Strategic Management Theory: Google - Research Paper Example

? Current strategy of the Google Corporation Google started as a small search company over the websites, today the company has grown to become the number one search engine by adding new features. The history of Google can be traced back to research project by Stanford University graduates that entailed developing a search engine for ranking the search results. In 2004, the company went public by listing 19,605,052 shares at $ 85 per share. Since then, Google has made several acquisitions including YouTube and DoubleClick which was one of the advertising competitors that was acquired at a cost of $ 3.1 billion. Google has also acquired Tonic Systems which adapts Microsoft Power Point files in to PDF documents and also html. Much of the revenues are derived from advertising thus AdSense and AdWords are clearly designed to display advertisements which are relevant to the content included in each web page. Google has utilized an innovative advertising strategy by placing advertisements on the websites which contain the related advertisements. Current strategy of the Google Corporation Introduction The company registered $ 10.6 billion in revenues in the financial year ending 2011 which was a 24 percent increase from the previous year. AdSense sales rose by 20 percent while the number of pay per clicks increased by 39 percent. Google + product registered 130 million users while the earnings before taxes were $ 3. 4 billion. The earnings per share also increased by $ 1.71 to $ 8.75 which was 24 percent growth while the taxation costs reduced by mere 6 percent. The company has high growth potential but needs to diversify revenue streams like the pending acquisition of Motorola at $ 12.5 billion (Hill & Jones, 2012). Current Google business strategy Google success can also be attributed to its superior search technology and e-mail service which contains massive storage space that has attracted many customers from Yahoo and Hotmail. The company which started as just a smart algorithm has developed an unique business model with winning applications such as Google video, Google maps, Gmail, and Google Earth which have challenged previous market leaders such as Yahoo, Excite, and Microsoft. At inception, the mission of Google was to organize the world’s information and make it universally acceptable and useful. The company is no doubt one of the fastest growing technology companies in the world. The company has gained success by providing relevant search results and also related advertisements on each webpage (Hill & Jones, 2012). Google IS supports the business strategic activities through innovations and allowing the customers to download and edit their software. Google has differentiated its search engine by utilizing a patented PageRank system. The company consistently restructures its PageRank algorithm in order to meet the changing customer needs. Google AdWords product is specialized for the advertisers who want to reach out to a certain market segment in an efficient manner. The advertisers have the opportunity of managing volumes of online advertising accounts which an upfront payment. Google emphasizes on creativity of employees whereby employees devote a certain percentage of their time in new and innovative projects. The company has partnered with Open Handset Alliance in the development of Android mobile software which many mobile device firms use to create applications. Google Chrome OS is also another open source software and Web browser which runs in several platforms like Windows, Linux and Mac (Hill & Jones, 2012). Google has also pursued a market niche targeting strategy. The company has segmented its market in to either middle sized businesses and large corporations. The company has diversified in to the mobile device industry by establishing alliances and partnerships with other companies to develop mobile device applications that increase customer traffic to its web pages (Hill & Jones, 2012). Another current generic strategy which Google is currently utilizing is forming strategic alliances and acquisitions. The company acquired YouTube, Tonic Systems and Double Click in the past few years in order to enhance its product portfolio and improve customer experience (Hill & Jones, 2012). Another generic strategy that is currently being utilized by Google is cost leadership strategy. The company pricing model has enabled the company attain cost leadership in the market and increase market share. The company has outsourced most of its chain value activities. The company has attained economies of scale in marketing through development of a wide product portfolio that attracts advertisers, subscribers and websites visitors that use numerous services like Gmail accounts, Google Docs, Google Books, YouTube and Google Maps (Hill & Jones, 2012). Google SWOT analysis SWOT analysis is a business analysis tool which considers the strengths, weaknesses, opportunities and threats which faced a company in the industry. The strengths are the core capabilities which enable a company to exploit opportunities in the market. The threats are the potential disadvantages in the market which can make the company less competitive (Hill & Jones, 2012). Strengths Google is currently the leading online advertising company due to innovative search engine. The company has a modern management that is geared at maintaining market leadership position through offering superior products and services to customers. The company has attained customer loyalty due to wide product portfolio. The company products can be utilized on wide variety of software and hardware platforms. The company has attained a dominant market share in USA and Europe and has a good cash flow for expansion in China (Hill & Jones, 2012). Weaknesses The company depends much on advertising revenue which may not be predictable to changes in economic conditions. The continued concerns of privacy and insistence by foreign governments to censure information may negatively affect the revenues of Google. The purchase of Double Click has raised major eyebrows on privacy issues. Google is currently experiencing increased costs in developing new business channels (Hill & Jones, 2012). Opportunities There are numerous opportunities which Google can exploit in order to expand its market share and profitability. Google should create its own browser in order to increase download time. The company can diversify in to artificial intelligence products due to its superior technology. The company has the potential of developing new hardware solutions for server architecture and upgrades its systems in order to offer real time search results to customers. The company has the opportunity of upgrading Google TV to offer local news portals for small towns. The company has not fully exploited its potential on 3D messaging market and gaming. The company can readdress the privacy issues by forming partnerships with major governments like China (Hill & Jones, 2012). Threats The company is faced with threats of lawsuits emerging from privacy issues, copyrights of music, books and movies available through You Tube. The company is facing stiff competition from social media companies like Google, Yahoo and Microsoft that may form strategic alliances and compete with Google in the online advertising market (Hill & Jones, 2012). Google SWOT analysis Strengths Weaknesses opportunities threats Strong brand and technology Potential lawsuits Partner with Chinese government to address privacy concerns Possible merger of competitors High market share in USA and Europe Stiff completion from Yahoo Upgrade server technology, 3 D messaging and gaming experience Copyright issues in YouTube, Google books and movies Good financial record Customer privacy concerns Diversify to artificial intelligence Social media competition like Face book Google BCG analysis Boston Consulting Group (BCG) matrix can be used to analyze Google business segments. Cash cows Search AdWords and AdSense are the cash cows of Google. Currently, Google attains much of its revenue from advertising segment. With the recent rapid growth in internet usage, the company should upgrade its advertising market segment to enhance customer experience and increase the market share (Hill & Jones, 2012). Question marks? Question marks are the high growth but products which have a low market share. These are essentially new products which have not been discovered by the market. The products may have a high demand but little returns due to low market share. Some products in this category include Google video, Google Earth and Google Maps. Google should invest heavily in marketing and upgrading these products (Hill & Jones, 2012). Stars These are products which have a high market share and high growth potential. Google Star products include Gmail, Android, Google Docs and You Tube which currently have a high growth potential and considerable market share. The market for these products is currently growing. The products need a lot of marketing in order to grow to cash cows (Hill & Jones, 2012). Dogs These are products with low market share and low growth potential. Some products in this category include the Chrome since the search engine market is mature and Google Trader since the e-commerce market has a lot of competitors. The best strategy is to avoid and minimize these products by selling them to other companies (Hill & Jones, 2012). Google BCG chart Cash cows Stars Question marks dogs Ad Words and Ad sense Gmail, Android, You Tube and Google Docs Google Video, Google Maps, Google Web 2.0, and Google Earth Google Trader, and Google Chrome Strategy Enhance market share and customer experience Increase marketing budget and exploit market potential Innovate products and advertise heavily Disinvest by selling to competitors Google SPACE matrix analysis SPACE matrix is a management tool which is useful in determining which strategy the company should select in order to attain competitive edge (Hill & Jones, 2012). The Strategic Position and Action Evaluation matrix mainly deals with strategy formulation. Some strategies which a company can select include aggressive strategy, conservative strategy, defensive or competitive strategy. SPACE matrix is based on four key areas which are grouped in to two groups (Hill & Jones, 2012). The first consists of internal strategic strengths which include financial strengths (FS) and competitive advantage (CA). The second dimension includes external strategic competencies which are environmental sustainability (ES) and industry strength (IS) (Hill & Jones, 2012). The competitive advantage includes customer loyalty, market niche targeting, market share, degree of innovation and product life cycle. The financial strengths include cash flow, turnover, liquidity and return on investment. External strategic factors include economic growth, technology, degree of industry rivalry, barriers of industry entry, inflation and price elasticity. Google has a strong competitive edge in the market and should pursue aggressive strategy. Google should continue integrating and acquiring other related companies through use of its internal strengths. Some strategies would include new product innovation, new market penetration like Chinese market and acquisition of competitors (Hill & Jones, 2012). CA and IS values will be plotted on the X axis with IS values ranging from +1 to +6 while CA values will range from – 1 to – 6. FS and ES strategic factors are plotted on the Y axis with ES values ranging from – 1 to – 6 while FE values range from + 1 to + 6. Google Space Matrix chart FE 6 3 -6 -3 3 6 CA IS -3 ES -6 Google IE analysis The Internal-External (IE) matrix is used in strategic analysis to determine the strategic position of a business. It is based on both internal and external business factors. It is based on both EFE matrix score which is plotted on Y-axis and IFE matrix score which is plotted on the X-axis. On x-axis, an IFE total weighted score of 1.0 to 1.99 is a representative of weak internal position, 2.0 to 2.99 is average while 3.0 to 4.0 is strong internal position. On the y-axis, EFE weighted score of 1.0 to 1.99 will be a weak external position, a score of 2.0 to 2.99 will be average while 3.0 up to 4.0 will represent a strong external position. The IFE matrix score of Google is 2.79 which means the Google is above average in the internal strengths while the EFE score is 2.46 which is slightly less than average in the external market strengths. The IE matrix is represented below in appendix 2. According to the results of IE matrix, Google should hold and maintain the current differentiation strategy and niche market targeting (Hill & Jones, 2012). Google IE matrix chart Google organizational structure Google has a flexible organizational structure with few hierarchies and chains of command. Google organizational structure is dynamic thus facilitates employee innovation. The 70-20-10 rule is the managerial guideline but employees have the freedom to take any risks in their innovations. There is direct communication between the management and subordinates due to less formal channels (Hill & Jones, 2012). The executives work closely with all subordinates in the achievement of organizational mission. The employees have the freedom to set the work objectives. The managers act as leaders in facilitating and empowering all employees. The management exercises executive control through a shared vision (Hill & Jones, 2012). Google should maintain the current organizational structure since it contributes to innovation which is essential for any technology company. However, the management should introduce informal groups in order for the employees to work as a team in new product development (Hill & Jones, 2012). Google business ethics The informal corporate ethics of Google is “Don’t be evil”. The company requires all employees to uphold high ethical standards in their work. The reputation of the company should ensure customers have faith and trust in the company activities. According to the company, the prosperity of the company will depend on trust. Google offers a relaxed work environment where employee can share success stories of the company. The dress code is casual and mangers free interact with subordinates. The organizational culture is spiritual and ethical although employees have risk taking freedom which may compromise business integrity (Hill & Jones, 2012). Google should uphold moral values in their business activity and stop subjecting teenagers to immoral content on the internet. The company should also respect customer confidentiality and privacy of private information. Some core values which should be integrated in the culture include business integrity and respect for diversity and privacy. All advertisements should be clearly labeled “Sponsored Link” in order to maintain business integrity (Hill & Jones, 2012). Conclusion Google is the largest search engine company. The company has attained market success due to differentiation strategy, acquisitions and niche targeting. The company should upload the current business strategy and continue with innovation efforts. The company should ensure business integrity by upholding privacy, ethical and confidential requirements of the customers. References: Hill, C.L & Jones, G.R. (2012). Strategic management theory. Mason. Cengage Learning. Appendix 1- Google SWOT analysis Strengths Weaknesses opportunities threats Strong brand and technology Potential lawsuits Partner with Chinese government to address privacy concerns Possible merger of competitors High market share in USA and Europe Stiff completion from Yahoo Upgrade server technology, 3 D messaging and gaming experience Copyright issues in YouTube, Google books and movies Good financial record Customer privacy concerns Diversify to artificial intelligence Social media competition like Face book Appendix 2- Google BCG matrix Read More