Introduction
Google Inc. is a technology-based company that offers a wide range of products in the field of internet and mobile technology. The firm was founded in January 1996 by two Stanford University graduate students, Larry Page and Sergey Brin. The two computer science students were interested in developing a search engine that was able to rate websites based on their relevance.
The students noted that it was not easy to get to specific websites that one desired using the existing internet explorers. It would take time to get to the needed web pages. They were convinced that they could come up with a better search engine that would make the work of web users easier than what was offered by the existing engines. They therefore started working on their search engine which they named BackRub.
The success of BackRub in ranking search attracted a number of investors who found it more effective than other existing search engines. By 1998, BackRub had become very popular among internet users because of its accuracy in ranking search results based on the words used (Gamble, Peteraf, & Thompson, 2015).
Larry Page and Sergey Brin renamed their search engine Google in 1998 to reflect its advanced nature in terms of volume of searches and effectiveness in ranking the search results. That same year, an investor tried to purchase Google Inc from the two inventors at $ 100,000, but the deal never sailed through because the two were interested in developing the idea further. Through crowd-sourcing, the two investors managed to raise a capital of $ 1 million to fund its operations.
The company experienced a phenomenon growth and by 1999, it had attracted $ 25 million additional funds from venture capital firms that had noticed the potential of the firm. By the year 2000, the firm had entered the wireless search technology and it enabled searches in 10 different languages. It was unique how this firm survived.com bubble burst that saw many internet-related companies crumble. However, Google emerged from the bubble burst stronger than it was before.
Its initial public Offering came in April 2009 following a phenomenon growth over a period of six years. The IPO was a phenomenon success because by the end of the first day of trading, there was an 18% appreciation of the firm’s shares in the market.
Since then, the firm has experienced massive growth to become the leading search engine in the world. In this report, the researcher will review the performance of Google Inc and the strategies it is using before making recommendations that can help it achieve even greater success in the global market.
Strategic Issue
Google Inc’s main source of revenue when it started trading on the stock market was the advertisements it received from the users of its website. However, the management was concerned about this single source of revenue. It came up with a number of strategies to help it expand its sources of revenue to avoid overreliance on one source. The main issue that comes out is how the firm is going to remain competitive even after expanding the scope of its market.
To remain competitive in the market, the firm has been using a number of strategies in the market. As shown in the case, the company has embraced diversity and strategic alliance as some of the strategies to help it achieve its desired success. The paper will look at how these approaches help this firm to expand its revenue stream.
External Analysis
When analyzing the competitiveness of a company, it is very important to look at the external environment and how it affects operations of a firm. The external environmental analysis helps in determining the competitive forces and how they may affect the ability of a company to achieve its set objectives.
External environmental analysis also makes it possible to look at other environmental forces such as the economy, the political environment, the legal structure of the business environment, emerging technologies and how it affects the operations of a firm, among other pertinent issues.
Google Inc has achieved success in the market because of its ability to monitor and manage these environmental forces. The external environment will be analyzed using PESTEL Analysis and Porter’s Five Forces. The Five Forces Analysis is given at the appendix.
Political environment
This is one of the most important external environmental forces that may affect operations of an organization. The political environment may have serious impact on the internal activities within a firm. It is a fact that political instability may lead to serious insecurity within a given country. Achieving success in a lawless country may not possible. Google Inc has flourished because of the political stability that has been experienced in the United States.
The country has enjoyed a long political stability and peace, with a change from one regime to the other happening very peacefully without affecting the national fabric that unites members of the society. The political class has also made an effort to avoid direct interference with the business community.
The politicians have been keen to avoid any policies or rhetoric that may have direct or indirect negative impact on the business community. The phenomenon success that Google Inc has experienced is directly related to the political stability and peace that the country has enjoyed since this firm was founded.
Economic environment
The economic environment is another major force that can affect a firm’s ability to achieve success within a given country or region. The economy of the United States has remained relatively stable over the years. The United States remains the leading economy in the world, with a very strong purchasing power. This company has been relying on individuals firms to place advertisements on its website. The impressive economy has enabled these individual companies to experienced massive success.
With this success, these individual firms have been using services offered by Google to experience even further growth. This cycle of economic success has been very instrumental in helping Google to achieve success. Other than the 2008 economic recession that affected the United States and the world at large, the economic environment has remained very supportive. Google Inc now operates in the global market. The emergence of strong economies in China, India, Brazil, African, and Russia has helped it to achieve even a greater growth.
Social environment
The social environmental forces may also have strong influence on the ability of Google to achieve success in the market. From the case study, it comes out clearly that the socio-cultural beliefs have a major impact on the purchasing patterns of the consumers. Consumers are always keen to purchase items they believe are of higher class compared to the existing products.
Google Inc was able to convince its users that the search engine understood their social needs and was able to meet these needs in a way that no other similar product in the market could. In the United States where Google Inc has its main market, the social environment is highly diversified.
The global society considers the United States as the current centre of civilization. In such a highly diversified environment, the firm will need to find ways of meeting the unique needs of different classes of its customers, especially after expanding the scope of its product delivery. It will need to segment the market and then find the best ways of meeting the needs of each market segment.
Technological environment
The emerging technologies have been as instrumental in the success of some firms as they have been in the downfall of others. Technology can help it to meet the expectations of its clients if it is handled properly. However, sometimes it may be very destructive. Technology has transformed the operational strategies used at this firm.
It currently uses emerging technologies to enhance speed, standardization, and quality of its products in the hardware segment of tablet computer and Smartphone. Technology has also transformed its marketing strategies as it seeks to reach out to the global audience. Google Inc currently uses social media platforms such as Facebook, Twitter, and YouTube to reach out to its targeted clients. Technology has also enhanced interaction between the firm and its global clients.
Through the emerging technologies, Google Inc has been able to introduce a number of new products into the market in order to help it enhance its competitiveness and increase sources of revenue. The increasing internet connectivity of remote parts of the world, especially in Africa and parts of Asia has helped this firm in expanding its market share. This firm’s services are now available in these countries although the firm has not made any significant human and financial resources into these markets, thanks to the modern technology.
Ecological environment
One of the three pillars of sustainability of any company is the ecology. Firms have always ignored the need to protect the environment even though they rely on it in various respects. Ecological issues may have impacts on the macro environment of a firm. The global society is becoming very sensitive of the levels of greenhouse gases in the air, and other agents of pollution. They are concerned because they know such pollutants may have a negative impact on environmental sustainability in the near future.
Pressure has been mounting on organizations to cut down their greenhouse gases emissions into the atmosphere as a way of protecting the environment. This means that firms such as Google Inc will need to have new production strategies which conform to the new environmental policies. This is specifically so after the firm successfully entered the computer and Smartphone hardware market segment. Manufacturing of these products should not be done in a way that may have adverse effect on the environment.
Legal environment
Finally, it is also very important to look at the legal environment and determine how it may affect operations of a firm. The legal environment is a macro factor that has affected the operations of Google Inc in a number of ways. A firm cannot operate successfully in a lawless region. It needs laws that will guide its relationship with other the stakeholders, and protects it from unfair business practices that may be a threat to its very existence.
The legal environment in the United States and Europe has enabled Google Inc to operate without any form of interference. This has facilitated its phenomenon growth over the past one decade. Google Inc entered the Chinese market in 2006 expecting a massive growth (Gamble, Peteraf, & Thompson, 2015). China had the highest number of internet users than any other country in the world, estimated to be over 300 million people.
The initial operations were affected by stiff competition from Baidu, a Chinese search engine that had dominated the market before the entry of Google. However, the real threat to this firm’s existence was a new law that censored searches that were seen to be critical of the government.
At first, Google tried to find ways of circumventing this law by redirecting its users to its Hong Kong search site that was not affected by the sensor. However, Google Inc later realized that the only way of achieving success in the Chinese market was to abide by all its legal structures even if some of these laws infringed on fundamental rights of people.
Key Successful factors
It is important to understand key success factors when analyzing external environmental forces that may affect operations of a given firm. As shown in the case study, one of the greatest success factors at Google Inc is the team of highly skilled and very flexible workforce who understands what the market needs, and able to change with changes in environmental forces. The company has only been in operations since 1996, but its impact has transformed the world of technology.
It has a deep understanding of how to deal with emerging market trends in this industry. The recent acquisition of a number of firms operating in related industries also means that it is in a better capacity to come up with new innovative products that will help in expanding its revenue streams.
Google Inc has introduced new strategies which encourage, and define how to manage forces of change in the workplace. Its proactive approach towards change makes it easy for it to deal with new disruptive technological forces that may affect its normal operations in the market. These are some of the key factors that have enabled this firm to be in its current position in the market.
Strategic Group Map
In strategic group map analysis for Google Inc, emphasis will be put on product diversity, geographic coverage, the market segment, branding extent, and marketing effort. The case clearly shows that this firm has diversified its products from internet related products to computer hardware products as a way of increasing its revenue stream.
Currently, this company operates in the global market. Its services are currently available in the entire world. Google Inc’s target market segment includes people who are always using the internet quit often. Its computer hardware products now targets user of personal computers within the United States and in the international market.
The brand Google has also helped this firm to achieve competitive strength over its market rivals. The brand has earned loyalty among the customers in the global market. The marketing effort of Google Inc has also been very effective in helping it achieve the desired success.
Company Situation
Google Inc’s has been struggling to expand its revenue stream as a way of attaining competitive edge over its market rivals. To understand the company situation, SWOT analysis, given at the appendix, will help in understanding the current position of the firm. The management of Google Inc has employed a number of strategies to achieve the intended objectives, as shown in the discussion below.
Generic strategy
It is important to note that the competitive position of Google Inc in the market has changed from that of an upcoming firm in the mid and late 1990s, to an industry leader it is today. Google Inc has been under pressure to distinguish its products from that of its competitors in the market in order to achieve a competitive advantage, especially when it first entered the industry.
The company has been using Porters Generic Strategy options in order to achieve competitiveness in the market. The diagram below shows the strategic options that have been available for this firm.
As mentioned above, Google Inc has been using cost leadership strategy in the market by offering discounted products to its customers. Most of the firms advertising directly through the firm’s website always get discounted products. They reach a wider audience at a relatively lower cost than what other platforms offer.
This has helped it in attracting a pool of loyal customers, especially those who are interested in reaching the global audience. This giant technology-based organization has also been using the differentiation strategy in order to achieve a competitive edge over its market rivals. Some of the products offered by this company are similar to those that are offered by other firms, especially following the decision to enter the mobile telephone market.
In order to distinguish its products from those offered by other firms, Google Inc has been keen developing additional unique features in its products. This helps in creating the impression that products from the firm are of superior quality as compared to those of its competitors.
In order to achieve maximum benefit in the market, Google Inc has also been giving massive focus on the market segments that are least exploited by other market competitors. For a long time, the existing search engines played little attention to the need to rank online searches. Google Inc identified this market gap and came up with a solution that completely transformed this industry.
Grand strategy
The case provided clearly shows the grand strategy that Google Inc has been using over the years to achieve the phenomenon growth it has experienced over the years. Its grand strategy is based on three approaches which include acquisitions, diversification, and strategic alliances. Google Inc has used acquisition as a strategy of achieving long-term goals in the market. This strategy is very effective for an organization that is keen on achieving robust growth within a very short period of time.
Acquiring an already established firm means that the acquiring company will not have to spend a lot of time trying to develop the business. It also easy to determine the profitability and success rates of the acquired business. By acquiring an established firm instead of starting a new one within the same industry, the acquiring company reduces the rates of market competition in such industries. These are the reasons that have driven Google Inc to use acquisition as one of the ways of expanding its market operations.
One of the first companies that were acquired by Google was YouTube in 2006. Google realized that YouTube offered a unique potential in the market that would help it expand its revenues. Two years later in 2008, the firm acquired Double-Click at $ 3.1 billion. In 2012, Google Inc made an ambitious venture by acquiring Motorola Mobility at $ 12.5 billion. This meant that it entered the hardware market segment of tablet computer and Smartphone industries. This was a major move that was meant to expand sources of its revenues.
Diversification is another grand strategy that this company has used in its strategic plans. The management of Google has been keen to reduce the firm’s overreliance on revenues earned from internet related products. All the major acquisitions made by the firm were all meant to diversify its sources of income. The acquisition of Motorola Mobility was seen as a strategic move by Google Inc to tap into the computer tablet and Smartphone markets.
Prior to its acquisition of Motorola Mobility, Google Inc had avoided the computer and Smartphone hardware market segment. However, the management realized that this market segment offered a perfect opportunity for this firm to grow its market share. This strategic move has proven to be successful as shown in the case study. Its Google TV was also introduced in 2010 as a way of diversifying the products of this company.
The third approach of grand strategy used by this company is strategic alliance with other established technology-related organization. Sometimes a business unit may realize that it has a common goal with other firms in the same industry or other related industries. Forming strategic alliance enables two or more business entities to share their resources and come up with ways of achieving a common goal that is beneficial to all the partners.
Google Inc entered a strategic alliance with Sony, Dish Networks, Intel, Adobe, and Logitech to develop a new product known as Google TV (Gamble, Peteraf, & Thompson, 2015). This was another ambitious project that was meant to enable users to stream videos, watch live networks, and On Demand programs.
Market development
Google Inc has extensive programs meant to promote market development. As the firm expands, it is necessary to find effective ways of marketing the present products to the targeted clients in the best way that would help in yielding the expected revenues. The company has been doing this by regularly changing the contents of advertising as a way of convincing its customers that it is innovative.
The product may be the same, or given cosmetic modification, but the complete change in the content of advertising makes the consumers believe that the products offer superior value than it used to before. Marketing development at Google may be looked at using the 4 Ps of marketing mix.
The pricing strategy of Google’s products has been very competitive, especially the fees it charges firms which advertise on its website. Google enables individuals and organizations to advertise within a national, a regional, or in the global market based on the firm’s market coverage.
The rates offered by this company are friendly compared to the charges of mass media. Google offers a wide variety of products. From search engine services, social media, and now to television services and computer hardware, the firm has expanded its product offering to help it capture wider market coverage as a way of enhancing its sustainability. The promotional aspect of marketing mix is also very important.
It not only informs the target audience about the existence of a given product, but also convinces them that it offers superior value at friendly costs. Inasmuch as this firm earns most of its revenues by offering companies promotional platforms, it has also been keen to promote its own products in the market.
Google uses various platforms to promote its products to the target audience. The placement component of the marketing mix is also very important. All the internet related products of this company are readily available to individuals who have access to the internet using their android phones, tablets, or personal computers. The hardware products offered by this firm are readily available various shops within the United States, Europe, and some countries in Asia.
Product development
Google Inc has also been keen on promoting product development as presented in the case. The management of this firm has realized that the needs of the customers in the market are changing. In order to manage these changing tastes and preferences, this firm has been conducting regular research and modifying its products based on the changes of market needs.
For instance, it has been enhancing its Firefox and Chrome products to offer superior value to its customers in the market. These two products have had their features improved remarkably to help improve the experience of the users. This product development strategy has enabled Google to become the leading search engine in the world.
Conclusion and Recommendations
It is clear from the discussion above and from the case study that Google Inc has achieved massive success within the past one decade due to its effective management strategies. When it started, this firm only earned revenues from the fees in charged on the users of its website. However, the management realized that it was necessary to expand product offerings in the market as a way of diversifying its income.
The firm has since become a major player in various industries that has made it direct competitor of some of the leading American companies such as Apple and Microsoft. The ability of this firm to achieve success in various markets that it has always targeted is unique. Although Google Inc has made a few mistakes in its expansion strategies, most of the strategic decisions of this firm in its expansion strategy have been very successful.
The entry into the new markets means that Google Inc will have to improve its strategies to manage the rivalry that is expected to come from some of the established firms such as Apple Inc and Microsoft Corporation. In this section, the researcher will provide a number of policy recommendations that may help Google Inc to improve its competitiveness in the market.
When giving recommendations to this company, the researcher was keen on basing the arguments on the trends that this firm has already taken which have achieved success. For instance, it is clear that the management of Google Inc is keen on diversifying its line of products in the market beyond the internet-related services which are its primary source of revenue. Using the Generic Competitive Strategies Model, it is possible to identify competitive strategies that this firm can employ to achieve competitive edge in the market.
Five Generic Competitive Strategies Model
This competitive strategies model is very important because it helps in defining the direction that a firm should take in order to achieve specific objectives in the market. The figure below shows the five strategies that a firm can take based on market target and the type of advantage a firm is seeking to achieve.
Figure 1: Five Generic Strategies Model
As shown in the figure above, a firm can choose one or two of the competitive strategies based on its aim in the market. For Google Inc, two of the five strategies may help it to achieve its aim based on the trend it has taken over the past decade. The first strategy that can work for this company is broad differentiation strategy. It emphasizes on the need to differentiate a firm’s products from that of its market rivals.
Differentiation strategy may take different approaches. This may be achieved at Google Inc through developing additional features on its products that rival businesses have not adopted. Branding of the products will also give it a competitive edge because the brand is trusted globally. Instead of using pricing strategies, the company should use technology and innovativeness to deliver unique products which are superior to that of the existing competitors.
The decision of the firm to diversify its products means that it will have to do more in order to continue producing products of very high quality. The diversification of its products should not be used to sacrifice the quality of products offered to the customers.
The second strategy that may work for Google Inc based on the model above is the best cost provider strategy. In this strategy, this firm will strive to give its clients high value for their money. Google can do this by meeting their expectations in terms of product quality provided at fair prices. The company should aim at thrilling its clients by offering what they expect, at fair price. It is important to note that this strategy does not involve offering products at prices much lower than the market average.
Such a move may trigger price wars which are always very dangerous to all the firms involved. Instead, it will offer high quality products, but instead of increasing the price to reflect the increased value of the products, the price will remain unchanged. This means that clients will be getting more value without having to pay more.
This strategy will also help this firm to strengthen its brand in the market. In the current competitive market place, brand of product means a lot to customers. They often prefer purchasing products of known brands as an assurance of quality.
Appendices
Appendix 1: Financial Ratios
Appendix 2: Five Forces Analysis
Appendix 3: SWOT
Appendix 4: Strategic Group Map
References
Gamble, J., Peteraf, M. & Thompson, A. (2015). Essentials of Strategic Management: The Quest for Competitive Advantage. New York: McGraw Hill.