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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