Google Inc
Google Inc
Executive Summary
Google is an ecommerce business that provides a variety of services. However, the company has specialized in the search engine market. Google’s mission is to organize information in order to make it useful and easily accessible to users. Google strategies involve focusing on the users and promoting innovativeness. The company has dedicated resource in providing innovative solutions that are directed towards enhancing the experiences of users.
The industry in which Google operates is characterized by high rivalry from companies such as Microsoft, yahoo and Facebook. The strength of buyers is also high because it is easy from buyers to switch to other users. Threat of new entrant and the power of suppliers, are least significant. Growth in the number of internet users and availability of diversification options, are some of the opportunities for Google. Google utilizes the ads-funded revenue model. This model entails offering services to users for free in order to attract large numbers of users, which will consequently attract paying advertisers. This model has been successful in helping the company reach its financial goals.
This paper recommends that in order for Google to deal with competition it must enhance its innovativeness by investing in the organization culture and R&D. Google should also use new ventures are channel for diversifying the company revenues. Google has to expand into the emerging market in order to foster growth within the company. The paper suggests the use of a multi domestic while expanding into the international market.
Mission, Vision and Strategies
Google mission is; “to organize the world’s information and make it universally accessible and useful” (Google, 2012). The company focuses on making the process of locating information on the internet easier for the internet users. The organization has used technology to make the process of searching for information fast and smart.
One of Google’s key strategies is to foster a climate innovation (Google, 2012). Google competitive lies in its people. The company focuses of hiring individuals with great abilities and talent. Google has also emphasized on promoting diversity within it workforce. Having employees from a variety of backgrounds has enabled the organization to relate with the global audience. Google has created an organization structure that enable employees to share ideas and make direct inquiries from the company’s top management. The premises are designed to promote interact of employees across all departments.
Another strategy used by Google is to focusing on the users (Google, 2012). Google believe that if it focuses on the users, all other things will follow. The company has invested massive resources in ensuring that Google’s users get quality experiences. The company directs its efforts into serving the needs of the users rather that cultivating the company’s internal goals. The company goal is to develop innovative solutions that will make information easily accessible to users.
External Environment
Five Forces Model
$1i. Rivalry
Google faces competition from a number of organizations. Yahoo and Bing are Google’s direct competitors. These companies offer similar search engine services as Google (Fabos, 2010). However, there are numerous other companies that compete with Google’s for buyers. These companies include; Facebook, twitter, Amazon and Apple (Fabos, 2010). All these companies provide services that seek to connect merchants to customers and, therefore, provide significant competition to Google. Operating in a highly competitive environment has several implications for Google. One implication is that the company has to find advantages that will position the firm in the market better than the competitors.
$1ii. New Entrants
Google also faces the threat of new entrants. New technological platforms are being established to compete with Google for advertisers (Fabos, 2010). However, factors such as; high competition within the industry; high capital requirements; high operating costs and high exist cost act as barriers to new entrants. This has diminished the threat presented by new entrants.
$1iii. Buyers
Google buyers comprises of companies that pay for advertisement services and firms that buy search applications for their websites (Fabos, 2010). Google’s buyers are relatively powerful. This is because of low cost involved when buyers switch from one service provider to another. Google has to consider the prices of its services in order to avoid losing it buyers to competing firms.
$1iv. Suppliers
Google has a variety of suppliers. These include; power suppliers, suppliers of electronic inputs, services providers and many others (Fabos, 2010). Google suppliers are small and fragmented and, therefore, do not have a significant impact on Google’s purchasing prices.
$1v. Substitutes
Google’s main commercial product is advertising. The company provides a platform that connects business will millions of Google users (Fabos, 2010). However, there are other channels of advertisements that business may opt in place of Google. These include TV and radio advertisement, print advertisements, bill boards, text messages and many others. Google must ensures that its services present greater value that these substitutes.
Key Success Factors
Key success factors refer to elements that are essential for business to thrive within the ecommerce platform (Viehland, 2000). One of the critical success factors in ecommerce is the ability to create a customer centric strategy. Ecommerce business should shift the power to consumers. The business should ensure that information is able to flow in both directions when it comes to the producer- consumer relationship. Consumers should be in a position to raise their views concerning how they would like their products. In addition, ecommerce business should also allow consumers interact with other consumers. There should be flow of information among the consumers.
Change and innovation are also critical success factors in the ecommerce business (Viehland, 2000). The technological environment is extremely dynamic. Thus, businesses that operate within this environment must find a consistent process of enhancing value to customers. This requires a lot of innovation.
External Opportunities
The growth of internet users presents significant opportunities to Google. In 2010, 24.7% of the global population consisted of regular internet users (Severino & Messina, 2010). This is a 362.3% increase from the year 2000. As computer and internet technology become easily accessible, the number of internet users will continue to grow. Growth in the number of internet users provides Google with an opportunity to grow in terms of the numbers of users. The organization can use this opportunity to increase its coverage of the global market. The developing countries offer the greatest opportunity for growth (Severinon & Messina, 2010). Thus, Google needs to focus its attention to this market.
There is also an opportunity for Google to venture into other lines of products. Google has already established operations within the mobile market after acquiring the handset marker, Nokia (Fabos, 2010). The company has also venture into the social networking field by launching it online networking site, Google+. Google has also ventured into the computer applications and hardware field through products such as; Google documents, cloud computing and many other. Google can diverse its revenue sources by developing these lines of product.
Threats
The biggest threat to Google’s operations is competition. The ecommerce field has become highly competitive. Google is facing competition from established players such as; Microsoft, Amazon, Facebook, Apple and many others (Fabos, 2010). Small players have also entered the field with the aim of competing for the online users. Competitive industries are usually characterized by high costs of business as companies must invest in marketing activities. Google is likely to experience increased cost in the future as competition continues to rise.
Security is also a significant threat to Google. Ecommerce businesses experience a challenge in terms of protecting their consumers’ information from abuse (Markoff, 2010). Google has dedicated its resources to ensuring accessibility, openness and speed where use of information is concerned. However, Google has not been able to guarantee its users complete protection of privacy. The company has been a victim of cyber crime on several occasions. In 2010, intruders were able to get into Google’s system and steal passwords belonging to all of the Google users (Markoff, 2010). The controversy involving Google’s privacy is likely to have an impact on Google’s business in the future. There have been proposals for the enactment of the anti-privacy legislation within the US government. This legislation will have a significant impact on Google’s operations.
Internal Environment
$1i. Google’s Profit Formula
Advertisement makes up the largest portion of Google’s revenues. This is because Google utilizes the Ad-funded revenue model (Schneider, 2011). This is whereby an organization provides its services to the users for free with the aim of attracting a large number of users. Attracting a large number of surfers makes the ecommerce platform attractive to advertisers. Thus, the advertisers pay the ecommerce organization in order to advertise their merchandise using the company’s platform. Ad-funded model are applicable where there is a possibility to attract a large number of users, and where the marginal cost of providing services to an additional user is negligible. Google makes use of the ad-funded model in its search engine, email, social networking services. However, there are other services that provide additional revenues to Google.
Google also obtains a portion of its revenue from the sale of computer applications. These applications include; Google docs, Google Chrome operating system, Google gears, Google earth, Google desktop reviews, android, Google TV, and many others. Google has also ventured into the production of computer hardware. Google hardware products include; Motorola mobility, Nexus Smartphone, and Chromebook. The sale of these software and hardware applications also forms a significant part of Google’s revenues. There are numerous lines of product that Google’s provide but which do not provide revenue to the company. These lines of products include; Google chrome browser, Picasa, Google toolbar, Google calendar, Google news, and many others. However, Google continues to provide these products because it needs to keep its services attractive to users thus attracting a large number of users. A large number of users will attract advertisers translating to higher
$1ii. Success of Google’s Profit Formula
Google profits formula has been successful in terms of enabling the company to reach its financial goals. In 2011, the company recorded revenues worth $37.9 billion and net income worth $9.7 billion (Market Watch, 2012). The increase marked a 14.5% increase in net income from the 2010 financial year. An analysis of Google net income indicates an increasing trend for the last five years (Market Watch, 2012). In 2012, CNN Money (2012) ranked Google at position 18 in the list of the world’s most profitable companies.
Google has also recorded growth in terms of book and market value. In 2011, the company’s assets were recorded at $72.5 billion up from the 2010 figure of 57.9 billion. This marks an increase of 25% in terms of asset value. The company has also grown significantly in terms of market value since the year 2008. This has been encouraged by improved performance of the company’s stock. The market value for Google as at December 2012 was $236 billion.
Recommendation
- Addressing Competition
Google has excelled in the search engine market. The company records the highest number of users than any other online platform. However, the company is facing stiff competition from rivals such as; Microsoft Bing, yahoo search and Baidu. In order to deal with competition, Google needs to enhance its competitive. The company has excelled due to its ability to develop innovative solutions to customers’ needs. Google’s organization culture and people will play a significant role in enabling Google to overcome competition. The company needs to encourage a culture of creativity and innovativeness. Google also need to invest in research and development in order to enhance competitiveness. Investing in research and development will enable Google to become proactive in identify new needs within the market and formulating solutions for addressing these needs.
Capitalize on other Initiative
Though Google has specialized in the search engine market, the company has established other ventures. These ventures are such as cloud computing and mobile phones. Google can use these ventures to increase the organization’s revenues. Google’s cloud computing technology can compete with Microsoft products and reduce the dominance of these products in the market. Venturing into the mobile phones market will also add into the organization’s revenues. This will lead to an enhanced financial position thus enabling the company to compete effectively.
$1iii. International Expansion
Google must consider international expansion in order to grow. Emerging market present an immense opportunity for growth. These markets are characterized by a hasty growth in the population of internet users (Severino & Messina, 2010). China, Brazil, and African, are excellent examples of emerging market. These markets are underserved, and thus present big opportunities to Google. In order to enhance response by local, Google need to adopt a multi domestic expansion strategy. This is whereby the company customizes its services in order to make them increasingly useful to the local people (Ireland, Hoskisson & Hitt, 2011). Google has tried to achieve this by translate Google into the local language in which the company operates. Google should seek to decentralize its operations while venturing into the emerging market. This is because decentralization will enable the company to capture the needs of the local people in an effective manner than when relying on a centralized structure.
References
CNNMoney (2012).Top Companies: Most Profitable. December 18, 2012. http://money.cnn.com/magazines/fortune/fortune500/2012/performers/companies/profits/
Fabos B. (2010). Search Engine Anatomy. December 18, 2012. http://www.efiko.org/material/Search%20Engine%20Anatomy
Google (2012). Company Overview. http://www.google.co.us/about/company/
Ireland D. Hoskisson R. & Hitt M. (2011). Understanding Business Strategy. USA. Cengage Learning
Market Watch (2012). Annual Financials for Google Inc. December 18, 2012. http://www.marketwatch.com/investing/stock/goog/financials
Markoff J. (2010). Cyberattack on Google Said to Hit Password System. December 18, 2012. http://www.nytimes.com/2010/04/20/technology/20google.html?_r=0
Schneider G. (2011). Electronic Commerce. USA. Cengage Learning
Severino S. & Messina R. (2010). Analysis of Similarities and Differences between Online and Face to Face Learning. World Journal on Educational Technology. 2 (2): 124- 141
Viehland F. (2000). The Critical Success Factor for Developing an E-Business Strategy. Journal of Information, Mathematics and Science. 1: 1-7
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