GOOGLE STRATEGIC MANAGEMENT - Essay Example

? TOPIC: GOOGLE STRATEGIC MANAGEMENT LECTURER: GOOGLE STRATEGIC MANAGEMENT Overview In line with the external and internal analysis that was performed on Google Inc, the cost leadership strategy is selected for the company as its most viable strategic option. But in line with this selection, a comprehensive tool vested in the use of a VIRO analysis is implemented in critically evaluating the credibility of the selected option for the company. The VIRO analysis will be simplified in a manner that takes four major independent variables, which are tested against four other dependent variables. The independent variables are given as financial resources, human resources, material resources, and nonmaterial resources. Each of these will be tested against value, rareness, imitability, and organization in place at Google Inc. The cost Leadership Option Generally, the cost leadership option is in place to ensure that the company gains competitive advantage by taking consumers away from competitors and bringing them to the side of Google Inc. To effectively do this, there are two major approaches for the company to follow. In the first instance, there is the need to increase market share by reducing prices (Horkheimer and Theodor, 2007). This may sound as an irony as a pair of objectives that cannot be achieved hand in hand. But from a very technical viewpoint, it is possible to both reduce prices and increase market share by using the cost leadership option (Lessig, 2009). According to Jay (2004), the validity in the functioning of the cost leadership option to both charge lower prices and increase market share is in the fact that whenever there is reduction in the prices of goods and services, demand goes up, thereby increasing the revenue or income of producers. But since an increase in revenue does not automatically guarantee profitability, there is always the need for producers to ensure that they charge industry-average prices and also reduce their expenditure base to ensure that they realize profits. In a second instance, cost leadership option is used to create competitive advantage by ensuring that there is increase in profit through the reduction of cost (Heidegger, 2012). This is a direct build up on the first approach. This is because it has already been established that when there is increase in revenue, there must be a corresponding reduction in expenditure to make profitability possible. Meanwhile, the cost of production accounts for one of the highest sources of expenditure for most companies, of which Google Inc. is not exception (Barthes, 2008). Since 2004, Google’s cost of production has been said to be going up steadily especially as the company started engaging in a number of divestitures that are aimed at increasing the revenue pool of the company. To effectively use the cost leadership option, the company must be prepared to focus attention on the need to reduce most of its identified cost, especially internal costs that bring about cost sharing situations (Althusser, 2011). This way, it will be possible to produce goods and services at a much reduced cost, which will ensure that even if prices are charged at all-time low, market share will not be affected. Using VIRO Analysis to analyze the Cost Leadership Option Having identified the cost leadership option as the most viable option for Google, this section of the paper uses the VIRO analysis to critically break the option down into four major business constituents of Google Inc. these four constituents are financial resources, material resources, nonmaterial resources and human resources. Each of these four constituents shall be analysed using the four acronyms of VIRO, which are value, imitation, rareness and organisation. Financial Resources As far as the value of Google’s financial resources are concerned, one major question is posed. This is the question of how expensive the financial resource is (Gramsci, 2007). It would be established that Google is one of the most fortunate global IT companies that has a very huge operating income, quoted in the excess of US$ 12.76 billion as of 2012 (Landsberg, 2004). This is a financial value that guarantees that when cost is reduced, there can still be several excess funds to focus on other projects. Fortunately for Google, it is currently operating in a market that cannot be said to have the problem of rare or limited financial resource. In most cases, companies have been prevented from rigorously engaging in cost leadership option because of limited financial resource on the part of the stakeholders who must make the flow of money into the organizations possible, which is the customer (Laclau, 2005). since the global economic meltdown was over, the global market has started picking up fairly well and bargaining power of purchasers have improved significantly. This means that reducing prices would be even more advantageous for Google under the cost leadership option because already, consumers are not limited in finances. Talk of imitating the financial resource of the company can best be linked to the subject of market substitutes who can provide alternative products that take financial resource away from Google to these competitors (Burke, 2009). in this match, it can be said that imitating the financial resource of the company is not a difficult thing to since on a daily basis, the number of IT companies springing up to be engaged in the very business line of Google continues to go up. This could however be an advantage in terms of the cost leadership option because once Google reduces its prices, consumers would now fall on its part instead of on the part of competitors (Habermas, 2011). There is also the question of how well organized the financial resource of Google Inc is. With this question, much attention will be given to existing arrangements that the company can effectively use or rely on. With Google, the answer to this question is yes because the company is currently operating a multi-variant IT platform where it goes beyond its traditional search engine service to include even more platforms including advertising, productivity tools and enterprise products (Hayles, 2010). Human Resources Since human resource cannot be quantified with money, the best way to access the value of the human resource that Google Inc. has is to look into the depth of knowledge, skill and competency possessed by the human resource of the company in delivering the kind of tasks they deliver at work (Bukatman, 2003). On this, Bijker, Hughes and Trevor (2009) have said that Google boasts of one of the world’s most gifted geeks that can be found in any company. It is not surprising that as part of the company’s human resource strategy, 20% of all that the company’s software engineers do is left to their own choosing. With a situation like this in place, it is always easier for the human resource to follow any strategic procedure that require them to produce more with less capital or cost (Skinner, 2013). Unfortunately for Google however, this human resource is not rare in the market. This is because on a constant basis, universities are producing graduates who have a depth of knowledge, skills and competence to give off the services that the human resource of Google gives. This challenge can however be catered for in the cost leadership option by ensuring that the company does not rely on graduates who eventually form the human resource base of the company as the sole raw human resource of the company. By this, the need to critically concentrate on an initial manpower strategy is recommended. Since the human resource of the company is not rare or limited on the market, it is very easy for competitors to imitate or produce human resource of the kind that Google has. This does not defeat the need for the cost leadership option to be selected for Google because even in the midst of imitation, it can ensure that it uses prudent human resource management skills to ensure that it retains as many of its human resource to champion the course of being effective at production to bring about value for money (Crary, 2012). Finally, the organization of Google’s human resource continues to be one that remains a global model for other competitors to learn from. At Google Inc. employee engagement is not a concept but a practice (Foucault, 2005). This has been a unique way of organizing the human resource base of the company to ensure that employees understand their organization’s culture and climate. Naturally, where there is sufficient employee engagement, cost reduction in production can be guaranteed to make cost leadership strategy possible because each employee approaches work with the highest level of competence that ensures that their input to the company can be recognized. Material Resources There is no denying the fact that Google depends heavily on material resources to make the company run. Given that the information technology industry where the company operates is a generally very complicated one with so much dynamism, the value of material resources is quite expensive. However, the advantage with this is that they are not difficult to obtain on the market. This way, there is always the assurance that purchases of material resources can be made (Feenberg, 2009). In line with the selected option, it would be noted that because of the availability of material resources on the market, suppliers are often forced to reduce prices, making it possible to produce at reduced cost. Luckily, material resources used by the company are not rare and so issues of shortages are never really expected. Because of this, the company is always kept in business to ensure that the match between demand from consumers and supply from the company synchronizes to make the flow of revenue constant, even if prices of goods and services are reduced. Material resources that are both used as raw materials and those that are produced as finished products are very easy to imitate. This is a serious weakness for the company against the selected cost leadership option this is because the possibility that competitors will use less expensive materials to produce products and services at cheaper prices is higher. This way, it will be the competitors who will be at a better advantage as compared to Google (Taggliacozzo, 2007). Finally, because of how easy it is for the material resources to be imitated, there is always a comprehensive organization program by the company to ensure that its acquired material resources and produced ones are not abuse by possible imitators. This has been the only way that the company has ensured that if its products are cheaper and those of competitors who use imitated products are cheaper, consumers will still select Google because they would realize that they are using cheap quality products rather than cheap inferior products from imitators. Nonmaterial Resources Nonmaterial resources are an important part of the operations of Google Inc most of these come in the form of intangible resources such as intellectual property and patents. Clearly, the brand glory of Google is vested in these nonmaterial resources, meaning that they are of the highest value for the company. Through their presence, they give the company a unique identity and set it apart from other competitors. What is more, some other nonmaterial resources like organizational culture, organizational strategies among others have become a useful means of creating brand equity with the customer base of the company (Gitelman, 2006). Because of the legal protection on most of these nonmaterial resources, they are generally difficult to imitate. Google’s nonmaterial resources have also been found to be rare because they are unique to the company only (Weinberger, 2010). Because of the dominance that the company has on the nonmaterial resources, they have always been well organized (Gere, 2002). Recommendation From the VIRO analysis so far, there are two major areas that it can be said that Google needs to consider critically as these could come as threats to the cost leadership option that has been opted for it. The first of these is in reference to human resource, and the second is with material resource, both of which come with the rareness and imitability. As a recommendation, Google Inc is admonished to center most of its internal organizational strategies around employees so that they can get the best of values from these people. Specifically, motivational programs that ensure that the best of employees are retained to continue offering the best of service to the company are recommended. On material resources, there is the need for the company to begin focusing on supply chain models that guarantees them with the best of suppliers who can provide original raw materials, leading to the production of quality products. Until then, it would be reiterated for the company to keep holding on to the cost leadership option as against other options like focus strategy, which would require them to concentrate on particular niche markets (Winner, 2010). The reason this option is not useful at this time is that information technology is fast advancing and Google Inc. cannot afford to create boundaries for itself with the focus strategy. Conclusion From the various outcomes of the VIRO analysis that was undertaken, it can be confidently concluded that the cost leadership option selected for Google Inc was rightly placed and a step in the right direction. This is because with the cost leadership option, Google will be put at a position where the company achieves two major benefits. In the first place, the fact that there will be an endeavor for there to be reduction in cost of production means that there will be an internal benefit for the company because there will be much to save in terms of in-house cost, that can be directed at other aspects of the organization such as remuneration for employees. Quite notably, it has been recommended for Google to increase the emphasis it gives to its human resource if this human resource can be trusted to produce more at less cost. Having enough funding to motivate the human resource would thus make the realization of this recommendation easier. Externally also, reduction in prices while maintaining market average would ensure that Google increases the gap that exists between they and their competitors further because they are going to have more customers doing business at lower cost, the sum of which will be higher revenue (Cormack, 2012). References Althusser, L. 2011. Lenin and Philosophy, and Other Essays. 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