish itself from its rivals, Google has introduced several special programs such as, providing educational facilities and scholarships for students. 6. Business environment The present volatility in business and economic environment across the globe has presented various challenges for Google’s domestic and international business strategies. The recovery process is different in emerging and advanced nations posing as obstacles, in terms of revenue and profitability for Google. For instance, online advertising in developing nations is lesser compared to advanced nations. Besides that, monetary and economic factors, such as, inflation and exchange rates, appear to affect working and strategy implementation process of Google. After success of Google search engine, the company ventured into many acquisitions and partnerships for expanding its global footprints. Earlier mergers and acquisitions were related to internet search and software associated with websites. Even so, in order to expand business, Google started diversifying into various related businesses such as, blogging, mapping, mobile advertising, gadgets, mobile software, package delivery, robotics and artificial intelligence. Some of the biggest acquisitions by Google include Android, YouTube, ITA travels, Admeld, Like.com and Feed burner. Most of these companies are niche market dominators and have provided Google with the opportunity to enter and capitalize the global market. The company has also been following regionalization policies. For instance, in many economies such as, China, the company has limited its functions and access capabilities as per local government policies (Business Insider, 2011). Role of economic unions/trade blocs Trade blocs are agreements between various governments across the globe. The objective is to eliminate or reduce trade barriers among participating nations. Trade blocks are beneficial in increasing FDI, healthy competition, reduced imports costs and increased market efficiency. Nevertheless, trade blocs are also criticized for creating bias or preference for the participating nations. There is also loss of sovereignty and increased interdependence among participating nations. In economic union policies on services and goods movement, product regulation and production factors are common. These unions are very profitable for participating nations. Google has also been involved in few economic unions such as, that with European Union. However, unions affect the company in terms of preferences and modes of operations; for instance, conflict that arises while using Google search (Economist, 2013). 7. Firm/industry location Various factors affect the location of an industry. These can be raw materials, access to information and technology, transportation and communication facilities and availability of labor and easy of land and power availability. For instance, most of the national and multinational IT firms in India are situated in Silicon Valley. The major reasons are availability of resources, technology and power. Another prominent reason is close contact with other firms as well as industries, which not only keeps the firm updated about latest trends and demands in the market, but also closely monitors the competitors and their activities. This also explains the need for an agglomeration economy, especially for IT sector. Clustering of various economic activities helps in overall optimization of the sector, which is welcomed by the industry firms. This cluster also encourages competitive advantage among firms by promotion of common interest and economic support. In turn, this industry can dominate other sectors by gaining a competitive advantage. Optimal firm location In a company of socially optimal size, a unit output results from lowest costs of production. After a certain time, the company gains economies of scale. In general, larger firms tend to be more efficient compared to small ones because of economies of scale. However, global firms depending on expansion for growth need to understand its impact on efficiency in production. Google’s expansion strategies are usually evaluated through long run analysis of costs and expenditure in expansion and growth plans. Figure 1 Long Run Analysis (Source: Economicsonline, n.d) The above diagram represents long run analysis of a company. When expansion costs of a company become higher compared to productivity in that region, it reverses the plan and opts for regions that are yet to be penetrated. The company has been using this strategy to explore regions such as, Europe, Asia and Africa. Shifts in industry location Major shifts in industries took place during the industrial revolution. European nations and North America were pioneer locations for major industrial booms. As a result, these two regions grew faster compared to other regions. This also facilitated technological development, in a relatively faster manner. Google was launched in California and had its operations restricted to developed and advanced nations for a period of time. Nonetheless, greater number of emerging nations, such as, China and India, are able to taste prosperity in terms of technology and communications, with advent of globalization and dissolving of boundaries. This forced MNCs such as, Google, to expand and establish their base in emerging nations. At present, India is one of the highest revenue providers for Google (Business Insider, 2013). 8. Business and pricing strategies Google’s major business comes from advertising. These include AdSense and AdWords. This forms the core service business of Google. Secondary business of Google includes a variety of products and services such as, YouTube, Gmail, Fiber and Nexus. Many of these services and products have been acquired. The tertiary business of Google encompasses technology services and products such as, Google Glass and Wi-Fi Balloons. The search engine market is saturated with multiple new entrants, intensifying the competition. Even so, with expansion and experiments with ventures and new research and developments, the company is in a competitive advantageous position. Having a large product and service base allows Google to implement different pricing strategies according to market structure, positioning and target market. For instance, Google follows predatory pricing for its Android, which has restricted other operating systems from gaining any profit while competing on the dominant platform for mobile users. Price discrimination is prevalent in the IT market. For example, Google docs are direct competitors of Microsoft office. The most common platforms where price discrimination occurs are pay-per-click advertising and offering free software and applications on selected platform such as, Android or Smartphone. Google also follows second degree price discrimination by creating slightly differentiated products and offering them at a higher price than competitors (Forbes, 2013). Network externality is the positive or negative effect created on a service or product user with rising or declining usage of similar or other compatible services or products. Google’s search engine improves with more number of people using it as more information gets added in Google’s database with every search. Though these are scale externalities, yet they induce positive word-of-mouth advertising. Google has always been keeping up with changing market and consumer trends. For instance, Wi-Fi balloons and Google glass are latest developments catering to the current market demand. 9. Entrepreneurial ability of managers Technology is, in general, evaluated on three major aspects. The first is relevance and accuracy such as, extent to which search results correspond with user intentions. Second aspect is capacity of the technology and third is freshness of the technology. As a result, constant innovation is the only way IT firms are able to survive with a competitive advantage. Innovation in Google ranges from launching of technologically advanced products such as, Google Glass, to strategic expansion in various related and unrelated markets. This allows the company access to wide service and product portfolio. The internal organizational design of Google is innovation oriented and gives emphasis on creativity and new idea generation. The company does not follow any strict organizational hierarchy and employees are free to approach the management any time. Google requires high creativity in its work environment. In order to fulfill these requirements, best employees are hired across all business and academic dimensions. The corporate culture of Google is established as environment as well as employee friendly, thereby stressing on a relaxed and informal workplace. The company promotes idea generation and creativity in its planning and strategy process too. In order to retain productive and creative employees, the company follows various strategies such as, high pay and incentives, flexible work timings, innovative work approaches and work-life balance. Google’s sustainability initiatives include establishing greener future for a viable environment. The company also follows green practices for managing its supply chain. For instance, almost all buildings of Google are certified as green buildings with several renewable power sources. The company also conducts multiple seminars and campaigns, spreading awareness regarding usage of sustainable and environmental friendly products. 10. Conclusion The current study was focused on a strategic and business analysis of Google. It is one of the most respected and admired firms across the globe. The present business environment has become extremely competitive and in order to stay in business, Google will need to engage in constant innovation and development. References Business Insider. (2011). Google’s biggest acquisitions so far. Retrieved From Read More