Google Inc Business Strategy - Essay Example

Table of Contents Table of Contents 1 Introduction 2 Theory 2 Analysis and Evaluation of Google Strategy 3 Conclusion 8 References 10 Bibliography 11 Appendix 12 Introduction The internet has revolutionised the lifestyles of individuals as well as business organizations especially in the area of communications. Individuals are largely resorting to using the internet as a source of information. The development of e-commerce has also opened up the online shopping channel. Companies like Amazon and eBay have their business models entirely based on the internet. A research study conducted by Morgan Stanley pegs the total number of internet users at about 1.8 billion as of the year 2009. The number is expected to grow by about 13 percent annually on a year on year basis. The report also states that approximately 18.8 thousand minutes was spent on internet browsing by ‘netizens’ across the world. Geographically China followed by USA and India have the largest number of active internet users with the numbers growing geometrically over the years (Morgan Stanley, 2010, p.6). The present study would analyse the business strategies of Google Inc and its effects on the business and the industry. The choice of the company assumes significance as the company is the leader in the online search industry and is synonymous with the aspect of web search and internet marketing. Theory The analysis of strategic framework of an organization can be done by using the framework of the Generic model proposed by Michael Porter. The model states that a firm can pursue four strategies that include overall cost leadership, focus, differentiation and differentiation focus strategies (refer annexure 1). Depending on the business and the market environment a firm can either chose one strategy or a combination of these strategies. Overall cost leadership strategy involves a strategic framework in which a business organization lowers its cost of operations and uses the cost benefits to sell products at lower prices than their competitors. Business organizations using a differentiation strategy provide a unique product or service offering that is unmatched by the competitors in the industry segment. Firms using such a strategy normally charge a premium for their uniqueness in the product or service offering and generate their core competence based on their innovations. Focus strategy involves targeting a very core and niche consumer segment and providing services that tend to cater to the very specific needs of the customers (Botten, 2007, p.263). Bowman’s strategic clock (refer annexure 2) also includes the above dimensions of Porter’s strategic model in addition to the inclusion of competitive rivalry within the industry (Drews, 2010, p.8). In the present study the choice of Porter’s generic strategies has been selected because of the fact that Google has a large number of business units and the framework of the generic model proposed by Porter would help in a better understanding of the business strategies of Google. Porter’s generic strategies would not only help analyse the past and present strategies but would also give an idea about the future course of strategic endeavours that would be pursued by the organization. Analysis and Evaluation of Google Strategy Google is one organization that is synonymous with internet as it is the largest search engine company. In addition to search engine that constitutes the bulk of its business, the company also has many other business units that includes video streaming, online social networking etc. The main source of revenue for the company comes from revenue generated from the advertisers who sponsor their products and services. The company was founded by Larry Page and Sergey Bin in the year 1996 in California USA. Since then the company has grown by a huge amount to emerge as one of the top rated brands in the globe. The company has diversified operations spanning numerous nations across the globe. It is also rated as one of the best places to work in. The company is also listed on the bourses of the NASDAQ where its stocks are being actively traded (Google, 2011). Google is rated second in the list of Fortune 500 companies that makes it one of the most prominent and formidable brands of the world (CNN Money, 2011). As per the framework of Porter’s generic model, Google essentially follows a mix of differentiation and focus strategy. Google has a vast range of products and services making it a highly diversified company. However the company’s focus has been largely towards the internet users and all its products and services are fully dependent on the internet. All its target audience constitutes individuals who use the internet for various purposes. Google’s varied and large number of product offering ensures that the company has services that cater to every need of the internet users. This is evident from the fact that the company has offerings that include mail servers (gmail), social networking (Orkut and Google plus), books (google books), pictures Picasa as well as you tube that serves as the online video browsing portal (Reding, 2008, p.2-3). The core competence of Google arises from its unique search engine algorithm that enables matching the keywords entered by the user with the relevant advertisements. The company gets revenues on the basis of number of clicks generate from its sponsored links that come on the top of the search page. Another important strategic perspective of Google lies in its aspect of keeping innovations with simplicity. All of the company’s services and web pages including its web browser are very simple and do not keep the user confused as they contain the minimum number of applications making it easy for normal users to use the products and services with ease and comfort. Google also uses its differentiation strategy by having a unique search engine algorithm that matches key words by advertisements which is specially unique for Google and unmatched by any of its competitors (Kent, 2011, p.4). Google has a large number of diversified business units that also includes a large number of competitors. Google main competitors in the market include Microsoft and Yahoo that constitute its core competitors in every market. Google is the market leader in the search engine segment with the highest market share that is largely due to the aspect of its unique search engine algorithm. In the online social networking site Google trails back in a large amount with its competitor Facebook that is the market leader in that segment. Recently Google launched its new social networking website Google plus that is expected to offer competition to Facebook. Google also launched the android application system making its foray in mobile computing segment. In this segment its competitors constitute Apple and Microsoft. However, overall Google’s main competitor is Microsoft which is the dominant player in the computer operating segment. Google launched its new browser chrome and also made its intentions of launching a new operating system thereby opening up direct competition with its arch rival Microsoft and Apple. The market share of Google has been increasing at a rapid rate with the company increasing its market share to 65.6 percent that represents a gain of 0.3 percent as compared to its figures in the previous month in August 2011 (Bloomberg, 2011). Google’s suppliers include organizations and individuals putting up their advertisements on various sites of the company. It also includes organizations and individuals like publishers who put up their content on the servers of Google. The development of Google Analytics is a step in this regard. The company’s customers include individuals who use the internet for various purposes. Google has a large and differentiated product and service offering that seeks to provide the best experience to every section of the consumers. It also includes corporate clients that use various offerings of Google such as mail servers as well as analytical tools like ad words and ad sense to use the internet marketing as a tool for marketing communications. In terms of suitability, Google’s products and services are very profitable considering the growing number of internet users and the ever growing popularity of the internet. The development of e-commerce and the clicks model of business have further strengthened the business prospects of the company. Companies like eBay and Amazon are increasingly becoming popular with customers. This has necessitated the need for business organizations to indulge in internet marketing activities. Google’s products like Ad words and Ad sense provide marketing solutions for companies trying to use the internet as a source for marketing communications. This shows that the company’s product and service offering are in tune with the demands of the external environment. The large scale of operations and the business model of the company can easily ensure creation of economies of scale and scope in terms of operations. The concept of cloud computing would involve Google to purchase large volumes of raw materials at very low cost helping it create economies of scale in operations. Google also plans to introduce the new web browser that would help in providing added benefits to consumers. Customers would have to purchase less added products like patches that would also contribute towards creation of economies of scope in business operations (Google-a, 2011). In terms of feasibility, Google’s revenue model is largely based on the income generated from advertising revenues that are featured on its websites. Google generates revenues from pay per click model. Considering the popularity of Google and the rate of internet usage the revenue model appears to be highly profitable. However, critiques have also questioned the large number of varied product categories that have been started by Google. It appears that the company is losing focus by looking into too many sectors at a time. For example critiques have questioned the revenue model and feasibility of you tube that is the online video browsing site. The company bought this at a high price mostly in the form of stocks; however the unit is unable to generate much revenue. There are also question marks over the ability of the company to generate revenues from its business model where most of the services are available for free to the customers (Hill & Jones, 2007, p.97). There is also a growing confusion as to the nature of industry catered by the company. The company’s foray into numerous categories of the industry has led to considerable doubts over the feasibility of the company’s financials and the aspect of losing focus and venturing into too many segments at a single point of time (Scott, 2008, p.127). Google with its large and motivated workforce has enough appeal to make its business strategies acceptable to the various internal as well as external stakeholders. Google has been rated very highly for its employee friendly practices that ensure a good supply of talented workforce for the organization. The company’s success in the business market is itself an indicator of the company’s strength. The strong financials and profits generated by the company ensure good acceptability of the company’s products and services in the market. However the aspect of losing focus is one point that must be considered by the company. A large number of loss making units also put considerable question marks over the sustainability of the company’s business strategies. The company’s business strategies face risks in the form of economic uncertainties. Google’s revenues mainly arise from the advertisements posted by organizations on its web pages. However an economic downturn as happened in 2008 can lead to decrease in advertising spending by the organizations and partner companies. The aspect of Google’s products and service being mostly free makes its more reliant on the advertising revenues generating considerable susceptibility for the organization in terms of sustainability in its business operations (Rosenberg, 2010, p.159-160). Conclusion The analysis of the business strategies of Google reflects a robust and sound business strategies being followed at the organization. The company has a lot of prospects in the age of increasing usage of the internet by individuals. The innovative and differentiated product offering of the company ensures complete satisfaction of the customers as well as the stakeholders of the organizations. However there are certain areas that needs to be taken care of the by the company in order to maintain long term sustainability. This includes ensuring that the company does not lose the focus while moving into multiple sectors. This can create confusion in the minds of the stakeholders and also increase the risk of the company. Google also needs to adopt some of the risk managing techniques that can help diversify the risk of the company. It should look towards bolstering its revenue models that would include identifying more revenue generating options for the organization. Finally, a control and evaluation mechanism in the form of a balanced scorecard technique can help the firm to evaluate its financial as well as non financial strategies that can not only help in monitoring but would also help in generating long term sustainable competitive edge for the organization (Balanced Scorecard Institute, 2011). References Angwin, D., Cummings, S. & Smith, C. (2006). The strategy pathfinder: core concepts and micro-cases. Wiley-Blackwell. Balanced Scorecard Institute. (2011). What is the Balanced Scorecard? [Online]. Available at: http://www.balancedscorecard.org/BSCResources/AbouttheBalancedScorecard/tabid/55/Default.aspx. [Accessed on December 5, 2011]. Bloomberg. (2011). Google Increases U.S. Search Market Share as Yahoo Slips, ComScore Says – Bloomberg. [Online]. Available at: http://www.bloomberg.com/news/2011-11-09/google-gains-u-s-search-market-share-in-october-comscore-says.html. [Accessed on December 5, 2011]. Botten, N. (2007). CIMA Official Learning System Management Accounting Business Strategy. Butterworth-Heinemann. CNN Money. (2011). World’s most Admired Companies. [Online]. Available at: http://money.cnn.com/magazines/fortune/mostadmired/2011/full_list/. [Accessed on December 5, 2011]. Drews, S. (2010). The Role of Strategy Directors in the Current Economic Environment. GRIN Verlag. Google. (2011). Overview. [Online]. Available at: http://www.google.com/about/corporate/company/. [Accessed on December 5, 2011]. Google-a. (2011). Top ten advantages of Google's cloud. [Online]. Available at: http://www.google.com/apps/intl/en/business/cloud.html. [Accessed on December 5, 2011]. Hill, C.W.L. & Jones, G.R. (2007). Strategic Management: An Integrated Approach. Cengage Learning. Kent, P. (2011). Search Engine Optimization For Dummies. John Wiley & Sons. Morgan Stanley. (2010). Internet Trends. [Pdf]. Available at: http://www.morganstanley.com/institutional/techresearch/pdfs/Internet_Trends_041210.pdf. [Accessed on December 5, 2011]. Reding, E.E. (2008). Google Illustrated Essentials. Cengage Learning. Rosenberg, J.M. (2010). The concise encyclopedia of the great recession, 2007-2010. Scarecrow Press. Scott, V.A. (2008). Google. Greenwood Publishing Group. Thomson, N. & Fuller, C.B. (2010). Basic Strategy in Context: European Text and Cases. John Wiley and Sons. Bibliography Chaffey, D. et al. (2008). Internet Marketing: Strategy, Implementation And Practice. 3rd ed. Pearson Education India. Foxall, G.R. (1981). Strategic Marketing Management. Taylor & Francis. Gurton, A. (2003). How to get into marketing and PR. Cengage Learning EMEA. Hamel, P. (2001). Globalization and social movements. Palgrave Macmillan. Hooley & Graham, H. (2008). Marketing Strategy and Competitive Positioning. Pearson Education India. Morgan, M. (2001). Making innovation happen. Kogan Page Publishers. Nankervis, A. R. (2005). Managing services. Cambridge University Press. Appendix Annexure 1: Porter’s Generic Model (Source: Thomson & Fuller, 2010, p.170) Annexure 2: Bowman’s Strategic Clock (Source: Angwin, Cummings & Smith, 2006, p.121) Read More