Googles Strategically Impervious Core Competencies - Term Paper Example

MANAGEMENT: STRATEGIC ANALYSIS OF GOOGLE ……………………………….. PUT HERE Table of Contents Page 1.0 Introduction 1.1 Background of the Organization………………………………………………………………………. 5 1.2 Outline and Purpose of Report………………………………………………………………………… 5 1.3 Scope and Limitations……………………………………………………………………………………… 6 2.0 Environmental Analysis 2.1 Macro-Environment………………………………………………………………………………………… 6 2.1.1. Political…………………………………………………………………………………………………….. 6 2.1.2. Economic………………………………………………………………………………………………….. 6 2.1.3. Social/Cultural………………………………………………………………………………………….. 7 2.1.4. Technological……………………………………………………………………………………………. 7 2.1.5. Legal…………………………………………………………………………………………………………. 7 2.1.6. Demographic……………………………………………………………………………………………. 7 2.2 Industry-Environment………………………………………………………………………………………… 8 2.2.1. Threat of New Entrants……………………………………………………………………………… 8 2.2.2. Supplier Power………………………………………………………………………………………….. 8 2.2.3. Buyer Power………………………………………………………………………………………………. 8 2.2.4. Substitutes………………………………………………………………………………………………. 8 2.2.5. Industry Rivalry……………………………………………………………………………………….. 9 3.0 Organizational Analysis……………………………………………………………………………………. 9 3.1 Current Strategy………………………………………………………………………………………………… 9 3.2 Resources and Capabilities……………………………………………………………………………….. 9 3.3 Strategic Performance (balanced scorecard, triple bottom line, performance cube, KPIs)………………………………………………………………………………………………………………… 10 4.0 Summary of Strategic Situation……………………………………………………………………….. 10 4.1 Summary of External and Internal Factors…………………………………………………………. 10 4.2 Gap Analysis (between environment and strategy; strategy and performance; strategy and capabilities)………………………………………………………………………………….. 11 4.3 Strategic Options (time, resources, capabilities- present& future-, benefits, risks)………………………………………………………………………………………………………………… 11 5.0 Conclusion and Recommendations…………………………………………………………………. 12 6. References…………………………………………………………………………………………………………….. 14 1.0 Introduction The success of a business organization depends on the level and extent of internal strengths so that such multiple but integrated tasks as control, rationalization and utilization of its strategically important resources can be carried out to achieve predefined productivity targets and the more desirable corporate objectives through competitive advantage. Thus strategy can be defined as “A planned course of action undertaken to achieve the goals and objectives of an organization. The overall strategy of an organization is known as corporate strategy, but strategy may also be developed for any aspect of an organizations activities such as environmental management or manufacturing strategy” (www.dictionary.bnet.com). Google has been developing its strategically calibrated resource base – capital assets, skilled labor force, supplier networks, strategic alliances, marketing networks of intelligence, financial resources, strategic operations, management processes and international Human Resource Management (HRM) practices (Bruce, 2008). The company has been growing from strength to strength by adopting capability enhancement strategies that have little parallel elsewhere in the industry. Google’s strategically impervious core competencies have been built around this formula or framework of strengths and weaknesses. It’s a paradigm of a priori elements of which the dispensation is characterized by a very highly valued and rare VRIO – value, rarity, inimitability and organization – resource framework. However its competitors haven’t altogether given up hope on defeating Google at its own game one day in the future. Google as a first mover in developing difficult-to-copy resources still lacks some essential strategic elements in its management strategy. Strategic management processes involve careful planning for the future growth and marketing possibilities. The level of competition coming from other competitors like Yahoo and Amazon must be taken into consideration. 1.1 Background of the Organization Google was established as a partnership by Larry Page and Sergey Brin in 1996. They were Ph. D. students at Stanford University and were initially concerned about developing a mathematical model for crawling back the pages on internet thus digitally connecting all pages through an algorithm called google. The project was the Ph. D. thesis of Larry Page. Both together used Brin’s mathematical model to create a universal model on the internet thus facilitating easy and faster access to internet based resources (Sheehan, 2006).This technological achievement has been revolutionizing the search engine and digital communication industry. 1.2 Outline and Purpose of Report To establish positive and negative correlations between and among a few selected variables such as strategic management practices, corporate goals, organizational outcomes and strategic resource management at Google. To establish links between Google’s successful strategic business management practices and policy orientation to achieve positive organizational synergies including cumulative impact of customer satisfaction and diversification of resources. Finally to build a theoretical and conceptual contingency model on Google’s unconventional approach to a business strategy in its global operations. 1.3 Scope and Limitations Scope and limitations of this study are determined by a series of endogenous and exogenous variables and their behavioral dynamics. For instance the scope of the study is determined by the competitor/market/product orientation strategy and the nature of that strategic environment. Thus, in turn, its strategic management practices are determined by the extent and nature of this external environment. On the other hand limitations on this study are basically those which are related to the current lack of literature on the very nature of the strategic operational environment of Google and its competitors. Similarly there are some glaring gaps between Google’s strategic management practices and the organizational outcomes. These limits would necessarily affect this study though. 2.0 Environmental Analysis 2.1 Macro-Environment 2.1.1. Political As an internet search engine and a digital communication company Google has been exposed to a high level of political pressure in the world. Especially its strategic external competitive environment has been subject to some politically motivated pressures that, in turn, have produced ripple effects on its management. Recent political outcomes that affected Google’s performance can be categorized into those with a predominantly local impact; those outcomes or implications with a much broader significance; and those with far reaching political implications. 2.1.2. Economic Current global economic developments in general and the US ones in particular have had a huge impact on Google’s operations. Despite these negative developments associated with an unusually prolonged recession and a financial crisis, Google registered big revenue gains over its rivals (Vembu, 2008). The US dollar has been gaining value against other major currencies in the world for quite some time now. As a result Google has suffered some losses in revenues 2.1.3. Social/Cultural Google has placed so much emphasis on public relations and corporate responsibility programs. It is being constantly questioned about its unethical practices like bombarding surfers with messages and intruding into chat sites without prior warning. Social factors like behaviors and religious/cultural practices affect Google’s operations both by way of multicultural staff and customer relations. 2.1.4. Technological Technological environmental influences are the most important factors of all. They have had a very significant effect on Google’s goals and management strategy related outcomes. In fact, Google has been the trend-setting search engine with very innovative web and portable applications. 2.1.5. Legal The external legal/regulatory environment of Google is heavily characterized by click frauds and net neutrality. Many legal cases against Google involve its intrusion into private search histories. The Digital Millennium Copyright Act requires internet search engines to comply with regulations when they carry third party content on their portals. 2.1.6. Demographic The customer demographics include such factors as the age groups, professional and individual preferences determined by such factors as incomes and wealth. Google has a particular advantage related to net surfers’ tendency to use it irrespective of the age differences. 2.2 Industry-Environment: Porter’s Five Forces 2.2.1. Threat of New Entrants The information super highway is open to new entrants without any restrictions. Google’s current attempts at cutting costs would be a good factor in enabling it to compete well against its rivals ( McPhee, & Wheeler, 2006). The threat of new entrants is there always and almost like an endless force. New but small technology savvy start-ups launched by fresh graduates are on the rise. 2.2.2. Supplier Power Supplier power is defined as the degree of liberty that suppliers have over the firm which buys supplies from them. Google has to get supplies from suppliers in the open market where competition norms may threaten Google’s own strategic objectives. 2.2.3. Buyer Power Buyer power is the most formidable force with far reaching outcomes for the business organization. For example customers have such a significant impact on the decision making process of the firm since they might as well boycott services of a particular search engine if those services are below their expectations (Sanderson, 2001). 2.2.4. Substitutes Google has been aware of the ability of new start-ups in the industry to substitute its products on the web. Thus Google has been making a valiant effort to upgrade its services and maintain that distinct look and quality. 2.2.5. Industry Rivalry Competition in the internet search engine market is very intense because existing economies of scale of individual competitors like Amazon and Yahoo would serve as the most attractive invitation to a price reducing war. At any given time a particular search engine can experience excess capacity and thus the slightest hint of cost and productivity benefits associated with the possible capturing of market shares of competitors would compel them to act quickly and with determination (Porter, 2009). 3.0 Organizational Analysis 3.1 Current Strategy “Strategy is the direction and scope of an organization over the long-term which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations” (Barnes, 2007). The current strategy at Google has been determined not only by the external strategic operational and competitive environment but also the internal factors such as international HRM practices, value chain management, supply chain management, corporate social responsibility (CSR), corporate goals and so on. 3.2 Resources and Capabilities Resource-based view of organizational success is determined by the internal strengths of the organization which is about controlling, rationalizing and utilizing the available resources to the maximum benefit of competitive advantage. Google’s own resources consist mostly of capital, trained personnel and networks in the form of strategic intelligence of markets, finances, operations, techniques and HR management (Harris, & Schaubroeck, 1990). 3.3 Strategic Performance (balanced scorecard, triple bottom line, performance cube, KPIs) Google’s strategic management culture has led many successes. The organization has adopted many positively correlated management practices. Key Performance Indicators (KPIs) like the Balanced Scorecard Technique was adopted by Google. Though a lot of old financial techniques are still included in the BST it’s still regarded by some big organizations as a truly good metric in measuring performance (Gao, Darroch, Mather, & MacGregor, 2008). The performance cube of Google is centered on sustainability oriented efforts at product innovation. The Triple Bottom Line accounting paradigm at Google is indeed determined by some socially responsible practices. Its social accountability principles are far well defined than many of its rivals’. 4.0 Summary of Strategic Situation 4.1 Summary of External and Internal Factors Google’s efforts to successfully implement long term strategic initiatives have been successful though. In this respect effective use of communication techniques within and without the organization is emphasized by strategic management experts in order to achieve these long term objectives (Mooney, 2001). Communication within the organization is necessarily influenced by its leadership style and organizational culture and structure. A vertical top-down structure with an autocratic leadership style is less likely to facilitate efficient communication between different layers of the hierarchy while conversely a horizontal structure with a democratic leadership style would more likely facilitate good communication flow between departments. Google’s authentically paradigmatized business settings essentially generate active and proactive strategic responses irrespective of the strategic environmental constraints. Thus it’s not a secret that organizations have a tendency to respond to their strategic environment, both operational and competitive, with a heightened awareness of associated implications (Barney and Hesterly, 2007). 4.2 Gap Analysis (between environment and strategy; strategy and performance; strategy and capabilities) Gap analysis is about where the organization is right now and where it would want to go. Between environment and strategy, Google is faced with an ever increasing strategically competitive environment while its own strategy isn’t far behind the extreme demands of this environment. Secondly between strategy and performance Google has a well defined strategy while its current performance is marred by some external forces like the recession. Finally between strategy and capabilities, Google’s current resource capabilities are far superior to its rivals. Especially its VRIO capabilities would be able to sustain its strategic initiatives for a number of years to come. 4.3 Strategic Options (time, resources, capabilities- present& future-, benefits, risks) There is no gainsaying the fact that under such circumstances the best strategy would be determined by not only the quality and quantity of information but also the ability/inability to assess outcomes in advance. Thus the whole exercise is determined by a set of approximate principles that require managers and decision makers within the organization to develop a conceptual framework and a contingency model for response to its strategic environmental pressures ( Dunbar, Garud & Raghuram, 1996).Time-centric outcomes at Google have been marked by more versatile capabilities but less preparedness to face economic risks including currency volatility. 4.0 Conclusion and Recommendations Management strategy at Google’s has been characterized by a dynamic structure with greater emphasis on a friendly management culture. As the PEST analysis demonstrates Google has particularly been influenced by a number of external factors. For example political, economic, legal and social factors have had a far reaching impact on its operations. The most significant factor has been the evolving regulatory and/or legal regimes governing the internet based activities in the US and elsewhere. Recent global economic outcomes have had a considerable impact on Google’s strategic management decision making process. Its financial performance was significantly affected by these developments though its rivals did worse. Its strategic management practices were well articulated to successfully integrate a wider spectrum of search engine-based products and services so that potential web-surfers would be hooked on the content including advertisements. This enabled the company to integrate its search engine based products in to the present networking architecture. In addition to these online seamless links, the company also registered on its persistent growth trajectory some positive financial metrics. Recommendations All the more the learning outcomes associated with Google’s strategic orientation to the competitor’s response show that the company has been considerably more hostile in its M&A related expansion strategy. This is unlikely to help Google much in the times to come because competitors such as Microsoft and Amazon have already adopted similar strategies. Its strategic management practices need to be aligned with the current resource-based capabilities rather than competitor oriented approaches that place little emphasis on resource diversity and development. In the internet search engine industry the scope for strategic management response to external pressures like those of political, economic, social and legal/regulatory depends on the company’s ability to bring about a convergence between strategic corporate reaction to the external SWOT environment of threats and opportunities and internal strategic management reorientation. Google has to adopt such a strategic management reorientation program to identify its own management related strengths. REFERENCES 1. Barney, J., & Hesterly, W. S., (2007). Strategic Management and Competitve Advantage: Concepts and Cases. New Jersey: Prentice Hall. 2. Barnes, S., (2007). E-Commerce and V-Business, Second Edition: Digital Enterprise in the Twenty-First Century, 2nd edition. Oxford: Butterworth-Heinemann. 3. Bruce, B. C., (2008). Google Income: How Anyone of Any Age, Location, And/Or Background Can Build a Highly Profitable Online Business With Google, Florida: Atlantic Publishing Company. 4. Dunbar, R. L. M., Garud, R., & Raghuram, S. (1996). A Frame for Deframing in Strategic Analysis. Journal of Management Inquiry, 5 (1), 23-34. 5. Gao, H., Darroch, J., Mather, D., & MacGregor, A. (2008). Signaling Corporate Strategy in IPO Communication. Journal of Business Communication, 45 (1), 3-30. 6. Harris, M. M., & Schaubroeck, J. (1990). Confirmatory Modeling in Organizational Behavior/Human Resource Management: Issues and Applications Journal of Management, 16 (2), 337-360. 7. McPhee, W., & Wheeler, D. (2006). Making the case for the added-value chain. Journal of Strategy & Leadership, 34 (4), 39-46. 8. Mooney, D. (2001). Leadership Skills: SWOT Analysis - A Structured Way To Plan. Communicator, 2 (4). 9. Porters Five Forces, Retrieved October 6, 2009, from www.mindtools.com 10. Sanderson, J., 2001, ‘The Impact of Regulation on Buyer and Supplier Power’, Journal of Supply Chain Management, 37 (2), 16. 11. Sheehan, N. T. (2006). Understanding How Resources and Capabilities Affect Performance: Actively Applying the Resource-Based View in the Classroom. Journal of Management Education, 30 (3), 421-430. 12. Vembu, S. (2008). Cloud economics: Microsoft, Google & Amazon. Cloud computing journal, Retrieved October 6, 2009, from www.cloudcomputing.sys-con.com. 13. Definition of Strategy, retrieved October 6, 2009, from www.dictionary.bnet.com Read More