With the objective of “To organize the world’s information and make it universally accessible and useful” (Google, 2012), Google expands its business to strive towards becoming the leader of internet-related provider, in particular in Internet research and advertising technology. The company has expanded nationally and globally, providing its search service in a large number of different languages and countries through its own unique strategy.
The report starts with a discussion about the market Google is operating in, how Google smartly manages its internationalisation and globalization strategy according to its own market position in different stage.
Followed by the comment on whether its diversification strategy appropriate across the whole international market. The report then will evaluate this strategy mainly focus on the aspect of the potential to damage its own brand, especially based on the case of their failure expansion in the Chinese market.
Then the report will look at impact for the market as Google fully enter the Android market, Google’s business model in terms of reating revenue will be described and processed by the critique of whether the model would be sustainable in the long term.
The report finally will define the market Google operate in and how it enters into android market will be explained in detail. Additionally, there are some recommendations provided in terms of its sustainable development through the whole report. ? Defining the market which Google Inc’ operates in? The market in which Google operates in is collaborative and interactive; Google has acquired and merged with different companies, which have given it a competitive edge over other firms.
It recently acquired Motorola and this brought a lot of speculation as to whether it could handle the hardware business without any prior experience or necessary skills According to the case (Tangirala and Debapratim, 2012), Google had no skills in the supply chain, monitoring physical stock or achieving efficiencies. However such acquisitions have benefited Google because it has been able to have more reach as it can now target mobile users with the new hardware business. Other companies it has collaborated with are HTC and T-Mobile on implementing the Android platform. Competition
The environment is also quite competitive. Having to face giants like Apple, Microsoft and Facebook means that Google has to be highly adaptable and maintain their market share by being more aggressive in their marketing strategies. (Tangirala and Debapratim, 2012), Google says that their acquisition of Motorola will be able to intensify the competition. Motorola’s purchase will fully bring Google into the mobile market as they will now have hardware for their operating system Android, Also Motorola will strengthen the patenting of Google as they have more than 17,000 patents in their name.
Apple and other mobile providers might feel threatened by this move. (Rusli and Miller, 2011) Diversification More to this, Google has not focused on its core business of being a search engine rather it is diversifying and looking for new opportunities for growth. Google has expanded into other segments such as maps and Google scholar, in the communications section there is Gmail and an enterprise segment where cloud computing and Google docs are involved, social networking among others. This means that Google is not only able to reach a wider audience but that it is able to spread risks.
Diversification means that in case one area of their business fails they have an alternative to rely on. (Tangirala and Debapratim, 2012) Innovation Google’s survival could be attributed to its highly innovative structure. It has a culture of being innovative and an atmosphere that encourages employees to bring new ideas and creativity. However, Google must keep on innovating in order to outdo their competitors and to keep at pace with the changes in the highly volatile global environment (Tangirala and Debapratim, 2012) Infrastructure
Together with all the companies that Google has acquired, they also have data centers and servers which it uses to create its web presence and to store information. These infrastructures increase reliability and make information access faster. Google Inc’ had a total of 90,000 servers by 2010 and they invested heavily on technology this gives Google a good platform. Pg. 4 Some of it is virtual for example cloud computing. (Tangirala and Debapratim, 2012) ? What’s internationalization and globalization strategy? In which way Google is going?
Internationalization strategy is a development strategy that enterprises want to offer their products and services outside their home country, it usually reflected in the form of greater existence in different locations around the world. That is why internationalization also refers as international expansion (Stephen and Karin, 2002). Internationalization strategy is a development planning during the process of internationalized operation and management, which is designed to give the assistance of improving company’s competitiveness and environment adaptability.
Corporations have adopted this strategy view overseas market separately. They treat the markets differently due to various markets’ features. Globalization strategy refers to the procedures of global integration, which incorporate the international operations and markets into a united strategic entity (Stephen and Karin, 2002). Corporations that use this strategy are generally powerful multinational enterprises, they attempt to monopolize markets in their own industries. However, if using this strategy inappropriately, it is more likely to have a detrimental effect on the whole company.
The merit of globalization strategy is that companies can concentrate their efforts in building competitive advantages by leveraging capabilities and coordinating activities through boundaries. Which like a double-edged sword, the demerit is that it is hard to coordinate between each subsidiary as well as between headquarter and subsidiaries, because each host country has their own business characteristics. According to the collected evidences Google tends to be relying on the globalization strategy.
To begin with, as mentioned above, one reason for companies adopting a globalization strategy is that they want to monopolize the market in their own industry. Definitely, Google achieved this goal. In October 2011, Google accounts for 82. 4% of the worldwide desktop search engine market share. Furthermore, in 2008, Google shifts its international marketing structure form representation offices to Research and Development center, and then to partnerships with other enterprises, which reflected that Google gradually integrated the competitive advantages from the alliance partnership and improved its own capabilities (Ronen, 2009).
In addition, Google has many R&D centers worldwide. For instance, if the software was R&D in Israel, this software is not only specialized in Israel market, but also launched globally by using different languages. Therefore it is clear that Google did not focus on localizing their products or services for different markets nowadays.
Finally, globalization is focusing on building united competitive advantage. In order to keep its competitive edges, Google transfers and share outcomes of technology innovations within various R&D centers, and with alliance partnerships to connect the operation nd management activities from different counties and locations. Google’s retrieval from china, impacts upon globalization plan. According to the list of info-facts (2012), China is the second most powerful country in the world. And in Fleming’s (2010) report, “U. S. , China, and India will be the three most powerful countries in 2025”. These illustrate that China is a hugely influential nation around the world. Moreover, China has more than 500 million internet users (Efrati & Chao 2012), and the number is still increasing. China is a market which cannot be ignored.
Google’s retreat from the Chinese market has definitely impacted upon Google’s overall global expansion strategy. Most of the Asian countries have strong regional relationship and China has a widely impact on them. As we all know, eastern countries are in high context cultures, but, Google is from a low context culture which is totally different from high context culture. Their ways of running a business are quite different. It seems that if Google cannot operate successfully in China, it cannot operate well in other Asian countries either, such as Japan and Korea.
And this will deeply impact its global expansion strategy. As the picture (adapted from Chardonneau’s slides) shown in appendix 1, Asia owns the biggest internet market, and Google’s coverage in Asia is so weak. If Google still wants to achieve its global expansion strategy, it has to come into the Asian market and first of all, Google needs to solve the problem in China. In fact, Google’s quit in China offers its competitors a good opportunity to enter into the Chinese market. After all, not all the international companies are unable to handle the operation problems in China.
Since Google announced its retreat, its market share has declined 5% and its biggest competitor in China, Baidu has increased by 50% (Powell 2010). Other internet companies like Microsoft, Sohu and Tencent where all benefit from this great opportunity which offered by Google (Powell 2010). Cultivating your competitors will obviously diminish your own benefits. More and more powerful competitors will absolutely hamper Google’s global expansion. In addition, they need to keep putting efforts to the beta test before they aunch any new products into new market, especially in the Asian market. It needs to customize it according to different market to satisfy local consumers. As discussed above, one of the main reasons why Google failed in the Chinese market was because it did not use ICP, which is a compulsory for all websites operating in China (Zhou, 2009). ? Diversification strategy working in the international market The multi-diversification strategy is generally appropriate across the whole international market.
This strategy is being used in different markets, while the only difference is whether it more focus on direct-diversification or indirect-diversification that depends on the intensity of competition on the core products. Briefly, since 2004 Google’s endeavor mainly focuses on encouraging innovation by bottom-up through the whole company. It acquires innovative companies to diversify into new areas or to add value to existing technologies and services (Kotelnikov, 2012). From “personalized web”, “Google News”, “Website Optimizer” to acquire technology to put up online display and banner advertisements by buying out “DoubleClick”.
Followed by the direct diversification, Google, starts to expand its new product line through indirect diversification strategy. For instance, Google enters the social networking space through launching “Orkut”, “Google Checkout” then was launched as a payment gateway for online buyers and “Google Chrome” which is a representor of a desktop browser, see appendix one. Firstly, in the current global market, Google’s diversification strategy take the development of its core products as a priority.
It makes a great contribution on perfecting its core competency—search engine, which is the most profitable product. Additionally, it also increases the reputation of “innovation” for Google all over the world. Multi-products line adds more values for the consumers will become the main competitive advantages for Google in the long-term in the international market. Therefore, the benefit of diversification strategy is to protect current market share and attract potential customers by World of Mouth.
Particularly, Google launches early nd often in small beta tests before releasing new products into the market, with many markets becoming more and more competitive as a result of new competitors from global or deregulated markets, those who innovate best will win in the future (Kotelnikov, 2012). Secondly, while even through the company put great efforts to add more value on its core products, the competitors also come up with substitute products, for example, “Powerset” from Microsoft and “Search Monkey” just launched by Yahoo attack the weakness of Google, providing a much flexible search engine.
Google needs to add up more new product lines to create and exploit economies scope. In particular, “Baidu” whose market share in China is up to 78. 3%, while only 16. 7% of “Google’s Hong Kong Site”(Baidu, 2012). Google can use its direct-diversification strategy, which pays attention on internal growth of search engine to increase its market share in the market, which doesn’t have a strong competition, such as Australia. The indirect – diversification strategy should be used in the market that already has some strong competitors such as China, Korea.
It is certain that the risk of this diversification strategy is there is a huge investment in the new businesses and the majority of the new businesses haven’t started making profit for Google. However, take current global market trend into consideration, the strategy will work in the long term in the international market. If we look closely at year 2009, revenue from ads on their sites accounted for 83% of the total.
Compared to 2008, this item represented 90% of Google’s total income. Nevertheless, the growth rate of these “windfall” is, so far, relatively modest (Sebastian, 2010). Thinking of Google, what product stands out? But are there too many? Is Google too ubiquitous now is an arguable question in recent years? “I think that, ultimately, we do have too many products and we need to condense them,” Marissa Mayer, Google’s VP of Search, said Friday at the SXSWi conference in Austin (Matt McGee, 2011). According to the map of Google’s product in the appendix, Google products now covered in many different fields such as search engine, social network, music, mobile system etc.
But there is people say ” As Google Becomes More Ubiquitous, They Get More Sloppy ” (Jeff Y, 2012) “Google is taking information from almost all of your Google services ” (Tsukayama, 2012). It was very serious privacy issue and been intensely discussed. ” Google makes its money by selling yourself; by knowing where you live, what videos you like watching, and your entire search and surfing history, Google sells targeted advertising to the tune of tens of billions of dollars per year. Selling you is 96% of Google’s revenue stream. ( Anthony, 2011).
Google was not obligated to pay a fine for doing so but the brand was damaged to some extent. Google also faces the risk from failed product or services. “It comes down to having too many things going on at once. At Google, quality control is slipping. ” (Jeff Y, 2012). For example, Google lunched Google Buzz in February 2010, it was considered a threat to Facebook and twitter but it’s been shut down very soon in November 2011 by Google because of the lack of users and the late show in the market compare with twitter.
The failure of Google buzz damaged not only the real money but also the trust and confidence of consumers toward the brand. (Rob, 2010) Besides, with too many successful products, customers may lose what the brand Google really represents which is also a risk of brand damage. “We’re very aware that our business is based on the trust of users and if damaged then that’s the worst thing we could do. ” The new privacy director said. (Google, 2010) But will all these factors really hurt Google? The answer is uncertain.
As we can see from the Googleland map in appendix , Google’s main product is always the search engine and they use all the other products to support it. “Today, with approximately 70 percent domination of the global search market, the omnipotent, omniscient, omnivorous and ubiquitous Google keeps upping the ante to stay on top of the search engine game. “(Callari, 2012) Therefore some people argued that as long as people still use and trust the Google search engine, the Google brand will not be hurts seriously. Google’s foray into Android market, all around impact.
In this section, we will focus more on Google’s capability after it has bought Motorola and gain access to becoming one of mobile phone providers with its own Android OS. After Google has bought Motorola, there are a few implications to mention here. First of all Google will be the owner of all patents from and therefore will be of a great support for Google when their mobile phone enters the market where Apple is a dominant player (Reisinger, 2011). During the launch of a new phone company is most likely to be sued by their competitor arguing over the originality of the phone.
Therefore after having Motorola as a patent support Google may save a lot of money in this aspect. Secondly is that Google now has a capacity to create and manufacture their own mobile phone and tablet PC. The benefits of buying Motorola also extends to the field of hardware that Motorola has been in for sometimes, what Google has bought to it self is the hardware manufacturing ability, ranging from TV top box, internet TV to internet router and live stream (Bryant, 2011). Therefore again apple will have to be careful since now Google has a potential to fight Apple not just in the field of mobile phone but also as a TV top box provider i. . Google TV (Purdy, 2011).
Thirdly it is not clear that when the new Motorola, Google phone is released, it will come with the newest Android OS or not. But move to buy motorolla to gain access to manufacturing capability can really affect Google’s android mobile partner. One clue to this argument is current news about Samsung, which has been Google’s main Android phone provider, has announced that its mobile phone in a short future will also feature the windows operating system (The Sydney Morning Herald, 2012).
Although the news said it was all about Samsung providing more variety to the consumer, but it can also be thought of an uncertainty avoidance move by Samsung who might feel an aggressive move by Google coming into the hardware market. Perhaps besides Google and Motorola as the two winners from the incident, Microsoft surprisingly might gain benefit from this incident (Wortham, 2012). This move from Google is actually what Microsoft is hoping for because besides Google, the only well know non-phone maker operating system is the “windows 8” from Microsoft.
The moment of changes to watch out for is the time that Google’s partners feel that they are indeed competing against Google instead of having Google as their partner (Wortham, 2012). Microsoft windows 8 here will then act as a preferable alternative operating system for those ex-Google’s partners to adopt. So what will happen in short-long run for the market? In the short run it will not change much because the majority of the mobile phone relies on Android OS. Breaking off partnership with the OS they rely on is really not a good idea in the short run.
Also since by law after closing the deal that Android will still remain free for another five years (Waugh, 2011). In the long run the story may be entirely different. It is expected that mobile phone manufacturers may start thinking about an alternative plan according to Google’s moves. If Google still keeps its promise that buying Motorola is just for its own defense, then it is still a great idea to have such a big company as your support (Wortham, 2012). How does Google create revenue?
To scrutinize the business model of Google Inc, one impressive feature in this model is that Google offers free resource to the end user. Analyzing the reasons behind it, Google’s philosophy is to share information universally and make it accessible globally (Google, 2012). Thus, the characteristic of free is a necessary catalyst which accelerates Google to become the largest search engine company around the world. By doing this, advertisers have become the main income rather than the end users.