Google and Its Comfortable Position in the Market - Term Paper Example

Information Management to Create Competitive Advantage Google Executive Summary Information systems can greatly impact the way in which a business isconducted. This happens primarily because the cost of doing business can be reduced by effective use of web-based technology. This provides an organisation with competitive advantage. This paper explores in details, the ways in which Google has effectively used technology to cement its position in the business. Google has primarily used innovation to gain competitive advantage. The customer satisfaction has also improved as the company delivers quality service. The competitive advantage of the company using Porter’s models have been used to relate to the ways in which Google has earned its success. Porter’s five forces model, Generic strategies and the value chain models have been studied in details to understand about the meteoric rise of the company. On completing the study, it has been seen that Google enjoys a comfortable position in the market and it is ahead of its competitors in terms of revenue and market share. The generic forces strategy shows that product differentiation has been used by the company in creating new products and this has allowed it to stay ahead of its competitors. Contents Executive Summary 2 Introduction 4 About the company 4 Theoretical framework 5 Findings and Analysis 7 The five forces model 7 Generic Forces 9 Value Chain 9 Conclusion and Recommendations 10 Reference List 12 Introduction Information systems currently dominate every department of the business from marketing and manufacturing to finance and accounting. The biggest advantage of using a strong support of information systems on the business organisation is that it synthesises the large information gathered from various sources and arranges it in an accessible and logical manner. This allows the company to recognise its threat and opportunities successfully. Both large and small business enterprises use information systems management in their traditional business model to gain competitive advantage over the rivals. The purpose of this paper is to see the ways in which Google, an American multinational corporation providing internet related services, has used information system technology in the organisational development to gain competitive advantage over its competitors. The models of Michael Porter are used to understand the ways in which Google has strategically used information systems planning to develop a competitive advantage. Competitive advantage is extremely important for an organisation to add value to products and services offered by the organisation. Reliance on the value addition is important for the organisation for achieving its mission. About the company Google was initially a privately held company founded by Larry Page and Sergey Brin and since its inception, it has become one of the largest brands in the world. This incredible fast growth of the company was largely the result of good partnerships, new products development and acquisitions (Yahoo Finance, 2014). One of the primary causes for the exponential rise of the company is the use of effective technology and strategic management of the of the information system. This paper focuses on the information system Google to create competitive advantage over its competitors. Theoretical framework The five forces model developed by Porter is an important tool in understanding the competition that is present in the industry. It also helps in determining the attractiveness of the industry in which the business operates (Rainer, and Cegielski, 2010). The five forces described by porter are: Rivalry of competitors within its industry: Information technology has made the competition very stiff as the competitors catch up easily by replication of the products. Threat of new entrants into the industry: The rise of the information technology has raised the threat e imposed by the entry of the new competitors. This is because the barriers to entry associated in the traditional business are not present in the virtual business. Threat of the substitute products: The use of Web has made this threat very prominent as the internet has made it possible to replicate any information at low cost. Bargaining power of the buyers: The bargaining power of the buyers has increased with the advent of the information systems. This is because the number of available options to the buyers has risen. Bargaining power of the suppliers: Internet has a mixed impact on the power of the supplier (Rainer and Cegielski, 2010). Porter had also developed the three generic forces namely cost leadership, differentiation and segmentation that can be used by the businesses to gain competitive advantage. The information system acts as an enabler in all of the generic forces and helps an organisation pioneer in all the dimensions. Cost leadership: The information system greatly reduces the cost of doing business by an organisation (Booth, Roberts and Sikes 2011). This mainly happens because using e-commerce and e-procurement helps in the reduction of operational costs of the business. The online business-to-business model and the business-to-consumer model eliminate the costs incurred in physical business activity. Differentiation: Organisations can create differentiated products and add greater value to them by using internet based services. By using proper information infrastructure, the company can have a better understanding about the expectations of the customer. This helps the company to design its products accordingly to raise the satisfaction of the customers (Lichtenthaler and Muethel, 2011). Segmentation: Information technology leads to the innovation of products by the company. It allows the company to follow the customer buying patterns, tastes, and preferences closely so that the company can come up with better products to cater to specific set of customers. This allows the company to serve their customers better. This also allows for the creation of niche markets for the organisation (O’Brien and Marakas, 2011). Value chain analysis can be used as another parameter to understand about the competitiveness of the business. Value Chain analysis treats the whole business as a chain or a process and divides the activities of the business into two broad subcategories namely the primary activities (inbound and outbound logistics, operations, sales, management and customer service) and the secondary activities (human resources, administration, , procurement and technology) (Laudon and Laudon 2012). Value chain of an organisation helps to determine the ways in which the organisation can add value to its customer service. The value chain helps an organisation to locate the specific vantage points in the value chain. Once the strengths in the value chain are identified, then information systems can be used to enhance competitiveness of the organisation. The study made by Laudon and Laudon shows that an organisation can create a value web or hub structure to improve the efficiency of its value chain and gain a competitive advantage. This happens when the company digitally connects with its customers, suppliers and partners by eliminating the information gap in the value chain (Blatstein, 2012). The coordination in the demand and the supply chain can be enhanced by improving the communication, collaboration and cooperation among the agents associated in the supply chain. Findings and Analysis The way Google has used the information systems to improve its competitive advantage can be understood with by applying Porter’s analysis of the competitive advantage. The five forces model Threat of Competition: The treat from the competitors appears to be medium, as the company has transformed itself over the years from a privately owned firm into an industry leader. The overall structure of the competition is quite complex yet the company has managed to use its dominance and establish itself ahead of its major competitors, Yahoo and Microsoft (BBC News, 2006). In the study made by Zitrong, et al. (2012) the rivalry among the web search engines are affected by the creation of brand identity. Google has successfully created a brand, which has made it easily recognizable thereby puting it ahead of its competitors (Iyer and Davenport, 2008). Threat of suppliers: The power of suppliers is not very strong as the internet content and the bandwidth is readily available (Miller, 2011) the advances in the information system have reduced the threat from the suppliers. Google has successfully positioned itself in the operating systems of Microsoft and Apple, the largest names in the software industry. As most of the information on the internet is free, so the power of supplier is negligent. Threat of the buyers: The power of the buyers is high, as the spectrum of buyers is wide including the advertisers, internet users and the licensees (Forbes, 2011). Though Google enjoys a wide base of customer loyalty and the end users prefer Google.com as their search engine, yet there are large numbers of less attractive options that are available to the buyers (Curtis and Curtis, 2011). One of the basic reasons of the popularity of Google is that the algorithm used by Google includes a component that selects for and reports on the popularity. The user friendliness of Google has also cemented its position among the users. Threat of substitutes: The costless switching of the buyers from one service provider to another and a change in the preferences of the buyers are major threat for Google. The threat of substitutes is moderate at best because the competitors also face similar threats (Prenhall, n.d.). Threat of new entrants: The threat of new entrants is high as the cost of entering the business is not very high. However, the success in this industry is extremely difficult to achieve by the new entrant. This is because billions of page views are required to support fixed costs of a sales force, overhead, technical staff and building brand awareness. It is difficult for new companies to attain success in this venture. Google has deployed the use of efficient technology to gain competitive advantage in all of the parameters mentioned above (Anderson, et al. 2003.). Generic Forces Out of the various generic forces, which a company should consider for gaining the competitive advantage, Google uses product differentiation. Low cost leadership is not quite relevant as the nature of business eliminates high cost of operation. This allows almost all of the competitors to use low cost techniques in carrying out the business. Google has been largely dependent on the information technology system to create new products that can raise the satisfaction of the customers (Auletta, 2009). Information technology can be used either to create new products or improve the convenience of the customers who are already using the existing products. The introduction of Google Maps can be taken as an example when Google introduced the mapping services. Google Base can be taken as another example. In this system, the software offers free classified listings of goods that are for sale allowing the information to be readily accessible by the internet users (Girard, 2009). Google checkout is another such service, which has been launched by Google. It is an online service that helps to organize store user’s financial information, which in turn facilitates him to purchase from the internet vendors (Waters, 2005). Google plus is the social networking site that has been launched buy the company to promote the social networking (Miller, 2014). All these examples show that Google has used constant innovation and product differentiation to increase its customer base that has increased its revenues (Tay, 2013). Value Chain Google merely acts as the intermediary between the users and the other websites, sorting, classifying and creating an interface through which the content on the web becomes visible. The business is primarily funded by advertising (Manyika, 2009). For instance, the Google smart phones, running on the android technology can be used to understand the effectiveness of the value chain. The system used by the company benefits all the agents including customers, suppliers, competitors and complimentors. Google spends a significant part of resources on improving the value chain. Conclusion and Recommendations This project has focused on the ways in which information systems has been used by Google to gain a competitive advantage over its competitors. The theoretical base used to construct the framework is the Porters models of competitive forces, the three generic forces and the value chain analysis. The analysis of the competitive forces reveals that Google enjoys a leading position in the market and the reasons for the same have been discussed. The brand name of Google and the preference of the end users in using the services of the company are the primary reasons, which has led the company to achieve a leading market share. The analysis of the generic forces shows that product differentiation strategy has been widely used by employing efficient technology to move ahead of its competitors. The constant innovation of new products has added to the customer base of the company and has been successful in attracting the advertisers which happens to be the primary source of revenue for the company. The recommendations for improving the use of information systems are: Firstly, to have a dedicated team of R&D that will constantly try to improve the services of the company by enhancing the quality of the products. Secondly, to constantly improve the brand recognition and loyalty of the customers. The threat from the use of substitutes is always present and if the customers are dissatisfied with the quality of the products then they will shift base. Finally, to maintain a good relation with the suppliers will be essential. This is because if Microsoft and Apple make their software incompatible for Google then it can pose a threat to the company. Reference List Anderson, C., Lazarus, J., Loftsgaarden, B. and Weiss, B., 2003. Internet Search & Strategies For Sustainable Profits. [pdf] Mcafee. Available at: 3 [Accessed 20 February 13]. Auletta, K., 2009. Googled: The end of the world as we know it. New York: The Penguin Press. BBC News. 2006. Google censors itself for China. 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Google Has Updated Its 9 Principles Of Innovation: Here They Are And The Products They Have Enabled. [online]. Available at: < http://www.businessinsider.com.au/google-has-updated-its-9-principles-of-innovation-here-they-are-and-the-products-they-have-enabled-2013-11> [Accessed 20 February 13]. Waters, R., 2005. In search of more: the ‘friendly’ engines that will manage the data of daily life. Financial Times, [online] 1 February. Available at: < http://www.ft.com/intl/cms/s/0/ad1524ce-73f6-11d9-b705-00000e2511c8.html#axzz2trhitrbi> [Accessed 20 February 13]. Yahoo Finance, 2014. Business Summary. [online] Available at: [Accessed 20 February 2014]. Read More