Key Strategic Issues: Google - Essay Example

Strategic Marketing Planning Assignment -GOOGLE- Table of Contents Table of Contents 2 Introduction 3 Environment Analysis 3 Identification of the competitive position 8 Strategic Position 11 Key Strategic Issues 12 Recommendations 13 References 13 Appendix: 15 Abstract Google is one of the biggest brands on the internet and offers a wide array of services, is analysed form a strategic marketing perspective. The environment which it operates in is analysed from different angles and probable strategic issues are identified and recommendations are provided for Google to follow in order to face up to the challenges which emanate from these issues. Introduction In the world of internet Google is the biggest brand. The internet searching giant has diversified into varied services in the internet arena. It has been able to leverage its position and brand equity as a leading internet search engine and has seen success through its other products and services also. In the 21st century the word of internet and technology is an ever-changing one and is filled with interesting startups who with their innovative ideas could pose considerable challenges to at least some of the areas where Google operates. Moreover there are other significant players like Yahoo! and MSN, who have the financial scale and technological wherewithal which could match Google. The operating environment for an organisation like Google is a complex mix of technological, social, political, economical and other factors. Especially the ever changing technological environment is bringing in newer challenges for a company like Google. Google is known as an innovative organisation but to continue its success the company would have to strategies and innovate and stay ahead of the curve. For this to happen it is extremely crucial for it to analyse its environment properly. And it should always be cautious about the game changers who could pose some threat to its business or specific business areas. Environment Analysis One of the best tools or model to analyse the environment for Google or any other organisation would be to use what Johnson and Scholes (1996) recommend. They propose a five step approach to determine the organisation’s strategic position. Fig.1. Five Stage Approach to Environment Analysis This approach is used to look into certain key issues like complexity of the environment, the level and type of interaction the firm has with its marketing environment, impact of the change in environment and it different variable on the firm, predictability of any future changes that might take place, the receptiveness of the present management in context of trends and also the capability of the firm to cope with the changing environment. Audit of the Environmental influences and Assessment of its nature: The environment of an organisation can be analysed through the PEST model. It consists of political, economic, social and technological factors. Political factors- Google Has always advocated that the medium of internet should be an open platform and also it should be free to use. It has been following this maxim since its time of inception. But in the year 2006 it decided to enter the political arena by setting up a political action committee or PAC known as Google NetPAC to put forward views in favour of its belief that the internet should be free and other allied issues. As it is a big company political decisions do have implications on its functioning. This committee focuses on political and governmental relations. There have been efforts on part of cable companies to jeopardise the net neutrality by introducing a fee based system, which Google does not subscribe to. This basically means that high bandwidth websites would pay more to the cable owners and get first access whereas simple service providers would lag behind. Copyright, privacy issues are also on the action committee’s mind. But some of the experts have predicted that this move by the company might affect it as they believe that this would take away from Google’s non corporate liberal brand image. But on the other hand Google management says that the foray into the political arena through NetPAC was only meant to accentuate positive decisions on part f the government in the sphere of internet and technology (Clothier J., October 2006). They just want to concentrate on issues which they think are significant. As Google is a multinational company it operates in varied countries of the world which offer different types of political environments. For example in China and Iran it has to go through government censorship. In countries like Iran, China, Cuba the internet is not a free medium and it has to pass through multiple layers of governmental censorship and scrutiny. An organisation known as the Freedom House has done a survey in this context and has found Iran and China to be having two of the most stringent web censoring norms. And in spite of the fact that Google propagates t freedom of the internet it has also fallen prey to regulations and censorship in these countries. China in fact has the highest number of internet users and also has been found to apply the most sophisticated and stringent web censoring norms and tools. Iran on the other hand even uses force and intimidates those who do not comply with its stiff internet rules and norms. Google has had to succumb to the Chinese government’s pressure and it has declared that it would launch especial version of its search and news platforms which would comply with that country’s laws and regulations. This is a situational quandary which the company finds itself in. Being a strong proponent of internet freedom and yet succumbing to the pressure by Iran and Chinese governments, the company has been criticized in many quarters. Again the company cannot even leave the Chinese market as China with its massive population and huge number of internet users, form an important strategic market for the future (AFP, April 2009; Mills E., January 2007). Economic factor - Google’s business is an e-business and operates in the economic business environment. Google launched itself as a search engine and over the next few years it started offering various other services like email, advertising. In fact though Google is the leading search engine in the world yet search is not its main source of revenue. In the e-business environment there are different types of players each following their own business models and frameworks. The first is the brokerage model under which the particular firms help in business to business, business to consumer and consumer to consumer transaction and business. The brokerage model firms are again sub divided into different types. Market place exchange is a brokerage model which deals with transaction processing, negotiation and ultimately completion of the transaction. Again there are firms under this model which only do buying and selling fulfillment i.e. they take orders from the customer and fulfill the buying or selling process. Demand collection systems also fall under this category and these companies arrange the ultimate fulfillment after the buyer goes for a final bid. Virtual market places are online shopping malls or stores which offer different goods from different merchants and provides them the platform to do so in exchange of a fee. The second business model which exists in the e-business economic environment is the advertising model. There are different types of website which provide a platform to advertisers to showcase their ads. In fact in case of Google the majority of the company’s revenue is generated from advertising. There are millions of customers who use Google’s advertising program s called AdWords and AdSense. Google focuses on the user whether individual or business as it believes them to be ultimate source of its revenue. Under its economic model, Google partners with individuals, businesses and also with other websites and builds up a mutually gainful relationship. Google leverages its brand name and search traffic and puts up advertisements on the search page which is pertinent to the search topic. This program is known as AdWords. It also offers its own search technology through another programme called AdSense. In case of AdWords there is a small fee which a business entity pays to Google every time a user clicks on its link. This is how Google generates revenue from AdWords. The users are also satisfied since only those ads which are in context of their search topic, are put on the search page. AdSense on the other hand is a programme which if put up on individual websites gives the owner of the site advertising revenue. Only ads which are relevant to the websites’ content are put up there. The owner can also incorporate a Google search box on the site along with AdSense. When someone searches through the search box then pertinent text ads are shown by Google (Morgen B., n.d.). There also other portals which are generally search engines with a huge flow of traffic which they leverage by putting up ads. Again ‘classifieds’ are online services where list of items which are for sale are put up in exchange of a listing fee. In vcase of Google it follows a method through which the ads that it puts up are targeted at the content or the search key words. This is also known as content targeted advertising. Another type of online advertising service is the query based paid placement through which advertisings which are linked to certain key words while the user is searching on the web, is put up. Then there is another business model which is known as the Infomediary Model which deals with information and data about the consumer’s web usage pattern. This data is again in turn used by businesses for marketing campaigns which are specifically targeted towards specific user bases. Again Merchant models are those which cater to wholesale and retailing of goods and services. This consists of virtual merchants or online-only retailers click-and- mortar i.e. traditional businesses that also have an e-presence, bit vendors, bit-vendors which deal in pure digital product and services and takes care of its distribution and sales. The next model is the manufacturer- direct- model deals with cutting of the intermediaries and the distribution channel with the basic objective of shortening the distribution channel and reaching the ultimate consumer directly. This model deals under different heads like purchase, lease, license and brand integrated content. In case of brand integrated type, the content is created by the producer with the ultimate view of product placement. An affiliate model on the other hand makes purchase or buying opportunities available to the users while they are surfing the internet. These services offer specific incentives in financial form to users if they would purchase product from sites which are affiliated to them. Open source is another type which is dependent on the loyalty of the user. These are accessible openly and the content is also developed and maintained by a set of hugely dedicated users. Social networking sites, which are hugely popular, now form a part of this kind of business model. There is also another model known as the subscription model which is based on service charges on a weekly, monthly or annual basis in exchange of content being made accessible to paid users only. The last one model which can be mentioned is the utility model is such that it bills the consumer on the pay- as-you-use model which generally means that the customer pays in accordance with the degree or quantum of use of the service (Rappa M., 2009). Social factors - The internet has become a part of the 21st century life and people spend a considerable amount of time on the internet accessing different services from searching to emails. And Google being one of the leading brand providing these services, has ample effect on the society and the user base. One of the prime concerns of the society and therefore various social groups and the government has been that of privacy or rather privacy concerning terms of Google usage. In fact Privacy International in its report on privacy issues of the leading service providers on the internet gave Google a ‘failed’ rating. The study was done based on twenty parameters and Goggle’s competitors like Yahoo or MSN fared better than it. The company has been found to keep or retain personal information about users in their databases for a long and undefined duration of time and even when the user has ceased to use that particular service. These users also do not get any option of deleting this information. Google is said to be maintaining all the strings of search along with the IP addresses of the computers and also the time of accessing it for a long period stretching up to 24 months. Moreover through its recently acquired social networking site called Orkut it has easy access to personal data about millions of users worldwide. Google also retains the different search results which are accessed through its toolbar through a unique cookie it puts in the user’s computer. Through this cookie Google keeps a tack of the movement of the user on the web. Google also has been accused of not following established privacy norms under the European Union and OECD guidelines. The company does not even provide any access to the log created by them through user usage pattern across their different services (Farber D., June 2007). Under pressure from EU’s Data Protection Working Party Google has relented and has agreed to anonymise the logs it creates on the servers after a period of 18 months. Though the company has declared and has claimed that it would not provide individual personal information yet there are valid privacy concerns. The very fact that it is a leading player in number of internet services like search, mail, blog and others makes the privacy issue even more critical because more the services it offers more the amount of personal data it has within its access (Koman R., June 2007). Google has also relented under pressure from social groups and agencies that there is a need to create a minimum standard on issues regarding privacy on global basis. The company has also proposed a joint collaborative effort between the government and the private sector. In this context the Asia Pacific Economic Cooperation Privacy Framework provides the basis for these proposals. Also the fact remains that o ne of the most important internet markets China has not agreed to these proposals. Again some of the privacy advocates are pointing out that even this proposal on part of Google to adhere to the privacy norms is eyewash and the company is actually doing all these just to assuage the fears and the anger of the society and the user base as a whole. But Google on its part has even approached its competitors like MSN or Yahoo to participate in the venture. But Critics Point out that the Asia Pacific Economic Cooperation Privacy Framework is one of the weakest available and is not at all forward looking and the framework’s guidelines do not match with most of the European standards (Mills E., September 2007). There are actually four or five major areas where Google gives rise to the concerns of the privacy advocates. These are Gmail, its email service, desktop search which is used to search the PC from the desktop, web accelerator which actually increases the speed of browsing the net by a process through which cached copies of the user-visited websites are maintained and these again contain personal information. Then there are cookies which Google plants on the user’s PC to track her web usage pattern and her movement through the internet (Mills E., July 2005). Technological factors – Google started as search engine and has later on brought in a range of diversified service offering to its customers. Each of these offer a differ utility and spans over areas like email, blogs, book and journal search, maps, browsers, chat applications and many others. But the technological environment is an ever changing one. In fact in the area of search there are different new innovations which have arrived. There are focused search engines which are used to search in-house databases of big private and government organizations. Again some search engines focus only on blogs which is the new phenomenon while others offer real time searches. Some image search engines use pixels to search while Google does it by matching key words (Google: Seven potential threats to its dominance, June 2008). Identification of the competitive position Google is the leader in internet searches and has diversified into various services like emails, chatting tools, browsers, advertising platform and application like AdSense and AdWords and others. It also has a platform called Google Labs where it puts up new applications developed by its in house engineers. Then customers or users give their valuable feed back in context of these prototypes and depending upon these the decision is taken whether to put up these applications on Google.com or not (Google Labs Frequently Asked Questions, n.d.). Google’s competiveness comes from the wide range of services it offers to the users. In fact due to its high brand value and position amongst the users Google has been able to leverage it and has pushed all its services and products into the market. Its position as the leading search engine has had positive rub-off effects on its other offerings and whenever it has launched new applications it has utilised its already existent and huge search-user base. Its competitive strength also comes from its financial standing. Fig.2. Google Inc. Financials Source: (Google Inc., 2009) Fig.2. shows the financials of Google over the 2007, 2008 and 2009 (up to March quarter). Key indicators like total revenue, gross profit operating income and net income have all grown significantly in 2008 in comparison to the year 2007. Future opportunities and threat: There are some emerging trends in the world of internet which could offer Google its next opportunity or could turn into a threat if not taken care of now. Low immediacy (2/3 years) High immediacy (within 1 year) Low impact (not significant to organisation)   Broadly monitor trend Closely monitor trend but no action Data Mashups Collaboration webs Monitor and prepare contingency plans Collective Intelligence Grass Root Videos Mobile Broadband Social operating Systems Closely monitor trend and implement contingency plans Pixta.com Endeca Micro blogging Technorati.com High Impact (significant to the organisation)   Fig.3. Immediacy / Impact Analysis Data Mashups: Different website’s data are mixed together and presented on a single interface or a tool. For example in a website like Housingmaps.com, best of the pertinent information and content is mashed together and presented to the user through a single interface (Hof D. R., July 2005). Collaboration webs: These are social networking sites but on a smaller scale and are platforms for collaborative efforts on particular subjects or issues in context of learning. Skoolaborate.com is one famous example. Pixta.com: This image searching site uses pixels to search whereas Google does it based on keywords or headings and therefore pixta offers greater accuracy. Endeca: A search engine which charges governmental and multinational organisations against the focus search utility which it offers. Micro blogging: Twiter.com is the most famous micro blogging site which also offers users the utility of real-time search. Experts are of the opinion that twitter could be a potential source of threat for Google in future, owing to its enormous popularity with the web users (Perez C. J., April, 2009). Technorati.com: It tracks a plethora of blogs and also ranks them in accordance with the number of times they get linked to other blogs by fellow bloggers. Collective Intelligence: These use a collaborative effort on part of dedicated users who create and maintain databases. Grass Root Videos: Users create their own video clips and put it up on the websites like YouTube. YouTube is a hugely popular site. Mobile Broadband: With the growing popularity of handheld mobile devices, increasingly internet is being accessed through them. This generally means that internet has become mobile and therefore Google could look to leverage opportunity also. Social operating Systems: Through these, the internet footprints of a user across social networking sites are connected and pertinent services are presented (Google: Seven potential threats to its dominance, June 2008). The aforementioned trends provide opportunities as well as threats. If these newer areas are tabbed into early by Google then it would provide ample opportunities for growth but if left alone, other companies would occupy the space and Google would fall behind. The world of technology is such that even a small start-up with a new innovative concept and idea could pose threats to established players like Google in the market. Though these startups might not have the financial scale and wherewithal initially yet they generally get backing from venture capital funds if their technology or innovation shows promise. Strategic Position Fig.4. Google’s strategic game Strategic position of the company emanates from the span of its offerings and also its financial clout. It can operate at a considerably bigger scale than its peers and competitors. It can utilise its finances and invest in Rand D, new product development, acquisitions. In fact the company has taken the strategic path of organic and inorganic growth as and when it has demed to be suitable. In case of certain applications it has gone for acquisition or takeovers as a mode of entering those areas of technology. Google has acquired the online video site called YouTube, social networking site called Orkut , blogging site called blogspot.com and also various other companies. Again it has gone for strategic collaboration with open source developer community and has developed an open source platform for mobile phones called the Google Android. This platform gives it access to a wide array of talent and provides it the opportunity of accessing various innovative applications by virtue of these developers (Industry Leaders Announce Open Platform for Mobile Devices, November 2007; Google Milestones, 2009). Key Strategic Issues The key strategic issues Google faces emanates from various sources: It might be the government or social groups which oppose its privacy policy. Again the fact that it cooperates with authoritarian regimes in China and Iran and adheres to their censorship gives ample scope to general public and many governments to attack Google. Technological innovation by newer companies in newer areas also pose threat to Google and it would have to take decisions whether to enter these new areas or not depending upon its possible financial upside. It would also have to take a call on whether it wants to pursue inorganic or organic growth strategies or wants to follow a mix of both. It is already a behemoth in the world of internet and with future growth it would get even bigger. Therefore allegation of Google turning into a monopoly cannot be ruled out. It has to strategise to face up to such allegations also. Recommendations It is recommended that Google: Keeps its eyes open to new emerging technologies and gauge its future potential, to early advantage of it. Puts in more money into R and D activities so that it can outperform its competitors in launch of newer and more innovative products. Keeps on developing its open source mobile platform called Android which surely presents a huge opportunity as the internet users are moving onto mobile devices for net access. Follows a mixed strategy of organic and inorganic growth depending on the situation and its own analysis. Takes care of privacy issues as it might turn the user base against it after a certain span of time as online privacy is a crucial issue for anyone. References Clothier J., October 2006, Google Steps into Political Arena, CNN, [Online], Available: http://www.cnn.com/2006/WORLD/europe/10/25/google.politics/index.html [21 May 2009]. AFP, April 2009l, China, Iran Censor Web: Rights Group, [Online], Available: http://www.google.com/hostednews/afp/article/ALeqM5hkTCZr8Fc_SIX2By-dv6G8E3ogqQ [21 May 2009] Mills E., January 2007, Google to censor China Web Searches, CNET, [Online], Available: http://news.cnet.com/Google-to-censor-China-Web-searches/2100-1028_3-6030784.html [21 May 2009] Morgen B., No Date, UCSD Jacob School, [Online], Available: http://www.cse.ucsd.edu/~paturi/cse91/Presents/mbotella.pdf [21 May 2009] Rappa M., 2009, Business Models on The Web, [Online], Available: http://digitalenterprise.org/models/models.html [21 May 2009] Farber D., June 2007, Privacy International pokes a stick in Googles eye, ZDNet, [Online], Available: http://blogs.zdnet.com/BTL/?p=5339 [21 May 2009] Koman R., June 2007, Google Yields to EU Privacy Concerns, ZDNet, [Online], Available: http://government.zdnet.com/?p=3224 [21 May 2009] Mills E., September 2007, Google proposes global privacy standard, ZDNet, [Online], Available: http://news.zdnet.com/2100-9588_22-164412.html [21 May 2009] Mills E., July 2005, Google Balances Privacy; Reach, ZDNet, [Online], Available: http://news.zdnet.com/2100-9588_22-143720.html [21 May 2009] Google Labs Frequently Asked Questions, No Date, Google Labs, [Online], Available: http://www.googlelabs.com/faq [21 May 2009] Industry Leaders Announce Open Platform for Mobile Devices, November 2007, [Online], Available: http://www.google.com/intl/en/press/pressrel/20071105_mobile_open.html [21 May 2009] Google Milestones, 2009, Corporate Information, Google, [Online], Available: http://www.google.com/corporate/history.html [21 May 2009] Google: Seven potential threats to its dominance (June 2008), [Online], Available: http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/2791994/Google-Seven-potential-threats-to-its-dominance.html, [21 May 2009] Perez C. J., (April, 2009), Google Acquisition Rumors Reflect Twitters Importance, [Online], Available: http://www.pcworld.com/businesscenter/article/162586/google_acquisition_rumors_reflect_twitters_importance.html, [21 May 2009] Appendix: Fig.1. Five Stage Approach to Environment Analysis Pg-5 Fig.2. Google Inc. Financials Pg-10 Fig.3. Immediacy / Impact Analysis Pg-11 Fig.4. Google’s strategic game Pg-12 Read More