Strategic Business Analysis of Google Company - Assignment Example

Task 3 Opportunities and Threats Google is one of the leading organizations of the world offering a unique and customized experience to its sacross the whole world. The recent surge of the Google indicates that the market for information technology is taking a new leap in a direction specially. Google is actively engaged in development of technologies which are relatively more robust as well as efficient as compared to its competitors. Google’s management is considered as one of the most important elements in its overall success as it is often argued that management of Google is largely based on encouraging cutting edge ideas and overly emphasis on the details which give Google an entirely new dimension as compared to its competitors. Google Engineers are considered as some of the best in the industry who focus on creating products with a single minded aim to produce something which can radically change the whole world. (http://www.soopertutorials.com, 2009). Such attitude at Google therefore give it a more unique strategic dimension and as such the overall strategy formulation at the top level is always directed at leading the market in more unique manner. This also allows Google to be a market leader and dominate the market in different segments in a manner which is not only unique but also significantly different from most of its competitors. Secondly, the open end platform strategy of Google gives it a voluntary exposure to most of the online customers therefore the overall strategy of Google offers it a more unique dimension of attracting the customers simply through its sheer brand power and brand image. What is however, also important to understand that Google, as compared to most of its competitors is considered as a new business and as such earlier competitors such as Yahoo, Ask, Microsoft etc can overcome it at least in search engine business once the they realize the traditional weaknesses of the Google and start utilizing their strengths in more strategic manner. The new emerging phenomenon such as Facebook.com, MySpace, is comprehensively beating Google in some new trends that are appearing on the internet and as such the overall competitive landscape may not be entirely favorable for the Google. With the introduction of Binge by Microsoft, the competition environment in search engine marketing is relatively changing too with Google to face stiff competition from its rivals. The major rivalry between Google and its nearest competitors is spread into many different dimensions including cloud computing, new operating system, mobile operating systems, revenues from advertising campaigns such as Google ads etc are new dimensions of the competition which Google is facing or has to face in the future. The competitive environment is therefore tough and requires a better strategic initiative from Google. In order to assess the overall opportunities and threats to Google, it is important that some strategic tools such as Porter’s Five Forces as well as PESTLE Analysis which can predominately define the overall threats and opportunities to Google and how it can withstand its competition. Porter’s Five Forces Porter’s Five Forces is one of the most important models for environment scanning as well as competitors’ analysis. This model is largely based on the assumptions that the market distortions potentially create situations where the overall competitive environment may be radically different and ability of firms to achieve their strategic objectives and market dominance depends upon five different forces. In order to assess the threats and opportunities to Google, Porter’s five forces will be one of the relatively better methods for assessing the overall competitive environment for Google. An analysis therefore may be as under: Barriers to entry Barriers to entry refer to various factors which may restrict the entry of new competitors in the market. These barriers to entry may provide some sort of insulation to the existing players from new and more competitive players who can, in future, take away the market. Barriers to entry can include economies of scale, absolute cost advantage, technological supremacy, strong brand identity in the market, access to inputs as well as propriety technology may serve as some of the barriers to entry. Google is a kind of company which has many natural advantages in terms of its strong brand identity as well as having technological supremacy. The rapid changes that have taken place over the period of time allow many competitors in the market to restrict new competitors in the market. The existing competition in the search engine market is mostly dominated by the existing competitors and as such no new players have entered into the market. Apart from this, what is also important to note that the more significant contribution made to the revenue of the Google is through its Google Ads. This dominance over the online advertisement market therefore provides another important barrier to entry in the market to secure Google’s position in the market. Threats of Substitutes Threats of substitutes are another important source of competitive environment in the market which indicates the relative switching costs involved in using the services. Google offers an open end platform environment for most of its services which means customers can enjoy many services such as Google Aps, email etc free of cost. This therefore makes switching cost relatively more steeped if customers switch to some other services which can bill them for services availed. It is also important to note that threats of substitutes can also be assessed from the inclination of the customers towards the new substitutes therefore in order to maintain its dominance over the market; Google has to innovate more frequently and bring in constant changes which can offer its users more innovative experience every time they login to Google. Further, the customized services such as iGoogle provide more customized services which are not only comprehensive in manner but also offer a customized services to the users. This therefore makes switching cost higher as compared to the services offered by the competitors. However, it is also important to note that Google has to constantly make technological changes as well as bring in new technologies and platforms to reduce the chances of substitutes taking over its traditional market. The strategy of Google indicates that it is follower in some products such as its new mobile operating system which is considered as an alternative to Microsoft’s mobile operating system. The new mobile operating system rolled out by Microsoft is therefore a strong threat to Google as well as Apple as it is considered as a perfect substitute of similar products offered by Google and Apple.(Millis, 2007). Google has partnered with Motorola to offer its new mobile operating system whereas Microsoft’s partnership is with Nokia which is relatively a better known name in the mobile phone industry as compared to Motorola. Thus the threats of substitutes are not only an inherent threat for Google but for the overall industry also. Supplier Power Google offers services which are virtual in nature therefore there are less or no threats from suppliers as Google do not procure any input form any source except the fact that it has to hire its engineers. Buyers’ Power Major source of revenue for Google comes from its advertising services which are offered at extremely low prices to customers. A relatively low cost environment therefore offers buyers a very limited bargaining power to use the services of Google. It is important to note that the overall industry dynamics are such that Google caters more than 150 million search hits every day that means an exposure of Google’s customers to the users of Google will be huge as compared to other traditional means of advertising. It is also important to note that most of the services and products offered by Google’s closest customers offer products which are physically delivered to the customers unlike Google’s which offers the same services online. This further allows Google to leverage its power over the buyers in relatively non-traditional manner. Competitive Rivalry Finally, the competitive rivalry depends largely on above factors and decides the overall opportunities and threats faced by the firm within any particular industry. The extent of competitive rivalry for Google therefore largely based upon the relative strengths and weaknesses of its competitors. The overall market trends also indicate that the nature of competition has relatively changed with no market leaders i.e. market leadership and first mover advantage is relatively short term in this industry which further necessitate that the firms must continue to evolve in a manner which allows to become a market dominant player over the sustained period of time. If we assess the opportunities and threats for Google based on above analysis, it will be clear that Google may face threats in some segments of the markets such as online search engine however; opportunities for it are relatively more diversified. It can and will enter into operating system market to challenge Microsoft whereas on the other hand, its dominance over the advertisement market can allow it to withstand the competition from Yahoo. Further, it may be possible that strong competitive pressures may force Google to offer many of its services at free of cost which can potentially reduce its profitability over the long run. Task 4 Google is unique in the sense that it allows its employees to spend a significant portion of their working hours to be spent on their personal schemes. This is also considered as an effort to bring in more creativity and innovation within the firm and bring in changes which can critically improve the overall brand image of the firm. The different products and services which have been launched so far by the Google also include some controversial projects such as its partnerships with different universities of the world to scan their libraries and present the books in electronic formats. Most people argue that Google may be violating the copyrights of many individuals by engaging itself into this project. Balmer’s argument may be considered as a valid claim in terms of the stand alone projects of the Google which may not is entirely value adding for the firm. Mission Statement of Google The Mission Statement of Google reads as under: “To make the world’s information universally accessible and useful”1 This mission statement of the firm indicates that the overall emphasis of the firm is on disseminating the information in a manner which can provide an unrestricted access to information by every individual on this earth. However, this mission statement lacks some important information and the overall direction that this mission statement sets out may not be entirely in favor of the shareholders of the firm. It is generally accepted that any activity undertaken by the firm has to add value for the shareholders of the firm. Thus the overall strategic direction of the firm must also corresponds to this one single objective of adding value for the shareholders. Considering this assumption into account, one can assume that different projects undertaken by the Google except its advertisement services may not be entirely contributing towards generating value for the shareholders in more traditional manner. However, what is also important to understand that such projects increase the overall attractiveness of the Google and increases its total user base which than indirectly serve as source of revenue as those who click on various advertisements appearing on the different sites creates an indirect revenue source for the customers of Google. This exposure of services to as many users therefore increases the potential for earning more hence investors often expect to get the return in the shape of capital appreciation rather than dividends. It is important to note that Google, in its recent past, has not paid any dividends and as such investors have relied more on capital appreciation rather than earning through dividends paid frequently by the firms. The overall focus of Google is on four important services i.e. search engine services, ads, apps as well as mobile. Any activity therefore undertaken within these domains must be selected in such a manner that it must add value for the shareholders rather than allowing individual employees to roll out their creative and sometimes ambitious plans. Acquisitions made by Google Since 2001, Google has acquired more than 50 companies mostly working in US however, there are firms which were working outside US and were acquired by the Google in order to further expand its choices. It is important to note that some of the companies which have been acquired by the Google worked with it on different projects and as such Google was well aware of the overall strengths and weaknesses of most of the companies they worked with before acquiring them. For example, Google acquired Zingku in 2007 in a bid to dominate the social networking market. This acquisition was made in order to provide the users an opportunity for social networking over mobile phones. (Slawski, 2005). Considering the fact that Google offers its services for mobile phone users and have now also rolled out its own mobile operating system therefore this acquisition may serve as a better strategic move made by the firm in a bid to capture a new market and increase the potential for earning more in future. This is also critical from the view point of creating synergy as it fits exactly well into the overall affairs of Google. Similarly, the acquisition of Postini, company offering email antivirus services was another strategic acquisition which allowed Google to integrate email scanning services to its clients. This acquisition was mainly done for the Google Apps Premium Services offered to the large corporations as paid services under cloud computing. Thus acquisition also seems to corroborate the overall strategic direction of the firm and will certainly add to the value creation for the shareholders. The acquisition of Panoramio, an Spanish firm offering photo tagging services which Google utilized for launching Google Earth services. Thus Google has an experience of working with this firm before acquiring the firm. These acquisitions indicate that the overall future strategic direction of Google is not something which can be described as insane but it indicates a very methodological approach in acquiring those businesses which are best at doing things which Google cannot accomplish on its own. This also allows Google to use the core competencies of the firms in a manner to achieve the competitive advantage in the industry. These strategic acquisitions also translated into the financial performance of the firm as Google, over the period of last few years, have posted a consistent increase in the profitability as well as revenue of the firm. Further, these acquisitions were perfect strategic fits for the Google as they facilitated the accomplishment of existing services offered by the Google to its users as well as customers. The above acquisition strategy of the firm also reflects the overall culture and attitude of the firm as Google, over the period of time, has developed itself into a firm which has some of the most innovative management practices. The overall culture and HR Policies of Google is such that it allows its employees to initiate their own projects within the organization and if there is a commercial potential in such initiatives, the same are rolled out as the products and services offered by Google. (Schumacher, Thomas, Mack & Bell, 2007). The corporate culture of Google is something unique which has allowed its employees to flourish new and innovative ideas which have materialized into successful business products and services. It is because of this reason that the Google does not consider itself a conventional company and offers amenities to its employees which are not traditionally offered to other employees in the industry. (Google,2009). What is however significantly important to note here is the fact that such policy of creating a sustainable competitive advantage through allowing employees to engage into private ventures, recruiting highly creative individuals speaks about a culture which is pre-dominantly more open and allows creativity to flourish within itself. Being a knowledge organization, Google therefore has to create an environment which reflects its overall attitude towards the knowledge management and creativity. (www.oyginc.com, 2009). Assessing the culture of Google while considering the comments of Balmer, it will be evident that as of now, the culture of Google is allowing it to become more innovative and roll out products and services which not reflect the awareness about the market but also indicate about the overall creative effort put behind it. The pace of creativity therefore indicates that all the subsequent efforts of Google to hire creative individuals and allowing them to have some leverage is resulting into increased revenue for the firm rather than resulting into negative growth for the firm. In nutshell the overall culture at Google can be considered as a learning culture which is allowing it to become innovative. Conclusion Google is a unique phenomenon given its overall market presence as well as its dominance over the different segments of the market. What is also however, critical to note that Google is working in an industry where too much changes take place too rapidly thus the overall threats and opportunities arise very quickly. The existing competitive landscape in the industry suggest that the overall competition is based on different segments such as online search engine services, online advertisement, cloud computing, mobile operating systems, traditional operating systems etc. Because of the diversity of the competition, the overall depth of the Competition is greater too because Google is up against some of the giants of the industry. A five force analysis of Google will indicate that it has to face significant challenges in the future specially in the domain of strong substitution products and services available in the market. The basis of competition therefore may further rest on a fierce price war in order to gain an access in the market. Some of the strategies of the Google are considered as Insane however, given the fact that most of its policies have resulted into an increase in the profitability and revenue for the firm, this argument may not be entirely true. References 1. Google. (2009). The Google Culture. Available: http://www.google.com/corporate/culture.html. Last accessed 04 November 2009. 2. Schumacher, A, Thomas C, Mack, F & Bell J. (2007). Strategic Analysis: Google. Available: http://www.slideshare.net/joshs633/strategic-analysis-google. Last accessed 04 November 2009 3. www.soopertutorials.com. (2009). Google Inc.: SWOT analysis. Available: http://www.soopertutorials.com/business/strategic-management/1369-google-swot-analysis.html. Last accessed 04 November 2009. 4. www.oyginc.com. (2009). The Hows and Whys of Organizational Culture. Available: http://www.oyginc.com/newsletter/newsculture1.php. Last accessed 04 November 2009. 5. Mills, E. (2007). Google sends Android to conquer mobile world. Available: http://news.cnet.com/Google-sends-Android-to-conquer-mobile-world/2100-1038_3-6217113.html. Last accessed 05 November 2009. 6. Slawski, B. (2005). Google Acquisitions. Available: http://www.seobythesea.com/?p=64. Last accessed 05 November 2009. Read More