Competitive Intelligence: Google Inc - Essay Example

? Competitive Intelligence: Google Inc. Advantage and disadvantage of competitive intelligence According to Elbashir et al. (2008), CI helps companies to analyse business information and to take effective management decisions (p.135). Decision making is the core of any organizational activity. Effective decisions can help a company to improve its competitive power whereas poor decisions may retard the progress of the company. CI helps managers in taking effective decisions for the progress of the company. “One of the main advantages of competitive intelligence is identification of the competition” (Organizing the Competitive Intelligence Effort, n.d.). It is important for an organization to know the competition in the market, before formulating effective marketing or business strategies. It should be noted that the competition in the market is increasing day by day because of globalization and liberalization. Prominent companies are developing introducing innovative products in the market to improve their competitive power. Knowledge about competition helps a company to take counter measures to reduce competition. “Competitive intelligence will not only help you identify and monitor the competition, but you can expand competitive intelligence to monitor issues that profoundly impact your organization (such as deregulation, technology, social changes, etc.)” (Organizing the Competitive Intelligence Effort, n.d.). For example, Apple conquered the consumer electronics market with the help of a series of innovative “I” series products such as iPhone, iPad, iPod etc during the beginning of twenty first century. Same way, Facebook conquered the IT industry with the help of its social networking site. These successes opened the eyes of the competitors widely and they started to introduce innovative products. For example, Samsung’s Galaxy S2 and S3 smartphones are the answers to Apple’s iPhone whereas Google+ is an answer to Facebook. “Without some form of competitive intelligence in place, strategic decision-making will run the risk of being too inward thinking” (Organizing the Competitive Intelligence Effort, n.d.). “The process of competitive intelligence will require substantial support from senior management since it must become an integral function within the organization” (Organizing the Competitive Intelligence Effort, n.d.). It is not necessary that the top management always act wisely in demanding situations. It is impossible for middle managers to take independent decisions on critical matters. In short, the success of competitive intelligence rest in the hands of top management. Another disadvantage associated with CI is with respect to the costs. In other words, gaining CI is an expensive act. It should be noted that different channels are necessary to gather accurate business information. Moreover, the authenticity of the gathered information should be verified before taking any actions. It is quite possible that the gathered information and analysis lead towards wrong interpretations. Since accurate statistics is not always guaranteed, there is a risk that Google might end up getting information, which is misleading to the company. Another disadvantage of CI is the intensification of trade wars. At present, plenty of trade wars such as Apple vs Samsung, and Google vs Facebook are going on because of the efforts of companies to conquer market with the help of CI. Competitive Intelligence (CI) at Google Rachel Hand presented a chart of some volatility and changes in search engine business that occurred in a short period in 2011 (See the chart given in the next page). From the chart given below it is evident that many changes occur regularly in the search engine and computer market from time to time. No company, however big it may be, can guarantee success in the ever-changing business world. Therefore, it is imperative for Google to continue to maintain its lead by examining issues and making changes were necessary. Changes in Market Share in February and March, 2011 (Hand, 2011) Secondly, Google uses competitive intelligence in order to become a more efficient and responsible user of its resources (Helft and Hempel, 2011). CI provides Google the necessary information to know the market pulses and trends. Consumer habits are changing day by day because of the advancements in science and technology. Introduction of new products and modification of existing products are necessary to cater the needs of the ever-changing consumers. Google introduced products such as Android, Google books, Google+ Google earth, etc because of the above awareness. For example, “Since its launch in 2005, Google Earth has been used to circulate information about various conflicts around the world, including the wars in Iraq and Afghanistan. Its most high profile conflict layer has been the ‘‘Crisis in Darfur” (Parks, 2009, p.536). These facts clearly suggest that the reputation of Google as a socially committed company is increasing day by day with the introduction of products such as Google Earths. Current consumers are interested more in socially responsible companies. The above awareness forced Google to develop many services and products, which may bring social changes. Competitor Analysis of Google (Porter's Five Forces) According to Porter, there are five key forces that shape the industry within which any business operates: Threat of new entrants; Threat of substitutes; Bargaining power of buyers; Bargaining power of suppliers and Competitive rivalry (Porter, 1998, p.4). The threat of new entrants includes the entry of small advertising companies in the United States and in local markets that they enter (Marketline, 2008). It should be noted that Facebook and Twitter are comparatively new entrants in the IT market. Google never thought that these companies may cause major problems to them. However, Facebook seems to be the number one competitor for Google now. Although there are several options and opportunities on the net, it is difficult for a single entity to come up with a major campaign that will be significantly dangerous to Google's dominance. However, a perpetual threat that is in this category is the changing technology and changing systems in this industry. So many new ideas and concepts are introduced on a daily basis and Google will need to always be on its guard. This can be done through competitive intelligence. For example, Advertising is one of the major revenue sources of search engine business. Until the introduction of social networks, Google faced fewer difficulties in generating advertising revenues. However, introduction of social networks provide another channel for adverting to the business people. In other words, social networks came as a substitute product to search engine business. The bargaining power of buyers is increasing day by day because of the availability of cheaper substitute products. For example, advertising on social networks is comparatively cheaper than advertising through search engines. So, buyers or the advertisers often bargain well with Google like companies to reduce the advertising costs. Earlier, in the absence of social networks, buyers had limited options and hence their bargaining power was poor. Bargaining power of the supplier is insignificant in the case of Google since Google purchase no raw materials from suppliers. The only area that this threat seems critical however is in the area of outsourced firms that provide services for Google. It is quite possible that these outsourcing agents could form a firm and challenge Google in online advertising. Such things happened in the past. For example, Microsoft was once a small firm used by IBM to do some coding work. However, Microsoft grew and became a global giant ahead of IBM at present. In short, Google cannot rule out the risks from associate firms. Competitive Rivalry is the last component in Porter’s five forces model. In the case of Google, the main competitive rivals are those firms that are large enough and cover the Internet marketing, social media and search engine aspects of the Internet. The direct examples are Yahoo, Microsoft and Facebook (Singh, 2012). Google and their competitors (Facebook, Yahoo & Microsoft) “Determining the probable strategy of a competitor in the penetration of a new market area could be handled by a group of people from several functional areas of the organization” (Cleland and King, 1975, p.25). Larry Page and his team did succeed in identifying some of the most promising business segments in recent times. Thus, Google books, Google+, Android, Google health etc like products emerged out from Google in recent times. These products and services, not only helped Google to improve its competitive power, but also it helped the company to change its image from a search engine business company to an innovative technology based company. Yahoo, Microsoft and Facebook share common markets in terms of internet marketing, social media and search engine business. This is exactly what Google does. All these three competing firms also have international reach and they keep expanding into foreign markets in order to improve their earning capacities and strategic growth (See appendix for a direct Competitor Comparison for Google). In 2011, Google introduced Google+ to challenge Facebook in the global social networking industry. Earlier, Google thought that search engine business alone may generate more advertising revenue to them. However, the huge success of Facebook in generating advertising revenue and opening up other business channels, forced Page and company to shift their focus towards social networking business. “This shift to a more social web changes everything for businesses and consumers alike. Among the first industries to be rocked: advertising. Google may capture 41% of today's $31 billion U.S. online advertising market, including the lion's share of the search-ad market” (Helft and Hempel, 2011, p.116). Moreover, “Google+ is also the first test of Page's plan to transform Google into the nimbler, more accountable company it once was and, in the process avoid the Innovators' Dilemma, the paralysis that grips so many successful companies” (Helft and Hempel, 2011, p.116). “Google CEO Larry Page trotted out an impressive statistic during January 2012 quarterly earnings call: Google+ now has 90 million users, double what it had three months ago. Even better, 60 percent of those users are engaged daily, and 80 percent weekly” (Brodkin, 2012). It should be noted that Facebook’s membership has already crossed 100 million marks. Since Google+ is introduced only a year before, its performance is more than satisfactory to the company. Yahoo also has a strong customer base. This is mainly centred in the United States and it is growing in other parts of the world. Yahoo continues to be a competitor because it has a long-standing history with its customers, which goes back to the early years of the Internet. “Being the most heavily used search engine, Google in a very real sense controls the distribution of information to the world” (Catone, 2007). As mentioned earlier, Google has almost monopolized the search engine business. Even though there are plenty of other search engines, Google became world’s most favourite search engine because of the innovative business strategies it introduced. “As such, the company’s competitors have struggled to match the search engine’s accuracy and have fallen behind in popularity. However, despite the best efforts of its competitors, Google holds the majority of the global search engine market, and this does not look set to change” (Marketline, 2012, p.4). Google has introduced many innovative ideas such as Google tool bar to help the Google users immensely in finding the information they are looking for. Emerging markets such as Brazil, Russia, India, China, and South Africa (BRICS countries) Offer huge business potentials to Google. It should be noted that recent recession failed to cause much impacts in these countries even though it hit some of the wealthiest countries in the world such as America, England, France, etc. Among the members of BRICS nations, China and India seem to be the most rapidly developing nations. Many people believe that China may expel America in terms of economic progress in near future itself. Same way, India’s progress towards the super power post has been gained momentum in recent times. All these factors are encouraging signs for Google like companies. “Noticeable events by Google, eBay, and Amazon.com include launching their products in China during the past several years” (Zhang et al., 2011, p.40). Even though China’s track records in terms of human right violation and censoring of information are not so good, overseas countries are investing heavily in China. This is because of the fact that China provides a friendly business climate to the overseas investors. However, Google forced to withdraw its operations from one of the most promising markets of twenty-first century; China because of China’s tightest control over information exchanges through search engines. Google was not ready to obey Chinese laws with respect to search engine business. Google argued that Chinese laws are human right violations and hence they withdrew their operations in China. However, Yahoo is ready to obey Chinese laws and they are making significant headways in the country. Moreover, Chinese search engine Baidu is causing more problems to Google in Chinese market. Strategic players can choose from two broad do-it-yourself approaches. The first is to build a proprietary platform in order to create value and capture as much of it as possible. The second do-it-yourself approach is to create an open MSP, which prevents any platform from ever claiming value. Google’s Android operating system and Open Social application programming interface can be viewed as an attempt to do just that (Hagiu and Yoffie, 2009, p.78). Android is the reply from Google to Microsoft’s Windows. The most modern Jelly Bean OS from Android seems to be much better than any other mobile phone operating systems in the world. Apple’s IOS and Microsoft’s Windows are far behind Android in terms of popularity. The latest editions of Windows 8 from Microsoft seem to be an effort by Microsoft to conquer the mobile phone OS market from Google. Windows 8 has the facility to integrate between computer OS and Mobile phone OS. However, early reports show that Android’s jelly Bean is still the favourite in the market. That is why smartphones such as Samsung galaxy S3 which use Android as OS, are moving well in the market. Nokia is currently using Windows OS whereas iphone is using Apple’s own OS; IOS. However, Google’s OS seems to be far better than all of them. During the beginning of twenty first century, many prominent companies started diversifying of business portfolios to stay in the market. For example, Apple Inc. diversified its activities into consumer electronics industry during this period and became the most valuable technology company in the world at present. They pushed even Microsoft far behind in market capitalization. Even though Microsoft still holds upper hand in the computer OS market, they are not so in the IT industry. This is because of the fact that Microsoft is reluctant in diversifying its business portfolios to cater the needs of the changing consumers. On the other hand, Google did succeed in introducing innovative products time to time and all of them excel in the market in one way or another. In short, Google’s ability to read the market pulses well and makes changes in business strategies helped them a lot in staying competitive always in the market. References Brodkin, J., 2012. Google doubles Plus membership with brute-force signup process. [Online] Available at: http://arstechnica.com/gadgets/2012/01/google-doubles-plus-membership-with-brute-force-signup-process/ [Accessed 22 November 2012] Cleland, D.I. & King, W.R., 1975. Competitive Business Intelligence Systems. Business Horizons. December 1975. Catone, J., 2007.Google the Vote: How Google is Changing the American Political Landscape. [Online] Available at: http://www.readwriteweb.com/archives/googles_political_influence.php [Accessed 22 November 2012] Elbashir, M., Collier, P. A. & Daran, M. J., 2008. Measuring the Effects of Business Intelligence Systems: the Relationship between Business Process and Organisational Performance. International Journal of Accounting Information Systems 9 (2008) p135 – 153. Hand, R., 2011. Google Still King of the UK Search Engine Market Share [Online] Available at: http://theeword.co.uk/seo-manchester/google_retains_top_spot.html [Accessed: November 22, 2012] Hagiu, A. & Yoffie, D. B., 2009. What is your Google Strategy. Harvard Business Review. April 2009. Helft, M. & Hempel, J. 2011. Facebook V Google: The Battle for the Future of the Web. Fortune Vol 164 (8) pp114 – 124. Marketline. 2012. Google Inc: Compay Profile. New York: Marketline Publications. [Online] Available at: www.marketline.com Organizing the Competitive Intelligence Effort, N.d. [Online] Available at; http://www.exinfm.com/board/organizing_competitive_intelligence.htm/ [Accessed 22 November 2012] Parks, L., 2009. Digging into Google Earth: An analysis of ‘‘Crisis in Darfur”. Geoforum 40 (2009) 535–545. doi:10.1016/j.geoforum.2009.04.004 Porter, M.E., 1998. Competitive Strategy: Techniques for Analyzing Industries and Competitors. Publisher: Free Press; 1 edition (June 1, 1998). Schwartz, B., 2006. Charting Google's Growth By Employees. [Online] Available at: http://searchenginewatch.com/article/2057472/Charting-Googles-Growth-By-Employees [Accessed 22 November 2012] Singh, H., 2012. Who Competes with Google. [Online] Available at: http://www.forbes.com/sites/halsinger/2012/09/18/who-competes-with-google-in-search-just-amazon-apple-and-facebook/ [Accessed: 22 November, 2012] Yahoo Finance. 2012. GOOG Competitors [Online] Available at: http://finance.yahoo.com/q/co?s=GOOG+Competitors [Accessed: 22 November, 2012] Zhang, C., Song, P. & Qu, Z., 2011. Competitive Action in the Diffusion of Internet Technology Products in Emerging Markets: Implications for Global Marketing Managers. Journal of International Marketing Vol 19 (4) pp40 – 60. Appendix Direct Competitor Comparison GOOGLE FaceBook (MSN) YAHOO Industry Market Cap: 218.80B 52.69B N/A 21.76B 178.04M Employees: 53,546 4,331 N/A 14,100 408.00 Qtrly Rev Growth (yoy): 0.45 0.32 N/A -0.01 0.20 Revenue (ttm): 47.54B 4.64B N/A 4.96B 121.32M Gross Margin (ttm): 0.60 0.74 N/A 0.69 0.59 EBITDA (ttm): 15.85B 1.09B N/A 1.32B 13.70M Operating Margin (ttm): 0.28 0.12 N/A 0.16 0.04 Net Income (ttm): 10.56B 524.00M N/A 3.97B N/A EPS (ttm): 31.91 0.19 N/A 3.25 0.03 P/E (ttm): 20.87 126.01 N/A 5.67 24.20 PEG (5 yr expected): 1.25 1.65 N/A 1.43 1.15 P/S (ttm): 4.63 10.80 N/A 4.34 2.35 (Yahoo finance, 2012) (Schwartz, 2006) Read More