Case: Googles strategy in 2010
s Strategy in 2010Group 5
Abu Shafin Mohammad Mahdee Jameel (45D 41)Syeda Tasnia Hasan
(50D 11)Mohammad Zeaul Haq (50D 18)Chandan Ghosh (50D 27)Md.
Rafiqul Islam (50D 40)Md. Saroar Hossain (50D 45)
Presented to :Sheikh Morshed JahanAssociate ProfessorCourse:
W650 Business Strategy
1
Google is the leading search firm in the internet service
industry. It has many prospects for growth within the industry and
beyond-
More and more people are dependent on the internet as the source
of information. As anyone using the internet is Googles target
market, it has tremendous potential to grow as a reliable search
engine.
The loyal and satisfied customers also offer Google with the
chance for future expansion on a global scale.
Growth opportunities in industry2
Growth opportunities in industry (Contd.) - In 2009, 50% of the
traffic and revenues were made from outside the US and the
percentage grew as it entered the emerging markets.
Businesses are using it as the platform for advertising. The
company dominates the market for search based ads.
- Googles search results made advertising revenues of almost
$22.9 billion in 2009.
The increasing smartphone market is also adding to the growth
prospect of Google.
3
The Android operating system launched by the company has
incorporated features in mobile phones that compete against Apples
iPhone.
- Googles Android software market share increased from 0 in 2008
to 13% in May,2010.
Cloud computing, the common software platform in the internet is
also a growing market. Moving applications such as word processing,
presentations and spreadsheets to cloud presents various benefits
to corporate users.
Growth opportunities in industry (Contd.)4
Googles Chrome operating system was launched specially for cloud
computing applications. - the cloud computing market was estimated
to grow to a $95 billion market by 2013.
Google also offers various other applications besides its search
functions. It aims to expand its market by launching Google TV that
would allow users to search live network and cable programming.
Growth opportunities in industry (Contd.)5
Competitive Forces6
Competitive rivalry within the industry: moderate-high
Google has the highest market share in the internet search
market at 63.7% as of May, 2010 while Yahoo! and Microsoft have
18.3% and 12.1% respectively.
However, Googles Android faces intense competition from Apples
iOS.
Competitive Forces (Contd.)7
Bargaining power of suppliers: low-moderate
Given, Google remains the dominant search engine in the
industry.
Advertisers and receivers of Google products are both clients,
hence, there is a high supplier-seller collaboration.
Competitive Forces (Contd.)8
Bargaining power of the customers: moderate-high
Many products and services are free, if they are not used then
it would affect the bottom line of other products.
Internet search industry needs to appease the users or else it
will not be successful.
No single user has a controlling interest as most revenue is
generated by specific partner sites. Competitive Forces
(Contd.)9
Threat of new entrants: low-moderate
Barrier to new entry is high as current competitors are
established.
New entrants need large capital and lot of technical know-how to
build a network to compete and do better than Google and other
companies.
Threat can be there in segmented markets, if any company focuses
on a single product/service for a niche.Competitive Forces
(Contd.)10
Threat of substitutes: high in case of products and development
low in case of internet itself
Internet cannot be replaced as the source of information.
Tech-savvy users are always looking for more sophisticated
product and service offerings
Users can switch to other search engines if not satisfied with
the speed and accuracy of results. Competitive Forces
(Contd.)11
Internet Advertising Value ChainCore BusinessForward
IntegrationBackward Integration12
Internet Advertising Value ChainCore BusinessNexus
Chromebook
Android
Chrome
Google Fiber
Google.com
Google AdmobGoogle Analytics
Forward IntegrationBackward Integration
13
Mobile operating systemsHigh predicted growth rateBuyer
demography shifting from tech savvy to mass peopleExit of Palm
WebOSEntry of Windows Phone 7
14
Factors behind industry changeFactors behind industry change
Contd.Google SearchIncreased regulation and censorshipMini search
appliances for small businessAdWords and AdSenseMore and more
people coming onlineGoogle had huge tech lead in developing
marketsAcquisitions and New ProductsDoubleclick strengthening ad
offeringsYouTube Premier video siteGoogle Checkout e-CommerceGoogle
Apps
15
RivalsYahoo!Yahoo! used google search technology in googles
early yearsOwns some google stock from a lawsuitTried to get ads
from google contract broken mutuallyNow shifting more towards
MicrosoftMicrosoftTrying to move into online services from
traditional strengths in officeSees google docs as office
competitorPositions Live search as google rivalSearch agreement
with yahooBanner AdsSkyDrive Online storage16
Rival PositionsKey RivalsYahoo!Microsoft
17
Rivals likely movesSearch EngineYahoo! : Collaboration with
MicrosoftMicrosoft: Semantic Feature, entering ChinaPercent of
SharesSearch EntityJuly 2006June 2009May 2010Google Sites43.7 %65.0
%63.7 %Yahoo Sites28.8 %19.6 %18.3 %Microsoft Sites12.8 %8.4 %12.1
%Ask.com5.4 %3.9 %3.6 %AOL5.9 %3.1 %2.3 %Others3.4
%n.m.n.m.Total1oo %1oo %1oo %Source: Crafting and Executing
Strategy (Thompson), Pg- C-20118
Rivals likely moves (Contd.)Internet AdvertisingYahoo!Facebook:
Capitalize on its huge user base strength
19
Rivals likely moves (Contd.)Cloud ComputingOpportunity for
companies who manufacture OS/software bundles (Apple,
Microsoft)Mobile OSiOS, Blackberry: Price cut, Strategic
partnership with carriers (mainly in China)20
Key factors for competitive successSearch engineFast , accurate,
unbiased resultEasily adaptable with other websites (search
appliances)Enriched search indexAccessible via mobile
devicesSemantic search featureInternet AdvertisingSufficient site
trafficRobust analyticsAdvertisement relevancyExtension of search
result to mobile devices Keeping ad publishers interest in mind
21
Key factors for competitive success (Contd.)Smart TVMultiple
features (cable programs, stream videos, recorded
programs)Strategic partnershipsCloud ComputingAbility to store and
process large dataEnsure safety and speedAffordable pricing to
stimulate customer switchingOSUser friendlyUseful core applications
bundleInterests from app developers22
Prospects for Attractive ProfitsSearch Engine: HighInternet
Advertising: HighCloud computing: HighSmart TV: Moderate-LowOS:
High-Medium
23
One of the Googles main strategy is to Dominate Internet
Advertising.
Organize the worlds information and make it universally
accessible and useful is Googles mission. But as it is a business,
its prime target is making profit out of it. Currently, the main
source (97 %) is internet advertising.24
How Well is Googles present strategy working?Two best indicators
of how a companys strategy is working are:1. Its Financial health:
The stronger a companys financial performance, the more likely it
has a well-designed, and well-executed strategy.2. Its industry
position: If a company is an above-average industry performer we
can assume that its strategy is performing well.25
Googles Financial HealthTo know Googles Financial Health, we
evaluate some key financial Ratios:
200920082007Operating Profit Margin35.1%30.4%30.6%Net Profit
Margin27.4%19.4%25.3%Return on Asset 16.1%13.3%16.6%Return on
Equity25.1%15%18.5%Current Ratio10.68.88.526
Financial health of a key Rival Yahoo!200920082007Operating
Profit Margin6%0.2%10%Net Profit Margin9.3%5.9%9.5%Return on Asset
4%3.1%5.4%Return on Equity4.8%3.8%6.9%27
Googles Revenues20092008Advertising Revenues
22,888,80421,128,514Licensing and other
Revenues761,759667,036Total Revenues$ 23,650,563$21,795,55028
Googles ResourcesTangible Resources: Physical Resources: In 2009
its Property and Equipment was $4,774,938Financial Resources: Total
current asset $29,166,958 (including cash and cash equivalents,
marketable security, AR etc.)Technological Asset: In terms of
Technological asset it is far ahead than its competitors.29
ResourcesIntangible Assets:Human Resource and Intellectual
capital: Google has a group of skilled, specialized and experience
workforce who are one step ahead of their time. They are innovative
and creative enough to foresee the future. Brand and Company Image:
Google has a very good reputation as a firm. It has huge brand
value.Company culture and Incentive: Google is a nice place to
work. It has good culture to nourish the talents. It is the home of
talents from across the world.30
Capabilities Financially sound enoughGlobal presence; a
household nameContinuous improvement and innovationConstant
innovation of search algorithms Open transparent organization
cultureCorporate brand reputation or trust
31
Four test of Resources competitive powerIs the resource (or
capability) competitively valuable?Is the resource rare?Is the
resource hard to copy?Are there good substitutes available for the
resource?
32
Is Company Able to Seize Market Opportunities And Nullify
Threats?Yes, Google is able to seize market opportunities and
nullify threats.
In 2010, 234 million Americans aged 13 and older owned and used
mobile phones. More than 30% of mobile phone users accessed the
internet from mobile devices, and a rapidly growing number of
mobile phone users were exchanging basic mobile phones for
Smartphones.
Googles Android had achieved remarkable success, despite its
late entry, with its market share increasing from Zero in 2008 to
13% in May, 2010.33
Is Company Able to Seize Market Opportunities And Nullify
Threats? (Continued) Google had also entered into alliances with
Intel, Sony, DISH Network, Logitech and other firms to develop the
technology and products required to launch Google TV.
Most ambitious strategic initiatives in 2010 was its desire to
change the market for commonly used business productivity
applications.34
Is Company Able to Seize Market Opportunities And Nullify
Threats? (Continued)
Web browsers launched by Microsoft and Mozilla had thrown
challenges for Google preventing it from collecting user specific
information needed for Ad targeting.
Googles Chrome browser provided Google a defense. Google entered
into agreements with Acer, HP, Lenovo to begin producing Netbooks
that would use Chrome OS and Chrome browser.35
Is The Price And Cost of The Company Is Competitive With Those
of Key Rivals?Yes, the prices and costs are competitive with those
of key rivals.
Google always believe in minimization of costs. Google is
practicing this policy from its inception. For example, in 1998
Google was run on a shoestring budget, even with a cash reserve of
$1 million.36
Is The Price And Cost of Google Is Competitive With Those of Key
Rivals? (Continued) The licensing fee for the Microsoft Office and
Outlook package was typically $350 per user per year. Google Apps
could be licensed by corporate customers at $50 per user per
year.
Googles Site Search allowed enterprises ranging from small
business to public companies to license Googles search appliance
for use on their websites for as little as $100 per year.37
Is The Price And Cost of Google Is Competitive With Those of Key
Rivals? (Continued) More than 1 million Google Network members did
not pay a fee to participate in AdSense program but received about
60% of advertising dollar.
Google allowed users to pay a CPC rate lower than their bid
price if their bid was conciderably more than the next highest
bid.38
Competitive PositionPercentage of Internet Searches July 2006
June 2009 May 2010Google Sites 43.7% 65.0% 63.7%Yahoo Sites 28.8%
19.6% 18.3%Microsoft Sites 12.8% 8.4% 12.1%Ask.com 5.4% 3.9%
3.6%39
Into the Market for SmartphonesRemarkable success Googles
Android Software
0% Market Share in 2008 to 13.2% in May 2010
10000 free and paid apps for Android Software
60% Mobile Developer were working for new apps for Android40
Competitive PositionSustainability of Competitive Advantage
Strong Relationship between Internet Users, Advertisers and
WebsitesDominance in Internet AdvertisingAcquisition &
InnovationMobile Search & Smartphone PlatformsDominant Provider
of Cloud Computing SolutionsStrong Alliances
41
Strategic Issues & ProblemsShould give priority to Semantic
Search CapabilitiesPressure to achieve the revenue & growth and
maintain lofty stock price may lead Google Inc. to make decisions
that pushed the bounds of its corporate philosophySpecially they
should be concerned about the saying that the company had strayed
from its 10 Principles-specially, Principle-6,You can make money
without doing EVIL42
Strategic Issues & ProblemsCriticism about the Companys
complicity in Chinas censorship of Internet content
Complain of violation of Privacy Rights Google Maps street
view
Image Crisis from various country's investigation into Googles
data collection activities in May 201043
Strategic Issues & ProblemsSo, Unlike any other Business
Organizations, The above Issues are of fundamental importance for
Google as Google Inc. is not only an organization but also a
phenomenon, a symbol of Unity World Wide
44
The worry listRapid growth of FacebookDifficulty in expanding in
ChinaTablet market is expanding, but android is yet to gain a
strong hold thereAndroid market share is almost negligible in
PC/laptop market45
Questions ?46