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Critical Evaluation of Alphabet’s Transformation Report

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Updated: Jul 29th, 2021

Introduction

Google Inc, currently known as Alphabet Inc, is a multinational technology company that has its headquarters in Mountain View, California. Larry Page and Sergey Brin founded the company in 1998 and it has since achieved massive growth, especially after its initial public offering (IPO) in 2004 (Johnson, Whittington, Scholes, Angwin, & Regnér, 2017).

Started as a search engine, Google currently offers a wide range of technology products such as cloud computing, computer hardware and software, artificial intelligence, internet, and advertising services. In a market where competition is getting stiff, the management of the company has embraced Laissez-faire model of management, where senior managers create room for employees to make critical decision on the running of the company. The strategy is meant to address many challenges that the firm faces, top of which is stiff market competition.

The company made a decision to change its name and the management strategy to ensure that it can remain competition. It transformed from a firm where the management controlled activities of employees closely to one where workers could make independent decision based on a standard model of operations expected of them.

One of the main reasons why this company made this transformation was to enhance creativity and innovativeness. Allowing workers to address their assignments in the best way they knew how meant that they could experiment new strategies without the fear of retributions. According to Cline (2014), the transformation was also a deliberate attempt by the firm to ensure that it does not lose its talented workers. The company spends time and resources to recruit highly skilled workers and to take them through training. Once hired, the firm always makes an effort to ensure that they are retained within the firm for as long as possible.

External Analysis

Google operates in a wide range of technology industries, from the internet to cloud computing, computer software and hardware, advertising, and artificial intelligence. The external market poses significant challenges that may affect its ability to achieve the level of success that the management desires. Uhl (2016) explains that the sustainability of a firm depends on its ability to understand and appropriately respond to the external environmental forces. In this study, the researcher will use PESTEL and Porter’s Five Forces models to analyze the external environment of this company.

PESTEL Analysis

This model has gained popularity when it comes to analyzing the macro-environmental forces that a firm faces within a given country or region. The political environment in the United States has been sustainable for a long period. Uhl (2016) explains that the political class has been keen on making policies that protect the business sector as a way of promoting economic growth and reducing unemployment in the country.

It is important to appreciate the fact that some of the foreign trade policies that the current regime has employed may have a negative impact on the firm’s ability to operate successfully in the foreign markets, especially in China (Sato, Wylie, Yamada, Siow, & Nizami, 2017). The economic environment is another major factor. The growing global economy, especially in North America, Europe, and parts of Asia, which form the main markets of this company, offers growth opportunities for the company. It means that the ability of its customers to purchase its products is increasing.

The social environment is another major factor that defines the ability of a firm to achieve market growth and sustainability in its operations. The global society is becoming increasingly reliant on technology in various socio-economic activities. Virtual reality is gaining massive popularity in the entertainment sector. These emerging trends promise growth for the firm. Technology, which is the bedrock for Google, is another environment, which has remained dynamic over the past decades (Clemons, 2019).

The fact that this firm has been driving changes in the industry means that it has the potential of remaining relevant despite the changing technological forces. Ecology is another concern that the firm cannot ignore. The global society has become sensitive to the issue of climate change. Google has been playing a pivotal role to fight climate change by introducing technologies meant to reduce carbon emission and general environmental degradation (Uhl, 2016). This strategy enhances the relevance of the company in a society where people prefer having environmentally sustainable products. The final factor under this model is the legal environment. The company has to ensure that it operates within legal confines to avoid litigations (Clemons, 2019). Google has always been keen on avoiding actions, which are contrary to the law.

Porter’s Five Forces Analysis

Porter’s Five Forces Model helps in analyzing forces that a firm faces within a specific industry. One of the factors that the management of Google will need to consider is the level of rivalry among existing competitors. The company faces stiff competition from numerous equally successful corporations because of the wide range of industry within which it operates (Johnson et al., 2017). Some of the formidable rivals for the company include Apple, Amazon, Facebook, Microsoft, Yahoo, Bing, Baidu, Oracle, Altaba, Salesforce, and Yandex. The rivalry in the market is expected to get even stiffer as new entrants get into this market.

The threat of new entrants is another major concern. As new firms find their way into the industry, the level of competition is expected to get stiffer. This threat is real as there are no laws limiting other companies from offering similar products as long as they do not engage in intellectual theft (Clemons, 2019).

The bargaining power of suppliers is another concern. Google Inc must find a way of developing a close working relationship with its powerful suppliers. This threat is mild within the industry where the company is operating. The bargaining power of buyers is another major concern. Uhl (2016) explains that when buyers are presented with numerous options when they want to purchase a given product, then they become choosy, which makes them powerful. Google faces this problem in the industry because it has no capacity to dictate products that customers would choose other than providing them with high quality services.

Threat of substitute products is another major concern. Clemons (2019) argues that when customers can find a cheaper alternative that offers the same or superior level of satisfaction, they can easily switch their allegiance. This is a minor threat, but Google should not ignore it, especially in an era where Smartphone is gaining preference over personal computers. The firm may not to find a way of making its products relevant to Smartphone users. Figure 1 below summarizes the five forces.

Porter’s Five Forces Model.
Figure 1. Porter’s Five Forces Model (Tran, 2017, p. 71).

Internal Analysis

When the internal environment has been analyzed, the next step is to conduct a comprehensive internal analysis to determine the firm’s current capabilities and internal weaknesses that may limit its ability to achieve success. Google Inc is one of the most successful companies in the world. It has managed to achieve massive growth through mergers, acquisition, and development of new products that surpass customers’ expectation. SWOT and VVRIO model can help demonstrate the capacity of this firm.

SWOT Analysis

The model helps to identify strengths, weaknesses, opportunities, and threats that a firm faces in its normal operations. Google’s strengths can be discussed from various angles. One of them is its financial capacity. The financial success of this firm means that it can fund research and innovation projects and acquire its rivals facing financial constraints, as it has done in the past (Clemons, 2019). The company also has a team of highly skilled and dedicated workers capable of developing new products. Its strong brand in the market, innovative culture, and commitment to meeting customers’ expectations also give it an edge over its rivals in the market.

However, it is important to appreciate that despite its impressive performance in the market, it has some weaknesses that may limit its growth. Its biggest weakness is its inability to use its market dominance in a way that does not go against international antitrust laws. European Union has fined the company for violating the antitrust laws (Clemons, 2019). Such litigation may taint the image of the firm.

The market presents opportunities that the company can capitalize on to achieve competitive advantage in the market. One of the biggest opportunities that Google should take advantage of is the growing global economy to expand its market share. It should pay close attention to the emerging economies in the Far East, South America, and parts of Africa (Uhl, 2016). Population growth is another opportunity for the firm to increase its revenues in the market. The management of the company should be sensitive about threats that may affect its ability to achieve success. The biggest threat is competition. The analysis above had identified main rivals in the market. It should develop superior products that can outsmart what the rivals offer.

VRIO Model

The VRIO model helps to understand a firm’s sustainable competitive advantage in the market (Tigani & Naidu, 2014). As discussed above, Google Inc operates in a highly competitive market. This model can help determine its capacity to overcome the stiff competition in the market. It will be possible to determine if Google Inc has sustained competitive advantage in the market using this model. The product and capability of this firm is valuable, which means that it overcomes the first challenge of being at a competitive disadvantage. These products are rare, which means that it goes beyond having competitive parity.

Some of the products are not easily imitable, which has enabled it to become the dominant player in most of the industries such as in the search engine sector. As such, it goes beyond having temporary competitive advantage. Google is highly organized despite its large size and the numerous markets within which it operates. It means that it goes beyond unused competitive advantage. It means that the company has sustained competitive advantage in the market. Analysis of Google Inc using this model shows that the company has a unique capacity to achieve a massive success in the market. However, it has to continue on the same path of meeting customers’ needs in a unique way.

VRIO Model.
Figure 2. VRIO Model (Tran, 2017, p. 56).

How Google Managed the Transformation

The transformation of Google Inc from a search engine giant to Alphabet that operates in a wide range of technology-based industries was motivated by the desire for market growth and expansion. Clemons (2019) explains that when a firm is facing stiff competition in the market, one of the best ways of remaining sustainable is to diversify its products. Google Inc took this path when it acquired YouTube. It was keen on exploring the social media industry. It continued with its acquisition and introduction of new products. Some like Google+ did not achieve the desired level of success and after years of promoting it, the firm made the decision to discontinue it.

However, such failures did not dampen the spirit of the firm from developing new products. The company currently has a wide range of highly successful products in the global market. The strategy has not only increased its revenue and profitability but also strengthened its brand and sustainability a market that is highly competitive. According to Clemons (2019), Google Inc is one of the technology companies that have managed to define emerging trends in the market. It enables it to remain relevant in an industry that is highly volatile.

Strategy Evaluation and Recommendations

Google Inc is currently enjoying global market success because of its ability to deliver superior products to its customers. The company’s main challenge at the moment are restrictive laws in some markets in Europe, which is an indication that it understands what customers want and it is willing to deliver them in the best way possible. However, it should not ignore the threat posed by its rivals. Yahoo was once the dominant player in the industry but it failed to master market trends and as such, was unable to respond to them effectively. Eastman Kodak once controlled over 85% of the global film industry, but the glory was lost when it failed to transform in line with the market changes (Johnson et al., 2017). This section focuses on how to make the firm competitive in the market.

Critical Evaluation of Google’s Strategic Position and Choices

Google Inc is currently the top search engine in the world, controlling over 85% of the market share. Its closest rival, Yahoo, only has 6% of the market share, with Chinese Baidu and Microsoft’s Bing having only 3% of the market share (Drexl & Di, 2015). The impressive performance of Google is attributed to its powerful search engine that makes it easy for its users to have access to information they need within a short time. This strategic position as the market leader means that it can dictate market trends. However, its strategic choices would define if it retains this prestigious position.

Suggestions on How Google Can Face Growing Competition in the Future

The analysis conducted above shows that Google Inc has been successful in the market even if a few of its products failed to gain acceptance in the market. Despite this massive success, the management of this company should develop a plan for its future operations that would enable it to manage the growing competition. Porter’s generic strategies, shown in figure 3 below, can help the management to make a decision about the approach that the firm should take to manage the growing competition. Based on the current capabilities, this firm should consider two options in the order in which they are discussed.

The first and most appropriate strategy would be differentiation. The strategy involves developing unique products significantly different from what rival firms offer. Differentiation strategy will ensure that the firm’s products remain more appealing to customers than what rivals offer. It requires the firm to remain innovative enough to improve existing products or develop new ones (Clemons, 2019). The second suggestion for this firm is to embrace cost focus in its operations. The strategy involves embracing effective production strategies that lowers the overall cost of operation. The approach will ensure that the unit cost of its products is lower.

Porter’s generic strategies.
Figure 3. Porter’s generic strategies (Uhl, 2016, p. 67).

Conclusion

The critical evaluation of Google Inc shows that the firm has registered impressive growth and performance since it was founded in 1998. The management has been keen on understanding the emerging market trends and providing products that surpass expectations of its customers in the global market. It has benefited a lot from the growing global economy and played a role in enhancing globalization. Its success has enabled it to acquire others firms in its effort to expand its products portfolio. The researcher believes that this massive success can only be maintained if it continues in the right path towards meeting customers’ needs in a unique way. Differentiation and cost focus are the two strategies that the management should focus on to enhance its competitiveness.

References

Clemons, E. K. (2019). New patterns of power and profit: A strategist’s guide to competitive advantage in the age of digital transformation. Cham, Switzerland: Palgrave Macmillan.

Cline, H. F. (2014). Information communication technology and social transformation: A social and historical perspective. New York, NY: Routledge.

Drexl, J., & Di, P. F. (2015). Competition law as regulation. Cheltenham, United Kingdom: Edward Elgar Publishers.

Johnson, G., Whittington, R., Scholes, K., Angwin, D. & Regnér, P. (2017). Exploring Strategy: text and cases (2nd ed.). London, United Kingdom: Pearson.

Sato, Y., Wylie, K., Yamada, A., Siow, K., & Nizami, S. (2017). Transforming your organization with G Suite: Tips and best practices. Tokyo, Japan: Masanobu Iseri.

Tigani, J., & Naidu, S. (2014). Google big query analytics. Indianapolis, IN: John Wiley & Sons.

Tran, S. K. (2017). Google: A reflection of culture, leader, and management. International Journal Corporate Soc Responsibility 2(10), 4-16.

Uhl, A. (2016). Digital enterprise transformation: A business-driven approach to leveraging innovative IT. London, United Kingdom: Taylor Francis Group.

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