Acknowledgements
This project could not have been written without Dr. Eric Kuan who has so patiently guided me throughout the completion of this project. I would like to thank him for his guidance and giving me a lot of useful advices which enhance my project and the learning process. Executive Summary The word “Google” is a very familiar word to everybody. It is the word that everyone will think of when they want to look for an answer, or some information to thing that they don’t know. In reality, Google doesn’t have the answer to everyone question, but rather it has the answer to searching for solution and information. Google currently is having close to 70% of USA search engine market.
And now Google is launching almost programs that anyone can think of, from Google Earth, Google Map, Gmail to the recently launch of HTC dream phone. For sure, Google is standing tall among its competitors which were founded much earlier. This project aims at looking into this giant internet company and analyzes its muscle power and it’s Achilles’ heel. Not only that, it will also analyze its external environment to look out for threats and opportunities. This is done by looking at Google’s market share and brand ranking together with using various strategic models and theories such as PESTEL, Industry Life Cycle and Resources & Capabilities.
After which, a list of strategic options will suggested and each of the options will go through criteria test to determine the best one to help Google gain further success. Regardless of those who are fascinated of Google’s success or not, the content of this project follows simple process to allow readers to understand little more about strategic management. (Word Count: 235 Words) [pic] Proposal Description of company activities Google, Inc. is an American public corporation which started off as a search engine and earns its revenue from advertising. It then diversifies into e-mail, online mapping, office productivity, social networking, and video sharing services. Google is currently known as the number one internet search engine in the world. Reason for selection
I would like to learn how Google is still consistently achieving growth after such a long period of time. I would also like to investigate the company’s culture and how employees are so loyal to the company. It has been named the top place to work in according to Fortune Magazine 2007 and 2008.
Current or likely strategic issues facing the company Due to the recent financial Global recession, Google has acknowledged in late November that it planned to significantly reduce the number of its contractors and retain all of its full-time employees. Recently, China has warned Google and other popular web portals that they must do more to block pornographic material from reaching Chinese users, the latest in a series of government crackdowns targeting internet content. China authorities will block out Google if fails to implement action. This would lead Google to lose a huge market segment.
Chapter 1: Introduction
Introduction to Company
Google was founded by Larry Page and Sergey Brin in January 1996 as a dissertation project while he was in Stanford. Brin and Page then developed the PageRank algorithm which was used to create the Google Search engine.
Task Environment
The buyers and suppliers of Google are very special in this case. The main customers of Google are Internet users who use its search engine and as well as advertiser who places advertisement using Adsense. The suppliers are also the internet users which the advertisers are targeting. Other suppliers of Google are the contract workers who work for the company.
Competitors of Google in the America region are Yahoo, ASK and MSN which also provide search engine. Main Rivals in the China market are Baidu. com and Sina. com, not to mention Yahoo which has the market in China too. To investigate how Google is still consistently achieving growth after such a long period of time by finding out its competencies. To get some insight of how Google is still able to achieve tremendous growth since it was founded.
Scope of the Project
Scope of the project is to look into various services that Google is providing for internet users.
In the current competition, search engines company can no longer just provide search engines but also other services such as free web-base email, auction, news and language translation just to name a few. Google’s services and its competitors’ must be made to provide a clear picture. 1. 5 Project Objective The project objective is to sustain the strategic growth of Google in the search engine industry. This can be done by continuing to follow Google’s goals: To Organize the World’s internet information.
Chapter 2: Methodology
Approach
This involves looking at the micro and macro environment of Google business. Macro environment analysis would look at Google’s supplier, buyers as well as the competition and the external factors such as political, legal and social cultural.
Some models to that would be used in the analysis include: Porter’s 5 forces, PESTEL and Industry Life Cycle. Micro environment analysis will look at the resources, capabilities and core competencies of Google.
Data Sources
Data that would be use in this strategic analysis would come from various secondary data sources. Financial Data from Annual report of Google as well as its competitors would be used to for comparison. Other external sources of information would mostly come from internet, online journal, newspaper report and magazines.
Chapter 3: External Environment
Analysis In 1998, it was formally incorporated as Google . Inc at a friend’s garage.
By 1998, even though Google still consider itself in “Beta” stage, it had about 60 million web pages in its database and its search results were already much better than its competitors such as Excite. com and Hotbot. The Google had attracted a growing number of loyal Internet users, who liked its simple design. In 2000, Google started selling advertisements tag with search keywords. The ads were text-based so to avoid cluttered page design and to maximize loading speed. By 2004, Google has covered over 75% of the US web search market. Even though Google is now the number 1 in the industry, it still has to compete with competitors. Google has to expand or change its business model in order maintain its number 1 position.
External Environment
PESTEL Analysis PESTEL analysis is carried out on the general environment of Google.
Employees are required to spend 20% of their work time pursuing their personal interest.. Free gourmet food is served at the cafeteria in Googleplex. Not to mention gym, massage room, pool tables are some of the facilities that the employees can use inside. Employees are allowed to furnish their workplace whatever they like to make themselves comfortable. That is why Employees of Google are willing to spend the night at their workplace to finish their work. Another interesting culture of Google is that it strongly encourages creativity to create new innovation. Ideas are spread within the organization so that ideas can be build upon by other employees.
Superior Quality: Google adopt PageRank algorithms that provide search result that is more relevant to the internet user compare to other search engines. This result a trend that Internet users resort to Google to answer their question from the internet. Superior Efficiency: The layout design of Google main page and the result page is very simple. The reason for this is to provide fast search processing and downloads of information to the internet users. In October, Google disclose its data centers had an average Power Usage Effectiveness (PUE) of 1. 1 which was consider a low usage rate. Google is consistently studying how to reduce power usage such as making chillers and air movers were run simultaneously while machine were running and using fans to cool spaces that don’t need to be cooled. This help to reduce in cost. Superior Innovation: Apart from PageRank that is the prized Innovation of Google, Engineers and IT specialist are building on PageRank to improve its search result. Other Innovation such as Google Earth is a free software that is develop by Google allows Internet users to “explore the world”. Superior Customer Responsiveness: The size of Google results the weaknesses of the Customer responsive area.
This is something that Google and its competitors have been doing all along from a simple search engine, to email and news. Just recently, Google have launch Google Chrome: a web browser to its line of products. It will take some Innovation for Google to come out with a new product that will satisfy the present market. One area that the writer suggests is to look into the gaming area. As the economy downturn takes place, more people will go out of jobs and these people will stay more time at home in front of computer to play computer games. In other word, gaming industry is thriving business despite the economy downturn. Google can use it internal resources to tap into this industry. Vertical Integration: Something that Google has already done very successfully.
It has builds its own server computers as well as designing some of their components, writes its own operating systems, builds and operates its own data centers, owns much of the fiber-optic cabling through which its data travels, codes and delivers a suite of applications ranging from search engines to business productivity programs, sells and delivers ads over various media, operates its own checkout and payments service, writes much of its internal operating software, generates some of the electricity for its buildings, and even operates the bus system that brings its employees to and from work. Vertical Integration can be use to overcome its weakness according to the Corporate Grand Strategies Matrix. Google can acquire or probably outsource its customer service hotline to overcome its weakness in customer service. Horizontal Integration: Acquiring similar firms operating at the same stage in the industry. The option for Google in the horizontal Integration is to acquire its competitor such as MSN or Yahoo. MSN would be too much of resources to take over as it belongs to Microsoft. Yahoo would be the next best thing to acquire because its search engine is still being powered by Google.
However the only problem might be the Yahoo’s ego problem that might come in the way of acquisition. The problems with acquisition such as culture differentiation and value destroy might come along. Concentric Diversification: Acquisition of business that are related to Google in terms of technology, market or product. Recently, Google and its strategic Alliance partner HTC has launch it a new phone “Dream” which was pretty successful. Google can consider acquire HTC to have a share of the pie in the mobile industry. Another area of diversification as mentioned in product development is online gaming. One suggested company to look at acquiring is gamespy. com that hosted online gaming servers. 5. Recommendation of Strategic Options on Business Strategies Few recommendations of the options as mentioned above which would be the most feasible would be market penetration together with the combination of Cost leadership and Differentiation Strategy. The next option would be Concentric Diversification implement with Cost leadership and Differentiation Strategy. Of course, both strategies could be both adopt together by Google to achieve rapid growth if they have adequate resources.
Chapter 8 Usefulness of Strategic Management Models
In this chapter, brief descriptions of the benefits that are derived from each methodology are given. 8. 1 Porters’ Five Forces This model displays the external forces that can affect the company’s performance. It identifies which area and how competitive it is and enables the company to monitor these areas. Various forces can be studied and understand how much it can affect the company. It is one of the basic models to analyze the environment before offer making strategic action
Industry Life Cycle
Industry Life Cycle helps management to understand the changes in the industry and what causes the change.
It shows what stages the industry is in and give a rough idea about what is going to happen in the industry for the next few years. This will help to create suitable strategy to help the company to grow as different strategies are needed at different stages.
PESTEL
This model is used to scan the macro-environment of the company and its industry, which can directly or indirectly affect the company or its competitors. It is a useful model not only in strategic management but for marketing research as well. It is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations.
Resource Base Model
By using this model, management can identify whatever resources and capability that the company possess, thus allow ideas to how to fully utilize and allocate them to help company to grow or sustain.
Generic Building Blocks of Competitive
Advantage Efficiency, quality, innovation, and customer responsiveness are the building blocks of competitive advantage. These building blocks are generic in that they provide four basic ways to lower cost and achieve differentiation. Any company can adopt the 4 building blocks no matter what industry it is in or what product or service it provides.
The Grand Strategy
Matrix and Corporate Grand Strategies The Corporate Grand Strategies, often called the master for business strategies provide basic direction for strategic actions.
Internal and external analysis must be done first in order to give an idea where the company is standing. After which, this matrix will suggest what actions to be taken in order to allow the company to survival or to thrive.
Mckinsey 7s Framework
This framework is based on the concept that any strategy must be able to fit with the culture of the organization in order to be successfully implemented. If a strategy runs into problems during or after implementation, it is often because that is a lack of fit between the strategy and variable of the culture. This framework therefore can help in the choice of process to know what went wrong in the implementation.
Bibliography
- Hitt M,A, Ireland R. D. , Hoskisson R. E, Strategic Management: Competitive & Globalization, Thomson – South Western, 5th Edition, 2003
- Barney J. B. , Gaining And Sustaining Competitive Advantage, Prentice Hall, 2nd Edition, 2002.
- Grant G. M, 2005, Contemporary Strategy Analysis, 5th edition, UK, Blackwell Publishing
- Pearce II J. A and Robinson R. B Jr. , 2007, Strategic Management – Formulation, Implementation and Control, 10th edition, New York: McGraw-Hill Irwin
References
- Strategic Analysis of Google (5th March 2009) URL: http://www. lideshare. net/joshs633/strategic-analysis-google
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- Google’s market share tops 65 percent (6th March 2009) URL: http://news. cnet. com/8301-13505_3-9838695-16. html
- Google Market Share Up (6th March 2009) URL: http://www. marketingpilgrim. com/2007/05/google-market-share-up-again. html
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- Google: Our Energy Efficiency is Improving (7th March 2009) URL: http://www. datacenterknowledge. com/archives/2009/01/28/google-our-energy-effi ciency-is-improving/
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