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Google Inc. is an American based company that specializes in internet-related products and services (best known for their search engine). The company has steadily developed to become one of the best companies in the world since its creation in 1998. Google Inc. functions in an industry that is unprecedently unique and dynamic and has much different characteristics from its counterparts in the business world. The Internet industry is dynamic and is characterized by frequent adjustments of rising technologies and continuous revolutions. To stay pertinent, companies depend on tech-based solutions and exception strategies. Google Inc. is currently the best in the industry. This can be attributed to a healthy blend of distinct components and strategies, understanding its external environment/competitors and pursuance of attainable goals and objectives. Executive Summary
Google Inc. was created in 1998 by its extremely talented co-owners Larry Page and Sergey Brin. Initially, Google Inc. focused on providing customers with web-based search services with their Google Web Search engine. Currently, Google has 65%+ market share in the United States. Google harnesses the highest market share of all companies in its industry. Over the course of its existence, Google has drastically progressed in many ways by designing and offering a range of other internet-related products and services. Among them are search tools, communication and publishing tools, advertising services, security tools, development tools, map-related products, statistical tools, mobile and desktop applications, operating systems, cloud platform and Google Fiber, among others.
Google has been extremely assertive, ambitioius, innovative, and profitable. On its surface there doesn’t appear to be a problem for Google Inc., but all corporations must contnue to sustain improvement and evolve in the information technology industry. Google had diversified and advanced so many of its products beyond their infamous search engine that they made every company in the technology very intimated of them. They are at a decisive position in the development of their corporation, and need to find an answer to the question of, “What should Google Do?”.
Porters Five Forces Model: Power of suppliers – there are content providers and application developers as suppliers of Google. Being a key player in its ecosystem, its suppliers do not have much power on Google. Threat of new entrants – it is unlikely to have new entrants because of high barriers to entry such as capital and infrastructure requirements. However, there are possible threats of new search technologies. Threat of substitutes – there is no potential threat of substitutes due to users’ high reliance on Internet technologies. Degree of Competition – intense competitors among few competitors such as Microsoft and Yahoo!, but not as competent in search engines as Google.
(1) Staying focused in Search area: Googles search engine is its core business and Google has excellent expertise and position in this area. Googles search algorithms still need to be improved upon. Rather than letting competitors to take credit, Google should develop optimized search solutions gaining first mover advantage. Google can also expand to content- analytics areas providing analytical data to businesses which it has been doing for its advertisers. Lastly, staying focused in the search area it complies with Google’s mission making the world’s information accessible and useful. Argument against this option: Google has become almost a monopoly in Internet online advertising and hence, gathered attention from authorities concerning antitrust issues which might limit Google’s freedom in transactions such as collaboration with Yahoo!. Relying soley on the past winning formula would be risky for an organization like Google operating in the technological industry. Lastly, Search industry will be matured in the near future, therefore, has limited growth potential. (2) Becoming a developed portal: This option would allow Google to expand its coverage into different areas which would also help its search engine and advertising. A developed portal would give customers value-adding services as a portal might increase customer loyalty. Finally, Google already has some expertise in this area from development of products such as Gmail and Google Docs, implying that it is relatively less risky. Argument against this option: Market competition is intense with giant competitors such as Yahoo! and MSN. The customers of these competitors would not easily switch from them. Secondly, it‘s difficult to differentiate yourself in the portal business because all portals have very similar features. Finally, It does not align with Google’s mission according to Google’s CEO Mr. Schimdt. (3) Venturing into desktop apps: Desktop applications is a potentially large market. P.C. applications can with integrated with its cloud computing services adding value to those customers that have the need of mobility. Argument against this option: This option would be very hard hard for Google Inc. to compete with microsoft. While Google has developed web-based applications through Google Docs, it is not as experienced and well-known as Microsoft in this area. Its web-based applications are not as fully-featured as Microsoft’s. It would be reasonable to assume that Customers will not switch from Microsoft because of high switching costs and new skill requirements. Finally, once again this does not align with Google’s mission. (4) Providing e-commerce services: The e-commerce market is also another still-growing market, especially in emerging economies. With its offices all over the world and its search interface being available in more than 110 languages, Google can expand its e-commerce into those economies. With its own payment system, Google Checkout, Google can compete with eBay’s Paypal service. Google‘s search techniques such as personalized search can be a tool in providing highly relevant linkage between buyers and sellers which can be an advantage over eBay. Argument against this option: Google does not have expertise in e-commerce business, concerning with areas such as customer relationship management and marketing, compared with eBay, an established ecommerce intermediary with millions of customers in U.S.
As Schmidt said, Google does best in “Search”. It has gained a competitive advantage in search engine industry by improving its search technologies, for example, personalized search. Advertisers are drawn to Google because its network provides more search traffic and it has a unique Cost-Per-Click rate. In addition, the search engine industry is currently in its rapid growth stage which creates opportunities for Google. However, there are competitors such as Microsoft and Yahoo! competing with Google. Although, in 2005, Google landed the deal with AOL, its competitors may offer more aggressively in the future since network affiliates are very important for Internet advertising companies which implies Google should either raise the bid or attract AOL with other values. By the same token, search algorithms are not optimized yet, allowing opportunities for improvement. Therefore, there are a lot of areas for improvement in the search engine area to maintain its dominant position in the industry. Still, the search engine industry will be matured soon, which means that although it is a ‘star’ right now, it will turn into a ‘cash cow’. Therefore, Google should start moving towards new areas such as portal, ecommerce and PC applications. Google is one of the few organizations with strong culture and beliefs. When considering new markets, an important factor that needs to be considered is whether the strategy aligns with its mission statement, and accordingly its values, since the backlash against unaligned strategies might be caused within the organization. Since portal business and PC applications business are not aligned with Google’s mission, it should not go into these businesses. For e-commerce, although it may be an unfamiliar area, it has great market growth potential.
Based on the synthesis made on industry and internal analyses, there are two recommendations for Google. The first recommendation is that google needs to improve in search area. Google should stay focus on its core competencies which is web search and online advertising. It should invest in improving its search solutions and develop products and services to maintain differentiated in Internet advertising. Rather than becoming a full-fledged portal like Yahoo! with a high degree of personalization, Google should focus on developing new features like Gmail which would add value to the search and advertising area. In addition, it should work on its public relations to improve its image being negatively affected by lawsuits concerning with privacy and copyright issues since reputation is also important in search business. The second recommendation for Google is to venture into the e-commerce business. Google should step towards e-commerce business as a market creator like eBay. It can take advantage of its large amount of search traffics to attract customers as well as its advertisers as suppliers. In order to prioritize its efforts, it is recommended to invest 70% of resources into search area, 20% into value-adding features such as Gmail and 10% into new ecommerce business, using its 70/20/10 rule. Conclusion
“We do search”, as written in Google’s Statement of Philosophy, Google’s core business will always be the search business. To be able to maintain a sustainable advantage in the search area, Google needs to improve on its search technologies. Since the search engine industry will mature in the forseeable future, Google also needs to find new markets and develop expertise to dominate those markets, with its mission statement guiding those strategic decisions. Therefore, this report suggests Google to focus in search area as well as to venture into e-commerce business.
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