Strategic Management of Google - Essay Example

Contents Introduction 2 Discussion 2 Conclusion 12 References 14 Introduction Strategic management is a key business strategy used by businesses to achieve sustainable competitive advantage in the industry. It deals with running an enterprise effectively and efficiently. It is aimed at evaluating the challenges and opportunities in the environment in which the enterprise operates and formulating and implementing suitable strategic plans to move the business in the correct direction. Strategic management is not only a process but also a thinking perspective that should be effectively implemented throughout the business. The management uses the strategic plans to analyze the situations, take decisions and implement the decisions in the business processes to create and sustain competitive advantage over its competitors in the market. Strategic management is used to understand the performance of the businesses, the ways to create and maintain competitive advantage over other businesses in the industry. The strategic management plans of a business should ideally be valuable and unique and should be difficult to be adopted or substituted by the competitors. The main analysis is based on the strategic objectives and goals of the business and the internal and the external factors affecting the functioning of the business. In this report, the strategic management processes will be analysed and implementation of the strategic management process in the famous search giant business of Google Inc. will be discussed. Discussion The strategic management plan starts from an evaluation of the vision and mission statements of the business and the strategic goals and objectives of the business (Rouse, 2001, p.56). The vision of Google Inc. was to create a search engine that would be extremely efficient and capable of understanding anything in the world. The mission of the company is to create a database of all the information in the world and make them accessible for all the people throughout the globe. To achieve these, the company made their processes customer centric and aimed to make profit through value creation for the customers (Hofstrand, 2011, p.4). The business delivered a delightful user experience to build up a high level word of mouth promotion for the company (Levi, 2007, p.89). Google Inc. continually focused on the user experience and innovation as the key drivers of the business. The main philosophies that drive the operations of Google are focusing on a particular service, customer orientation, democracy on the web and the identified need for information all across the globe (Mordent, 2007, p.80). The strategic management plan involves the analysis of the industry environment, competition level and the external as well as the internal factors driving the business (Larsen, 2006, p.141). For the analysis of the macro environmental factors, Michael porter’s five forces model is used. The five forces analysis for the internet industry is done to assess the industry environment for Google Inc. Bargaining power of the buyers: The importance of the services is high in the industry, the buyer size is smaller, and the buyers are more sensitive to pricing. Also, the frequency and cost of changing is low, product differentiation is less and the ability to integrate is also very less. Bargaining power of suppliers: The switching costs and the concentration of suppliers are low and the importance of volume is high in this industry. Threat of new entrants: The entry barriers are high in this industry due to the increased importance of brand identity. The business scales are also very high making it difficult for new businesses to gain more market share. Threat of substitutes: The threat of substitute is low because the use of latest technology is limited to the established companies (Rommel, 2008, p.63). The major players in the industry quickly take up patents and innovations in the industry for their businesses. Competitive Rivalry: The differentiation of products is low and the companies have strength due to the maintenance of secrecy in their internal methods. The exit barriers are less and some businesses of comparatively smaller size are growing fast. The industry has a highly competitive landscape with many players in the market. The major names in the search engine industry are Yahoo, MSN, Viacom, Ask, Picsearch, Wikiasari, Eurekster, Rollyo, AltaVista, Powersetr, Pixsy etc. (Burrows, 2010, pp.28-34). Despite the presence of other playersin the market, Google remains the leading business with 58% of the internet searches market share in the United States market. The competitive rivalry in the industry is strong mainly due to the advertising payments done to the websites which account for the largest number of searches (Jones, 2008, p.16). A SWOT analysis of the company is done to understand the internal and the external factors impacting the business. Strengths: Search-Google Inc. has developed a unique and powerful search engine which enables image search, blog search and facilities like Google map and Google news. Google Finance- Google finance is a website dedicated to provide financial information and updates for different companies. The site provides the latest information and analysis for the companies and is a critical site for the financial industry. Communication and Communities- Google calendar is used as a free calendar which can be shared by different users. The Google calendar application is used by millions of users across the world to keep track of events and occasions. Other important services are the free Gmail and social network services like Orkut. Google Books- Google book is an important ecommerce site for online purchase of books. The site has an enormous collection of books and e-books. It also provides the facility for online reading of selected books. News- The site of Goggle is an important source for all media contents. News is published on the website within seconds of their occurrence The news are presented in a user friendly format and is sourced from all over the globe. Google Video- Google Video has a database of millions of videos that can be viewed and downloaded by users. Google Inc. also acquired YouTube in 2006, which increased its potential of indexing videos from all over the globe. Photo sharing- Google has launched the Picasa web album for providing the photo sharing option to millions of users. Google GEO- Google Earth and Google Maps are enormously popular applications used by people to locate and learn about areas through satellite images. They can also find the route from one specific location to another. Weaknesses: Commerce- Google portfolio does not have an efficient commerce feature. Google is highly dependent on the payments from advertising to earn revenues. Privacy- Google social sites lack privacy features as it is easy to see the other use account information (Hit, 2008, p.31). Content- Google is considered more as an information finder than an information generator. Opportunities: Google can try to capture the mass market portal sector that is dominated by companies like Yahoo and MSN. The company can increase the switching charges considering that users need to access the search engine (Wheelmen, 2011, p.35). Also, it can launch chat rooms and a more powerful mailing system. New services like print media, multimedia and private database can also be launched in this era of high technological revolution (Thompson, 2008, p.137). The company can also create an alliance with a mass market portal to increase its reach. The business can be diversified into mobile business and other related software and hardware businesses through more effective mergers and acquisitions. Threats: The competition in the search engine industry is increasing due to the popularity and high business of the search engines (Taylor, 2011). Investors are investing in new search engine businesses creating substantial threat for Google. Peer search is another potential threat for the company. The company has seen huge success in the industry due to the innovative and unique business model adopted by the company (Oster alder, 2009, p.164). The business model is the main factor that distinguishes Google from the other players in the market and is the main reason for Google being miles ahead of the other businesses in the industry. The development of unique applications like Google play, Google Earth and Google Maps has made the company the world’s leading innovating brand. A PESTLE analysis of Google needs to be done to understand the how external environmental factors affects the business operation of the company and also play critical role in the formulation of the strategic management plan (Henry, 2008, p.79). Political and Legal factors: Google Inc. has faced issues regarding the use of archived search keywords due to the intervention of the Department of Justice (Associated Press, 2010). The company has also faced problems due to the Chinese government wanting to censor the search results due to which Google had to move out from the Chinese market. Google has added a link for privacy in the home page in response to the concern of the users. The link was used to access the Privacy Centre in which the policies of the company regarding the political and legal issues are clearly explained (Bijoux, 2010). The company has also dealt with copyright infringement issues due to the storage of third party images and websites in their servers. The company has responded to this issue by creating a page exclusively for providing its copyright information. Economic factors: Google being a technology company is very less impacted by the economic downturns as the business is more based on internet advertising which is a necessary service in the world economy (Akola, 2008). According to a wired magazine article, Google is more than equipped to deal with the economy downturns. Google focuses on a measurable and targeted advertising process which makes the business generate profit even in times of economic recessions. The need for information and staying connected are crucial for the society and thus, the services remain unaffected by the economic factors (Mauborgne, 2004, p.16). Social factors: Internet as a means of communication and connection has become increasingly embedded in the social lives of people throughout the world (Gregory, 2005, p.46). Google as the largest search engine makes the internet easily accessible and user friendly for the common people. The use of internet has gained popularity among people of all age groups and cultures. The society of the world is largely dependent on the internet services (Johnson, 2008, p.18). People use the Google search engine for purposes varying from downloading music, accessing news, researching, to locate places and communicate through emails and social sites (Hax, 2012, p.51). The business is unaffected by the male- female ratio of the society and is likely to gain hugely when more people will start using the internet effectively and frequently. Technological factors: Technology is perhaps the most critical factor driving the business process of Google Inc. The company has taken special care to implement the latest innovative technologies in their business processes. Google offers a powerful search engine which is developed on highly complex and unique algorithms (Wired Magazine, 2010). The company has implemented efficient technology for developing successful products and services like the Android operating platform, search engine, maps, electronic mailing system and so on. Business strategies: The strategies of Google Inc. strategy is based on building a strong platform for differentiated products and services. The complimentary services are aimed at increasing the brand awareness and the use of the basic services of the company (Sadler, 2003, p.196). The unique services of the business include Google map, Google drive, the Document and Spreadsheet applications, the image editing and organizing application called Picasa web album and Google earth. These services act as the major drivers for the company’s business and the visibility of the brand name (The Wall Street Journal, 2012). Cultural structure: The culture of Google also plays a critical role in the strategic management process of the company. The company maintains a flat hierarchy structure, uses a non-discriminatory hiring process, follows a multi domestic culture, creates a multilingual work environment and blends recreation with work (Deep, 2012, pp.4-15). The business also exhibits several unique features like maintaining the exact fit between consumer behaviour and technology of the company, providing the latest search options, maintaining an excellent level of accuracy, speed and ease of use (Neilsen, 2004, p.69). The company is known to spend around 50% of its net income for its research and development processes to maintain the latest innovation techniques and technology in their processes. The company uses continuous innovation as an efficient strategy in the business (Saunders, 2012, p.78). The core competencies of the business are derived from its expertise in both software and hardware engineering. Literature review: Strategic management has developed with the help of contributions made by the researchers from the various fields of sociology, public administration, economics and organizational behaviour. The classification of Mintzberg (1998) is popular and is based on the visualisation of strategy. The researchers can be grouped into three broad groups according to their basis of research. The researches of the first group are more or less perspective in nature. The aim of their research lays on the formulation of strategies while the second group investigates the aspects of the strategy formulation process. They tend to concentrate on the role of factors behind the strategies. The last group culminates the above mentioned thoughts and seeks to be integrative. Their aim is to cluster the organizational structures, contents and the strategy decision making process into well diversified phase. The literature on the implementation strategy can be categorised into the different streams of literature where the prime focus lays on innovation, mergers and acquisitions, sustainability and collaborative strategies. According to Runco and Pritzker (1999) the term innovation can be used to define adoption of an internally generated device, product or service that is new to the adapting system (Runco and Pritzker, 1999, pp 53-57). A Meta analysis conducted on innovations stated that factors like specialisation, professionalism, diversity of knowledge, technical knowledge, slack resources, and managerial attitude towards change and communication have positive impacts on the adoption of innovations by the companies. On the other hand centralization seems to affect negatively on the adoption of innovations. The indifferent factors were managerial tenure, formalization and vertical differentiation. However it was found that managerial tenure and formalization remained indifferent on the initiation as well as implementation of innovations but vertical differentiation had positive impacts upon administrative innovations. Vertical differentiation also had negative impacts upon technical innovations. Researchers have shown that mechanistic organizations were less conducive than organic organizations in generating innovations. The mechanistic organizations are appropriate for administrative innovations while the organic forms of organizations are more appropriate for technical innovations. Loomis (2002) put forward the opinion that interdependence of capital can be recognized by strong sustainable development. Such capital might consist of reciprocity, networks, corporation and access to information (Loomis, 2002, pp. 7-11). In order to maintain strong sustainable development and equilibrium among capital stocks it is important to determine the purpose for which the capital is being used. Strong sustainability cannot be achieved by substituting one form of capital by the other. However the proposition of the weak sustainable development proposes it is possible to substitute capital as long as the balance of capital is maintained in the long run. Google has shown sustainable growth in the last six years which is established by its financial analysis (Yahoo Finance, 2010). The management of the company has identified the factors that may affect the business directly and indirectly like the increasing competition level, the evolution of the online advertising industry and the arising opportunities out of the market. Thus the management is implementing effective strategic plans to increase the profit margins in the future and generate other sources of revenue apart from the online advertising business so that the company is not affected by any limitations imposed on the advertising business (Reuters, 2013). The strategic decisions are based on the vision, mission and the goals of the business and are used to identify the industries to compete in and the process of competing in those industries. The strategic management process also involves the allocation of proper resources and designing the business to successfully implement the strategies. The key features of the strategic management process are- the process involves all the stakeholders in the decision making process, helps the business to achieve its objectives, evaluates the drivers of efficiency and performance of the business and incorporates both the short term and the long term perspectives for the business. Conclusion Google should take up the market modification strategy to survive in the highly competitive industry. The company needs to make huge investments for the research and development processes as well as for mergers and acquisitions to improve the strength of the business. The company should not depend on one particular strategy and formulate new strategies to increase the strength of the business and avoid strategy myopia in the company. Google can increase its market share by tabooing potential markets, increasing the users redirected from other search engines and increasing the traffic in their search engine. The future of Google Inc. depends largely on the increased use of the internet across the globe. With the company increasing it business throughout the world, the business is likely to be impacted by foreign currency fluctuation. The company may implement effective hedging strategies to offset these issues. The company should continue investing in latest technologies to successfully match up the growing business environment. Google should dare to implement new ideas and strategies as well as retain good talent within the organization to maintain the high standards of the business. Other companies are likely to implement strategies to take up the place of Google. So Google should take up sufficient corporate strategies to maintain sustainable competitive advantage over the other businesses (Satya Sekhar, 2009, p.15). Google has thrived as a giant in the search engine industry and has become a synonymous name for the searches on Internet. The company seems to have implemented excellent strategic management plans to reach this position and it should keep on implementing new ways to mature as a successful organization. The mergers and acquisitions of the company like the acquisitions of YouTube, Motorola and Postini have proved to be successful strategies for increasing then potential of the business. The company should keep on investing in order to increase the value creation for the customers and provide effective services to users all across the globe. References Akol, E. 2008.Google Inc.: Corporate Strategy. [Pdf]. Available at http://www.smi.ethz.ch/education/courses/corporatestrategy/Slides_AS2011/Google_B. [Accessed on 3 December, 2013]. Associated Press.2010. China Says Dispute Is with Google, not U.S. St. Petersburg Times. pp. 4b–5b. Bisoux, T. 2010. Our Philosophy—Google Corporate Information. [Online]. Available athttp://www.google.com/corporate/tenthings.html. [Accessed on 3 December, 2013]. Burrows, P. 2010. 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