Google Case 1. Discuss competition in the search industry. Which of the five competitive forces seem strongest? weakest? What is your assessment of overall industry attractiveness? Competition in the search industry is high. There are several search engines available, albeit Google holds the top percentage. Some of Google’s opposing forces are Yahoo! , Bing, and MSN search. The strongest is competitive rivalry and the weakest is buyer power. There is a big rivalry amongst search engines in gaining the newest advances and best technology to suit the customer.
Buyer power is weak because there is no substitute for an online search engine. You could use an encyclopedia or something of that nature, but with online search engines, information is available instantly and up-to-date. If a company can get past the barriers to entry, there is a high industry attractiveness. With advertisements being the main source of profit for search engines, a company could gain considerable profit margins with good advertisements and a mediocre search engine. 2. How is the search industry changing?
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What forces seem most likely to bring about major change to the industry within the next three to five years? Cloud computing technologies are one of the trends which will have a big impact on software market. Google is a big player in this field. Microsoft has identified this as a big threat to their business. The second trend in this industry is rising competition in mobile search/advertising and the importance of social networks. 3. What are the key factors that define success in the industry?
What are the key resources and capabilities required of successful search engine companies? How do these compare to the key success factors of the smartphone industry? Key factors of search engine industry success are: Consumer demand for innovative and interoperable products or services; net neutrality; improved search algorithms (fast, accurate, impartial and easy to use); awareness of convergence in media, internet, broadcast and entertainment; trust (user security, privacy concerns and protections); awareness of user habits and needs (supply solutions to anticipate and meet eeds). Google core competencies are: Constant Innovation of search algorithms; impartial algorithms used to rank data weight; open transparent organizational culture; policies: Implement, then monetize; People-Profit; corporate Reputation = Brand Trust; back net-neutrality interoperability + open source. Google, Yahoo, and Microsoft have both similar and dissimilar capabilities: All are financially sound; in fact, they all have the financial clout to afford large acquisitions, or to invest significant financial resources in a R&D; all are global; all are household names.
Currently, Yahoo and Microsoft must reassess their resources and capabilities to decide how to deploy them most effectively. In reality, they must leverage their current resources to develop new capabilities if they hope to compete with Google for the consumers. Google has an advantage in efficient organization of information. By means of using an unbiased algorithm to rank data relevancy, Google’s impartial search algorithm is also the key to its popularity, because Google users have a greater level of trust. Yahoo has a number of social networks and content advantage.
Microsoft’s advantage resides in their long reign of global market dominance in business by means of their market share of computer software and operating systems, although they also face risks from this due to global anti-trust issues. 4. Describe Google’s customer value proposition and profit formula linked to its business model. What strategies has Google relied upon to build competitive advantage in the industry? Google business model generates revenue by providing advertisers with an opportunity to deliver online advertising, directly matched by keyword to a user’s search query.
Google business model is based on three elements. The first one is the advertising when you search on Google, a program called AdWords. AdWords is Google’s advertising product and main source of revenue. AdWords offers pay-per-click advertising, and site-targeted advertising for both text and banner ads. The AdWords program includes local, national, and international distribution. Advertisements are short, consisting of one title line and two content text lines and/or image. The “content network” shows AdWords ads on sites that are not search engines.
These content network sites are those that use AdSense, the other side of the Google advertising model. AdSense is used by website owners who wish to make money by displaying ads on their websites. User’s click on ad displayed on a Web page means that advertiser pays Google and Google give percentage of that amount to the webpage. The third way in which they make money is through its Google Search Appliance, which they sell to their customers. This Google’s search technology can be integrated into a third party’s Web page or intranet.
This appliance delivers accurate search results throughout a number of documents. Meaning your company would have its own search engine and it would work just as well as google. com. Licensing fees ranged from $30,000 to $600,000. There is also Google MiniSearch Appliance designed for small businesses. Some of the most important strengths of the Google’s business model are: Reliable pricing system, scalable architecture, disruptive business model, and efficient ad system and relevant ads. 5. Have Google’s business model and strategy proven to be successful?
Should investors be impressed with the company’s financial performance? How does the company’s financial performance compare to that of Microsoft, Apple, and Yahoo? Please conduct a financial analysis to support your position—you may wish to use the financial ratios presented in the Appendix of the text as a guide in doing your financial analysis of the company. Google’s business model and strategy have proven to be successful, which can be seen in the continued growth of the company and its financials. I think investors would be pleased with the company’s financial performance.
Google has grown rapidly; from 2004 to 2007 its revenue growth slowed, but still increased by more than 50% every year. The company reported a year-over-year growth of 31% for 2008. Beside constant growth of total revenue, net income has also constant growth accept in year 2008, where increase was not as high expected. In parallel there is also a growth of market share. By the year 2009 Google has almost monopolized its position in the search engine market. The company generated 97% of its 2008 revenue from advertising. 6. What are the company’s key resources and competitive capabilities?
What competitive liabilities and resource weaknesses does it have? What opportunities exist? What threats to its continued success are present? Strengths Large leader in the global search market with more than 85% of the searches conducted Leader in the global search advertising market Superior search Superior advertising algorithms and methodologies High brand awareness: users’ trust with the famous “Google it” (consumer trust) Significant infrastructure base Financial stability (low debt, large cash reserves, exponential growth in revenues and net income) Weaknesses Interruption or failure of Google’s services
Competitor strategic actions Inability to hire or retain key people Inability to scale operational processes Top management issues Lack of product integration Possible slowing of high revenue growth Opportunities Increase in internet users Increase in search advertising New market growth (China) Larger definition of search marketing including new forms of advertising such as some sorts of social media Increase in wireless subscribers world-wide will embrace local mobile search services by 2013 Integration, strategic alliances and joint ventures with suppliers Investments in R&D innovation
Market power in value chain User demand for convergence and interoperability Threats Privacy concerns Antitrust and Copyright infringement suits against Google Increase global competition Disruptive innovations Internet security Open source’s ecosystem threats Recession impacts on search marketing and online advertising trends Foreign exchange risk 7. What recommendations would you make to Google’s top-management team to sustain its competitive advantage in the search industry? How should it best capitalize on its strategic initiatives in smartphones, cloud computing, emerging markets, and other ventures?
Here are some recommendations for Google: * Invest in R&D – Stimulate innovation Search for strategic alliances (integration and interoperability) * Seek alliances with like-minded companies that promote open source standards. Extend the reach of Google’s search into the wireless sector * Cloud Computing-further improvement of Google’s web browser in a way of supporting cloud computing. Attract Microsoft’s customers, first by Google search, well established services and then also with cloud computing * Manage the Google brand-Keep on avoiding marketing.
Anticipate, support, expand user’s bond with the Google brand by anticipating their needs, and developing tools that meet them. Allow users to have interactive access and control over their own personal information, increasing its usefulness and building trust in Google’s brand. * Support public education: critical issues impacting Internet access, net neutrality, open access and interoperability across platforms is very important. Reduced cost of personal training. * Invest also in internet security- with safe information, applications can become more and more important and valued.