Strategic management has many benefits to an organization. A company’s vision, mission and future goals are set from the strategic process. In addition, strategic management gives managers an advantage in allocating resources efficiently. Moreover, these strategies help give the firm a competitive advantage in the market. Statistics show that, on average, companies using strategic management are more successful.
Google has changed the way people look at and share information. This has made them a leading search engine on the web and a global technology leader. Back in the mid 90’s, Stanford University graduates, worked on developing this unique technology. Since then, Google has grown to become one of the most recognized brands in the world as well as one of the top Internet destinations. As of 2013, Google has 16800 employees working in more than 70 offices in more than 40 countries around the globe. Their headquarters is located in Mountain View, California, USA. Google is the world’s most popular search engine.
It began as a search project in 1996 by Larry Page and Sergey Brin, who were two Ph.D. students at Stanford University. They developed a search engine algorithm that ranked Web pages by content and keywords and by how many other Web pages linked to each page. This strategy produced more useful results than other search engines and led to a rapid increase in Google’s Web search market share. The Google ranking algorithm was later named “PageRank” and was patented in September of 2001. In only a short time, Google became the number one search engine in the world.
2. Business Definition
According to Google’s website, the company’s mission is to “organize the world’s information and make it universally accessible and useful.” While the Web search remains Google’s primary tool for helping users’ access information, the company offers several other services as well. Some of these include:
Image Search – search for images on the Web
Google Groups – online discussion forums
Google Answers – answers to questions based on a bidding system Google Maps – maps and directions
Google Toolbar – a downloadable search tool
Blogger – a free blogging service
Gmail – Web-based e-mail with several gigabytes of storage
AdWords – Advertising services for advertisers
AdSense – Advertising services for Web publishers
Google Inc. has a record of $22.9 billion in advertising revenues in 2009 and is an indisputable leader in Internet search. In October 2013, Google’s shares surged to a record high of more than $1,000 per share. By comparison, it’s initial public offering in August 2004 was at $85 per share. 3. Vision and Mission
Product Development Philosophy
Google divides its product investments three ways, following a formula of “70-20-10”. Seventy percent targets its core search and advertising products, 20 percent focuses on related products, and 10 percent centers on the most experimental products190. These projects would include ones where the company remains unsure if users will adopt the service or if it would make money, but such experiments are critical for the long term. Products can move among the categories as well. For examples, Google News, a service for searching news articles, and Froogle, a product search service, are both beta products that fall into the category of adjacent products The users often see some of products’ logo indicates that the product is “beta” version and this is about Google’s beta policy which Google keeps products and services in beta as long as its engineers expect to continue to make major changes to them.
Google’s betas also are central to its identity. Google itself was in beta for a very substantial number of years. Part of Google’s brand is that we under-promise and we over-deliver, and being in beta is part of that. It’s part of our branding strategy As Google provides more and more services, it can gather an increasing amount of information about users. Therefore, users are also worried that Google tracks all of searches, and it might then easily create a personal profile of a user and sell the results to the highest bidder. Indeed, when a user visits a Google website or does a search in Google, Google servers record information about that visit, including the IP address of the visitor, the URLs, and the date and time of request The Classification of Products and Services
Based on available public information, Google has various product classifications for its products. For example, in 2005 annual report, Google described its products and services by categories of “Google.com”, “Web and content search”, “Communication and collaboration”, “Downloadable applications”, “Mobile”, “Labs”, “Google AdWords”, “Google AdSense”, and “Google Enterprise”.
Yet on its website, categories are “Search”, “Explore and innovate”, “Communicate, show & share”, “Go mobile”, and “Make your computer work better”. In short, in order to allow the readers of this research to easily understand , this research adapts the latter classification. Also, Google does not provide a direct-meaning link to a central page that includes all of its products, instead of the direct word “products” Google uses “more” and “About Google” Accordingly, users know about Google as a web search tool, but do not easily to realize there are abundant products and services that can be applied. For example, users want to check out the newest launch, a Web-based spreadsheet, Google Spreadsheets, users certainly cannot find it anywhere through links on the index page of the Google’s website, then if they type-in the keywords to search and try several links which may provide a trial-out opportunities finally. Yet it already costs time and makes an impression.
5. Source of Competitive Advantage
Google owe its success to the following aspects. They have helped them maintain a sustainable competitive advantage, over their competitors viz Yahoo!, Microsoft, eBay, Amazon.
Google operates in a very competitive environment. With its plenty of products and services, Google faces competition from different industries. Google’s sustained competitive advantage is evident in its superior infrastructure. In the 3rd quarter of 2013, it was revealed that the Internet giant spent $2.3 billion on infrastructure. This is a stark increase of nearly 50% as compared to a year ago.
Powerful Search Engine
Google’s search engine received critical acclaim with PC Magazine naming it in its list of “Top 100 Web Sites and Search Engines for 1998”. Between the year-end 1998 till early 1999, the number of queries increased from 10,000 to 500,000 queries daily. Since then, the search engine has been refined and enhanced with newer features. In 2010, there were 516 improvements to search such as Instant Search that provides dynamic results. It’s the best search engine available that edges all its competitors, the biggest competitors being Microsoft’s Bing and Yahoo Search. Google handles more than 3 billion searches daily, which is a market share of about 67% in 2012. By comparison, Bing and Yahoo search holds a market share of about 16% and 13% respectively in 2012.
Extensive Portfolio of Products & Services
Google’s constant pursuit to expand its portfolio of services and tools is also evidence of its sustained competitive advantage. Google has also acquired over 100 companies to expand its services, notably the popular video sharing web site, YouTube in October 2006 and Motorola Mobility in August 2011. YouTube serves more than 800 million unique visitors a month and holds a leading market share of more than 40% in online video. This figure is 20 times greater than it’s nearest competitor, Youku in China. Google also encourages its staff to exercise their creativity and innovation, that can contribute to the formation of new products and ideas.
Resource Based View (RBV) of Google
Based on Resource Based View (RBV), an organization is able to gain sustained competitive advantage if its resources fulfil the following criteria of being valuable, rare, imperfectly imitable and non-substitutable. This is commonly known by the acronym “VRIN”. Valuable Resources – Google is best known for its search engine. The search engine has been Google’s most valuable resource, driving advertisements which accounts for a 96% of Google’s $37.9 billion revenue. Employees are also one of Google’s valuable resources. The lively and creative company culture has been important in the high-efficient operations, resulting in the creation of the many innovative services and tools.
Rare Resources – Google has a large portfolio of patented technology and the numbers of patents held have been increased with the acquisition of Motorola Mobility in 2013. It is reported that the acquisition has provided Google with an extra 24,000 patents. In-Imitable – Google’s scale of its infrastructure cannot be easily imitated. Substitutability – With its clean, minimalist user interface, Google Search offers an unparalleled way of retrieving information quickly that is difficult to substitute. Using RBV, it can be determined that Google sustained competitive advantage is achieved through the resources that it has. These resources are in-imitable and difficult to substitute.
6. Environment Analysis
6.1 Internal Environment
Its relatively short life as a company, Google quickly became a role model for its culture of innovation. Software writers and engineers were attracted to Google not just for its famous perks such as free meals and laundry facilities but also for a climate in which they were encouraged to let their imaginations roam free, dreaming up ideas just might be the next big thing on the Internet. During a long-running business boom, that culture served Google well. The best engineers were thrilled to work for a company that let them spend one-fifth of their time on new projects of their own choosing. But when the economy slowed and the stock market nosedived, Google’s managers had to cope with a new reality in which money was tight. Google could no longer afford its free-spending culture.
Managers had to figure out how to maintain the best of the culture while innovating at a more prudent pace. Google’s modified culture now values setting priorities. New ideas are still welcome if they are focused on core businesses of search, advertising, and Web-based software applications. Managers are reassigning employees away from teams working on unrelated projects and using them to staff teams working on profitable ideas in the core areas. Employees who have an idea that can improve the computer user’s experience are asked to consider also what impact that idea might have on Google’s bottom line. Similarly, hiring has slowed, because managers must not only justify the talent of a candidate but also target hiring to particular business needs.
The challenge will be to keep employees as excited about targeted innovation as they have been about freewheeling innovation. Google’s IPO prospectus announced dual-class equity, giving 10 votes per share to holders of Class B stock versus one vote per Class A share. Assuming that the founders retained their Class B shares, Google’s top management trio would own roughly one-third of the shares but control over 80% of the votes. This prevented hostile takeovers and quick decision making.
6.2 External Environment
Google’s competitors are constantly innovating in web search, online advertising, wireless mobile devices, and web-based products and services. To counter that, in 2011, the company spent $6.8 billion in R&D efforts.
Google.com reaches over 195 million people every month. According to a Gallup study conducted in 2011, sixty percent of Americans visit Google in a given week. The demographics, based on this study, skews towards young, affluent and college educated Americans, with more than half of those under 50. Since the rise in smartphones, one can only expect the number of users to rise.
Google’s primary cultural influence has been in terms of making information accessible. It has empowered its users to ask a question, usually in the form of keyword-based searches and receive a various possible answers. With products like Google Books and Google Translate, information that would normally not be available to each individual has become more accessible. Google is a leader of society that is more and more global because its mission is to organize the world’s information and make it universally accessible and useful to everyone. Socio-cultural factors include traditions, values, societal trends, and society expectation of businesses. These society expectations can be grouped into: population demographic, income distribution, lifestyle change and level of education.
Google is not limited to a certain demographic population, it is a global company that offers global users with global services and global knowledge for free with only one condition of being connected to the Internet. Therefore there is no restriction on any specific demographic, culture or specific income distribution. This gives Google a very strong advantage in the market. Its tools are offered to everyone and hence anyone, anywhere in the world can advertise on Google and increase their profits.
Google was not the first to devise search or email or advertisements. But its market leadership was due to the fact that it did all of those things better than others. Google pioneered cloud computing for the general public Google docs and was in fact years ahead of any other company in that area. With Android and Chrome OS, Google has branched out to operating systems and browser. In analyzing the technological factors affecting Google, the key aspects to consider are the level of basic infrastructure, rate of technological change, new discoveries and development, government spending on research, access to newest technology, technology incentives and technology legislations. Google’s IT infrastructure is a closely guarded secret because it is one of the company’s competitive advantages. Google has up to 450,000 servers spreads over at least 25 locations and it uses a customized version of Linux operating systems to give them control and flexibility in finding new discoveries.
The success of Google is mainly due to its innovative concepts and technologies such as Pagerank in their search engine, Adwords as advertising system, AdSense program, Gmail, Google Spreadsheets & Docs, Google Map, Google Froogle, Google Analytics, Google Desktop, Google Earth, Google Gear, Google Page creator, Google groups, Google talk, Picasa and more. In order to remain the best in the field of technology, Google has bought a great number of start-up companies (131) that allows it to benefit from the dynamism and creativity that these companies bring. These companies range in variety of fields such as security, advertising, video, file sharing, shopping, mobile technology and many more.
Google faces various types of political and legal pressures, most notable among them being the ability to address privacy concerns while balancing requests from government institutions. Google also faces risk of fluctuations in foreign currency exchange rates as well as increased regulatory scrutiny especially with the EU.
Government stability is one of the major aspects in Google’s strategy. If the market is stable, governments help businesses and so these businesses advertise more on Google, hence, benefitting Google. In addition, most of the governments do not have identified laws for online information sharing, thus, giving Google the opportunity to manipulate laws. However, China has created a barrier for Google by adding regulations that forbid Google from operating on their terms. For example, Chinese Government launched a surveillance system called Golden Shield for monitoring civilian use of Internet. On a positive note, most of the political factors affect Google negligibly. Some of these factors are taxation polices, employment laws and environment protection laws.
Gross domestic products (GDP) have been on the rise since a very long time. They are increasing annually at the average rate of 3.20% reaching a high level of 17.20% at times. Countries like South Africa, India, China and United Kingdom have had increases in their GDP each year since the 70’s and this is a positive factor on Google. With the stable and continued growth of those countries, Google’s internal and external investments will always be high in numbers. Users search more; hence more advertisements are put on Google’s search engines. The amount of users around those counters can impact on Google positively and lead them to establish better services and more products for their users, strengthening Google economically. Interest rate can have a positive or negative impact on any organization.
These impacts are decided depending on a company’s dealings. Google is a company that relies on investments, this means when interest rates increase gradually in a country, Google benefits. In UK, the rate average is set to about 8.2%, in USA it stands at 6.1%, in South Africa at 13.3%, in India at 6.6% and in China at 6.4%. These numbers mean that companies in that region of the world will be able to take out loans and invest or support their company. The more companies have money, the more they will be willing to spend on advertisements; hence doing that through Google. This increases opportunities for Google in these markets. Inflation rate is a problem for the customers or buyers.
However, companies benefit from it and it increases their overall income. In the past few years, USA, UK, India, China and South Africa have all recorded an average increase in inflation rate of 2.5-9.5% annually. This means that raw materials in these countries are becoming more expensive every year. This causes the companies to increase the prices of their products and getting more cash out of it. This causes Google’s advertisements to increase as well as the number of clicks for each ad. The result is more profits for Google from these countries.
7. SWOT Analysis
8. Universal Growth Path- The 4 E’s of Google strategy
The company’s new products and streamlining of old ones reveals an underlying logic, discipline, and structure. 1. Earn – 95% of Google’s revenue comes from advertising. Other than its minimalist ads, Google’s true nature is cleverly hidden from users. It’s really a B2B network that lets a “closed loop” of business customers target Google users through ads. Google’s ad service pages waste no time distinguishing between users and customers clear. Adwords support is loaded with phone numbers to call. You’d have to hijack a truck full of Google Glasses to get someone from Google to help you recover a Gmail password. Google has never stopped trying to diversify its revenue streams by charging for storage, business apps, and even YouTube channels. But none have made more than a 5% dent so far.
2. Entice & Defend – Google’s geeky magic comes from its non-stop inventiveness. Every Google service is a exciting and addictive mix of free (or cheap) utilities that make our lives easier or more productive. These utilities must accomplish one main goal – to create the biggest possible market to deliver ads. That means increasing the number of users, frequency of visits, or duration of stay on a Google property.
So each Google property must accomplish at least one of three things: Deliver ads to as many users as possible (like Gmail or Search) Bolster the “earn” by enhancing products, typically through data collection to improve ad targeting. Products like Google+ and Maps soak up user preferences, behaviors, and relationships. As this “big data” engine grows, the potential for new revenue streams and apocalyptic privacy fears multiplies. I’ll explore these in future articles. Defend Google and its properties against competitors that might steal usagetime. Facebook, Spotify, Netflix, iPhone and Twitter have forced Android, Google+, and Play into existence to defend Google’s its share of internet time. Google accomplishes all this through a combination of organic products, non-stop upgrades, and acquisitions. Each one must create deep roots (email, contacts, smartphone) and painful switching costs. The intended effect of all Google services is a lot like a casino.
Google wants to envelop you in its world until you can’t find the exits. Once inside, you’ll tell the dealer your life story as he takes your money… 3. Expand the Pie – This is probably the least understood part of Google’s strategy. Google knows its hard to find new customers and compete with every new service. So it does something I spent a lot of time promoting at MasterCard and American Express – expand the pie. In my case, it meant, promoting conversion from cash and checks to digital transactions, regardless of platform. With a bigger pie, everyone’s slice gets bigger.
In Google’s case, that means expanding leisure time. That’s right, Google wants to make time. Google knows if you’re online and near a screen or smart device, they’ll be making money. The two best examples of this are Glass and self-driving cars. With Glass, Google wants to sit on your face – literally. Their glasses can deliver digital stimulation at times previously wasted pretending to care about the people around you. Smart cars liberate you from your fear of crushing skunks and navigating New Jersey. Now you can research stocks, listen to Google music, and work on Google Docs.
4. Experiment – Google has a culture that breeds experimentation. The experiments range from Google X labs, which incubates top-secret R&D projects, to all employees who are encouraged to use 20% of their time to work on anything they like.
At present, Google is the most dominant search engine across the globe having a market share of about 65%. Maintaining this competitive advantage in the dynamic search engine requires Google to develop innovative competitive strategies against its rival firms. The first recommended strategy for Google to maintain its competitive advantage in the search engine industry is to strive always to be a technological leader through constant innovation. The search engine industry is technology savvy and key players strive to invent products that can constantly meet the changing needs of users (Sherman 2005). However, if Google can manage to position itself as a technological leader rather than a technological follower, Google will be capacitated to stay ahead of its competitors in terms of innovation.
Google should continue maintaining its competitive advantage is through product diversification. Diversifying its product portfolio in the search engine industry will be instrumental in ensuring that Google reaches a wider audience. For instance, Google offers numerous search engine tools for various applications such as Google Maps, Google Earth, GoogleMaps, Google toolbar among others. With a diversified product portfolio, Google will continue will continue to expand its customer base. A case in point is that Google is the only search engine company offering search applications for specific data types such as images, books, maps and docs. In order for Google to capitalize on its strategic initiatives, the company should be responsive to change. It is apparent that Google operates in an extremely dynamic and turbulent industry and therefore, being responsive to changes taking place in the industry is a critical success factor for Google’s business strategies to be effective.
For instance, the smartphone sector is typified by price wars and cloud-computing sector is typified by constant innovations by key competitors such as Microsoft. This implies that Google should be responsive to these changes in the industry. Google has been acquiring small venture capital corporations since 2001. For example, Google acquired Keyhole Inc, GrandCentral, and Aardvark. Apart from acquisitions, Google has collaborated with several corporations to enhance the delivery of their services. For instance, Google collaborated with DoubleClick to enhance its Google analytics service. All in all, Google has won countless awards, has maximized on profits, improved services, introduced new developments, eliminated most of the competition and dealt with their weaknesses. It is safe to say that Google’s business strategy is sophisticated but has come out with fruitful results. Although the world is not perfect, Google has more strengths and opportunities than threats and weaknesses. This is even proven on the Internet as someone has joked about Google by saying: “Only thing Google has failed to do, so far, is fail.”