From left to right: Larry Page, Eric Schmidt and Sergey Brin
2010 Was The Year
Of Google
Kacey K. Chea
TABLE OF CONTENT
I. CURRENT SITUATION...................................................................................................4
● HISTORY...................................................................................................................4
● CURRENT PERFORMANCE...................................................................................4
○ RATIO ANALYSIS........................................................................................5
○ COMPETITOR COMPARISON...................................................................5
○ INDUSTRY COMPARISON..........................................................................5
● MISSION....................................................................................................................6
● OBJECTIVES.............................................................................................................6
● STRATEGIC POSTURE............................................................................................7
○ CORPORATE STRATEGY............................................................................9
■ DIRECTIONAL..................................................................................9
■ PORTFOLIO ANALYSIS..................................................................10
■ PARENTING STRATEGY.................................................................13
○ BUSINESS STRATEGY.................................................................................13
○ FUNCTIONAL STRATEGY..........................................................................13
● POLICIES...................................................................................................................13
● ALIGNMENT.............................................................................................................13
II. CORPORATE GOVERNANCE.......................................................................................14
● BOARD OF DIRECTORS.........................................................................................14
● TOP MANAGEMENT...............................................................................................15
III. EXTERNAL ENVIRONMENT: OPPORTUNITIES AND THREATS (SWOT)............16
● NATURAL PHYSICAL ENVIRONMENT: SUSTAINABILITY ISSUES...............16
● SOCIETAL ENVIRONMENT...................................................................................16
○ ECONOMIC...................................................................................................16
○ TECHNOLOGICAL.......................................................................................16
○ POLITICAL-LEGAL......................................................................................17
○ SOCIO-CULTURE.........................................................................................17
● TASK ENVIRONMENT.............................................................................................18
○ THREAT OF NEW ENTRANCE....................................................................18
○ BARGAINING POWER OF SUPPLIERS.....................................................19
○ THREAT OF SUBSTITUTE PRODUCTS OR SERVICES..........................19
○ BARGAINING POWER OF BUYERS...........................................................20
○ RIVALRY AMONG EXISTING FIRMS.......................................................20
○ THE 6TH FORCE..........................................................................................20
● EFAS TABLE.............................................................................................................21
IV. INTERNAL ENVIRONMENT: STRENGTHS AND WEAKNESSES (SWOT).............23
● CORE COMPETENCIES.........................................................................................23
● VRIO ANALYSIS.......................................................................................................23
● BUSINESS MODEL..................................................................................................24
● CORPORATE STRUCTURE...................................................................................24
● CORPORATE CULTURE........................................................................................25
● CORPORATE RESOURCE.....................................................................................25
○ MARKETING...............................................................................................25
○ FINANCE.......................................................................................................26
○ RESEARCH & DEVELOPMENT................................................................27
○ OPERATIONS AND LOGISTICS................................................................27
○ HUMAN RESOURCE...................................................................................27
○ INFORMATION SYSTEM...........................................................................27
● IFAS TABLE..............................................................................................................28
V. ANALYSIS OF STRATEGIC FACTOR ANALYSIS (SWOT)........................................28
● SITUATIONAL ANALYSIS (SFAS TABLE)...........................................................29
VI. STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY......................30
● TOWS MATRIX........................................................................................................31
● STRATEGIES ALTERNATIVES..............................................................................32
● RECOMMENDED STRATEGY................................................................................33
VII. IMPLEMENTATION.....................................................................................................33
VIII. EVALUATION AND CONTROL.................................................................................34
X. WORKS CITED.................................................................................................................35
I. CURRENT SITUATION
1.1 -HISTORY
Larry Page and Sergey Brin, two graduate students met at Stanford University in 1995 and began exchanging and forming ideas that lead to the founding of Google in 1998. The company was founded upon $100,000 of funding from Sun Microsystems, a deal engineered by top executive - Eric Schmidt, who is now Executive Chairman of Google’s Board of Directors. “The name Google was chosen as a play on “googol”, a mathematical term for the number one, followed by one hundred zeros.” It is said that the founders used this term because it related to the web, which is “exponentially growing”. Google grew quickly and was instantly recognized as being a better search engine then its competitors.
By the turn of the century Google could be used in 15 different languages, which made it internationally recognized and expanded its number of users around the world. Mid 2004 shares of Google began to be offered making the company public. In 2006 Gmail a Google free email service became available, and many other Google services followed such as Google Docs, Google Apps, Google Chrome, and many other technological services that Google now offers known as “Google Technology”.
By 2010 Google was seen around the world as a leader in the technology world. Due to its rapid growth as a search engine and the implementation of all of its services, products, and applications Google became among the strongest, and most recognized brands.
1.2 - CURRENT PERFORMANCE
In the past six years Google’s financial statements show they had extraordinary revenue growth. It is expected for a decrease in growth due to the online advertising market reaching its maturity, as well as stronger competition.
1.2.1 - RATIO ANALYSIS
The current ratio of Google in 2010 is 4.158. Current ratio is total assets over total liability. Generally ratio that ranges from 1.5 - 3 means the companies are doing well in terms of assets over liability. In this case, Google’s current ratio is at 4.158, which is over 3 meaning; Google is generating more assets than its liability.
In 2010 Google’s debt to equity is .25. The debt to equity is the amount of debt a firm takes into finance their assets, therefore, the lower debt equity number the better.
Quick ratio tells the short-term liquidity in the firm, it also measures the short-term debt. A higher quick ratio means how fast a firm paying off their short-term debt. In this case, Google’s quick ratio is 4.16.
1.2.2 - COMPETITOR COMPARISON
1.2.3 -INDUSTRY COMPARISON
As people around the world increasing their use of the Internet, marketing space grows; this has made an increasing number of companies want to reach the constantly increasing number of Internet users. Google's currently dominant position in the market gives them an advantage.
The search engine providers’ market share that Google holds in the US continues to grow. Additionally the use of other programs that Google offers such as Google Chrome and Gmail continues expanding since their introduction. Google's advertising revenues depend on this large and expanding user base.
1.3 - MISSION
Beginning Mission: To create the ultimate search engine to help users tame the unruly and exponentially growing repository of information that is the Internet.
Current Mission: To organize the world’s information and make it universally accessible and useful.
Google’s mission is to serve 3 primary groups - users, advertisers and Google network members and content providers. Users are a bulk a Google’s consumers so it is of utmost important to satisfy its users and ensure retention and ‘stickiness’ across its products by providing a pleasant UI and UEX which will urge the consumer to continue to use Google’s products and ensure long term sustainability. Secondly, Google generates 97% of its revenue through advertisers who understand user behavior through search history and offer ads based on demographics such as age, gender and geographic location. Lastly, network members and content providers gain access to AdSense which allows revenue sharing among companies, thus strengthening business relationships.
1.4 -OBJECTIVES
● Ease of access to information: Google sticks to its roots of search engine technology by providing the best possible search results based on freshness, speed, relevance and comprehensiveness. Founder Larry Page admits, “Access to information will play a key role,” in terms of global economies, politics and societies. Google’s search functions empowers access to information across borders, languages, cultures, tablets, mobile phones, desktops, operating systems, etc. and aims to offer its services and target as many platforms as possible.
● Free communication for all: Google has democratized the communication industry as it aims to offer free communication and enhance interactivity among its users. CEO, Larry Page takes pride in the creation of Gmail as it entered the market by offering 100x the space offered by leading competing rivals, and now has over 10 million users.
● Provide relevant ads: It is no unknown fact that ads are a predominant portion of what pays the bill for Google. However, the company is focused on providing a user experience of utmost quality that is fast, precise and extremely intuitive and easy to use. The company’s belief is as follows: “Put your message in front of potential customers right when they're searching for what you have to offer”. Enabling support activities not only ensures sustainability for Google, but it also empowers businesses around the world through its AdWords advertising platform, which operates through an auction system. Simply said, the highest bidder gets their ad displayed on Google properties.
● Enhance video offerings through Youtube: The acquisition of Youtube was a massive win for Google as it opened up whole new playing field in sharing and accessing video content. Youtube enables users to access video content whenever they want and on any device, and also share it with the world. Youtube’s sign up services are extremely easy to set up an account and upload videos within a few seconds or minutes. Google strongly believes video is a powerful medium and the company is devoted to vastly allocating resources in enhancing Youtube’s services and strengthening its dominance in the video sharing space.
● Enable livelihoods through online Google products: As mentioned above, Youtube is an extremely powerful medium in terms of effectively propagating digital information. Google embraces the motto, “A video is worth a million words,” thus affirming video’s necessity and ability to spread information more efficiently than any other form of media. For example, Salman Khan, founder of online education resource platform Khan Academy, quit his full time job as a hedge fund manager to create a virtual resource where he explains principles in subjects ranging from finance to chemistry. He has uploaded over 2000 videos, which have been viewed more than 45 million times. Thus, individual aspirations to transform the education industry are a small example of how people may make a livelihood through Google’s useful product offerings. Furthermore, more than 1 million people use AdWords as a sole medium of expanding business through marketing and finding users through clicks within Google’s search results.
● Focus on mobile: Nearly 10% of Youtube’s views come from mobile devices. This magnificent feat was fuelled by enhance network connectivity and the introduction of advanced cell phone offering from Samsung and Apple’s iPhone among others. The PC is slowly losing its market share as information is easier for the user to access on mobile devices on the go and convenient to carry because of its small size.
1.5 - STRATEGIC POSTURE
● Shape the future:
Google made the Internet more attractive to new and current users. They made global information very accessible to everyone. Google sets a standard for other and future companies who want to be in its industry. People use Google to help ease their web search tasks and Google provides that for their users and they demand perfection and creativity from their employees. Google has exceeded their top competitors Yahoo and Microsoft Bing in the field of search engine.
Google’s Android operating system began to become a deadly threat to Iphone’s IOS. Google has turned mobile phones with their efficient operating system into a true smartphone. Android is catching up with Apple mobile application market. The war between these two giant mobile operating systems will revolutionize the smartphone industry within the near future.
● Adapt to the Future:
○ Google is looking to stay competitive in the future, which is why they have made many key acquisitions in 2010.
○ In 2010 Google bought travel software firm ITA. “Today, almost half of all airline tickets are sold online” Marissa Mayer, vice president of search products and user experience at Google. With this acquisition Google has leaped forward against their competitors because it helps make it easier for business and busy suitors to book their flights while on the go.
○ One of the biggest issues of Google is security breach. A company is as big as Google is always prone to theft. In August 2010, Google acquired Zetawire, a Canadian company that allows consumers to make payments on their smartphones using near field communications (NFC) technology. All credit, debit, and check payment systems are now securely embedded in your phone. This helps reduce the risk of identity theft, a crime that has rose dramatically within the past years.
○ Google also trying to stay on top of the food chain by completing the acquisition of Phonetic Arts, it creates synthetic voices that will read words in a natural, expressive way. With this Google mobile will be able to keep up with the Iphone giant.
○ “In 2009, Google Docs was introduced. It allowed a user to upload all file types, including ZIP files, in order to work with those files online.” (Case study, Page 568). This is very useful for students and working professionals because it allows users to edit and contribute to the documents in real time. It also eliminates the hassle of carrying portable flash drives.
● Reserving the right to play:
○ In order for Google to survive in the future, they must continue to become the most secure and reliable source of web searches and mobile processor. It tries to reach the number one spot in web search engine and mobile operating system by acquiring those companies. They have made it clear that they want to stay competitive in the near future.
To work at Google, all employees must know the following ten things:
(1) Focus on the user and all else will follow. (2) It’s best to do one thing really, really well. (3) Fast is better than slow. (4) Democracy on the web works. (5) You don’t need to be at your desk to need an answer. (6) You can make money without doing evil. (7) There’s always more information out there. (8) The need for information crosses all borders. (9) You can be serious without a suit. (10) Great just isn’t good enough.
1.5.1 - CORPORATE STRATEGY
Google makes money through advertising. “To maximize profits, it is in Google’s interest to learn as much as it can about its users. With more information, it can sell more accurately targeted ads, and therefore more expensive ones”. Their goal is to be the leading innovator in providing information and in modern technology including mobile, search engine and cloud computing.
1.5.1.1 –DIRECTIONAL
Google’s directional strategy is leaning towards growth in mobile and social strategy. “When using Google products, the company already knows who your most important contacts are, what your core interests are, and where your default locations are.” This makes it easier for users because they are using products that already know their preferences.
“Google’s 2010 acquisition of AdMob boosted the company to the head of the class of mobile ad networks, with a commanding 59 percent share of all US mobile ad revenue according to IDC.”
For Google, their smartphone subscribers are only trailing behind those of Black Berry, which is plummeting, but for Google their subscribers have increased 3 folds over the year. The acquisition of AdMob helped Google excel in becoming the leading competitor against IOS.
1.5.1.2 – PORTFOLIO ANALYSIS
● Google, owner of the world's most popular search engine, will widen its lead in the $877 million U.S. market for mobile advertising, ending the year with a 59 percent share, according to research firm IDC. During the year, Google has taken more than half of the mobile ads market shares from its main competitors (Yahoo & Microsoft). This was the turnaround year for the company because it gained the public trust in mobile business.
● In 2010, for the month of August, Google's share dipped slightly to 65.4 percent from 65.8 percent. This small dip could lead to a big problem if Google doesn’t do anything about it.
● During that short falling month of Google. Yahoo gained more customers. “Web users ran almost 15.7 billion explicit core searches in August. Out of those, Google led the pack, of course, with 10.3 billion searches. Yahoo claimed second place with 2.7 billion searches, a gain of 3 percent from July, while Microsoft came in third with 1.7 billion searches, up 2 percent from July.” Google needs to continue to provide the best search results on the web and keep it basic and simple in order for their dominance in search engine to continue.