Case 12. Google Inc: ( 2010) The Future of the Internet Search Ingine Company background Name
Google Inc.
Industries served
Internet
Geographic areas served
Worldwide
Headquarters
U.S.
Current CEO
Eric Schmidt and Larry Page
Revenue
$ 27.55 billion (2010)
Net income
$ 7,9 billion (2010)
Employees
20,861 (2010) Apple Inc., Facebook Inc., Microsoft Corporation,
Main Competitors
Samsung Electronics Co., Ltd., International Business Machines Corporation and many others.
Google Inc. is a multinational public corporation invested in Internet search, cloud computing, and advertising technologies. Google hosts and develops a number of Internet based services and products, and generates profit primarily from advertising through its AdWords program. The company was founded by Larry Page and Sergey Brin, students of Stanford University as Ph.D. candidates. Google runs over one million servers in data centers around the world, and processes over one billion search requests and about twenty-four petabytes of user-generated data every day. Google's rapid growth since its incorporation has triggered a chain of products, acquisitions, and partnerships beyond the company's core search engine. The company offers online productivity software, such as its Gmail e-mail software, and social networking tools, including Orkut and, more recently, Google Buzz. Google's products extend to the desktop as well, with applications such as the web browser Google Chrome, the Picasa photo
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organization and editing software, and the Google Talk instant messaging application. Notably, Google leads the development of the Android mobile phone operating system, used on a number of phones such as the Nexus One and Motorola Droid. Alexa lists the main U.S.focused google.com site as the Internet's most visited website, and numerous international google sites (google.co.in, google.co.uk etc.) are in the top hundred, as are several other Google-owned sites such as Youtube, Blogger, and Orkut Google is also BrandZ's most powerful brand in the world. The dominant market position of Google's services has led to criticism of the company over issues including privacy, copyright, and censorship. PRODUCTS OF GOOGLE
Search
Communicate & share
Business solutions
(1) Web Search
(1) Google Docs
(1) Google Adword
(2) Google Chrome
(2) Google Translate
(2) Google AdSense
(3) Google News
(3) Google Talks
(3) Google Analytics
(4) Google Scholar
(4) Google apps (5) Google checkout
Google’s financial status to date A research on Google’s official website revealed that as at end of year 2008, the revenue of Google have increased by 31.3% to $21.796 billion; the operating income have also increased by 30.4% to $6.632 billion; net income appreciated by .6% to $4.227 billion. Total assets of the organisation were up and valued at $31.768 billion; total equity was also valued at $28.239 billion. Since 2001, Google have made strategic acquisitions to consolidate its position as the most popular and visited website. Google acquired a firm called Key Hole Inc. in 2004 and renamed it as Google Earth. It has also acquired You Tube; Double Click; and Grand Central among others to strategically sustain its business concept. It has also entered into partnership with NASA Research Centre to work on research projects that involves a large-scale data management to help improve space technology.
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Strategic Posture Mission Google’s mission was to organize the world’s information and make it universally accessible and useful. Management believed that the most effective, and ultimately the most profitable, way to accomplish their mission was to put the needs of the users first. They found that offering a highquality user experience led to increased traffic and strong word-of-mouth promotion. Dedication to putting users first was reflected in three key commitments: Google will do its best to provide the most relevant and useful search results possible, independent of financial incentives. Its search results would be objective, and the company did not accept payment for search result ranking or inclusion. Google will do its best to provide the most relevant and useful advertising. Advertisements should not be an annoying interruption. If any element on a search result page is influenced by payment to the management, it will make it clear to our users. Google will never stop working to improve the user experience, its search technology, and other important areas of information organization. Management believed that their user focus was the foundation of their success to date. They also believed that this focus was critical for the creation of long-term value. Management stated they did not intend to compromise their user focus for short-term economic gain. Business Level Strategey Google’s strategy is built on a strong foundation of broad differentiation of complementary products. Complimentary products serve to increase the use of the each of the other products and increase brand awareness. Several of these unique provisions include its Docs & Spreadsheets productivity suite, Picasa the image organizing and editing program, Earth and Maps. These products are the key to augmenting the company’s advertising business and expanding the breadth of the brand. Google reinforces its brand image by keeping its name in nearly all its products. From Google’s perspective, the more uses a person has for Google services, the more opportunity there will be to show them ads. BUSINESS STRATEGIES OF THE MAJOR COMPETITORS
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The leading competitors to Google’s work strategy are the technology giants, Yahoo and Microsoft. All of these companies’ motivations are simple -- try to draw the most advertising dollars from their respective internet properties. Each of the competitors offer many services on their websites and strategically do so to try to engage users for as long as possible. CURRENT MARKETING STRATEGY The core strategy for Google success is not other than Viral Marketing. As Google has never used any advertisement for its success, it only exploits the social media networks to reach out to the large number of customers, forwarding power of e-mails & comments of blogspots. Google still continues to enjoy the number one position in the industry due to Vira Marketing Itself PRODUCTION & PURCHASING STRATEGIES Google is tested a new advertising program that pays site owners based on a Cost- Per-Click model. The program, called Cost-Per-Action, was revealed via an invitation e-mail from the Google AdSense team to Web site owners. Google is investing in the new technologies to keep pace with the changing expectations of the users. As Google's great IT advantage is its ability to build high-performance systems that are cost efficient and that scale to massive workloads. Because of that, IT consultant Stephen Arnold argues, Google enjoys huge cost advantages over competitors such as Amazon, eBay, Microsoft, and Yahoo. Corporate Governance Board of Directors Name
Position
Eric Schmidt
Chief executive officer
Sergey Brin
President of Technology
Larry Page
President of Products
L. John Doerr
Board Member
John. L Hennessy
Independent Director
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Ann Mather
Executive Vice President
Paul. S Otelinni
Ceo, board member, President of Intel corporation
K. Ram. Shriram
Board member
Top Management N Nama
Jabatan
Eric Schmidt
Chief executive officer
Sergey Brin
President of Technology
Larry Page
President of Products
Nikesh Arora
President, Global Sales Operations
David. C Drummond
Senior Vice President
BUSINESS MODEL OF GOOGLE Google Inc. has a unique business model that sets it apart from its major competitors. According to Chaffey, Google’s business model is encapsulated in the SEC filing statement, “to organize the world’s information and makes it universally accessible and useful”. Google’s major task is to make information easily accessible to its major stakeholders namely the people who seek for information on the internet. In support, Chaffey insists that Google’s model is highly geared to offer the best and quality service to the users so that their experience will lead to a strong word of mouth promotion and strong traffic growth. According to Dwivedi Google have move further from its initial core business model into different business concepts by expanding into different marketing offerings to its numerous clients such as Picasa; Blogger; Keyhole; Gmail; and Google News etc. Dwivedi (2008) claims that Google is primarily advertising firm, because 90% of its revenue and income comes from online advertisement for various other websites. Google allows any new business 5
to start advertising online without any need to hire the services of professional graphic designers; or advertisement consultants. Google’s business model is to advertise and provide services to all online users. Google has become the most identified and recognized brands outperforming Coca Cola and McDonalds because of it’s vastly search engine. Any online market or firm that attracts a lot of users is a business target for Google. That is why Google have either acquired or have some strategic alliance with firms like You Tube; Amazon; and My Space. External Factor Analysis Summary (EFAS Table) Ixternal Factors (1)
Wei
Ra
Weig
ght
tin
hted
(2)
g
score
(3)
(4)
5
.50
Comments (5)
Opportunity O1 Growing number of
.10
Google has an opportunity to create a
mobile internet users
platform that could be used to better display ads for mobile device users and increase firm’s income
O2Culture of
.15
5
.75
Many unique products are offered by
innovation
Google every year, with so many in development stages. According to Boston Consulting Group (BCG) Google is the 2nd most innovative business in the world.
O3 Worldwide internet .15
4
60
Internet usage growing is too fast in the
growth usage
O4
Growing
world.
into .5
3
.15
Google has already launched a few new
electronics industry
models
6
of
notebooks,
tablets
and
smartphones into the market but these were only introduction models. Google could strengthen its entry into electronic devices industry by introducing more products for more customer groups and cut out its market share.
This
would
result
in
tighter
integration of its software products and diversified income
O5 Google fiber cables
.5
3
,15
Google is currently testing their new fiber cables that can deliver internet content at astonishing 100 times as fast as current providers. It is wise for Google to invest in such infrastructure that virtually would have no competition and would integrate the company vertically
Threat T1 Growing number of .15
4
.60
Google finds it hard to monetize mobile
mobile internet users
internet users as there is less space to place ads on a mobile device and the ads costs less than usual. The growing number of mobile users means fewer searches made on the personal computers and lower income growth or even decline for Google
T2
Unprofitable .15
3
.45
Google has introduced many products and
products
services but few of them earn profits for the business. Most of the services are the burden for Google and only makes losses. If Google continues to introduce new products that add little value and only make losses, the company’s profits will fall. People now prefer to get information from
7
T3 Replacement of web .10
3
60
Facebook, twitter and etc
3
60
Microsoft , yahoo an apple is gaining a
search by social media search
T4 Competition from .10 Microsoft,
Yahoo,
market share in internet searches and is
Apple
smaller
playing an important role against Google.
and
competitors
The company has also introduced Windows 8, the OS aimed for mobile devices, to carve out its market share in mobile OS market. In both fronts, internet search and mobile OS, Microsoft is challenging Google and is taking away the potential revenues.
Total Scores
1.00
4.40
Natural Environment Built the largest solar panel Investment in Wind energy Investment in enhanced geothermal system Operates on 50% less energy Recycle 100% of the electronic waste leaving Google Buy food from local farmers Donations for bike riding Societal Environment POLITICAL/LEGAL FORCES Formal institutions have not significantly affected Google’s operations, although Google has faced pressure from the Department of Justice to relinquish archived search termsm (Buncombe, 2006) and from the Chinese government to censor search results (Liedtke, 2005). Google’s “Don’t be evil” mantra has been put to the test as users ask whether cooperation with governments undermines their privacy and freedoms. In 2008, 8
Google responded to customer concerns when it added a privacy link to its home page. This link took users to a Privacy Center where they could learn about Google’s policies in regard to political and legal issues (Google, 2008). Google has also 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. Copyright Office of suspected infringement (Google, 2008). ECONOMIC FORCES The United States was in a period of recession and stocks were trading at 52-week lows. However, technology companies like Google are relatively isolated because search and consequently internet-based advertisements has become a stable to the world society and economy. In fact, a recent wired magazine article says that Google “looks particularly wellpositioned to weather the downturn. Google's focus on highly targeted, measurable advertising makes it more recession-proof than many other businesses in tech.” (Schiffman, 2008) The crucial need to stay informed and constantly connected keeps such services vibrant despite the parched surroundings. SOCIAL FORCES The World is increasingly becoming more connected due to the means of communication available through the internet. And, for many people, the search giants like Google make the internet navigable. As internet use increases among all age groups and across all cultures, we will become increasingly more dependent on internet search. In addition, most new cell phones are internet capable devices. People will use these devices for driving directions, tolocate restaurants, check sports scores, download music, and even quick research. Google stands to benefit from this with an increased number of search queries. To enable more people to access Google’s services from their mobile devices, the company has released its Android Mobile Phone Platform and Operating System as well as the Google Mobile App that can be downloaded on other platforms such as the Apple iPhone. Google is well positioned in demographics because it has a relatively
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young userbase. This means that it will be less affected as the Baby Boomers age in comparison to other companies that depend on the 50 to 60 year-old demographic group. 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. TECHNOLOGICAL FORCES Technology is obviously always improving and Google has taken specific measures to makesure it does not fall behind. Google can use commodity computer parts (cheap components) knowing they will fail by ensuring that every component always has a duplicate. The components are attached to the computer with Velcro rather than screws which allows forquick swapping and upgrading (May, 2007). Internet search is applicable to most cultures all over the world freeing Google from geographic dependence. In fact, the company now has 20offices 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. As computers become more affordable, many people in economically disadvantaged countries are gaining access to the internet for the first time and Google would like to route them through its search and productivity products, like Gmail, Docs, and Sites. Google’s web applications are now bundled into the operating system on low-cost Linux- based computers (Blankenhorn, 2008).
Internal Factor Analysis Summary (IFAS Table)
10
Internal Factors (1)
Weig Rat
Weigh
ht
ing
ted
(2)
(3)
score
Comments (5)
(4)
Strength S1 Open source products .10
5
To organize the world’s information and make it
.50
and services
universally accessible. Let it be Google maps, calendars, drive, OS or the advices how to rank better in a search index. Google’s products can also be used with any OS or mobile device without a charge. Google openness is the key why Google is the number one in many products and services.
S2 Quality and customer .10 experience
are
5
.50
Everything that Google offers is of premium
the
quality. The products are aimed at solving
primary objects
customer needs and problems by providing excellent customer experience.
S3 Financial situation
.10
5
.50
Google is one of the most profitable companies in the world with earnings nearly $ 27.55 billion revenue $ 7,9 billion net income. Few other companies are so strong financially to compete with Google.
S4 Access to the largest .10
4
.40
Google has an access to 79% of the world
group of internet users
desktop search market users and 89% of the
worldwide
world mobile search market users. Combined, these internet users represent an extremely large market that Google can use to promote and sell its products and services.
S5
Strong
patents .10
5
.50
In 2012, Google added 1,151 patents and was
portfolio
the 21st business worldwide in terms of number
11
of patents. Intellectual property is the key in competing against competitors and Google with Motorola’s
acquisition
gained
a
strong
advantage over its competitors.
Weaknesses W1 Lack of product .20
2
,40
Many products can not success in many
integration
W2
countries
Unprofitable .15
2,5
,37
Google has many products and services that add
products
little value for the business and make only losses, thus decreasing firm’s profits.
W3 Patent litigations
.15
3
0,45
Google is often involved in litigations over the breached patents and other intellectual property. These litigations are costly and time consuming and distract the company from innovating rather than litigating
Total Scores
1.00
3,62
Corporate Structure
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Corporate Culture It’s really the people that make Google the kind of company it is. They hire people who are smart and determined, and we favor ability over experience. Although Googlers share common goals and visions for the company, we hail from all walks of life and speak dozens of languages, reflecting the global audience that we serve. Google strive to maintain the open culture often associated with startups, in which everyone is a hands-on contributor and feels comfortable sharing ideas and opinions. In our weekly all-hands (“TGIF”) meetings—not to mention over email or in the cafe—Googlers ask questions directly to Larry, Sergey and other execs about any number of company issues. Google`s offices and cafes are designed to encourage interactions between Googlers within and across teams, and to spark conversation about work as well as play.
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Strategic Factor Analysis Summary (SFAS) Matrix 2
1
4 duddu
3
5 Strategic (select
5
factors the
I
most
N
important
T
opportunities/ threats
E
from EFAS and the
Weigh
R
most
ted
M
scores
E
important We ratin
strength
& igh
weaknesses
g
from t
IFAS)
S1
Open
6
Duration
source .15
S
D
H
I
L
O
A
O
R
T
N
T
E
G
.75
X
products and services
Comments
To organize the world’s information and make it universally accessible. Let it be Google maps, calendars, drive, OS or the advices how to rank better in a search index
S3 Financial situation
.10
.50
X
X
Google is one of the most profitable companies in the world with earnings nearly $ 27.55 billion revenue $ 7,9 billion net income.
W2
Unprofitable .15
.37
X
products
X
Google has many products and services that add little value for the business and make
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only
losses,
thus
decreasing firm’s profits.
.
W3 Patent litigations
.10
50
X
Google is often involved in litigations over the breached patents and other intellectual property.
O1 Growing number .10 of
mobile
.50
X
X
internet
Google has an opportunity to create a platform that
users
could be used to better display ads for mobile device users and increase firm’s income
O2
Culture
of .10
.50
X
X
innovation
According
to
Boston
Consulting Group (BCG) Google is the 2nd most innovative business in the world.
T2
Unprofitable .15
.40
X
If
products
Google
continues
to
introduce new products that add little value and only make losses, the company’s profits will fall.
T4 Competition from .10
.40
X
X
Microsoft , yahoo an apple
Microsoft,
Yahoo,
is gaining a market share in
Apple
smaller
internet searches and is
and
competitors
playing an important role against Google.
Total scores
1.0
3,92
15
Total Scores
Generating a TOWS Matrix Internal Factors
Strengths (S))
Weakness (W)
S1 Open source products and services
W1 Lack of product
S2 Quality and customer experience integration
(IFAS)
are the primary objects S3 Financial situations
W2
Unprofitable
S4 Access to the largest group of products internet users worldwide S5 Strong patents portfolio
W3
Patent
litigations External
S6 Culture of innovation
Factors
S7Product integration
(EFAS)
Opportunities (O) O1
Growing
number
O+S of
-
Move
into
O+W non-internet -Make new
mobile internet users
markets (i.e. Magazines, TV, programs and
O2 Culture of innovation
Travel) (O3+S6) -
O3
Worldwide internet
industry
Investing to non developed social networking countries by using low cost space (O2+W2)
growth usage O4 Growing into electronics
improve them on
strategy (S7+O1) -
-Invest to increasing
Focus on mobile advertisement worlwide online market (S6+O1)
O5 Google fiber cables
16
systems (O5+W1)
Threats (T) T1
Growing
number
of
-
mobile internet users T2 Unprofitable products T3
T+W
T+S
-
Make competetive mobile google Innovate new product applications (T1+S6)
and service more
Adapt to Asian market (T1=S7)
integrated (T2+W1) Adopt to mobile
Replacement of web
market (T1+W2)
search by social media search
Porter’s generic competitive strategy Low Cost Strategy -
Low operating costs
-
Same technology used
Differentiation Strategy
for all
-
Development of customer loyalty
-
No payment required creating and
aspects of the business
managing online advertising accounts -
Unique formula
-
High customer utilty
-
Strong brand value
-
Using a patented system PageRank
Google currently pursues the generic business level strategy of differentiation by offering many unique products and services to many different kinds of customers. The web search engine is the most popular service offered by Google as it provides user the most reliable way to search. Google web search engine has differentiated itself from its competitors by using a patented system PageRank. PageRank comes across search inquiries by computing a recursive score of web pages based on the weighted sum of the PageRanks of the pages linking to them (Levy, 2010). This means that related web pages can be accessed based on a users search interest instead of based on how many times a search term occur on a webpage which is how competing search engines work.
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Google claims that PageRank is one of its search engine’s main competitive advantages due to the several features. Google`s product that supports its differentiation strategy is Google`s internet search- driven advertising. GoogleAdWords specialized for advertisers who want to reach a qualified audience as efficiently as possible. The ease of creating ad text and manage online advertising accounts with no large upfront payment required is also differentiates. Google product from its competitors as well as the ads appearing across Google`s growing roster of partners. Advertisers can even target customers in specific geographical locations. (Google, Advertise your business on Google 2010) The biggest advantage of Google`s differentiation business strategy is the development of customer loyalty. Google`s web search engine currently holds 66 percent of global internet searches. (Brandt 2009). In 2010. Google announced completion of new web indexing system called Caffeine (Grimes 2010) . Caffeine proides 50% fresher results for web searcher than previous index, which makes Google search engine more competitive. Additionally, Google launched Google Instant, which reduce the time needed for the search, provide predictions and more dynamic results. This option previously was the competitive advantage of Bing, however currently Google time needed for the search is much less than Bing’ (Wanger, 2010). Moreover, instant impacting the price of paid search campaigns and AdWords, which previously was higher than competitors. Currently the pricing range for Google search engine can be viewed as moderate comparing to the competitors (Copeland, 2010), which provide company with extra competitive advantage. At the same time Google was using product development strategy by improving their search ingine technology exponentially., adding host of new features within just five years of time span which help them dominating the world market. Conclusion For over a decade, Google Inc. has been a leader in technological innovations, providing quality products and services to both consumers and other business entities. A review of the corporation’s 2010 Annual Report, as well as analyses of financial data from prior years, reveals that Google has continued to prosper and expand immensely as a result of its 18
successes. Examinations of the company’s current financial position using ratios and comparisons to competitors suggest that Google is currently in a secure financial position in many respects and is likely to maintain this position in the immediate future. The corporation that continues to enhance internet technology everyday can be expected to remain a household name for many years to come. There is evidence to show that Google’s business strategy is indeed realistic, rationale, and viable and not as insane as claimed by Microsoft CEO, Steve Ballmer. The company have shown that they are capable of dominating all the associated businesses and activities on the internet. They have so far being aggressive in the search engine industry and for now there is no formidable challenger. They have also added more value to their brand name with all the strategic acquisitions they embarked upon since 2001. Truly speaking, unless something dramatic occurs in the realm of information technology; there is least probability that Google will collapse or fail. Even if they were to fail, it will create a big catastrophe in the information technology industry market which will be difficult to fulfil by any company. Google’s business strategy has been accepted worldwide by the masses through the patronage of their services. The top management of the company headed by CEO Eric Schmidt needs to be more proactive in their recruitment and retention strategies so that expertise staff do not leave the firm to other arch rivals such as Yahoo, Microsoft, and AOL. Gather (2009) sums up that Microsoft and Yahoo can try everything, but the large majority of people around the world will always "google" things, not "yahoo" or "bing" them, as Google has become a part of the language and culture more than any other internet search engine. And this will always give Google an upper hand in business because its strategy is indeed not insane.
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Question : Google, an online company that provide a riliable internet search ingine, was founded in 1998 and soon replaced Yahoo as the market leader in Internet Search ingines, By 2010 Google was one of the strongest brands in the world. Nevertheless, its grows by acquisition strategy was showing signs of weakness. Its 2006 acquisition of Youtube had thus far not generated significant revenue growth. Groupon, a shopping website, rebuffed Google`s acquisition attempt in 2010. Is it time for a strategic change? In my opinion, Google inc still should keep its strategy. Because, a
review of the
corporation’s 2010 Annual Report, as well as analyses of financial data from prior years, reveals that Google has continued to prosper and expand immensely as a result of its successes. Examinations of the company’s current financial position using ratios and comparisons to competitors suggest that Google is currently in a secure financial position in many respects and is likely to maintain this position in the immediate future. The corporation that continues to enhance internet technology everyday can be expected to remain a household name for many years to come. Hovewer, Google has to make some changes in its current strategy. For example Google should invest to developing countries by using low cost strategy. Now mostly people is using mobile phones and tablets instead of using laptop or computer. So It is recommended for google to make some easy working applications for mobile phones. In addition., Google should bring cheap internet for all over the world. We know that in some countries internet providers are still expensive. If Google invest in this sphere, it will be profitable. Futhermore, There are still some small changes is needed for Google inc such as : -
Move into non-internet markets (i.e. Magazines, TV, Travel)
-
Adapt more to Asean market
-
Make new programs and improve them on social networking space
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