Example Of Google Strategy In 2012 Case Study
Google is an online search engine based in California but with branches worldwide. The company was founded and developed by Sergey Brin and Larry Page, two computer graduates from Stanford University in 1996. The company was initially named Backrub but later changed to Google, a name that was adopted from the word googol meaning a numerical number one which is followed by a hundred zeros. This name was influenced by the founders’ core mission of making infinite information available to the internet users. The success story of Google has evolved from a small search engine company operating in a garage to the current global leader in cloud computing and search engine. Thus, the efforts put by the informal but hardworking employees have helped the Google achieve the company’s mission is ‘to organize all the information in the world and make it easily accessible to all types of people. The current strategy that involves digging as much information as possible and making it available to the users has enabled the company develop in terms of financial returns and popularity, as it is currently the leading global search engines highly visited monthly.
What is Google’s corporate strategy?
Google Inc is guided with the corporate strategy to become the world’s leading online company in provision of information and internet advertising. The idea of making a wide variety of information available to the users is stated in the company’s mission statement. The company provides a variety of information which includes maps, books, images, music, videos, and other web developing stories as well as advertisements from leading companies who have subscribed for the ad option. To achieve this, Google has invested heavily in buying most exclusive features since its formation to ensure that a wide range of information provision services is readily available to the user. Some of the steps that the company took to achieve this objective include the buying of a mapping company, Keyhole that has enhanced Google maps and locations. The company also added additional features such as the 3D feature and also inclusion of translation option where users all over the world can access information in fifty one different languages.
Maximization of the revenue is also part of the company’s corporate strategy. Google has maximized the net profits from the licensing fees attained from giving corporate access to intranet and website services. Google AdWords is the major source of revenue for the company as companies pay a certain amount as advertising fee. It targets the users to view specific ads based on the number of times they browse in a day, thus assisting the company to create traffic that is essential to get paid by the advertising company, mostly based on pay-per-click. AdSence is also another major source of revenue for the company. This strategy has helped Google to improve their financial returns from 220,000 dollars in 1999 to 37.905 billion dollars in 2011.
What is your assessment of the long-term attractiveness of the industries represented in Google Company's business portfolio?
The long term attractiveness of the industry is high as Google product portfolio is rich and dynamic. This means that what the company offers to the consumers is more and creates a wide range as demanded by the growing information technology field. Google’s product diversification has seen the introduction of attractive features and services such as Google maps, translate, books, news among others which has helped the company have a competitive advantage over the other providers of search services. Revenue at the company has recorded massive growth a fact which is attributed to the offering of different market related services. As the rise of the company was as a result of differentiation and offering more in the market, the future is still based on the same especially given that the internet field is quiet dynamic. The entry of the company into the software development and later the hardware provision with its pioneer nexus brand is a strategy that positioned it well in the industry. With own hardware and software, challenges limiting growth are reduced and more is offered to the customers who are able to link all the services offered by the company with the use of their devices.
A part from Google as a company ranked as the most popular internet site in the world in terms of visitation, other business units and products also fared well in the competitive field. Google chrome has developed a huge market share reducing the dominance of Microsoft’s internet explorer and Mozilla Firefox which enjoyed a huge share of 67.7 % and 23% respectively in 2008. In June 2012, the browser had overtaken Firefox and was tied at 32 % with Internet Explorer. The company’s search engine which is the main focus of the company generated 36.5 billion dollars in advertising revenue in the year 2012 with revenue earned as licensing fee in the same year being 1.4 billion dollars. Units such as You Tube which got up to a slow start since its acquisition recovered to make profits in 2011.
What is your assessment of the competitive strength of Google’s different business units?
Google has succeeded in developing a competitive and strong product portfolio aided by the different attractive business units which are aimed at giving the company a competitive advantage over other players in the market such as yahoo, apple and Microsoft. From inception, the founders of the company set a clear mission and guiding principles that have positioned Google differently from the competitors. While other companies design products aimed at maximizing profits and offer value to the shareholders, Google works from the other end which is meeting the customers’ needs. This has seen the company refrain from bombarding the users of its products with irrelevant ads. The company has also developed a close link and cordial relationship with its clients setting it aside from the competitors.
Google’s products are designed to meet every day’s need of an internet user. Although it was initially started as a company offering search services, it has developed and included many features that attract more traffic. The main features and services as well as the major acquisition it has made in the last ten years since the initial public offer are geared towards stamping its authority in the online ad and Software business. Google’s major strategies have turned out to be a success and this is evident in the way they have been able to rattle major players in the in information technology. As stated in the by John Gamble in the Google strategy in 2012, the company’s initial public offer in 2004 presented a wakeup call to competitors and proved to them that Google was a sleeping giant that had potential for growth. Microsoft’s Bill Gates noticed the features of Google’s products and saw not only a potential competitor but also a big threat to his business. Similarly, on noticing the potential product line of the company, Yahoo which had contracted Google in the search business made a swift move to replace it with its own search engine. This shows that Google posed a great threat and its strategies and product development presented a competitive advantage.
Google has invested in advanced research and product development which is brought about by investment in skilled and dedicated human capital. One of the company’s corporate philosophy 10 principles emphasizes on the way Google attributes its success to the members of staff. The seriousness that it handles its employees with has enabled them to develop innovative and competitive products. The employees are encouraged to share their ideas which are then screened to determine their viability and developed after intense value addition. The company’s impressive general performance can be reflected to its individual products or business units. It remains the most visited internet site in the world with over nine hundred people visiting the site every month. It has also over the years maintained a high rank as the top search engine with 66.7 percent in 2012 edging its closest rivals Microsoft and yahoo. The company’s management attributes this to the fact that it was able to differentiate itself from the competitors who included many features that were not attractive to the users. It has also maintained a good relationship with the advertisers and the websites that are the main source of information sort by the customers.
Product diversification has also been successful with the other units recording improved performance as well. Each move by the company attracts competition and counter strategies but Google always employs smart moves which has seen it succeed despite the difficult environment created by its main competitors. For instance, Microsoft and Mozilla Firefox tried to limit accessibility of information which enabled Google to direct personalized ads to internet users by hiding the profiles of the people using the browsers. Google’s strategy to counter this move was introducing their browser, the Google chrome which has recorded growth since its inception. In 2008, 67% of internet users were using Microsoft’s Internet Explorer with the Google chrome having only one percent and by June 2012 Internet Explorer’s share had been reduced to only 32 percent with Google Chrome tied on the same and Mozilla Firefox having 25 percent. The success experienced by Google is partly attributed to the company’s attractive features and products but has also resulted from the ability to counter challenges and unfavorable environment presented by the competitors.
What does a 9-cell industry attractiveness/business strength matrix displaying Google’s business units look like?
The main sources of revenues for Google include licensing, advertising and currently the sales of Nexus Smartphone that were redeveloped after Google bought Motorola. With the core objective of the company being attracting as many internet users as possible to access information through Google search, their business idea of advertisement through pay per click has become the main source of revenue. This is whereby according to the financial results released in 2011 financial year, advertising only generated 36.7 billion dollars while licensing generated 1.4 billion dollars for the company. The sale of Smartphone has faced stiff competition from market leaders such as Apple’s iPhone, thus becoming the least source of revenue for the company. The introduction of android operating system to all other Smartphone producing companies gave Google a better chance of extending advertising strategies to mobile phones through the android features such as Google search and Google play. This indicates that that main business units that generate revenue for Google are advertising, search licensing and smart phones. The table below presents a 9-cell analysis on the attractiveness and strength of these business units and indication of which unit should be given more attention. The y-axis represents the industry attractiveness while the x-axis is the competitive strength of the business unit/segment.
Strong Average Weak
Business competitive strength
Does Google’s portfolio exhibit good strategic fit? What value chain match-ups do you see? What opportunities for skills transfer, cost sharing, or brand sharing do you see?
Google product development and general portfolio exhibits one of the best strategic fit any company could have. The founders of the company seem to have a clear vision and laid down strategies from the time of inception because most of the investments made in the last ten years have so far turned into a success. The mission statement of the company states clearly what the company seeks to achieve and one of its ten principles of corporate philosophy states that it is better to do one thing and do it best. This is depicted in Google’s strategic developments that are geared towards making it the ultimate search engine in the world. Although it has diversified its product and service offering, its principle aim has remained what the founders wanted it to be. Therefore, all the acquisitions and developments by the company are linked to improving its search capability as well as boost online marketing through increase of traffic to their site. The acquisition of You Tube, Key Hole and Double Click as well as the additional of features such as Google books, Translate, travel information among other boosted revenue earned by the company. Double click in particular enabled the company to diversify the internet advertisement through the use of banners and the investment paid off with the company recording over three billion dollars from advertising on the site.
The strategy used by the company ensures that it does not invest so much on new product lines that would not only call for recruitment and training of new employees but will be costly and stagnate before achieving return on investment. The investments made are just additions to the existing products and are designed in a way that the existing employees are able to handle all operations at the firm.
What is your assessment of Google’s financial and operating performance in fiscal years 2010-2011?
Google had made a tremendous improvement in terms of financial returns in the year 2011 as compare to 2010. From the company’s profit and loss account, the total revenues generated in 2011 were 37.905 billion as compared to 29.321 billion dollars generated in 2010 indicating a 22 percent increase in the total revenues. In accessing the revenue contribution per unit, advertising was the main source of revenue in both years whereby 36.531 billion dollars were generated in 2011 as compared to 2010’s 23.236 billion dollars. Licensing revenues also increased in 2011 from 1.085 to 1.374 billion dollars. The current ratio in 2011 is 5.9 while in 2010 the current ratio was 4.2. These indicate a positive improvement in short-term health and the ability to pay its bills. These results indicate that Google achieved a tremendous improvement in the financial performance.
What actions do you recommend that Google’s management take to improve the company and increase shareholder value? Your recommended actions must be supported with a convincing, analysis based argument.
As Google seeks to increase revenue and grow its business portfolio in a bid to become the number on search engine and provider of information to its customers as stated in their mission statement, it is also important to ensure value to its investors and shareholders. Despite the company attributing its growth to diversification of its products and services through development of competitive features and acquisition of brands that offer value chain match ups and good strategic fit, the management needs to refocus its strategy to allow further growth of the already acquired brands. The internet world is quiet competitive which makes Google have the push to be on the forefront in embracing the changes. However, allowing the already acquired brands such as You Tube and double click to achieve their full potential will see the company benefit from increased revenue without incurring much cost.
The first few years after acquisition of You Tube saw the struggle of what was thought to be ultimate provider of revenue through ads links on the video sharing site. This however, changed in 2012 when the site eventually started earning revenue. The company should also start filtering ads posted on their site to ensure illegal dealings are avoided as was the case when the company lost over half a billion dollars in court settlement after it was discovered that unlicensed Canadian pharmaceutical companies were advertising on Google. To avoid such cases the management should ensure they stick to the corporate principles of the company.
Developing a close link with the clients who have propelled Google to its current position should be maintained. It is understood that in its initial stages the company benefited a lot from recommendations and word of mouth marketing by satisfied customers. The management should ensure this loyalty is maintained by sticking to the customers’ needs first approach. The company should also fully develop the computer hardware unit to achieve full production and target emerging markets such as Africa where internet usage has recorded and upward trend.
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