Case Study of beverages

1. What are the strategically relevant components of the global

and US beverage industry macro-environment? How do the

economic charactheristic of the alternative beverages segment

of the industry differ from that of other beverage categories?

Explain.

The strategically relevant components of the global and U.S. beverage

industry macro-environment: 

Global beverage companies such as Coca Cola and PepsiCo had

relied on such beverages to sustain in volume growth in mature

market where consumer were reducing their consumption of

carbonated soft drinks.

Coca Cola, PepsiCo and other beverages companies were intent

on expanding the market for alternative beverages by

introducing energy drinks, sport drinks and vitamin drinks in

more and more emerging international markets.

 Beverage producers had made various attempts at increasing

the size of the market for alternative beverages by extending

existing product lines and developing altogether new products.

 Expanding the market for alternatives beverages and increasing

sales and market share, beverage producers also were forced to

content with criticism from some that energy drinks, energy

shots, and relaxation drinks presented health risks for consumers

and that some producers’ strategies promoted reckless behavior,

the primary concern of most producers of energy drinks, sports

drinks, and vitamin-enhanced beverages was how to best

improve their competitive standing in the market place.

 Rapid growth in the category, coupled with premium prices and

high profit margins made alternative beverages an important

part of beverage companies’ lineup of brands.

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The economic characteristic of the alternative beverage segment in

the industry is differ from that of other beverage categories. Alternative

beverages competed on the basis of differentiation from traditional drinks

such as carbonated soft drinks or fruit juice. The market started out with

low competition, however that is rapidly changing as many new product

line enter and profit margin will inevitably suffer from the price reduction.

The rest of the beverage industry is faced with low profit margins because

of high competition and little ability to differentiate products.

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2. What is competition like in the alternative beverage industry?

Which of the five competitive force is strongest? Which is

weakest? What competitive forces seem to have the greatest

effect on industry attractiveness and the potential profitability

of new entrants?

Competition between brands mostly depended on product

innovation. Also alternative beverages competed on the basis of

differentiation from traditional drinks such as carbonated soft drinks or

fruit juices. Alternative beverages include energy drinks, vitamin-

enhanced drinks, and others. With energy drinks competition relied on

the brands attempt to develop brand loyalty based on their taste,

energy-boosting properties of their ingredients, and image. They work

on a drinks image by its brand name, packaging, clever ads,

endorsement from celebrities and extreme sport athletes, and

sponsorships of extreme sports events and music concerts. With

vitamin-enhanced drinks they center on brand name, packaging,

advertising, unique flavors, and nutritional properties.

The competitive alternative beverage was the strongest competitive

forces. Among the sellers of energy drinks and other alternative

beverages, competition is so strong and will grow stronger each years.

Competition among major brands centers primarily on brand image, an

appealing taste, attractive packaging, new product research and

development, sales promotions and endorsements, and gaining better

access to shelf space and strengthening distribution capabilities. As for

2010, there was no evidence of strong price competition in any of the

alternative beverage categories, which makes it difficult to argue that

competitive rivalry is fierce or brutal. With PepsiCo and Coca Cola

already having such a big market share and their products were

already provided to consumers in supermarkets, supercenters,

wholesale clubs, and convenience stores it was easy for them to make

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their alternative beverages available by delivering the product along

with their soft drinks. They were able to dominate such channels since

they could make the products so readily available to consumers and

winning them over.

The bargaining power and leverage of suppliers was the weakest

competitive force. Many suppliers for alternative beverage ingredients

and they fight with the others to sell their products. Packaging is

readily available from many suppliers and is like a commodity.

However, some rare ingredients providers had a moderate amount of

leverage in negotiations with energy drink producers. Additionally, the

producers of alternative beverages are important customers of

suppliers and buy in large quantities. The customers may have some

power over the companies but not a lot. At the time when these

alternative beverages were produced they didn’t have much

competition so customers were forced to pay higher prices and did. If

customers are willing to buy it at a higher price than the companies

will sell it at that price. Like with Red Bull they are small cans but sell

at a high price while Monster energy drink is a competitor sells their

product at the same price but offer more drink in the can but

consumers still choose to pay that high amount instead of switching to

Monster.

Companies that seem to have the greatest effect on industry

attractiveness and profitability with new entrants would be companies

like PepsiCo and Coca-Cola that already have such a huge following of

loyal customers to their brand. If they were to introduce a new product

verse a company who isn’t well known, consumers are more likely to

go with PepsiCo or Coca-Cola because they like their other products

and are more willing to try their new product opposed to a company

they aren’t familiar with.

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3. How is the market for energy drinks, sports drinks and

vitamin-enhanced beverages changing? What are the

underlying drivers of change and how might those forces

individually or collectively make the industry more or less

attractive?

The market for energy drinks, sport drinks and vitamin-enhanced

beverages kept on changing over time. It changed through differentiation

from other brands to get brand image and also to meet every demand. As

spoken in the USA, these energy drinks help a very great growth industry.

Because of the significance of brand recognition, the sellers kept on

building the product and how it to be most familiar.

Drivers of change

Product innovation is one of the market drivers of change. This

feature is said to be the most important features of competitive

alternatives in the beverage industry. Alternative beverages compete on

differentiation of traditional beverages such as carbonated soft drinks and

fruit juices. So for energy drinks, they often change taste, energy and

materials as well as improve their images. It is also through innovative

marketing and efficient distribution system that kept changing

industry by constantly changed packaging, attractive advertisements to

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attract customers, the support of celebrities and athletes also

sponsorships.

Alternative beverages sellers also need to have efficient distribution

systems to be successful in the industry. These forces only made the

industry attractive because it can attract first time buyers through

product and marketing innovation and offer responsive customer service

to large customers which may then lead to an increase in market

demand, market competition more intense and lead to higher industry

profitability.

The global beverages industry was projected to grow The high growth

of purchasing power in developing countries Increase in demand in

developing countries Widening Market to include adult parents and office

workers New entrants are stifling profits Changes in the industry’s long-

term growth rate: Product and marketing innovation can make the

industry more attractive by differentiation the product In order to

maintain premium pricing industry has had to continually innovate the

product New Entrants into the market are also driving product and

marketing innovation in order to compete Product and Marketing

Innovation Globalization was projected to increase through 2014 Analysts

believed that Europe, Australia, South America, and the Middle East were

attractive markets of energy shots.

Poor economic conditions in US because there is a global economic

crisis that makes the consumer becomes more price sensitive Increasing

Globalization The content of energy shots and energy drinks was not

regulated by the U.S FDA The high caffeine consumption was heart

arrhythmia and insomnia. Monster Energy placed warning on its labels

The concern of the relaxation drink within the alternative beverage the

consumption of relaxation.

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4. How is the market for energy drinks, sports drinks and

vitamin-enhanced beverages changing? What are the

underlying drivers of change and how might those forces

individually or collectively make the industry more or less

attractive?

First key factors are the benefit of the beverages product itself.

According to the case study,the competition in energy drinks,sport drinks

and vitamin-enhanced are really tight. Customer attend to choose these

drinks because all of these beverages are good for health. With these

competitions,coca-cola and PepsiCo,the most high rated seller in

carbonated drinks were force to expand the market for alternatives

beverages by introducing energy drinks,sport drinks and vitamins drinks

in more emerging markets.

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Second factor is the premium-priced introduced by the company. It is

psychologically that consumer will choose the price that affordable for

them. It is hard for an entity to survive in the market if the prices are

high. Even though it is made with high quality ingredient,most of the

customer will only pick with the affordable prices. It is true that company

like GNC Live Well supply the most high quality energy drinks but still

their customers are much lower compared to affordable energy drink

companies.

Third factor,availbality of the product. For example,GNC Live Well’s

store are not entirely available at all places. This store are only located at

the population 5000>. It does not located in rural areas but only in the

cities. Whereas,coca-cola,pepsi and etc are available even in the country

side. Thus,it is convenience to the customers to obtain all energy drink

products.

5. What recommendation would you make to Coca-Cola to

improve its competitiveness in the global alternative beverage

industry? To PepsiCo? To Red Bull GmbH

Coca-cola had been known as the giant in baverage carbonated drinks.

The strength of their brand also aided the company to distribute new

product to the market. Despite all successfulness,coca-cola company had

been threatened by other giants like PepsiCo & RedBull. I recommend that

coca-cola design a new product,whether from the casing of their drinks or

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their flavours. Appearance and a new flavours will attrach

children,teenagers and adult to choose their product.

My second recommendation is that coca-cola company done any

corporate social responsibilities (CSR). Contribution to the public will help

to attract consumer’s mind and heart closer their relationship to the

company. Most important thing is,image of the company will be build.

Even though it is may costly to undergoes CSR but in my opinion,it is

good for lon term effect,especially for the image of the company.

Coca-cola company are popular with their carbonated drinks, which is

not suitable for a different level of ages. In my opinion, coca-cola

company should design a product that have healthy benefit to these

targets consumers. For example,we take a look at redbull. It’s popular

with their high energy content for teenagers and athlete to undergoes

their daily activities. Compare to carbonated drinks that only inflict the

various delicious flavours. It is not impossible to create something that

contribute two benefits in one drinks.

1. Discuss competition in the search industry. Which of the five

competitive forces seem strongest? Weakest? What is your

assessment of overall industry attractiveness?

Search industry built on search engine and advertisements. It

seems like there are only five main competitors in this industry

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compete with Google. Among the companies are Yahoo!, MSN, Baidu,

Ask and AOL. Competition between Google and other companies are

tight because most of them have the same target market and carry on

a similar business and technology.

STRONGEST

Bargaining power of buyers

In year 2007 and 2008, 97% of Google's revenue comes from

advertising business. The remaining 3% comes from income already

made by other businesses. The advertising customers have the power

to bargain for Google depends on advertising sales too much. In

addition, since the industry is relatively new, there are still many

opportunities for further growth of Google's current or potential

competitors that cause the bargaining power of buyers is very high.

Rivalry

The main competition is the Yahoo! and Microsoft. However, all

competitors have similar products and services. The competition based

on the performance of each company that can attract customers rather

than on price. Such as an example of the results that will be generated

for each search engine when consumers are searching for information

about something, there is the latest news in each search engine, the

speed of the search engines and many more.

WEAKEST

Bargaining power of suppliers

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Talented people were required by Google. They are known as a

supplier to Google. Without them, Google is not able to continue the

success of its own. Because they are too hard to get talented people in

various fields such as technology, art, animation and many more,

Google has provided many benefits and flexible work schedules to

attract and retain them in the company. For example, they are given

the facilities and equipment as well as a lucrative salary appropriate to

their work. Therefore, the supplier has bargaining power is high.

Potential entries

Internet search engine industry has low barriers to prohibit new

participation has the potential to enter. There are several companies

that exhibit high technology and workers that are more knowledge

than any other company. This causes low barriers for each new rival.

Although the barriers are low, a new entry must provide better and

faster results to compete with other competitors. They have to win

others with better service and fast, and difficult to duplicate by other

competitors.

Substitute

As search engines or as an advertiser, there are some powerful or

suitable substitute can replace Google. Such an example successors

are as Yahoo!, MSN, Bing and others. Not only Google but they also has

a way of alternate and distinctive style to attract customers to choose

their search engine. The successor will also continue to change and

evolve to become established in order to compete with Google.

Since Google and the rest of the search engines are already

established and technologically advanced, new entrants will have a

hard time competing with the search engine giants.

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For new entrants to succeed, they must be able to top the service of

Google and the other search engines. Google and the other existing

search engines already have the search history of old users, putting

them at an advantage over potentially new entrants. The industry is

very attractive due to it being a relatively new industry. Technological

advances can push the industry to greater heights.

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2. How is the search industry changing? What forces seem most

likely to bring about major change to the industry within the

next three to five years?

Computing technologies are one of the trends which will have also a

big impact on software market. Google is a big player in this field.

Microsoft has identity this as a big threat to their business. This field is

still going under great improvement. Second trend in industry is rising

a competition in mobile search or advertising and importance of social

networks is still in growth. In the search engine market, the following

trends were find:

Internationalization of the search market

China as a new prospective market and fight between Google

and Baidu for market share in china

High possibility of further mergers in the search market

It can be expected that some of the search engines will be

specialized for customer-based needs.

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3. What are the keys factor that define success in the industry?

What are the key competencies,capabilities & resources of

successful search engine companies.

Particular strategy elements

Technology Google build and acquire its own technology. That means

the company build its own serve from the component that directly from their

trusted manufacturers “Google now operates the world's largest distributed

computer system.”-Drummond

Brand. “A European study recently determined Google to be the

number one most recognized worldwide brand”-Drummond. As we know,

Google had become a verb in order to search for informations. This also the

strength of the company.

Operational Approaches

Acqusition . In 2004,Google has been active in acquisitions. Also in

order to dominate the search engine world, Google has verify its services.

For example ,they provide maps, local services, airline travel information and

etc. With the decision to make an acquisition with Double Clicks, Google

have the opportunities to diversify their services more than search ads.

Entry market into smartphones. Google discovered that person from

the age of 13 and above had owned a mobile phones. In 2008,Google has

introduced the world with the Android system. With the introduction of

Android, it helps to boost up the share of mobile search and delivering the

internet advertisement through the phone.

Google has make many approaches. In order to succeed, the company

had involve in many different level of fields. For example, Google’s senior

management had an opinion that by the year 2013,the company will acquire

to $95 million if they invested in cloud computing. In 2010,the company had

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the collaboration with Intel, Sony and etc. This is because Google had

decided to initiate to expand search to television.

As for Google’s compentencies, capabilities and resources, there are a

few element that can be discuss. Globalization. Google is available in 160

different local country domain and 117 languages. While Google is available

virtually everywhere there is internet access but operated in only 20

countries. Google is still working to establish a significant business presence

in places such as Middle East. As they are expanding their operations and

hire their first employees in another country, that part of Google feels like a

startup.

They have started Google.org with the idea of eclipsing the impact of

Google itself while focusing on more philanthropic causes. Though they are

working on extremely tough problems in difficult locations, they have made

significant pace. They have established several main focus areas, including

predicting and preventing disease; improving public services by informing

and empowering people according to the locations; and increasing economic

growth and job creation through stimulating small and medium enterprises.

Simplicity and flexibility. The company gives their best services to their

customers. Flexibility here means that the company give variety of services

such as maps, translator and etc. Simplicity are meant by the simplicity of

their services. When a certain customer acquire their services ,its not

complex or hard to understand. Google give the direct and most simplest

services so that their customers doesn’t have the trouble to think hard just

to acquire or interpret an information.

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4. Describe Google’s customer value proposition and profit

formula linked to its business model. What strategies has

Google relied upon to build competitive advantage in the

industry?

Low cost provider

Google supplied their services to their customers with the lowest cost

but with the most excellent services. We can see on our daily life, as an user,

Google doesn’t charge with hidden cost but only cost with our internet

charge. It’s also seems that the using of internet when we trying to “googl”

the internet, it does not consume much charges into our internet limit.

Differentiation on features.

Why we chose Google? For most student it is because it much easier to

gain any services other than searching for an information. For an example,

Google become the only search engine that provide the services of

translator.

Reporting and Metrics. Advertisers has the ability to change their ad

campaign and also,a dvitisers had the ability to change their advertisement

whenever they pleased. AdWords Discounter is a feature built into AdWords

that will charge you the lowest possible CPC while still maintaining your

position for each keyword. So even if you set an ad group maximum CPC of

US$1.00, you won't necessarily be charged this full amount for every click.

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Your actual CPC (the amount you actually pay per click) is often less than the

maximum CPC bid you specify for your ad group or keyword.

Smart Pricing is a feature that automatically reduces the price

advertisers pay for clicks if our data shows that a click from a Display

Network page is less likely to result in a conversion. This means that if our

smart pricing system predicts a particular Display Network page is likely to

have a low conversion rate, we will automatically reduce the price

advertisers pay for that click.

Google’s business model are:

Reliable pricing system

Scalable architecture

Disruptive business model

Efficient ad system and relevant ads

To support further growth of Google they are relaying on this

strategies:

Differentation ‘Deliver the most relevant, objective data in the shortest

time’

Focus on user experience and anticipate user needs.

Develop personalized user products and services.

Innovate advertising solutions for business sector.

Protect key talent by investing in culture.

Explore & develop internet video/wireless frontiers.

Innovate service/interfaces for wireless sector.

That is why Google need to:

Invest in R&D (innovations, search for algorithms and communications)

Pursue strategic alliances (integration and interoperability)

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Manage the Google brand (avoid marketing)

5. Have Google’s business model & strategy proven to be

successful? Should investors be impressed with the company

financial performance? How does the company’s financial

performance in that of Microsoft and Yahoo? Please conduct a

financial analysis to support your position-you may wish to use

the financial ratios presented in the Table 4.1 of the text as

guide in doing your financial analysis of the company.

Analysis :

Statement of operation

2003 2004 2005 2006 2007 2008 2009

Operating Profit Margin 0.233 0.2 0.32 0.334 0.306 0.304 0.351

Net Profit Margin 0.072 0.125 0.239 0.29 0.253 0.194 0.276

ROA

ROE 0.179 0.136 0.155 0.181 0.185 0.15 0.181

Operating Profit Margin

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This ratio will show how much profit is earned on each dollar sales, before paying interest

charges and income taxes.

Net Profit Margin

This will show after-tax profit per dollar of sales.

Return on Total Asset

A measure of the return on total investment in the enterprise. Interest is added to after-tax profits

to form the numerator, since the total assets are financed by creditors as well as by stockholders.

Return on Stockholders’ Equity

This ratio will show the return stockholder are earning on their investment in the enterprise.

Advertising revenue

Google is one of leading internet technologies and advertising companies in

the world that specialized in internet search engine and related advertising

services. The company's infrastructure includes a strong portfolio of own

websites which generate advertising revenues contributing to a significant

portion of its total revenues. Table below indicate the advertising revenue as

percentage in the full year from 2003-2008.

2003 2004 2005 2006 2007 2008

Google Websites 54 50 55 60 64 66

Google Network

Websites43 49 44 39 35 31

Licensing and other

revenue3 1 1 1 1 3

Exhibit 6 : Google’s Revenue by Source, 2003-2009 (c-147)

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Google website:

Advertising revenues from Google websites accounted for 66% of its total

revenue in 2008 compared to 64% and 60% respectively in 2007 and 2006.

This represents a revenue contribution of $ 14,413,826 thousands,

$10,624,705 thousands and $6,332,797 thousands. Among this three full

year, 2009 was the highest level of revenue contribution for advertising.

Moreover, Google website accounted for 55%, 50%, 54% of the company’s

advertising revenues in 2005, 2004 and 2003 respectively.

Google Network Websites:

The highest revenue record in Advertising revenue from Google Network

Websites is in the year of 2004 which id 49% of the total advertising

revenue. in the year 2003, the revenue is 43%. Then increase to 49% in

2004. In 2005, the revenue from Google Network Website start to declined.

Revenue accounted for 44%, 39%, 35% and 31% for the full year of 2005,

2006,2007 and 2008 respectively.

Licensing and other revenue:

Basically Licensing and other revenue in 2003 contribute 3% of the total

revenue. In 2004 the revenue declined to 1%. In 2005, 2006, 2007 the

contribution revenue from Licensing and other revenue are same as in 2004

which is 1%. Meanwhile, in 2008, the percentage of revenue rose to 3%.

If we compare the revenue for year 2006 between Google,yahoo and

Microsoft,it seems that Microsoft had the lead with $44,282,000,000.

Microsoft had the lead from the year 2006-2009.

In our opinion,according to the calculations,Google’s business strategy have

been proven successful and investors should be impress with the company.

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6. What are the company’s key resources and competitive

capabilities? What competitive liabilities and resources

weakness does it have? What opportunities exist? What

threats to its continued success are present?

Strength

Google is one of the premier internet brands in the world. The

company is ranked among the top brands worldwide. Over the past 4

years since 2010, Google was ranked number one worldwide in Brand

Value. Google brand is valued at $43,557 million according to 2010

estimates, which is an increase of 36% compared to 2009. Also,

according to industry sources, the company is the second most

valuable brand in the world.

Google search engine was designed to help people retrieve

information from either a computer network within an organisation or

the World Wide Web, Google's search engine differs from prior engines

in that it sorts information by a ranking of relevance. This relevance is

determined by the number of times other web pages refer users to a

particular webpage to find their requested information. An uncluttered

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and clear user interface simplifies the search function. Users are able

to get fast and more relevant results to their search queries. Let’s first

examine the speed of an average Google search. Any random search

takes between 0.06 to 0.12 seconds (Gigaom). Google’s competitive

edge is traced to the fact that they’ve built their own infrastructure of

servers, storage systems, bandwidth and hardware that supports the

fastest search on the web.  This initially helped to form the competitive

advantage which Google once held over its rival search engines, since

imitated by Microsoft with its MSN Search. The relative ease of the

search interface for internet search users has helped to place Google

firmly in the position as the current US market leader

In addition, the company holds strong market position. According

to industry sources, Google Sites lead the US explicit core search

market, followed by Yahoo and Microsoft. The company also owns 90%

of search market in Latin America. Google is also hugely dominant in

Western Europe with more than 90% market share of the search

sector. In Asia Pacific, Google owned 51% of the search market in

2010, followed by Baidu (23%) and Yahoo (18%). Further, the

company's YouTube online video services is a leading online media

platform. YouTube serves over two billion videos per day from a

selection of over 500 million. The company also has robust market

share in social networking segment with Orkut, and webmail through

Gmail. In addition, Android, the company’s own mobile operating

system for smart phones, is the most used in the world with over

500,000 devices activated daily, and has about 34% of smart phone

operating system market share at the end of 2010. Significant brand

image coupled with strong market position provides a competitive

advantage to the company over its peers. Robust financial

performance strengthens investors' confidence and provides capital for

future growth avenues.

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Google has a wide portfolio of offerings. The company's

integrated offerings include search, operating systems and platforms,

and enterprise products. It maintains a vast index of websites and

other online content, and makes it available through Google.com, the

company’s search engine, to anyone with an internet connection. The

company also offers Google Instant, which starts searching with every

keystroke, thereby saving users time on every search. As per the

company, Google Instant has saved its users over 100 billion

keystrokes. The company's application tools allow users to create,

share and communicate user generated information. Some of Google's

applications products include Google Docs, Google Calendar, Gmail,

Google Groups, Google Reader, Orkut, Blogger, Google Sites and

YouTube.

The company serves users in nearly every country and 146

languages. Google Translate works in about 58 languages and offers

translations between 3,306 language pairs. For geographic

information, Google covers the globe with imagery from satellites,

airplanes, and cars, and the company made street maps available of

nearly 100 countries. YouTube, an online community that lets users

upload, share, watch, rate, and comment on videos, from user

generated to niche professional to premium videos, serves over two

billion videos per day from a selection of over 500 million. More than

150 million people use Google Maps every month on their mobile

phones, and nearly 10 million use Google Latitude to connect with their

friends and families on maps.

In addition Gmail, the company’s most-used communications

app, the company’s broader suite of apps is used by over three million

businesses and 10 million students. In addition, in June 2011, the

company also launched Google+ in an attempt to capture the growing

social networking market. Google’s operating systems and platforms

include Android, Google Chrome OS and Google Chrome, Google TV,

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and Google Books. The company’s enterprise products provide its

technology for business settings. Some of its enterprise offerings

include Google Apps, Google Search Appliance, Google Site Search,

Google Checkout, Google Maps Application Programming Interface

(API), and Google Earth Enterprise.

Google’s advantage over competitors is its rapid speed that

keeps users coming back. The results of the search may vary, but

because of the incredible speed, a user can search another key phrase

with minimal sacrifice and therefore be less inclined to switch to a

competitor.google need very little end user marketing as the name

itself is getting word by mouth publicity. It has a simple interface and

it give comprehensive result without confusing its users.

Google also weights the votes and ranks web pages with its

PageRank technology to give it user access to the most important

pages first. Google also not biased towards advertisers. It clearly

separates relevant advertisement and actual results bt giving

‘Sponsored Links’ tag to sponsored results when user searches to get

information with some keyword. Moreover its also ranks sponsored

links to keep more relevant sponsored links on the top.

Google offer localized search called ‘search by location’ where

users can get results showing vendors, products and service earby

their areas. Google also have range innovation additional sevices like

Images, Groups, Directory and News. Google didn’t complicate its

website by making itself a portal rather it kept tabs for these service

on ots homepage so users can easily navigate and that also keeps the

website as simple as it was earlier.

Google has also come up with solutions for wireless handheld

devices, personalized toolbars, catalogues which are added essence

strengths. Other than that google also quickly routes the user to the

webpage and doesn’t linger for ad revenue.

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Weakness

Legal proceedings. Claims of patent infringement could adversely

impact Google’s financial condition. While these claims have not been fully

adjudicated there could be large financial loss if the decisions are not

favorable to Google. According to News week the U.S. Federal Trade

Commission is expanding its antitrust probe of Google Inc to include scrutiny

of its new Google+ social networking service. The FTC is looking into whether

Google is giving preference to its own services in search results and whether

that practice violates antitrust laws. Google is also facing various legal

complaints from various nations for inadvertently collecting personal data

from unprotected wireless networks via its Street View cars. This breach of

privacy has brought up regulatory sanctions against the company from

various countries including the U.S., Canada, and the European Union.

Although these cases have not been adjudicated there is a real chance

Goggle could face government sanctions in some of the countries. Any

unfavorable verdict in any of these cases could affect the company’s

financial condition and operating results.

Google's greatest strength and biggest revenue driver to the tune of

99 percent is its advertising scheme. But Google's contextual ads are also

the company's biggest weakness. Spammers and made-for-AdSense site

creators are constantly gaming Google's system through the practice known

as click fraud. And some AdSense publishers note that Google's black box

algorithms ensure that the company can bilk advertisers for millions. While

Google says it has click fraud under control, it's made some concessions. And

if AdSense publishers continue to grouse, expect more equivocating and

changes from Google.

Google scored a home run with text-based advertising, but its

subsequent efforts at monetizing content have fallen short. Google's project

to sell ads in magazines floundered, but the company has recently redoubled

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its efforts and is selling ad space in newspapers. Google has been ramping

up its audio sales force, and the scuttlebutt is that the company will soon sell

advertisements in podcasts. Google's success in these offline efforts will

depend on its ability to sell to scale, whether in one medium or across

media. But the technology is unproven, and there's no guarantee Google will

be able to target ads to consumers as effectively in offline environments. In

the interim, the company may be vulnerable to established players or

companies that specialize in a single market and/or medium. Google cost Per

Click advertising charging and ranking policy is confusing and makes it

difficult for marketers to predict where their ads would be positioned and

how much they would cost.

 In the eyes of some media companies, Google's business relies on

exploiting content the company doesn't own. To technophiles and those who

understand the flow of attention and Web traffic, Google is nothing but a

highly effective guide to the wilds of Internet content. But the media

companies that are accustomed to being at the top of the attention food are

expressing their frustration.Google admitted its vulnerability recently in

a recent SEC filing: "Courts in France have held us liable for allowing

advertisers to select certain trademarked terms as keywords. We are

appealing those decisions. We were also subject to two lawsuits in Germany

on similar matters where the courts held that we are not liable for the

actions of our advertisers prior to notification of trademark rights. We are

litigating or recently have litigated similar issues in other cases in the U.S.,

France, Germany, Italy, Israel and Austria. Adverse results in these lawsuits

may result in, or even compel, a change in this practice which could result in

a loss of revenue for us, which could harm our business."

Retention of Key Personnel. Google’s performance largely depends on

the talent and efforts of a skillful workforce. Google is in a very competitive

industry where competition for skilled employees is intense. Though they

have a great compensation program (such as their equity award programs)

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that may not be enough to motivate, attract and retain the world’s most

skilled people. Perhaps the least of Google's worries, but a worry

nonetheless, is how to make applications that lay users understand and

actually use. Some of Google's products, like News, Maps and Gmail, are

very successful. Others, such as Google Video, Google Reader and Google

Talk have faced adoption challenges. Part of the problem is Google's

tendency to solve engineering problems instead of user problems. A good

example is Google Video's link within a video feature. The feature is great if

you know about it and want to physically change a URL. But otherwise, it's

an accessibility nightmare. Another problem is Google's tendency to come

out strong with a beta release, but neglect to follow up with a release

candidate. 

In addition, Google has relatively low patent technology compared to

its competitors. For example, as per the industry sources, the company was

granted 282 US patents in 2010, compared to Microsoft’s 3,094 new patents

and Apple’s 563 patents. Also, in July 2011, Apple, Microsoft, RIM, and the

other consortium partners won Nortel’s bidding and gained access to over

6,000 mobile patents. Although, in the same month, Google purchased 1,030

patents from IBM to protect its Android platform from litigation, it may not

completely protect the company from patent wars, especially from the

combined efforts of Apple and Microsoft to target Google’s Android platform.

Furthermore, the legal uncertainty around the open source operating system

may make new customers wary about licensing the Google mobile platform

and also can cost current Android customers millions of dollars. In addition to

fighting lawsuits against itself, Google also has to concentrate on helping out

its carriers who are facing patent infringement problems due to the adoption

of Andrioid OS. Unfavorable verdict in any of the matters related to patent

infringement or other intellectual property rights may affect the company's

financial condition and operating results.

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Google do not have latest driver news like yahoo. Google only focus

strictly on the web portal like search only. Their diversification is limited. It

means that google doesn’t have highly personalized search by which it could

charge users by switching cost if they decide to leave google’s service.

Google also doesn’t have sticky like Yahoo and Msn have which can attract

users.

Many spammer manipulate google ranking technology by creating

dummy sites with thousands of links to pages that they wanted Google to

ranks highly. Google link based ranking did not employ actual traffic analysis.

Google contextual advertising was perceived by marketers to be less

effective in generating sales because visitors to web pages showing editorial

content were less likely than searchers to be ready to buy. Contextual search

algorithms are not 100% perfect and many times make mistakes.

Google also cannot compete serach engine in China. Many locals here in

China prefer Baidu for Chinese searches and Google for searches in foreign

languages. Baidu is still ranked as the most popular search engine without

any doubt for now.In my opinion, Google is the only real threat to Baidu’s

dominance.  As long as politics interfere with Google’s availability in China,

Baidu will stayon top as king of the Chinese search engines.

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Opportunity

There are many opportunities in the external environment for Google

to exploit and become more versatile in the market industry they operate.

The ability to grasp and implement the opportunities will place it in a very

stable position far ahead of their major competitors like Yahoo; Microsoft and

Amazon. Microsoft believes new Web services will work in tandem with

software installed on the computer, a vision that differs from "software as a

service" advocates who expect services delivered over the Web to eventually

replace software that resides on local PCs. This is indeed a great opportunity

for Google to expand and assert itself on the market because their new

operating system to be launched in the second half of 2010 is an upgrade of

the Google Chrome.

If enough computer manufacturers embrace the Chrome operating

system, it could weaken Microsoft while opening up new avenues for Google

to persuade consumers and businesses to use its suite of online applications

and other Internet services, generating more opportunities for Google to sell

lucrative Internet ads. This will greatly be a great incentive for Google and a

disincentive for Microsoft because their operating system tagged Windows is

quite expensive due to the fact that it adds an extra cost to the purchase of

a PC. If Google’s operating system is successfully launched, it will be a fierce

challenge to Microsoft who has enjoyed some kind of monopoly for more

than two decades without any formidable challenge by any firm.

Nevertheless, getting consumers and businesses to switch to

computers powered by a new operating system won't be easy, as Google has

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learned from the introduction of Chrome. Google have been gradually trying

its operating system for Smart Phones and other mobile devices. This

operating system is referred to as Android and is a direct challenge to the

ones by Microsoft Inc. and Apples Inc. According to the Associated Press

Google says about 30 million people are using Chrome, a small fraction of

the Web surfers who rely on Microsoft's market-leading Internet Explorer. If

all their marketing and operation strategies fall in place, then Google will

ultimately capture the market with its proposed operating system. At the

moment the world’s third largest PC manufacturer, Acer Inc. have dropped

Windows notebooks and replaced it with Android which in their opinion is

cost saving and at the same time will enable the PCs to run faster.

Part of the Google quest to attract users to its Gmail service, Google

has introduced dozens of features, including one that, after a certain time,

makes a user solve a Maths problem before sending an email, giving them

time to rethink it. Google makes money anytime an e-mail user clicks an

advertisement banner in their inbox; by enhancing their e-mail service to

increase their advertising market share, they hope to take away a significant

chunk of the market share away from Yahoo.

Google can become a mass-market portal like Yahoo and Microsoft and

also can increase switching cost for its users. It also can add sticky like chat

rooms and email systems to attract users and survive in tough competition.

Google also can enhance personalized and localized searching and can also

add localized paid listings of advertisers.

Other than that Google can start new service like multimedia, product

search, private database and print media. Google also can merge with an

established mass-market portal to lock in large number of users and

advertisers. Beside that Google can start giving full fledged service on hand

held mobile devices to capture market beyond conventional internet.

Threats

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Yahoo, Microsoft, and Amazon have all joined in a court suit to block

the court settlement of a 2005 copyright infringement class-action suit that

would give Google the right to digitize, host, and sell ads against millions of

published works (Myslewski, 2009). This is just a tiny bit of the threats faced

by Google against their major competitors.

Other threats faced by Google are their inability to motivate their

contract employees spread all over the world. In December 2008, Google

could not give cash bonus to their contract staff members but gave them G1

cell phones. Other than that is their privacy concerns.

Foreign exchange risk will give threat to Google. Other than that is

disruptive innovations. The other threat is increase global competition.

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7. What recommendations would you make Google’s top-

management team to sustain its competitive advantage in the

search industry? How should I best capitalize on its strategic

initiatives in mobile phones, cloud computing, emerging

markets and other ventures?

Invest in R&D-Stimulate innovation.

Constant search for improved algorithms and communication.

Implement new innovation very quick. Try new solution with real

people.

Search for strategic alliances (integration and interoperability)

Seek alliances with like-minded companies that promote open

sources standards. Extend the reach of Google’s search into

wireless sector (seek alliances with wireless network provider or

create a Google wireless network). Maybe seek alliances with Apple

(combining iPhone, WiFi Network and Google’s mobile search

capability)

Mobile Operating System

Mobile industry is one of the important goal in Google strategy.

Open platform (devices,services,network and application) are

already in Google strategies.

Cloud Computing

Futher improvement of Google’s web browsers in a way of

supporting cloud computing. Attract Microsoft’s customer, first by

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Google search, well established services and thn also with cloud

computing.

Manage the Google brand.

Keep on avoiding marketing. Anticipate, support, expand user’s

bond with the Google brand by anticipating their needs and

developing tools that meet them. Allow users to have interactive

access and control over their own personal information, increasing

its usefulness and building trust in Google’s brand.

Support public education-critical issues impacting Internet access.

Net neutrality, open access and interoperability across platforms is

very important. Reduced cost of personal training.

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