Executive Summary

This project examines the internal and external challenges Google faces and

the strategy it employs to meet these challenges. These challenges are brought out by

pressures from both internal and external environment. SWOT analysis is used to

analyze Google.

External Environment Analysis

Political Factor

Google has been embroiled in a number of government lawsuit and restriction.

The partnership between Yahoo and itself brought itself into an antitrust lawsuit with

the US government. (Gamble & Thompson 2009) While in China, the government

implementation of information regulation filtering is against Google policy thus

affecting Google investment in China (Gamble & Thompson 2009). Due to new

regulation from many countries, Google application Streetview has been slap with a

number of lawsuits as show in exhibit 1

A western Pennsylvania couple has sued Google Inc., saying pictures of their home that appear on the
Web site's "Street View" feature violated their privacy, devalued their property and caused them mental
suffering. (Foxnew.com 2008)
Exhibit 1

Economic Factor

During the recession, majority of American companies saw a decline in their

business of about 25%. This affected their marketing budget. Despite Google

growing by 3% during that period, it was still affected as companies were not

investing as much as they did in advertising; the main source of revenue for Google.

To date, America remains the biggest market for Google and the current slow

recovery from the recession will impact Google growth. (Gamble & Thompson 2009)

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Social Factor

Social media such as Facebook and Twitter is the leading the way to how

people communicate with one another. Youtube allows individuals to post videos; it

is a platform that one can communicate and express themselves. Such social

networking platform will continue to see increase in usage. Google recognize the

potential growth if it were to diversify into it

Technological

There is an increase in smart mobile phones which allows for internet surfing

and communication through social network. This only further increases internet

usage. Software programs that supports cloud computing is shaping the future of the

industry. The industry is estimated to be worth USD$95 billion by 2013 (Gamble &

Thompson 2009)

Strong Rivalry among Competitors

Microsoft and Yahoo are Google’s biggest rivals. Currently, Yahoo and

Microsoft are in a partnership to compete against Google for a larger market share in

the area of search engine. Search engine Bing was the fruit of the partnership which

will contest with Google’s 37% market share. Bing is a threat to Google due to factors

like huge financial muscle of Microsoft and Yahoo’s 19.6% of the market share who

are mostly loyal users. Recently, Azure was acquired to compete with Google on

their cloud computing concept.

Threat of substitution

Television, print media and radio are tradition media avenues. These are the

substituted threats which account for 84% of the American market. However, these

threats are weak as they cater to different audience.

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Power of suppliers

Power of suppliers is weak as Google; a result of a great partnership

relationship with them. Google provides the Android software to mobile phone

manufacturers such as Samsung, which in turn use Google as the default search

engine in the phone.

Power of Buyer

Despite the variety of search engine available, consumers prefer Google. The

products and services offered by Goggle ranges from traffic estimation, advertising

campaigns and providing professional advice from experts is what attracts audience.

The large audience group make Google attractive to advertisers to invest in

advertising space.

Threat of New Entrant

Search engine Baidu overtook Google in China is an example of the threat

new entry poses to Google. This is possible because the entry barriers for new

competitors are low. Secondly, the cost of switching vendors is low for consumers.

Finally, the market is open for anyone with the financial means and creativity to try.

Internal Analysis

Value

Google best capabilities are its employees; who have a mindset and creativity

that makes a difference. They utilize innovation and creativity to solve complex

problems and exploiting opportunities. An example would be the development of

Adsense, Adwords and Chrome browser.

These applications enabled them to provide solutions to any problems in the shortest

time possible. It also further enhances its search function efficiency to have a

competitive edge. In the mobile market, by developing a unique way to translate

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HTML Formatted files which can be read on mobile devices for wireless users and the

Android system, Google has gain a large market share.

Rarity

The unique culture in Google is unlike any corporate or enterprise in America.

Google’s employees are passionate with their jobs and always having a mindset of

making a difference, but this can be copy. There are plenty of internet advertising

companies nowadays but Google has developed unique and cost effective advertising

services, such as Adwords and Adsense to target massive potential users through the

aids of its acquisitions. Hence, rarity is high in term of their functional abilities.

Imitate-ability

The possibility of imitation is low as their costs structure and complexity are

extremely high to imitate. For example, Microsoft launched a new search engine and

search advertising system, code named Moonshot in 2004 and 2006 respectively to

compete against Google but it failed. (Brandt, 2009)

Organisation

Google recruits young people with strong academic backgrounds. This is

because they intellectual, creative and are willing to work for longer hours with

minimal wage. Google’s management system is relatively flat. They adopt team level

structure to achieve synergy and creativeness among employees. An employee’s time

is split in a way where they spent 70% of their time on work 20% on projects and 10

% personal interest time to create innovation culture

SWOT Analysis

Strength

Google has always been highly innovative and constantly implementing new

ways and services to improve and set new standards that enable them to enjoy great

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success and become a market leader. This is due to their ability to constantly

anticipate the needs and wants of the consumers. Their search engine provides the

user with relevant information in the matter of seconds. Their costing structures to

offer advertisers are cost effective and relevant. Their competitive advantage derives

from relationship with internet users, advertisers, and websites.

Weakness

Their main weakness as shown in exhibit 2, majority of Google’s revenues

depend on internet advertising. This makes them vulnerable when their competitors

overtook their leader in the industry.

$20,000,000
Exhibit 2: Google’s revenues by
$15,000,000 Advertising
Revenue
$10,000,000
Lisensing& other
source, 2003-2008(in thousands)
$5,000,000
revenues
$0
Source: Google’s revenues cited in
2005

2007
2008
2004

2006

essentials of strategic management

2nd edition, 2009, pg 393

Another weakness is by trying to compete against Microsoft by trying to

create a new operating system. In doing so, Microsoft reacted by luring Google users.

Their international market has been another weakness. They have been losing market

shares in due to lawsuits and government policies. Furthermore, Facebook and

Twitter controls the majority market share of social networking websites.

Opportunities

Emerging markets such as Russia, India and China offers opportunities for

Google. The mobile phone applications market and search-based advertising is also

growing. Google could also venture into offline advertising. Google has the potential

to become the dominant provider of ‘cloud computing’.

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Threat

Currently the two biggest threats to Google are Bing and the shrinking advertising

budget from companies in US.

Problem Statement

Google is diversifying into too many areas without first strengthening their

core business which are advertising and search engine.

Criteria for Evaluating Strategy

- Increase market share for search engine

- Increase revenue

- Open new market based on its strength

Three Strategic Alternatives and Evaluation

One of the strategic alternatives is to venture into offline advertising such as

television advertising. As show on the exhibit 3 below, offline advertising accounts

for 84% of the market. Google is able to track viewers’ habits during commercial

breaks and use it to identify ads that are more relevant to viewers of different

programs. This will induce higher chances of providing advertisers with appealing

service as it immediately raises the effectiveness of Google’s advertisement in every

aspect through the proliferation of its targeted audiences and advertising platforms.

With this differentiating strategy and its strength of it brand name Google, it distinctly

shows that they will be able to diversify into new area of business successfully.
Medium Amount Percentage
Newspapers $48.6 billions 37.5%
Internet $21 billions 16%
TV $20 billions 15.4%
Network TV $20 billions 15.4%
Radio $20 billions 15.4%
Source: Essential of strategic management (Gamble and Thompson 2009)
Exhibit 3

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 Based on the criteria, if Google is able to dominate the offline advertising

industry just like its successful internet advertising, it might receive sharp revenue

growth for its overall advertising revenue within 2 to 3 yrs. The industry is new to

Google so it will be at a disadvantage as they do not have much experience in this

industry. Even thought they are opening a new market but they wouldn’t be able to

exploit their strength. Their core business is still their search engine, by choosing this

option they would be diversifying into unrelated business which carry the risk of

unable to achieve the outcome of 1+1<2.

The next strategic alternative is to adopt a broad differentiation strategy

through integrating cloud computing into its Android system. By using software-as-

service model which is one of the three cloud models, Google provides the services

by hosting both the applications and data which enables the end user to freely use

Google’s services from anywhere through their mobile devices. This mobile service

does not only instil convenience in locating the data, it also provides commonly used

business productivity applications such as word processing, spreadsheets, and

presentation software for mobile users to expedite in their works. Hence, adding the

value of these unique features, it will stimulate more buyers’ interest to purchase

Android operating system than other mobile operating systems such as Window

mobile
Google’s strategy and etc. search based advertising on mobile devices had been very successful. In 2008
to dominate
Google accounted for 63% of searches performed on internet-enabled phones. The company’s introduction of its
Android operating system for mobile phones was expected to allow it to increase its share of mobile searches and
expand the market for other type of internets ads delivered devices.( Gamble & Thompson 2009)
Many information analysts agreed that ‘cloud computing’ would become a common software platform and could
grow to a $95 billions market by 2013.( Gamble & Thompson 2009)

Exhibit 4

As supported by evidence in exhibit 4, Google dominated 63% of

searches performed on internet enabled phones in 2008. It is predicted that

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 Google will increase its overall market shares in mobile and search industries to

about 80% in 3 years. Google could acquire more mobile search profits than its

competitors if they can speed up the development of mobile cloud technology.

Cloud computing on mobile device will definitely lead to an increase in their

market share of internet users. Cloud computing on mobile platforms can also

help them differentiate themselves from their competitors in markets such as

China.

Last strategy alternative, is for Google to perform strategic acquisition or

partnership with market leaders such as Facebook and Baidu.

A think local, act local approach to strategy making is essential when there are significant country-to-country
difference in customer preferences and buying habits, when there are significant cross-country differences in
distribution channels and marketing methods, when host country governments enact regulations requiring that
products sold locally meet strict manufacturing specifications or performance standards(Gamble & Thompson
2009) Exhibit 5

As shown in exhibit 5, think local, act local concept is best when the host

country is diverse and complicated and the advantage to cater to the individual

need of the market. Through partnership or acquisition, they will be able gain

share in the target market. Based on the criteria to gain market share they will be

at an advantage.

Acquisition of companies will need large resources and time and they

might interfere with the countries anti monopoly regulations. This will affect

their return of investment.

The last criteria; opening new markets, is not practical as they will still

be in their same business. Based on the blue ocean strategy, it will be better to

create a new industry or distinctive market than push out competitors, which is

both costly and time consuming.

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 Recommended Alternative and Execution

We would like to recommend to Google that they should adopt the strategy of

integrating cloud computing into its Android system as this strategy fulfil all the

predetermined criteria.

Eight Components of Strategy Execution

1. Building an organisation capable of executing the strategy successfully.
2. Allocating ample Using the principal
resources managerial activities
to strategy-critical components of strategy execution process
3. Ensuring that policies and procedures facilitate rather impede effective strategy execution
4. Pushing(Gamble & Thompson
for continuous 2009) as
improvement in shown in exhibit
how value 5, they should
chain activities first recruit
are performed
5. Installing information and operating systems that enable company personnel to perform essential activities
6. employees
Tying rewards that to
directly posses expertise in of
the achievement cloud computingobjectives
performance and integrate their search engine
7. Fostering a corporate culture that promote good strategy execution
8. Exertingexpertise to invent
the internal this system.
leadership needed They will implementation
to propel also need to provide ample resources for
forward

Exhibit 6

this primary project. With the current Google culture, they have the necessary policies

and facilities for this project. They will need to realign their present product to

accommodate this project for instance their Google chrome. Rewarding the team for

the project success will motivate them. Upon completion of the system, they will need

to negotiate with their strategic partners and implement this system in their products.

Limitations of alternative and conclusions

The limitation of this strategy is the failure of Google unable to successfully develop

the system. This will result in the loss of investment. Google must gain the advantage

of being the first in the market, if competitors are able to develop new technology that

surpasses Google technology. That might result in the loss of new market for Google.

With Google’s vast cash reserve and progressive positive growth in revenue, they are

able to market this technology at a strategic pricing. Ultimately, it will ignite the

revenue growth when there is a surge in their overall positioning. Hence, the

implementation of this broad differentiation strategy will accelerate Google’s

progression to dominate as a cloud computing provider in the upcoming future.

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References

Barney & Hesterly, 2005, ‘Chapter 3- Evaluating a Firm’s Internal Capabilities’,

Strategic Management and Competitive Advantage Concepts and Cases, Prentice

Hall, pp. 2-21, assessed 18 Sept 2010,

<HTTP://WWW.SCRIBD.COM/DOC/2259137/VRIO>

FOXNEW.COM APRIL 04, 2008 : GOOGLE'S 'STREET VIEW' PHOTOS OF

HOMES VIOLATE OWNERS' PRIVACY, LAWSUIT ARGUES ASSESSED

ON 18 SEPT 2010 FROM

<HTTP://WWW.FOXNEWS.COM/STORY/0,2933,346770,00.HTML ON >

Gamble & Thompson, 2009, Essential of Strategic Management- The Quest for

Competitive Advantage, 2nd edition, McGraw Hill, New York

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