Diversification Strategy of Google - Essay Example

?Company Analysis Table of Contents Company Analysis Table of Contents 2 Introduction 3 Diversification Strategy of Google 3 Strategic Evaluation of Google 6 Conclusion 7 References 7 Introduction One of the most prominent names in the present day civilisation is ‘Google’. Google has completely revolutionised the face of internet as a medium for searching out information that ranges from food and lifestyle to government legislatures. Google as an organization was founded in the year 1996 by two bright Stanford University students Larry Page and Sergey Brin. After an initial humble beginning with a small start up capital the company grew by leaps and bounds to presently emerge as one of the leading brands of the world with financial strengths that matches the likes of industry players like Apple and Microsoft. The company’s stocks are listed on the bourses of the NASDAQ. Google has a diversified product portfolio that ranges from search engines to software applications, browsers and mails. The main reason for the success of the organization has been attributed to the highly innovative approach of the organization as well as the strategy of the company to keep its products as simple and highly efficient. In addition to this certain other strengths of the organization also includes a unique algorithm for its search engine operations that provides quick and accurate response to web users without any hassles (Google, n.d.). Diversification Strategy of Google Google has a wide array of product offering that range from web browsers to social networking sites and video sharing. The company has diversified into many segments in an attempt to leverage the benefits of the opportunities of the different product segments. The company began its operations with the search engine division. It diversified into the online video sharing and viewing segment by acquiring You Tube which was acquired by the company in 2006 for a whopping 1.8 billion US dollars. The company got a good response as it became the most popular video sharing site across the world with about 150 minutes of video added every hour. However the diversification strategy of Google of entering into this segment has been questioned by many researchers as they feel that the segment only increases the number of uses and adds to the popularity. However the fact that the segment generates only 240 million dollars as revenue towards an expenditure of about 500 million to 1 billion dollars raises serious question over the sustainability of this segment in the long run. This is mostly because of the fact that every video is free for viewing and there are very few advertisements on the site (Grant, 2009, p.827). The company went further ahead in its diversification plans and announced the launch of its new browser named ‘Chrome’. This browser was launched in 2008 and was increasingly seen as an attempt by Google to throw a competition to its main rival Microsoft which launched the internet web browser ‘internet explorer 8’. The company stated that this product would have the aspect of simplicity and would ensure a complete blend of innovation with simplicity. The company claims that this browser would allow faster access to information and would have better security features and would be compatible with the latest web platforms. Experts however state that the main reason behind this diversification strategy of Google was that the new version of the internet explorer launched by Microsoft had certain protective elements that would delete the cookies which in turn would not allow Google to track down the browsing habits of the users. This was a vital issue for Google as its entire advertising and search engine business model was based on the aspect of tracking users browsing habits. Google believed that the simple nature of the product and its appeal and brand image among the target audience would largely help in giving Microsoft a run for its money. Google also announced that it would launch an operating system that according to experts was a strategy directed towards its main rival Microsoft in an attempt to challenge Microsoft in its core business domain (Grant, 2009, p.834-835). The latest diversification strategy of the search engine major Google was the launch of its mobile operating system named Android. The launch of this product in November 2007 marked the foray of Google into the mobile computing segment. This product is a free and largely open ended software application that has highly innovative features and aims to generate good advertising revenues for the organization. The company states that the product would largely help in creating a revolution in the mobile based internet segment and make them highly popular among the general masses. Google hopes that with the large scale popularity the product would help in generating advantages for the organization as the company aims to generate advertising revenues from this application. The company states the with the launch of Android the company would generate revenues in the tune of 5.08 billion US dollars by the year 2012 in the North American and Western European markets alone. The development of a good operating system for mobile users would encourage more users to use the internet on their mobile phones that would help generate numerous revenue based opportunities for the organization. The new operating system also has opportunities in the sense that the existing players do not have the mass scale appeal like that of big players as all of them are basically small and marginal players that have limited capabilities. The foray of a professional and large firm like Google would help in improving the standards of this industry segment that would help in attracting more users towards this segment which would open up new opportunities for the participants of the market. This strategy would also help in generating first mover advantage for Google into this attractive business segment and would help in positioning the image of the firm in the minds of the target customers (Grant, 2009, p.833-834). Strategic Evaluation of Google The analysis of the business strategies of Google reveals that the company has emerged as one of the leading brand names in the industry. The company presently banks upon a diversification strategy to undertake future expansion of its business and to generate revenues for maintaining profitability and sustainability. The diversification strategy of the organization has evoked a widespread debate on the effectiveness of these strategies towards generating competitive advantage. The analysis of the diversification strategies of Google reveals that it has forayed into numerous product segments. This strategy has certain sets of advantages as well as disadvantages. Diversification into different segments helps in risk management of the company as it ensures sufficient contingency plans for the company in the event of a market getting affected by the environmental factors. This would serve to have a positive effect on the attractiveness of the company towards the shareholders that would help gain strategic advantages for the firm. On the other hand experts have also argued that diversification into too many segments can actually lead to the company going nowhere. Diversification into numerous segments would largely tend to shift the focus into different areas that would lead to generation of issues within the organization. The analysis of the business model of Google also shows that there are numerous products offered by the organization that do not generate revenues for the firm and yet they put a considerable strain on the expenses of the organization. One such product is You Tube which is the online video streaming and sharing site of Google. This product has immense popularity among the general masses however it does not have much options of generating advertisement revenues that are the backbone of Google’s sources of revenue. The business unit of the company has over the years generated losses and the firm has not been able to break even after its acquisition in the year 2006 (Grant, 2009, p.827). Since most of the content is free and considering the fact that this business unit has not generated revenues hence selling off this unit would largely help the firm to reduce its operational losses. The selloff of this business unit also makes sense as no favourable opportunity forecasts have been predicted for the business unit. Abandoning this business unit would also help Google to sustain its focus on the other emerging products that hold immense potential in the future. Conclusion Google is one of the best known and among the most popular brands of the present day business. The company over the years has acquired a unique positioning in the minds of the target audience through an effective mix of innovation, expertise and simplicity. The company has embarked upon a strategy of diversifying into different product lines so as to expand its business and generate greater scope. However the large number of diversified products in its product portfolio would generate confusion among the management as it would tend to shift the focus of the company into different product lines. In addition to loss of focus Google also has a large number of business units that do not generate sufficient revenue and also put up a strain on the resources of the organization. The key to success for the organization lies in its ability to maintain a strategic positioning and a good focus while divesting some of its loss making units that would help it reveal sustainable competitive advantage for the organization. References Google. (No date). Overview. Retrieved May 27, 2011 from http://www.google.com/about/corporate/company/. Grant, R.M. (2009). Contemporary Strategy Analysis. John Wiley and Sons. Read More