Analysis and Evaluation of Google Strategy

by Jason Shaw
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Table of Contents

  • Introduction
  • Theory
  • Analysis and Evaluation of Google Strategy
  • Conclusion
  • References
  • Bibliography
  • Appendix

Introduction

In the world of connectivity, the internet has revolutionised the lives of people as well as corporate organisations. Individuals often revert to using the internet as a source of results. The online shopping platform was also opened up with the growth of e-commerce. Companies like Amazon and eBay are absolutely dependent on the internet for their market models. A Morgan Stanley report analysis pegs the cumulative amount of internet users at around 1.8 billion as of 2009. On a year-on-year basis, the figure is projected to increase by around 13% annually. The study also reports that ‘netizens’ across the globe spend around 18.8 thousand minutes on internet surfing. Geographically, China has the highest number of active internet users, led by the USA and India, with the figures rising geometrically across the years (Morgan Stanley, 2010, p.6). The present thesis would examine Google Inc’s corporate strategy and their effect on the organisation and the market. As the business is the pioneer in the online search sector, the company’s option assumes prominence and is associated with the web search and internet marketing feature.

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Theory

Through utilising the structure of the Generic model suggested by Michael Porter, the study of an organization’s strategic framework may be carried out. The model notes that an organisation should follow four techniques that involve total cost control, specialisation, differentiation and differentiation (refer Annexure 1). A organisation may either select one approach or a mixture of these strategies, based on the company and the business climate. The ultimate cost control approach provides a competitive process in which a company enterprise decreases its operational expenses and utilises cost advantages to deliver goods at cheaper rates than its rivals. Using a differentiation approach, market enterprises have a distinctive product or service proposition that is unmatched by competition in the sector category. For their distinction in the product or service offering, businesses employing such a tactic typically charge a premium and produce their core expertise based on their inventions. The emphasis approach requires approaching a very core and niche market group and offering offerings that aim to address the customer’s very unique needs (Botten, 2007, p.263). In addition to the incorporation of economic competition within the sector, Bowman’s strategic clock (see Annex 2) also contains the above dimensions of Porter’s strategic model (Drews, 2010, p.8). The use of Porter’s generic strategies was chosen in the current study due to the reality that Google has a wide number of business units and the structure of Porter’s suggested generic model will help to better explain Google’s business strategies. The generic tactics of Porter would not only help evaluate the past and current methods, it would also provide an indication of the potential direction of strategic efforts that the company would undertake.

Analysis and Evaluation of Google Strategy

Analysis and Evaluation of Google Strategy

As it is the biggest search engine corporation, Google is one entity that is associated with the Internet. The corporation also has several other business divisions that involve video streaming, online social networking, etc, in addition to the search engine that forms the majority of its business. The company’s primary source of income comes from the revenue created by the marketers sponsoring their goods and services. The business was founded in 1996 in California, USA, by Larry Page and Sergey Bin. Since then, the company has expanded immensely to become one of the world’s top-rated brands. 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 youtube 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 keywords 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 growth of e-commerce and the market model for clicks have further improved the company’s business prospects. Companies such as eBay and Amazon are being more popular among clients. Which has required the need to invest in internet marketing campaigns for business organisations. Google apps such as Ad words and Ad-sense offer promotional options for enterprises seeking to utilise the internet as a public relations source. Which indicates that the product and service products of the business are in accordance with the external environment’s demands. In terms of operations, the broad size of activities and the company’s business model will effectively guarantee the development of economies of scale and reach. 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 the 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 youtube 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. Question marks are often presented regarding the skill 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 strategy 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.
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  • Nankervis, A. R. (2005). Managing services. Cambridge University Press.
Appendix

Annexure 1: Porter’s Generic Model

Google Planning Research and Assessment

(Source: Thomson & Fuller, 2010, p.170)

Annexure 2: Bowman’s Strategic Clock

Google Planning Research and Assessment

(Source:  Angwin, Cummings & Smith, 2006, p.121)

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