Usage Of The Information By Google To Develop More Competitive New Business Models - Report Example

Contents Contents Executive Summary 2 Introduction 3 Conceptual Framework 3 Findings and Analysis 4 Conclusion 5 References 6 Executive Summary Thereport below examines the effectiveness of IT systems in shaping the business models of corporations. The changes introduced by the IT plan of a company on the overall productivity are also analysed. This is done by considering the case of Google and Microsoft. The contribution of the IT function in the business model of the company is revealed through a detailed analysis involving Porter’s five forces, Porter’s value chain model and Porter’s generic model. It is revealed that the companies are leveraging IT systems to formulate the business model rather than using it just as a support function. Business models will continue to change as they have owing to the dynamic nature of business, however through IT; it is possible to positively affect changes in all the functions of the company. Introduction Information systems are used in companies over the world as a supporting function that makes processes more efficient. This has been done so irrespective of the nature of the industry they have been used in. However, with respect to the software industry, there are certain deviations. In addition to being a support function IT tools are also used for the core functions of the company. In spite of this, IT management has not been given the attention it deserves and is still treated as a business enabler function. Hence, it is high time that IT management is seen as a tool that shapes the business model of the company resulting in the topic at hand. Although Google and Microsoft have been considered for this study, it has been done so with respect to their main fields of operation namely the search engine market and that of the operating systems although they have operations in other areas, some of which overlap. The reason behind this is that the characteristics of the market can be matched with that of the company to reveal the strategies of the companies. Thereafter, the company mission, vision and other objectives were studied so as to examine their alignment with the IT strategy of the company. Since this was available through company sources such as websites, annual reports, etc, academic resources were reserved for familiarization with the principles of IT management. Subsequently analysis was carried out on both the companies with respect to Porter’s models. Statistics regarding the industry in which each of the companies operates in proved especially useful in revealing their strategies. Finally, the significance of information systems in developing the business models of the companies was established. Conceptual Framework Having established the prominence of the information systems and information management within the organizational setup it is important to delve into the various aspects that it affects. The business model of a company defines not only its customer relationships and financial structure, it also determines specific factors such as work culture, etc and everything in between. Firstly, the business model adopted is such that it facilitates the customer segments that provide business for the company and also helps create solutions for the demands and needs of the customer. The various channels of communication, distribution and sales are also incorporated into the model. Long lasting customer relationships are built with these models. However, the businesses of the company are sustained through the utilization of important resources through efficient processes so that they are profitable. Lastly, the cost structure of the company is also considered in the business model (Osterwalder & Pigneur, 2010). While the above points determine the factors inclusive in a business model, it is the various methods through which they are achieved, that determine their effectiveness. Information systems, is one of these methods. This template has changed from the traditional model in which manufacturing products and services were sold to customers and the physical location of the organization was extremely important. IT systems were only used to increase the efficiency of operations. However, newer business models and traditional organizations that have adopted these models operate with IT embedded both in the structure and operations of the company (Joseph & Mohapatra, 2009). Since an IT plan is paramount to the business model of a company and these models are constantly modified and upgraded as per the various business needs, the strategic importance of IT cannot be overstated (Kelkar, 2010). Therefore, it is important to examine the IT strategy of a couple of companies to understand how it is used in the larger business model. Google’s mission is “to organize the world‘s information and make it universally accessible and useful” (Google, 2011). It is important to make note of the mission at the outset since the IT strategy in the company is used to fulfil the goals set through the mission and vision statement. It is also important to note that since IT is used by software companies as an income generating function in addition to the support function; it will be unique when compared to other companies. Google has placed much importance on establishing a more efficient and control-free work culture resulting in employees productivity that is nearly twice to thrice as good as its competitors such as Microsoft and apple in the last five years (Veille, 2010; InfoWorld, 2004). Microsofts mission is “to help people and businesses throughout the world realize their full potential” (Microsoft, 2011). In spite of the extremely dynamic nature of the IT market, Microsoft has been able to retain its competitiveness. Its business model has been more or less the same with customized system builders passing on their software product to resellers based on volume license agreements sold online (Foley, 2008). A key strategy behind the sustenance of the company has been its ability to identify opportunities for new initiatives (Data Sheet, 2008). The various IT tools such as internal office applications, content portals, mobile interfaces, etc are designed such that they fulfil the above strategies. For example the development of a mobile service by Google with assistance from twitter which helps people communicate with each other even in the absence of an ISP is aligned with the companys principle that states "Focus on the user and all else will follow" (BBC, 2011). Findings and Analysis Firstly, consider Google with respect to Porters five forces. In the internet search market, a competitor would require a considerable amount of information about user habits so that patterns, etc are established. In addition, integration of services is more attractive to users. In spite of this, Google which was established in 1998 is now the dominant search engine replacing established brands such as Yahoo, AltaVista, etc. Since the market has matured over the years, the threat of new entrants is low. The main revenue from the search engine market is generated through advertisements and Microsoft and Yahoo are the main competitors of Google in this market. Although Google has a huge customer base, partner sites, who are responsible for a significant amount of the business of the company, do not account for more than 5% individually and hence the buyer power is low (Google, 2007). By diversifying the function of information tools, Google has been able to carve a unique place in the market and the threat of substitutes is very low. With respect to Porters generic strategies, it is clear that since most of Googles products are made for the masses the dominant strategy is a cost leadership strategy. Its most popular services including the search engine, mail service, etc are free to use and at the same time, it has been able to integrate them with unique services such as Google maps, earth, YouTube, etc leading to a differentiation strategy. Although the company faces competition in each of the markets, it does not face such competition when the overall portfolio is considered. Therefore Google incorporates a combination of cost leadership and differentiation strategy. Being an IT company, the value chain of Google deviates from the traditional value chain structure. In addition, the nature of services offered by Google also contributes to this variation. The input to the value chain (net users) is used to generate revenue to the company not only through text advertisements but also through the sales generated by the users who visit the partners website which is achieved through the search algorithm of the company. Microsoft is most famous for its operating systems and suite of office applications. With respect to competitors, it is in a similar position as Google since the introduction of an operating system requires expertise and experience in a number of areas. Similarly the buyer power may be considered to be low since no single company accounts for a major share of the revenues. The threat of substitutes is slightly higher although competition exists only between a couple of other companies mainly due to the advent of open source software and operating systems. Similar to the internet search market, that of the operating systems also accompanies a low threat of new entrants. However, with respect to Porters generic strategy, there is a considerable amount of difference. When compared to its competitors, Microsoft does not have a very strong cost advantage and relies therefore on differentiation and focus strategies to some extent. Since user interface is one of the most important features of an OS, Microsoft has been able to produce unique OSs over the years and at the same time focus on providing unique solutions to small businesses, support departments of companies, etc. Hence the strategy of Microsoft is the differentiation strategy to a large extent coupled with the focus strategy. Although, it is also a software company, Microsoft follows the traditional value chain model more closely than Google. The software products produced by the company are very similar to hardware products even to the point of sales and distribution with licensing being a major factor. Hence, it is hard to isolate the IT function in a company, especially in software companies where IT is both the means and the end, while analyzing its business model. Upon establishing the business model of the company based on its various objectives, IT tools and techniques can be applied accordingly. They not only act as a support function but also have an influence on the culture and direction of the company. Conclusion Information systems have emerged as one of the dominant functions of a company comparable to the HR function, etc. Originally intended to make support processes more efficient, IT has emerged as one of the factors that shapes the business model of a company. However, there is still a considerable amount of potential in the system that is yet to be utilized by various companies especially as a pro – active function that helps formulate the objectives of the company. As the importance of factors such as employee motivation, innovation, communication, etc have emerged on the productivity of the organization; IT is being leveraged to positively influence them. Industry leaders have demonstrated that IT can be used in more ways than one. However, in order to benefit smaller organizations that might not have the resources to develop a custom IT strategy, it would be beneficial to establish a general framework that can be employed by these organizations as was done with OHS systems, etc. References BBC. 2011. Egypt protesters use voice tweets. [Available at] [Accessed on 20th Feb 2011]. Data Sheet.2008. Business and IT Strategy Briefing. Microsoft Corporation [Available at] [Accessed on 20th Feb 2011]. Foley, M.J. 2008. Microsoft 2.0: How Microsoft Plans to Stay Relevant in the Post-Gates Era. John Wiley and Sons. USA. Google Inc. 2007. Corporate Filing. Washington D.C.: Securities and Exchange Commission. [Available at] [Accessed on 20th Feb 2011] Google. 2011. Corporate Information – Overview. [Available at] [Accessed on 20th Feb 2011] InfoWorld. 2004. The Google Way. 23 Feb 2004. Issue 8. Joseph, P.T & Mohapatra, S.J. 2009. Management Information Systems In Knowledge Economy. PHI Learning Pvt. Ltd. New Delhi. Kelkar. 2010. Strategic It Management: A Concise Study. PHI Learning Pvt. Ltd. New Delhi. Microsoft. 2011. Our Mission. [Available at] < http://www.microsoft.com/about/en/us/default.aspx> [Accessed on 20th Feb 2011]. Osterwalder, A & Pigneur, Y. 2010. Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. John Wiley and Sons, New Jersey. Veille. 2010. Google, Microsoft, Apple and Amazon. [Available at] [Accessed on 20th Feb 2011]. Read More