Google

An internate search company.

A case analysis for “Strategic Management(MBA)”

Submitted by: Group (E)

Current Situation:

Current performance

i. strategic Position

Founded in 1998, Google has become the world's most admired Internet search engine and given it an
outsize influence over the online world; however, Google's ambition far exceeds the confines of Internet
search and advertising. The company sees its mission as the organization of the world's information, making
it universally accessible and useful.

Google has been testing out new tricks, including display ads and mobile phones, with its Android mobile
operating system and acquisition of AdMob, the mobile advertising company. But none of these new
businesses are generating significant revenue for the search giant yet.

Google's boundless function, as well as many opponents say in a high-handed approach to copyrights, has
put it at odds with a growing list of companies in industries ranging from each & every corner of different
aspects of communications to e-commerce. And the company's eagerness to collect vast amounts of data
about its users and their online habits has prompted increasing fears that Google could become a threat to
consumer privacy.

The company continues to dominate in its core business-search advertising, which accounts for more than 90
percent of its revenue. But Google faces fierce competition from social media sites like "facebook" and
"twitter". Facebook wants to turn scores of sites across the Internet into satellites where users will be
able to interact with their Facebook friends. What's troubling for Google about Facebook’s growth is that the
information exchanged over the social network is walled off from search engines — and increasingly
lucrative territory for ads.

Google also faces new competition from Microsoft's Bing. Bing still handles a small slice of Web searches
in the United States, 12.7 percent, compared with Google's 62.6 percent, meanwhile, Bing's share has been
growing, as has Yahoo's, while Google's has been shrinking.

In November 2010, the company was promoting Google TV, hoping that other companies will build it into
their TV sets, Blu-ray disc players and set-top boxes. The point is to bring Web videos to the homeowner's
television set.

ii Vision & Mission: Google’s mission is to organize the world‘s information and make it universally
accessible and useful.

1. Corporate Governance :

Board of Directors

• Eric Schmidt, Google Inc.

• Sergey Brin, Google Inc.
• Larry Page, Google Inc.
• L. John Doerr, Kleiner Perkins Caufield & Byers
• John L. Hennessy, Stanford University, USA.
• Ann Mather
• Paul S. Otellini, Intel
• K. Ram Shriram, Sherpalo Ventures.
• Shirley M. Tilghman, Princeton University, USA.
 Top management

• Eric Schmidt, Chairman of the Board and Chief Executive Officer.

• Sergey Brin, Co-Founder and President, Technology.
• Larry Page, Co-Founder and President, Products.
• Nikesh Arora, President, Global Sales Operations and Business Development.
• Shona L. Brown, Senior Vice President, Business Operations.
• David C. Drummond, Senior Vice President, Corporate Development and Chief Legal Officer.
• Alan Eustace, Senior Vice President, Engineering and Research.
• Patrick Pichette, Senior Vice President and Chief Financial Officer.
• Jonathan Rosenberg, Senior Vice President, Product Management.

2. Societal Environment :

Societal Environment analysis known as “PEST” analysis is an important tool in which to

measure this vision and alignment with the various forces of change affecting the world and the
industry. The mindset behind evaluating these forces is to avoid actions that may be doomed to
fail due to political, economic, social or even technological reasons. Using this mindset, we will
explore Google’s current position and influences that could have lasting impact on Google’s
future position in the search as well as marketing industries as they relate to the global economy.

Political Factors:

Google had become a hot political debate when it had made announcements of its agreement to
acquire YouTube® on October 24thof 2006. In March 2008, the company completed the
acquisition of DoubleClick, which offers online advertisement serving and management
technology to advertisers, Web publishers and
advertisement agencies. However, the closing of Google to purge UK personal
this deal remains to be decided as many data gotten from Wi-Fi. Google
companies -Yahoo, AT&T, Microsoft, etc) as will delete the personal data
well as regulators debate the acquisition and it’s collected by the company's
Street View cars in Britain
far reaching impacts on the industry.

* In this year British Agency Said on November 3rd Google Violated Privacy Law in this year.

All this issues are serious political threat to a company that has grown to a market capitalization
of $162 billion by worrying more about serving customers than catering to the whims of
bureaucrats and politicians.

Another potential issue which surrounds Google is that of privacy. In the US online protection of
personal data is actually ahead of some other regions of the world. India, who has become a
major player in the information-technology outsourcing, has different laws regarding the use of
personal identifiable information; a topic that concerns many in the private as well as corporate
sector. Although in the corporate environment the concern is that it is becoming more and more
an issue of contracts rather than politics on how information is to be handled, the issue of privacy
is still a major concern. In the US, privacy laws (4th Amendment of US Constitution as well as
various Statutory Laws) are targeted towards Government actions rather than corporate entities,
thus corporations are largely unregulated. Conversely, the EU has a wide range of privacy
protection laws which limit what information corporate businesses may collect as well as how
they use this information. It is important to realize that as social issues regarding the use of
personal information evolve, legal issues regarding privacy and aggregation of data will also
continue to evolve. What is acceptable in one country is not necessarily acceptable in another and
Google as the ‘Gateway to information’ must continually be aware of this slippery slope. As laws
develop regarding information that is available on its servers housed in the US as well as other
nations, Google will need to be careful of its data aggregation practices and how the implications
of law and acceptable methods of advertising may impact their business model.

Economic Issues:

G
oogle is in a win-win situation with economic factors as it continues to provide focused
advertising campaigns to businesses at drastically lower costs than traditional TV, radio
or newspaper/magazine advertisements. Due to the opportunities to leverage targeted
advertising combined with lower cost solutions, they have been instrumental in creating a niche
market in Internet advertising that’s why to solve that problem, facebook© is launching a next-
generation messaging service that will allow its 500
million users to communicate with people who are Google CEO as well as CFO argued
st
outside this social network. So, it will raise the stakes on last Sunday (21 November,
in Facebook's battle with Google and its Gmail 2010) that Social Networking is
`Absolutely' a Part of Strategy.
service. However, this niche market does have many
direct competitors like Yahoo! and MSN who are also
looking to gain market share in this particular advertising sector. Both Yahoo! and MSN are
having a difficult time competing directly with Google’s Adsense and Adwords marketing tools,
mostly in part to Google’s popularity. Although Yahoo’s system actually costs the advertiser
less, “Google does get more traffic and it converts better than Yahoo, and in the end, isn't that
what we're all looking for? Thus, Google should be the winning choice for anyone that is looking
to convert clickers into buyers. Because after all, who doesn't want to increase their
sales……….???

Socio-Cultural Issues:

As highlighted earlier, privacy concerns of the general public continue to evolve and depend
greatly on public consensus. Many advocacy groups continually stress the importance of privacy
and confidentiality of personal information. For that reason, in
this year US regulators scold The Federal Trade Commission Google on 29th October. This
is scolding Google Inc. without
fact is further stressed by the many news stories of
punishing the Internet search
compromised corporate leader for collecting e-mails, systems and the loss of
personal identifiable passwords and other personal information. Thus public
awareness of this issue has information transmitted over increased. However, even
unsecured wireless network.
with the vast majority stating that privacy is a concern there
is continual posting of personal information, pictures and various other private matters to the
 Internet in the form of blogs, websites, etc. Therefore, as much as it is stated as a growing
concern, the general public’s actions do not follow suit with their overall statement of privacy
concerns. Consequently, many e-businesses bank on consumer inertia to continue being
profitable.

Technological Environment:

Google has been diversifying its offerings to explore other markets outside of search and advertising.
Google completed the acquisition of Postini, Inc., a provider of information security and
compliance solutions. This ideal of diversification is even built into the Google business model which
supports employee exploration; one day a week is devoted to development in areas that are either
outside of, or an extension Google Inc. looking to hire more than 2,000 people around the
to, Google’s core globe, bumping up its workforce as it expands into new markets
competency. However, as and battles for talent with faster-growing rivals.//
we have seen in the case Google, which controls about two-thirds of the global Internet
of the eBay and Skype search market, is looking for new opportunities to grow by
merger, the question branching out into a variety of markets, including Android
Google needs to ask is Smartphone software, online display advertising and Web-based
what kinds of expansions productivity software.
are aligned synergistically with the core business and which are more tangential to its core
competencies?

Google has addressed this concern in extending its current offerings into various markets. These
markets are outside of its core search and advertising, but have leveraged the technological
competencies in its new offerings.

An example of this Finally, Google Voice for i Phones //

leverage that yielded a The solution would have been the Google Voice app. On
competitive advantage Android phones, the app works great. It replaces the built-in dialing
was seen in a desktop program—with a smarter one that sends the proper Caller ID
search feature where information and has a million cool features. But when Google
submitted an iPhone version of the app, Apple rejected it (or, rather,
“Microsoft included a
just let it sit in app-store limbo).
new desktop search feature in Vista, but Google beat it to the punch with its freely-downloadable
Google Desktop Search.”1 Ballmer of Microsoft stated that the two biggest competitive threats to his
organization: open source All kinds of people, including me, tried to figure out what
software and advertising Apple’s problem was. Plenty of accusations were hurled, many
supported applications in linked to greed and a desire to protect the revenues of AT&T
which he directly stated (Google Voice makes cheap international calls and lets you send
and receive text messages for free).
the symbol of the second
problem was Google.

Ballmer said Google's search prowess isn't the company's biggest accomplishment. "Getting search
right was actually not the hardest part of the issue. They got ad funding -- they really figured that out.
And now the rest of us are going to have to learn that game." 2 In addition to Ballmer’s observations

1
http://knowledge.wharton.upenn.edu/article.cfm?articleid=1651
2
http://knowledge.wharton.upenn.edu/article.cfm?articleid=1651
 are Google’s online offerings. Subscription based software has and continues to be a driving force in
the success of many companies like salesforce.com. Thus, it is this balance that Google must
continually monitor as it expands into areas like mobile markets3.

3. Task Environment :

Porters Six Forces Model:

Force Impact on Google

Supplier • Google is globally dominant.

bargaining • Competition Elimination and Substitution: Microsoft embedding their search tool
Power into their Explorer browser.
• Threat of forward integration – Google search might not perform as well with
new software releases from Microsoft and Apple.
Barriers to • Yahoo & Microsoft have radically improved their search engines and can
New Entry on pass/deploy their search tool through their products.
• There is no such thing as the perfect search engine – thus a better search engine
invented by another will critically affect Google – may have even severely as
40% of the company revenue comes from advertising which is driven through the
search engine.
• Online marketing and the rules governing what is good and bad practices
(e.g. cloaking) are still evolving – this could affect Google’s current technology
and philosophy.
• Switching costs are mostly related to hardware (storage of indices and speed of
information return) and accuracy related.
Competitiv • Rules/ethic has not been defined so the environment is easily exploited or
e rivalry manipulated.
• Currently there are only a few rivals (Microsoft, Yahoo) so the degree of rivalry
is more oriented to an oligarchy – this could bring attention of UN or individual
countries as a restriction of trade in the future.
• Switching costs for most of the search tools are nothing.
• Brand identity is important (if not paramount – Google has made the language as
a noun and a verb)
• Improving on the search engine and its features is a significant task for a large
number of highly skilled IT technologists.
Threat of • High.
Substitute • Switching costs are negligible
s • Buyer inclination to substitute is primarily driven by speed and accuracy
of the result and also by the overt pushing of ads that are included with the
search results and pages.
• Users of the search tool are demanding more services and complexity or
sophistication with the search tool to remain ‘loyal’ to its use.
• Ad Revenue is directly related to use - - even the loss of a small
percentage of use can mean significant revenue loss to Google or the other
search generating companies.
Buyer • Use of the search rankings is a significant leverage point by the owners of search
bargaining tools in bargaining.

3
http://news.zdnet.co.uk/communications/0,1000000085,39284914,00.htm
 Power • Users of the search tool are becoming more sophisticated and demanding other
services also for free.
• Substitutes are available – and for the same price: free
• No real reviews are undertaken on what features the web community would like
to see so each search company employs researches to straw poll/guess directions.
• Two client groups – web community wanting to search/locate items and the
organizations selling products – have to satisfy both client groups equally.
• Threat of backward integration.
Shareholde
r power

4. Internal Environment :

This is an analysis, which is one way to organize the internal factors into the generally accepted categories
of strengths and weaknesses and as well as to analyze how well a particular company’s management is
responding to these specific factors in light of the perceived importance of these factors to the company.

Here company’s strengths and weakness are found and identify which strength or weakness carries more
weight. According to these findings the company can understand their position and take necessary steps.

In IFAS the VRIO framework (Value, Rareness, Immutability and Organization) is used to assess the
importance of each of the factors that might be considered strengths.

Value

Google’s search products bring value to their customers because they provide relevant websites promptly.
Google has achieved the top market share in the search industry precisely because their product is rare.
Google excels at directing a large quantity of visitors to websites using its Ad Sense program. Many
business are dependent upon the traffic Ad Sense brings to their website to generate income. For the
advertisers this increased traffic translates into increased sales and directly helps the bottom line.

Infrequency

Google’s search offerings are rare because of the relevancy of the results. Microsoft and Yahoo, Google’s
main competitors, simply do not provide links that are as useful as Google’s.

Google’s website features a minimalist design, which is uncommon. Most websites feature some sort of
banner advertising and are littered with hundreds of words. The Google home page can only contain 28
words as a policy of the company’s founders. This keeps the clutter to a minimum, which is a stark
contrast to Yahoo and Microsoft’s search home pages. Google faithfully adheres to the provision in the
 mission statement, which recognizes that “advertisements should not be an annoying interruption”. This
rare service is testimony to their charge to never “compromise…user focus for short-term economic gain”.

Immutability

Google’s results are not easily imitated because of the large infrastructure requirements to serve the
relevant pages quickly. Google has servers all over the world all synced up and all running on a very large
quantity of RAM, fast computer memory. With each search Google refines its results so that the search
engine gets “smarter” and caters to people’s individual preferences. Since Google has the largest market
share, their search engine can effectively learn more quickly than competitors’ products. Google’s
operations exhibit path dependency because it takes time to collect the data to provide results and even
more time to analyze both the content and users reactions to the results. Without going through a process
of refinement over a significant period of time, a competitor could not replicate Google’s search results.
Google has used its analytics tools to help understand the social complexity of the meaning of keywords to
specific groups of users.

Organization

There are different ways of organizing and accessing information, and right now searching the Internet is
arguably the best for retrieving information efficiently. Google does not confine itself to the search product
it is most well known for and has special applications for browsing different kinds of information such as
its Shopping, Books, and Music applications.

Google consistently delivers relevant results at blazing speeds with minimal hassle. These three
competitive advantages set its core search functionality apart from the competitors whose web portals
simply can’t keep up. Google should be able to sustain its competitive advantages through the foreseeable
future, but it will need to continue to innovate new ways to diversify its advertising business so the
company is not dependent on solely the Ad Words service.

5. External environment :

The external environment of an organization comprises of the moves and the strategies adopted by its
competitors. It also takes into account the changes in the general economy and other socio-cultural
factors.

Changes in the general economy and other socio-cultural factors

Global:

Internet search is applicable to most cultures all over the world freeing Google from geographic
dependence. In fact, the company now has offices in the U.S. and international locations in over 30
countries working on research, sales, and marketing (Google, 2008). Google offers a personalized search
engine for more than 115 countries, and as language support improves, the company is likely to gain
market share.

Demographics:
Google is well positioned in demographics because it has a relatively young user base. This means that it
will be less affected as the Baby Boomers age in comparison to other companies that depends on the 50 to
60 year-old demographic groups. Internet search is also not a gender-specific issue, and would not be hurt
by changes in the ratio of female to males. The company will however benefit when some traditional and
paternalistic societies begin using the Internet more frequently.

Technology:

Technology is obviously always improving and Google has taken specific measures to make sure it does
not fall behind.

Economic:

The United States is currently in a period of recession and stocks are trading at 52-week lows. However,
technology companies like Google are relatively isolated because search and consequently internet-based
advertisements has become a staple to the world society and economy. Goggle’s focus on highly targeted,
measurable advertising makes it more recession-proof than many other businesses in tech.

Political and Legal:

Formal institutions have not significantly affected Goggle’s operations. Google has faced concern on
copyright issues because the company stores copies of third party web pages and images on their servers.
They have responded to this criticism by releasing a copyright information page. The page provides the
relevant information regarding digital information and provides links to notify both Google and the U.S.

Opportunities, Threats, Industry Competition, and Competitor Analysis

Opportunities
*Advertising partnership with Yahoo
*Experimental partnerships with radio and print media
*Acquisitions of businesses (You Tube, Double-Click)
*Other partnerships (AOL Time Warner, NASA, News. Corp.)
*Increase in online advertising
* Online video increasing
* Google engineers are encouraged to spend 20% of their work time (one day per week) on projects that
interest them.

Threats
1. Facebook
2.Twitter
2. Click fraud
3.Copyright disputes stemming from Google Book Search.
 Potential New Entrants:

The barriers to entry in the Internet search market are high. The current competitors have thousands of
servers deployed in locations all over the world and have accumulated many years worth of data about
user habits. A new entrant would need to provide better search results at very fast speeds to compete in
this highly competitive market. With that in mind, it must be recognized that when Google was founded.
Yahoo, Excite, and AltaVista dominated the search market and Google has since eclipsed them all .The
market now, however, is more mature with a necessary path dependency to gather data on both the
content of WebPages and the search history of users. Therefore, the threat of new entrants in the Internet
search market is relatively low.

Current Competitors:

Google’s main competitors, Yahoo, and Microsoft (operating under their respective brands – MSN and
Live Search), posted revenues of $7.0 billion and $51.1 billion respectively (Google, 2007). There is a
dizzying amount of money made in this industry. Google’s large market share enables to improve the
quality of search results and targeted ads more quickly than their competitors. This creates a sort of self-
perpetuating draw for customers as the search results constantly improve. The competitive rivalry is
strong and ongoing in this industry because large amounts of advertising dollars flow to the website that
has captured the largest volume of searches.

6. SFAS ( strategic factors Analysis summary) :

Strategic factor analysis (SFAS) summarizes an organization’s strategic factors by combining the External
and Internal factors. When it is completed then the company revised the weights that reflect the priority of
each factor as a determinant of the company’s success.

Internal Environment

The following internal traits portray a

resource-based view of Google's core strengths:

1. Strong brand name.

2. Broad web site appeal
3. Innovative search technology
4. "The advertisers' return on investment (ad cost per sale or cost per conversion) from advertising
campaigns on web sites or Google Network members' web sites compared to other forms of advertising"

Google's weaknesses are:

1.Growing pains (i.e. finding new key employees and infrastructure)

2.Dependence on advertising
3.Google Member Network's lack of popularity
4.Weak position in China
5.Nearly all revenue from one product line (search)
6.Lack of experience
 External Environment

Google's opportunities are:

1. Unmapped countries expanding services

2. New advertisement format and tracking mechanisms
3. Size of current customer base and market share leverage,
advertising agreements

Google's threats are:

1. Competition from Microsoft and Yahoo. Greater resources, bundled

services, and ability to attract and retain users through portals
2. Increasing intellectual property.
3. Increasing competition reducing operating margins
4. Shrinking advertising budgets by companies
5. Increasing international competition
6. New laws and regulations domestic and international.

Strategic Analysis

Google is a single-product-line business search engine technology. In order to compete with other media
titans such as Microsoft and Yahoo, Google has sought to employ the power of differentiation to create a
competitive advantage. In the case of Google, by applying concentric diversification focus on the core
product of search services the company has also been able to benefit from a competitive advantage in
faster response times, greater scalability and lower costs. Google’s future will be more relevant and useful
to end-users and maintain its competitive edge over other search providers by retaining and growing its
user base.

7. Recommendation :

Recommendation

a. Implementation

• Have R&D of browsers, databases and servers continue along with evaluation of purchasing or
partnering with companies that offer what is needed.

• Hire more high tech people to fulfill many R&D ideas & design demographic search sites.

• Re-evaluate goals on- how far does Google want to go on the privacy front especially now that the
merger with DoubleClick is raising serious questions about competition and regulations?

• Emphasize the usage of data containing information with permission and have open discussion on
how to protect people as well as their own business.

• Create and promote an image of an ethically and socially responsible company that believes in
respecting people's privacy.

• Implement enhanced operational and management systems that will provide the real time results
clients.

• Continued focus on enhanced advertising targeting

 • Continue expansion of free Wi-Fi in key cities.

• Develop software for large data gathering systems or purchase companies that do this. Determine
which areas to pursue…Genealogy software, scientific research, weather, space.

• Expand multimedia product offerings

• Create hardware for imbedded search systems.

b. Evaluation:

• Customer satisfaction of Google's search methods slow down in terms of blocking the speed of
browsers, databases and efficient hardware for servers. With the entire technology experts at Google and
changes in the physical market of the internet changing from phones to Wi-Fi and data storage systems and
access methods changing, a coordinated modernization effort may yield tremendous advancements in speed,
throughput and security.

• The market for phones, TV, computers, handheld gaming, and music is continuing to merge into one
Product. Research and development in these areas of technology is needed to be the market leaders with
continued online advertising technology usage and implementation.
• Advocacy systems and procedures for real time statistics and feedback on internet ads to their
customers will give their customers confidence and allow them to augment their marketing campaign
constantly.

• Decision to make free Wi-Fi and broadband internet usage available will stimulate increased desire
for products that can use this in multi-media such as music, conferencing and video.

• As hardware systems continue to advance and develop many software algorithms will continue to
become hardware components. Google should stay on top of these developments as well as usage of this
type of hardware in system rockers and satellite

c. Control

• Examine the long term costs of the browser, databases and server technologies along with evaluation
of what it financially will bring to the bottom line. Keep in mind many databases and browsers are
offered free.

• Determine costs to implement demographic search sites and study the long term maturity issues
involved when the children users are older and use to the Google way of doing things. Also for older
users, determine the increased development costs verses income for things such as visually enhanced
sites. Sound and voice could become easily integrated into this type of site.

• Stay abreast with the rules and regulations regarding privacy and all legal technology issues. Take a
moral high ground as to how they will define and handle these issues and apply that to all customers
and users world-wide no matter what the laws are. If they can help define these usage issues at the
national and international level it will enable them to base their business on a known rather than an
unknown.
 • Analyze market strategy for all the evolving technology areas.

• Google should do follow up compliance checks of all privacy standards and policies on customers'
sites and offer public disclosure to those sites that don't adhere.

• Determine, costs, roadblocks and benefits in cities determined important for free Wi-Fi.

• Determine costs verses revenues earned for software systems outside of core business Follow the
multimedia market and look at product offerings.

• Follow costs and needs for imbedded hardware systems.

Reference:

1) http://www.3news.co.nz/Google-to-purge-UK-personal-data-gotten-from-Wi-
Fi/tabid/412/articleID/187249/Default.aspx

2) http://news.yahoo.com/topics/google

3) http://pogue.blogs.nytimes.com/2010/11/16/finally-google-voice-for-iphones/?
ref=google_inc