Google Case Analysis
Google is simply one of the most successful companies—in terms of profits, technological innovation, and cultural impact—that the world has ever seen. Google’s success, challenges, and future are all subjects worthy of thick books. Here, we’ll briefly discuss a few questions. We first look at the online search industry through the lens of Porter’s five forces model, and see a few reasons why Google has been successful. Second, we recommend Google continue expanding in ways that support its core philosophy of providing information. Third, we predict continued success for Google’s Android operating system.
Fourth, we discuss why Google’s culture and governance structure have been beneficial. Fifth, we look at Google’s struggles in China and Korea and make a few suggestions. Finally, we examine Google’s future with regulatory agencies and make recommendations to deal with regulation. Evaluate the sponsored search engine industry based on Porter’s five forces model. An analysis of Porter’s five forces reveals how Google became the most used search engine today. The first force to be analyzed is the threat of new entrants to the market. Currently, the threat of new entrants is low.
The technology and marketing needed to enter the market are prohibitive for most firms. What’s more, people are comfortable with the search engine choices presently available and, while switching costs are low, Google itself has demonstrated that it has a strong foothold on the search engine market. In November 2009, Google “enjoyed a 65. 6% share of all U. S. searches…[and outside] the United States Google’s lead was even larger, exceeding a 90% share of search queries in numerous countries. ” The second force that needs to be analyzed is the threat of substitutes.
Industry substitutes would be other ways to collect information and/or browse the web. For the vast majority of cases, search engines and Google in particular have been shown to be a faster and better way to collect information (compared to say a library or research firm). We might consider social sites like Facebook or Reddit to be threats. Rather than pure searches, people get information based on recommendations of peers. In Google’s case, it has incorporated social into its own algorithms in response to this threat.
For most searches, though, people go to a search engine like Google rather than waiting for a friend or a Facebook algorithm to suggest it. The threat is low-to-medium. The third force, the bargaining power of suppliers, is also low. The suppliers are just those who put information on the web. Those suppliers can’t switch to another web without Google or other search engines and won’t stop creating content even if one search engine disappeared. The threat is not just low, it doesn’t exist. The fourth and fifth forces are the bargaining power of buyers and the competition. For both the industry and Google in particular, both are low.
Buyers are those who purchase ads. And Google’s ads easily reach more people and cost less than any competitor. (Though those are also relatively cheap). Google AdSense give buyers the best tools to track and improve their advertising. Excepting some huge companies, such as Yahoo, no one has enough heft to negotiate with Google to any degree. They must simply except the price. Google knows they outshine the competition. In addition to enhancing its core search businesses, should Google also branch out into new arenas? Which of the following would you recommend:
1) building a full-fledged portal like Yahoo! s; 2) targeting Microsoft’s desktop software hegemony; and/or 3) becoming an e- commerce intermediary like eBay? Why? Reflecting upon Google’s recent strategies since Larry Page’s return as CEO, it is quite interesting to note that Google has shifted its stance—becoming more consolidated and more focused in strengthening its business model; and less adventurous in seeking opportunities. Under Page’s leadership, Google aims for depth and specialization and has hence abandoned many of its projects and fine-tuned its focus to seven major business areas: search, advertising, social networking, Android, Chrome, YouTube and local mobile commerce.
How Google will develop under Page from now on will be a very interesting issue to follow. However, for the various reasons stated hereon, it is important for Google to expand. Despite the benefits associated with specialization and fortifying brand image, it is nevertheless important to continue experimenting with new businesses and spur innovation since this is what defines Google as people know it. Going forward, Google should tackle all three branches for expansion.
In pursuing these opportunities, Google should stay focused on its mission as opposed to merely attacking the incumbent leaders. Whilst the development of new features and offerings may inevitably eat away competitors’ market shares, the guiding mission is to provide greater convenience for users in accessing and making use of information, whether that may be via search or share, voice or text. The purpose is to create an all-in-one platform that facilitates such activities. Google should expand for both offensive and defensive reasons.
With its current reputation and diverse portfolio of tools and services, it is in Google’s best interests to expand into new areas–both to broaden its revenue base and fulfill its mission of “reorganizing the world’s information and making them accessible and useful”. Numerous opportunities can still be reaped via further development of current products, such as Chrome OS and Google Apps, and expansions into complementary businesses will be able to leverage their current knowledge base to create both economies of scale and scope. In turn, expansion is necessary as a defensive strategy.
As the technology market matures, product offerings including the search engine will converge and standardize, resulting in tougher competition. Facebook is already emerging as a potential threat where, via introducing a myriad of applications and market places to its social network platform, it has been able to replicate many of Google’s offerings in a simpler form over one enclosed environment. In order to fend off such threats, it is imperative that Google expand into new areas both to diversify risks and concurrently brand itself as the more ttractive provider.
As such, Google should build a portal–which it already has with the current array of applications and tools–but not in the tabloid and link structure as Yahoo! The main feature that distinguishes Google from Yahoo! is the user interaction that takes place via the applications, and as such Google should maintain the portal as an all-in-one platform analogous to the Windows environment encompassing its application programs. Similar arguments must also be made regarding desktop software and e-commerce expansions.
They also both already exist in a form and they will all serve as ancillaries operating under the Google site in support of its broader mission of facilitating information access. The main point is that Google should stay focused. It is neither an online software company nor an e-commerce intermediary. Google is an information company, and it is important that its expansions operate under the concept of facilitating information organization and access. Who will eventually dominate the mobile operating system platform? Google (Android), Samsung, or Apple? Why?
Provide your justifications for your answer. Google, in the form of Android, already dominates and we expect this trend to continue. The market research firm Nielsen released the U. S. market share rate by smartphone operating system and manufacturer patrons. A full 51. 8% of smartphones use Android and Apple’s iOS ranked second with 34. 3%. By manufacturer, Apple is still keeping the first rank using iOS and Samsung, using Android, ranked second with 17%. It also indicates that Apple has gone far ahead of the competitors in regards to the iPhone’s indelible mark on technology, culture and business.
However, while the release of Apple iPhone 5 is attracting people’s attention, Google announced on September 11, 2012 that the opening number of New Android handsets hit 500 million. They are expecting that the cumulative shipments of Android handsets (Android Activations) will exceed 1 billion by 2013. In contrast, it is predicted that Apple iPhone’s aggregate shipments will reach 527 million by the end of next year and 1 billion by 2015. The product management director of Google Android, Hugo Barra commented on his Google Plus, “Today is an important day. 00 million handsets have been opened worldwide and every day more than 1. 3 million has been increasing. ”
Likewise, despite the fact that Apple has been sensational in the mobile market and has hit the operating system market with iOS providing many different kinds of materials, which are fresh enough to attract the users, we cannot deny that the future trend of the operating system market has been moving towards Android. Our team believes that Android will continue to dominate for several reasons. First, there are many staunch allied forces such as Samsung, HTC, Motorola, Sony Ericsson, and LG.
These smartphone manufacturers make Android smartphones, Because Apple does not let other manufacturers use iOS, they cannot help but have a difficulty on the numerical inferiority front. iOS will not be able to overcome such a large amount of competition. Second, while Apple makes one iPhone a year, hundreds of Android phones are released every year. This is why Android can upgrade quickly and generate the models users want. Each of the many Android manufacturers has released more than ten products. These phones vary in specifications, design, price, keyboard, and specialized functions.
This is a strong point of Android because users’ tastes vary. The iPhone, however great, is only one per year, so people have no choice and many will be unsatisfied. The last point that we need to emphasize is the growth of the Android market. The number of the Apps in the Android market is over 500,000 with a dramatically increasing rate. [See Appendix Figures 3 and 4] According to the domestic contents industry, the Android Market has fewer limitations in terms of operating and managing for app creators compared to the Apple App Store.
Unlike Android, for the Apple App Store, development companies must go through thorough pre-approval procedures according in order to register their apps. This implies that it has a structure to exclude the contents that are against Apple’s profit model. This will hinder Apple’s iOS further adoption by users. In contrast, the Android Market is relatively easier to register except in the case of harmful contents such as gambling or pornography. With all of this in mind, our team concludes that that Android will dominate the mobile operating systems market.
Do you view Google’s distinctive governance structure, corporate culture, and organizational processes as strengths or potential limitations? Justify your answers. We view them as strengths. The corporate structure of Google, which is common for media companies, such as newspapers, was created to provide the top management autonomy and independence. Google emphasized stability in the long term and thus during the IPO the dual-class equity decision strengthened the company’s strategic resolution.
Public technology companies face great pressure from the shareholders, which could lead to unethical and short-sighted decision making. The fact is that Google as a company is now so powerful it can ignore many shareholder complaints. The cultural values imposed by Google also greatly align with the strategy. Google’s statement of philosophy “Don’t be evil” is a prime example of the culture within the organization. This philosophy is widely used in every-day work to aid in ethical decision making.
The other company philosophy also differs from the traditional listed company as Google does not disclose information usually available from listed companies and also does not wish to “manipulate” the earnings to improve the stock price.?? Google’s company culture has become a world famous example. Employees are encouraged to spend up to 20% of their time pursuing their own projects and initiatives. While most of these resources will not create any value for the organization, it will maintain the innovative culture.
Concerns that due to these initiatives, the organization might be diversifying too much and spending too much resources on non core-business. (As mentioned above, Larry Page as CEO is addressing this concern. ) However, the increased autonomy, teamwork and cross-unit communication all not only foster innovation but also help create future leaders within the organization. In addition to the organizational behavioral benefits this system provides, Google employees have also created successful products and services, such as Google News and Gmail.
The organizational culture of Google is described to be very positive, productivity oriented and the structure also increases the speed of execution, reduces the need of middle management and thus decreases costs. The company is also highly competitive, which can cause increased stress levels, but at a large innovation driven organization such as Google, this type of continuous improvement and internal competition is one of the key forces driving Google. Despite the recent growth in the market share, Google is still not a dominant player in Korean as well as Chinese markets?
Why? What should Google do to penetrate these markets? With “Google” being synonymous with online search in the U. S. , the average American may find it surprising to learn that Google does not in fact dominate all markets and is in fact losing to homegrown competitors in countries such as China and South Korea. Google’s growth since 1999 is staggering. As of 2009, Google accounted for an incredible 65% of searches in the United States and holds 70% or more of the search engine market in 34 other countries.
Google has had no trouble establishing itself as the dominant player most of the time, however it was this philosophy that got the company into trouble in the worlds most important market: China. ? Google brought its business to Mainland China in 2005 by establishing a subsidiary in Beijing. By 2006, the company released its search offering www. google. cn. While being the first foreign search engine to enter the Chinese market was a positive. Google found itself facing stiff competition from China’s most popular homegrown search engine, Baidu.
Baidu’s purpose was to develop a search engine that would match the needs of Chinese citizens. Founded in 2000, the site quickly became a search powerhouse, was listed on the Nasdaq in 2005, and held over 70% of search market share by 2010. Google found itself in a tricky position from the moment it entered China. But while it was prepared for the Chinese government to censor a certain percentage of its search results, it did not expect the government to hack into its servers to retrieve private information about Chinese dissidents.
In 2010, Google announced that it would move its Chinese servers to Hong Kong in an attempt to circumvent the Mainland’s control over censorship and hacking attempts. Since that time, the relationship Google has held with China has been tumultuous. The government attacks Google in the media, and despite a superior searching performance, Chinese people think of it as the “clueless foreigner. ” Another important reason that led to Baidu’s imminent popularity is the fact that it lets users download illegal mp3’s, a practice, that, if shut down, should significantly affect its usage rates.
As of 2012, the latest market share numbers show Google’s hold on the Chinese market declining month by month to 16. 8% while Baidu hovers around 78%. In South Korea, the story is quite different. Google entered the Korean market in 2001 only to find it up against a search competitor that many have argued is not only superior to Google, but also more innovative. Naver was launched in 1999 by a group of ex-Samsung employees.
The purpose of the engine was to provide a niquely Korean experience, and the difference in the two sites reflects that almost immediately. Naver was built with the Korean user in mind, and therefore created a knowledge database allowing users to post information that could be searched by other users. Due to the lack of Korea-specific content on Google, many Koreans find it difficult to find the results they want when they search Google in Korean. ? If Google wants to penetrate these markets it needs to create search engines that keep the needs of the users in mind.
For instance, in Korea, people prefer Naver because of the plethora of user created content that is searchable in Korean. It will be very difficult for Google to replicate this strategy, however the company could start by incentivizing the most prolific content creators on Naver to start using related Google databases to post the same content, driving users to become more familiar with Google. In China, the challenge is enormous, especially given that the Chinese government lost face when Google decided to pull out of the mainland.
One area that Google has a clear competitive advantage is its integrity compared with Baidu. Baidu will accept money and place prominent links to guide users to websites with questionable products such as knockoff pharmacy product sites and, in the past, sites selling melamine-tainted products. If Google can leverage its integrity and create an engine which provides Chinese users with a more Chinese experience, such as placing links to youku as opposed to youtube, they may be able to slowly leach some of Baidu’s market share back into their corner.?