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Global Business Strategy – Google Inc Report


Introduction

The purpose of this business report is to analyze and evaluate Google, Inc’s marketing strategies through using several technical business models. The analysis and evaluation should explain how the business has achieved its phenomenal growth and outline whether the current strategies used are appropriate to help the organization continue with its future strategy.

It’s essential to understand the current intentional position of the company before appropriate strategies can be recommended and implemented.

Thus, a professional investigation should reveal the following; the internal environment (strengths and weakness) and the external forces such as political and economical. Through understanding this breakdown, the current strategic position and management can be explained and understood thoroughly.

Company Overview

Google is an internet-based Multinational Corporation that earns profit through advisement and development of internet-based products. It was founded by two students from Stanford University namely Sergey Brin and Larry Page in 1996 (New York Times 2007). As time passed by, the need to develop a relevant search engine on the internet became more apparent.

The two PhD students registered the new search engine as Google, Inc in 1997. In 1998, it was incorporated as a private company until 2004 when it was held as a public company (Anon 2010). It is also simple and almost everyone who is internet literate can use Google to search anything over the internet. The term ‘Google’ was derived from ‘googol’ which refers to the use of a search engine to obtain information on the internet.

Google, Inc derives most of its revenue through the use of advertisements. Since 2004, its stock price rose to $500 in 2007 with its revenues from advertising rising tremendously every year. Its initial market was valued at 1.7 billion dollars but has increased substantially to over 150 billion dollars. Its success has been triggered by the many acquisitions it has had, which gives room for more innovations (New York Times 2007).

Since its inception, Google has acquired over 30 individual companies, for instance, in 2003, it acquired Applied Semantics, Inc which made advertising easy and further developments were made on the advertising campaigns (Slawski 2007). In 2006, it acquired Writely. Later the same year, Google acquired YouTube for 1.65 billion dollars. Double-click was acquired in 2007 at 3.1 billion dollars.

This was a large advertising company which was also a threat to Google in terms of competition. However, since it was acquired, there has not been much development as would have been expected because of anti-trust issues that arose. In the same year, Tonic systems were acquired (Slawski 2007).

Services and Products that Google Offers

The company mostly offers free software, with some few exceptions. This software form the basis for end-users services which attract a large number of audiences, consequently attracting a large number of advertisers. As noted earlier, 99% of Google’s revenues come from advertising services, such as the use of AdSense, and AdWords.

Google Adwords display advertisements which are relevant to the context of each specific web page. To place advertisements on AdWords, the advertising companies make some payments to Google. On the other hand, in AdSense, it is Google which pays publishers to entrench Adsense into their sites.

It is worth noting that both AdWords and AdSense contain similar advertisements, the only difference is that when users click on advertisements in Adsense, the publishing company is paid whereas in AdWords it is the users who pay Google for their adverts to be included on Google’s pages (Anon 2010).

Other types of products offered by Google are two pieces of hardware referred to as the Google mini and the Google search Appliance. Google mini is preferred by small companies while medium and large companies prefer the other hardware. However, both hardware are borrowed by companies for easy searches within the company intranet, while others use them commercially on their websites.

Most of Google’s products and services are offered for free which include but not limited to Gmail, YouTube, Docs & spreadsheets, Google finance, and Google maps. Google is an innovative company and it is always developing new products and programs as it deems necessary.

Market Analysis

Google occupies almost 50% of the market share of all the search companies on the internet. Some of these companies are a threat to Google in terms of competition. For instance, Yahoo is one of the biggest competitors and it occupies about 28% of the market share while Microsoft lags behind it with 10%. Other competitors are Ask.com and AOL, which occupies 5%market share combined (Slawski 2007).

Most of the products offered by Yahoo are almost similar to Google’s products, although Google offers a wider variety of products and services than yahoo. Most of Microsoft’s products are on software and operating systems although it also offers search and limited online services.

Google has been able to withstand competition in the ever growing global market because of its internal development and acquisitions of major companies. It is likely that Google will expand most of the products and services it is offering today in order to compete favourably in different markets in all types of products and services including software and web-based services.

PESTEL analysis

Political factors

  • Government regulation of the internet services
  • Taxation policies
  • Regulation on excess capacity

The world is in the process of employing a free trade policy whereby the market is the one that determines the price in the market as well the products to be supplied. The global financial crisis has compelled countries of the world to relax their trade barriers. This is good for the company since it can expand in other many countries. This will increase the market base (Shane 2003).

Economic

  • Factors affecting GDP – employment, inflation, government
  • More disposable income –profitable countries amplify service demand
  • High investment from foreign shareholders
  • Competition

In the past decade the economy of the world has been on the low pace with many countries recording a negative rate. The world has recorded a positive rate since the great depression Era. Even if the rate today is not so good there is hope and thus a risk taker can as well diversify its business.

Socio-cultural

  • Lifestyle trends and consumer preferences
  • Demographic changes
  • Leisure activities
  • Increased spending

The attitude the people has towards Google products is that they are of high quality and are reliable. They are however willing to trade with current technologically improved products (Shane 2003). There are no threats as far as the social environment is concerned if the correct technology is adopted.

Technological

  • Innovation capacity
  • Changes in technology
  • Improved infrastructure

As stated earlier, there is a change in technology in the world. Technology is not stagnant and more is expected in the future (Atrill and Mclaney 2004). The competitiveness of the company will be dependent on the efficiency of technology that it will implement.

Environmental

  • Net work problems in some regions
  • Poor terrain

Legal

  • Technical standards
  • Competition regulation
  • Licensing and patent rights

The important thing is to comply with the laws and regulations, which are set.

The external forces described above can help in the determination of the Google’s market growth (or decline) and the implication of its strategic business unit.

If an economic recession occurs, the economic forces would have a considerable bearing on the future market strategies through ripple effects on the political and socio-cultural factors. Political factors put a restriction on the development of the industry by putting tough taxes and regulation requirements (Slowman and Sutcliffe 2004).

Marketing Strategy

Identifying the customer needs and exceeding them is achieved through several factors;

Price

  • Competitive international pricing strategy (Mowen 2004).
  • Price-wars over internet products
  • Price-ranges (customers select services & the price range that suit them).
  • Limit pricing strategies

Promotion

  • Cross-advertising advantage (vertical integration)
  • Acquisition of smaller companies – boosts international promotion & brand name
  • Service promotion through corporate image (efficient & quality products)

Products / Services

  • Diversified range of internet products and services.
  • Inter-linked products for customer use (Mowen 2004).
  • Delivering the content that customers desire (identifying customer preferences and delivering it to them)

Place

  • Open market operations (expansion through acquisitions)
  • Effective distribution channels through advanced technology
  • Accessible (i.e. virtually every place)
  • Online media content (worldwide access)

People

  • Skilled sales team to advertise, promote, and distribute services
  • Effective allocation of H.R. (Correct people for the job)

Google’s Superior Marketing Strategy

Google’s superior marketing strategy complements its mission statement and has seen its product being well positioned in the market. The company’s reputable brand name is a source of competitive advantage as it lures customer traffic. It offers clean and user friendly products and services that attract a large number of end-users. Most of its web pages are easy to use compared to other search engines.

By a single a click, a user is able to access the information he is seeking for whereas other search engines provides complicated procedures. It does also provide relevant results on specific pages making it easy for end-users.

This can be termed as Google’s superior marketing strategy that has enabled it to hold its current position. On top of easy to use services, it provides a wide variety of free products and services which increase its end-users (Slawski 2007).

By efficiently controlling its cost drivers, Google has developed a cost and differentiation advantage over its competitors through:

  • A high degree of technological innovativeness
  • Economies of scale and scope in ability to reach customers
  • Maximization of resources and capacity
  • Linkages between value chain activities
  • Interrelated business units
  • Vertical integration

Strengths and Weaknesses

Strength

  1. Effective management– training, motivating & reviewing staff. Also outsourcing
  2. Marketing power & growth- strong brand creation through cross-promotion.
  3. Strong balance sheet- stable liquidity & average debtor/creditor days reduced.
  4. 4. Tax advantage in different countries- lower corporate taxes.
  5. Strong capital base
  6. Strategic expansion through customer-focused innovations and acquisitions
  7. High turnover growth
  8. A strong market strategy
  9. Strategically placed to fight competition
  10. A strong brand name and good reputation among customers

Weaknesses

  1. Lack of a well thought future market strategy
  2. High cost structure
  3. Lack of a succession plan

Google Company’s strength is ventured in its strong brand name that is internationally recognized. There is a wide recognition of its products in all parts of the world. The strength of the company is undoubtedly engineered by its internal managerial mechanisms.

In order to have a competitive edge in selling its product and services, it will be advisable for the company to take advantage of its ability to compete favourably with equal players in the market (Hooley and Saunders 1993).

Porter’s 5 Forces (Analysis)

Porter came up with a structure for determining competition in an industry. His argument was that in every industry, there are at least five competitive forces which establish the nature of competition within that industry. These 5 forces are examined under:

Buyer’s (bargaining) power

Buyers determine the way products move. It is through buyers that a company realizes its competitive advantage in the market. Google has the following buyers’ power.

  • High Buyer Concentration- leads to price wars & high competition (Ketels 2006)
  • Short Contracts- Buyers can switch to alternatives rapidly
  • Inexpensive switching costs- customers can switch-over effortlessly
  • Backward Integration- threat removed since industry is diversified

Competitive Rivalry in the Industry

Within an industry, there are businesses which compete with each other for the available market share. These businesses either specialize in the production of similar products or differentiated products (Ketels 2006). Google’s rival firms compete with one another on the basis of:

  • Quality
  • Performance
  • High exit barriers
  • Little product differentiation
  • High investment intensity

Though the company offers high quality and low cost services, there is still great rivalry in the industry as products are close substitutes to each other.

Threat of Substitutes

A substitute product is a product that meets the same needs as those met by a product produced by the industry. Google’s products have many substitutes in the market offered by the competing companies such as Yahoo and Microsoft.

Threat of Entry

This depends on the number of entry barriers available. The higher the entry barriers, the fewer the number of competitors will be in the industry. Google enjoys the following barriers:

  • Brand loyalty of customers
  • Strong capital cost on entry (Ketels 2006)
  • Legal constraints
  • Acquisitions
  • Government restrictions on monopolistic firms
  • Greater economies of scale- out performance
  • Diversification- acceptable quality survives, can be easily imitated

It stands to win over the threat of entry in the market because; the government has put strong entry barriers.

Supplies’ Bargaining Power

  • Flexibility to the industry’s request
  • Volume and price provided
  • Concentrated suppliers
  • High switching cost

The suppliers bargaining power is weak over the buyers’ and could always lower their prices to ensure a share of the buyers’ prospective profit.

The Three Generic Strategies

Market segmentation is the breaking down of the target market into small segments to make advertising easy. One of the benefits of market segmentation is that companies are able to target specific populations that would have not been reached if mass marketing was adopted.

With this kind of marketing, companies are able to have a closer contact with their potential customers and they are able to understand their tastes, interests, and preferences. The differentiation strategy is the use of a set of incorporated actions that are intended to improve the production and delivery of goods and services and customers are expected to recognize these goods and services as having different and unique importance.

The cost leadership strategy is one of the key strategies in marketing (Earl 1996). Each producer in the industry aims at being the lowest producer at a given level of quality. Products are sold at an average price so as to attract a big market share and earn high profits. Most customers tend to prefer the low priced products if they guarantee them of quality (Hooley & Saunders 1993).

Urgent Issues

The company already has a strong brand name. This is an upper hand in positioning itself in the new market. Other than the company itself, the companies that it has acquired are also doing well. There is the expertise that the company boosts of.

This is gotten from the acquired companies and the developments that have been taking place over the years. Using this, the company should come up with measures that are aimed at countering competition by offering quality to the clients. Other urgent issues include;

  • Close relationship between its suppliers and distributors
  • Expansion of markets through social and cultural contexts
  • An effective procedure to be followed in order to establish new and attractive ideas for the success of the organization.
  • Strong marketing operations- through vertical & horizontal integrations

Google’s Strategic Position

The success or failure of any business or organization depends on the organizational behaviour perceptions. The way the management team together with the employees handles these perceptions determines whether the organization will close its operations or it will continue. This is because management and employees are responsible for the future development of the organization.

This is done through motivation, communication, politics, and power. Businesses have to develop a competitive advantage if they are to continue and failure to do so will lead to deterioration (Anctil 2008). For a relationship to exist, messages have to be sent and received between people such as employees and companies such as suppliers.

Google endeavours to invest in differentiation and low prices in comparison to competitors. As a result, they have adopted the hybrid strategy, which has enhanced their competitive advantage. Google has realized a high turnover growth which offsets its low profit margins and enables sustainability of the cooperation’s price-based competitive advantage.

In addition to reinvestment of margins, Google has achieved differentiation through its products as well as imperfect mobility of its brand name, which is inimitable. Hence, Google enjoys market dominance and first mover advantages through technological innovations.

From its initial existence, Google has capitalized on its core competencies through vertical integration, horizontal, and geographical diversification.

In line with its marketing strategy, Google has achieved diversification inorganically through acquisitions, strategic alliances and the associate programme, as well as organically through new product development and technological innovation. The internal expansion focused on improved products for existing customers and new markets.

Recommendations

Since the Google Company is growing fast and at the same time facing challenges, it is important that certain recommendations be proposed. The recommendations should be adopted with the sole reason of advancing the company’s global operations. To achieve this, the following recommendations are important;

Restructure marketing techniques: the company is facing stiff international competition and is likely to lose out in case it remains with the same old marketing strategies; the company should consider drawing new market communication strategies that will reposition its products in the market. In addition, the company should re-brand its products through careful and skilful innovation in order to attract new customers.

To ensure that the operations of the company are successful, it is important that the company defines its operation principles of internal control. Moreover, the company should also establish ways of monitoring and evaluating the internal controls.

The company should establish proper criteria according to which the process of risk management will be taking place. The criteria should be in such a way that potential risks are identified early enough and appropriate actions taken promptly.

Financial strength is one of the most important core businesses of the company. To ensure that the company’s financial resource are well managed and utilized, it is recommended that the company gives a clear description on how the internal audit should function to avoid any form of Fraud or misappropriation of financial resource

It will also be important for the company to enhance the flow of information from the top level to bottom level. The flow of information on crucial and sensitive matters should be effective and efficient. This should utilize the most current communication technology.

The strengths and weaknesses of the company should be evaluated on a periodic basis in order to identify potential challenges that can affect the normal operations of the company. It is important to note that new challenges arise and can contribute to the company’s already existing weaknesses.

Again, the company is likely to gain more strength in areas which, if well utilized, can help enhance the competitive advantage of the company. A definite period should therefore be set to be used in monitoring and evaluating the internal weaknesses and strengths of the company.

Conclusion

Google is the biggest and yet the most innovative internet firm. It was started as a research project by PhD students from the University of Stanford. Since inception, it has been going through periods of growth and innovation. It has evolved to be an internet-based powerhouse and has been able to beat other internet firms, such as, Yahoo and Microsoft.

It occupies about 50% of the market and offers a variety of products and services that attract a large population of users. Google offers relevant search results and it is also simple and user-friendly and this has facilitated its tremendous growth to become the most preferred search engine in the world. Google critical marketing strategies are the acquisition of small firms and the development of new services and technologies.

Its revenue is entirely on advertising. What makes Google’s advertisement unique from others is that the ads displayed on a page are pertinent to the content of that specific page. Google also offers a wide variety of free services such as Gmail, Google maps, and other we-based services which attracts many end-users forming a basis for increased advertising revenue.

Reference List

Anctil, E., 2008. Marketing and Advertising the Intangible. ASHE Higher Education Report, 34(2), 31-47.

Anon. 2010. . Web.

Atrill, P. and Mclaney, E., 2004. Accounting and finance for non-specialists, 4th Edition. Financial Times Prentice Hall, pp. 152-72.

Earl, P., 1996. Management, Marketing and the Competitive Process. Williston, American International Distribution Corporation.

Hooley, J. and Saunders, J., 1993. Competitive Strategy: The Key to Marketing Strategy. New York, Prentice Hall.

Ketels, C., 2006. Michael Porter’s Competitiveness Framework: Recent Learning and New Research Priorities. Journal of Industry, Competition and Trade Vol.6, no.2, 115-136.

Mowen, C.J., 2004. Consumer Behaviour-A Framework. Beijing, Tsinghua University Press.

New York Times, 2007. . Web.

Shane, S., 2003. A General Theory of Entrepreneurship: The Individual-Opportunity Nexus. London, Edward Elgar.

Slawski, B., 2007. . [Online] SEO by the Sea.

Slowman, J. and Sutcliffe, M., 2004. Economics for Business, 3rd Edition, Financial Times Prentice Hall, pp. 84-94.

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