Case 12. Google Inc: ( 2010) The Future of the Internet Search Ingine

Company background

Name Google Inc.

Industries served Internet

Geographic areas served Worldwide

Headquarters U.S.

Current CEO Eric Schmidt and Larry Page

Revenue $ 27.55 billion (2010)

Net income $ 7,9 billion (2010)

Employees 20,861 (2010)

Main Competitors

Apple Inc., Facebook Inc., Microsoft Corporation,

Samsung Electronics Co., Ltd., International Business

Machines Corporation and many others.

Google Inc. is a multinational public corporation invested in Internet search, cloud

computing, and advertising technologies. Google hosts and develops a number of Internet

based services and products, and generates profit primarily from advertising through its

AdWords program. The company was founded by Larry Page and Sergey Brin, students of

Stanford University as Ph.D. candidates.

Google runs over one million servers in data centers around the world, and processes over

one billion search requests and about twenty-four petabytes of user-generated data every day.

Google's rapid growth since its incorporation has triggered a chain of products, acquisitions,

and partnerships beyond the company's core search engine. The company offers online

productivity software, such as its Gmail e-mail software, and social networking tools,

including Orkut and, more recently, Google Buzz. Google's products extend to the desktop as

well, with applications such as the web browser Google Chrome, the Picasa photo

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organization and editing software, and the Google Talk instant messaging application.

Notably, Google leads the development of the Android mobile phone operating system, used

on a number of phones such as the Nexus One and Motorola Droid. Alexa lists the main U.S.-

focused google.com site as the Internet's most visited website, and numerous international

google sites (google.co.in, google.co.uk etc.) are in the top hundred, as are several other

Google-owned sites such as Youtube, Blogger, and Orkut Google is also BrandZ's most

powerful brand in the world. The dominant market position of Google's services has led to

criticism of the company over issues including privacy, copyright, and censorship.

PRODUCTS OF GOOGLE

Search Communicate & share Business solutions

(1) Web Search

(2) Google Chrome

(3) Google News

(4) Google Scholar

(1) Google Docs

(2) Google Translate

(3) Google Talks

(1) Google Adword

(2) Google AdSense

(3) Google Analytics

(4) Google apps

(5) Google checkout

Google’s financial status to date

A research on Google’s official website revealed that as at end of year 2008, the revenue of

Google have increased by 31.3% to $21.796 billion; the operating income have also increased

by 30.4% to $6.632 billion; net income appreciated by .6% to $4.227 billion. Total assets of

the organisation were up and valued at $31.768 billion; total equity was also valued at

$28.239 billion. Since 2001, Google have made strategic acquisitions to consolidate its

position as the most popular and visited website. Google acquired a firm called Key Hole Inc.

in 2004 and renamed it as Google Earth. It has also acquired You Tube; Double Click; and

Grand Central among others to strategically sustain its business concept. It has also entered

into partnership with NASA Research Centre to work on research projects that involves a

large-scale data management to help improve space technology.

Strategic Posture

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Mission

Google’s mission was to organize the world’s information and make it universally accessible

and useful. Management believed that the most effective, and ultimately the most profitable,

way to accomplish their mission was to put the needs of the users first. They found that

offering a highquality user experience led to increased traffic and strong word-of-mouth

promotion. Dedication to putting users first was reflected in three key commitments:

Google will do its best to provide the most relevant and useful search results possible,

independent of financial incentives. Its search results would be objective, and the

company did not accept payment for search result ranking or inclusion.

Google will do its best to provide the most relevant and useful advertising.

Advertisements should not be an annoying interruption. If any element on a search

result page is influenced by payment to the management, it will make it clear to our

users.

Google will never stop working to improve the user experience, its search technology,

and other important areas of information organization.

Management believed that their user focus was the foundation of their success to date. They

also believed that this focus was critical for the creation of long-term value. Management

stated they did not intend to compromise their user focus for short-term economic gain.

Business Level Strategey

Google’s strategy is built on a strong foundation of broad differentiation of complementary

products. Complimentary products serve to increase the use of the each of the other products

and increase brand awareness. Several of these unique provisions include its Docs &

Spreadsheets productivity suite, Picasa the image organizing and editing program, Earth and

Maps. These products are the key to augmenting the company’s advertising business and

expanding the breadth of the brand. Google reinforces its brand image by keeping its name in

nearly all its products. From Google’s perspective, the more uses a person has for Google

services, the more opportunity there will be to show them ads.

BUSINESS STRATEGIES OF THE MAJOR COMPETITORS

The leading competitors to Google’s work strategy are the technology giants, Yahoo and

Microsoft. All of these companies’ motivations are simple -- try to draw the most advertising

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dollars from their respective internet properties. Each of the competitors offer many services

on their websites and strategically do so to try to engage users for as long as possible.

CURRENT MARKETING STRATEGY

The core strategy for Google success is not other than Viral Marketing. As Google has never

used any advertisement for its success, it only exploits the social media networks to reach out

to the large number of customers, forwarding power of e-mails & comments of blogspots.

Google still continues to enjoy the number one position in the industry due to Vira Marketing

Itself

PRODUCTION & PURCHASING STRATEGIES

Google is tested a new advertising program that pays site owners based on a Cost- Per-Click

model. The program, called Cost-Per-Action, was revealed via an invitation e-mail from the

Google AdSense team to Web site owners. Google is investing in the new technologies to

keep pace with the changing expectations of the users. As Google's great IT advantage is its

ability to build high-performance systems that are cost efficient and that scale to massive

workloads. Because of that, IT consultant Stephen Arnold argues, Google enjoys huge cost

advantages over competitors such as Amazon, eBay, Microsoft, and Yahoo.

Corporate Governance

Board of Directors

Name Position

Eric Schmidt Chief executive officer

Sergey Brin President of Technology

Larry Page President of Products

L. John Doerr Board Member

John. L Hennessy Independent Director

Ann Mather Executive Vice President

Paul. S Otelinni Ceo, board member, President of Intel

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corporation

K. Ram. Shriram Board member

Top Management

N Nama Jabatan

Eric Schmidt Chief executive officer

Sergey Brin President of Technology

Larry Page President of Products

Nikesh Arora President, Global Sales Operations

David. C Drummond Senior Vice President

BUSINESS MODEL OF GOOGLE

Google Inc. has a unique business model that sets it apart from its major competitors.

According to Chaffey, Google’s business model is encapsulated in the SEC filing statement,

“to organize the world’s information and makes it universally accessible and useful”.

Google’s major task is to make information easily accessible to its major stakeholders namely

the people who seek for information on the internet. In support, Chaffey insists that Google’s

model is highly geared to offer the best and quality service to the users so that their

experience will lead to a strong word of mouth promotion and strong traffic growth.

According to Dwivedi Google have move further from its initial core business model into

different business concepts by expanding into different marketing offerings to its numerous

clients such as Picasa; Blogger; Keyhole; Gmail; and Google News etc.  Dwivedi (2008)

claims that Google is primarily advertising firm, because 90% of its revenue and income

comes from online advertisement for various other websites. Google allows any new business

to start advertising online without any need to hire the services of professional graphic

designers; or advertisement consultants. Google’s business model is to advertise and provide

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services to all online users. Google has become the most identified and recognized brands

outperforming Coca Cola and McDonalds because of it’s vastly search engine. Any online

market or firm that attracts a lot of users is a business target for Google. That is why Google

have either acquired or have some strategic alliance with firms like You Tube; Amazon; and

My Space.

External Factor Analysis Summary (EFAS Table)

Ixternal Factors (1) Wei

ght

(2)

Ra

tin

g

(3)

Weig

hted

score

(4)

Comments (5)

Opportunity

O1 Growing number of

mobile internet users

O2Culture of

innovation

O3 Worldwide internet

growth usage

O4 Growing into

electronics industry

.10

.15

.15

.5

5

5

4

3

.50

.75

60

.15

Google has an opportunity to create a

platform that could be used to better display

ads for mobile device users and increase

firm’s income

Many unique products are offered by

Google every year, with so many in

development stages. According to Boston

Consulting Group (BCG) Google is the 2nd

most innovative business in the world.

Internet usage growing is too fast in the

world.

Google has already launched a few new

models of notebooks, tablets and

smartphones into the market but these were

only introduction models. Google could

6

O5 Google fiber cables .5 3 ,15

strengthen its entry into electronic devices

industry by introducing more products for

more customer groups and cut out its market

share. This would result in tighter

integration of its software products and

diversified income

Google is currently testing their new fiber

cables that can deliver internet content at

astonishing 100 times as fast as current

providers. It is wise for Google to invest in

such infrastructure that virtually would have

no competition and would integrate the

company vertically

Threat

T1 Growing number of

mobile internet users

T2 Unprofitable

products

T3 Replacement of web

search by social media

.15

.15

.10

4

3

3

.60

.45

60

Google finds it hard to monetize mobile

internet users as there is less space to place

ads on a mobile device and the ads costs less

than usual. The growing number of mobile

users means fewer searches made on the

personal computers and lower income

growth or even decline for Google

Google has introduced many products and

services but few of them earn profits for the

business. Most of the services are the burden

for Google and only makes losses. If Google

continues to introduce new products that add

little value and only make losses, the

company’s profits will fall.

People now prefer to get information from

Facebook, twitter and etc

7

search

T4 Competition from

Microsoft, Yahoo,

Apple and smaller

competitors

.10 3 60 Microsoft , yahoo an apple is gaining a

market share in internet searches and is

playing an important role against Google.

The company has also introduced Windows

8, the OS aimed for mobile devices, to carve

out its market share in mobile OS market. In

both fronts, internet search and mobile OS,

Microsoft is challenging Google and is

taking away the potential revenues.

Total Scores 1.00 4.40

Natural Environment

Built the largest solar panel

Investment in Wind energy

Investment in enhanced geothermal system

Operates on 50% less energy

Recycle 100% of the electronic waste leaving Google

Buy food from local farmers

Donations for bike riding

Societal Environment

POLITICAL/LEGAL FORCES

Formal institutions have not significantly affected Google’s operations, although

Google has faced pressure from the Department of Justice to relinquish archived

search termsm (Buncombe, 2006) and from the Chinese government to censor search

results (Liedtke, 2005).

Google’s “Don’t be evil” mantra has been put to the test as users ask whether

cooperation with governments undermines their privacy and freedoms. In 2008,

Google responded to customer concerns when it added a privacy link to its home

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page. This link took users to a Privacy Center where they could learn about Google’s

policies in regard to political and legal issues (Google, 2008).

Google has also faced concern on copyright issues because the company stores

copies of third party web pages and images on their servers. They have responded to

this criticism by releasing a copyright information page. The page provides the

relevant information regarding digital information and provides links to notify both

Google and the U.S. Copyright Office of suspected infringement (Google, 2008).

ECONOMIC FORCES

The United States was in a period of recession and stocks were trading at 52-week

lows. However, technology companies like Google are relatively isolated because

search and consequently internet-based advertisements has become a stable to the

world society and economy. In fact, a recent wired magazine article says that Google

“looks particularly wellpositioned to weather the downturn. Google's focus on highly

targeted, measurable advertising makes it more recession-proof than many other

businesses in tech.” (Schiffman, 2008) The crucial need to stay informed and

constantly connected keeps such services vibrant despite the parched surroundings.

SOCIAL FORCES

The World is increasingly becoming more connected due to the means of

communication available through the internet. And, for many people, the search

giants like Google make the internet navigable. As internet use increases among all

age groups and across all cultures, we will become increasingly more dependent on

internet search.

In addition, most new cell phones are internet capable devices. People will use these

devices for driving directions, tolocate restaurants, check sports scores, download

music, and even quick research. Google stands to benefit from this with an increased

number of search queries.

To enable more people to access Google’s services from their mobile devices, the

company has released its Android Mobile Phone Platform and Operating System as

well as the Google Mobile App that can be downloaded on other platforms such as the

Apple iPhone. Google is well positioned in demographics because it has a relatively

young userbase. This means that it will be less affected as the Baby Boomers age in

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comparison to other companies that depend on the 50 to 60 year-old demographic

group. Internet search is also not a gender-specific issue, and would not be hurt by

changes in the ratio of female to males. The company will however benefit when

some traditional and paternalistic societies begin using the internet more frequently.

TECHNOLOGICAL FORCES

Technology is obviously always improving and Google has taken specific measures to

makesure it does not fall behind.

Google can use commodity computer parts (cheap components) knowing they will

fail by ensuring that every component always has a duplicate. The components are

attached to the computer with Velcro rather than screws which allows forquick

swapping and upgrading (May, 2007).

Internet search is applicable to most cultures all over the world freeing Google from

geographic dependence. In fact, the company now has 20offices in the U.S. and

international locations in over 30 countries working on research, sales,and marketing

(Google, 2008).

Google offers a personalized search engine for more than 115 countries, and as

language support improves, the company is likely to gain market share. As computers

become more affordable, many people in economically disadvantaged countries are

gaining access to the internet for the first time and Google would like to route them

through its search and productivity products, like Gmail, Docs, and Sites. Google’s

web applications are now bundled into the operating system on low-cost Linux- based

computers (Blankenhorn, 2008).

Internal Factor Analysis Summary (IFAS Table)

Internal Factors (1) Weig

ht

(2)

Rat

ing

(3)

Weigh

ted

score

(4)

Comments (5)

10

Strength

S1 Open source products

and services

S2 Quality and customer

experience are the

primary objects

S3 Financial situation

S4 Access to the largest

group of internet users

worldwide

S5 Strong patents

portfolio

.10

.10

.10

.10

.10

5

5

5

4

5

.50

.50

.50

.40

.50

To organize the world’s information and make it

universally accessible. Let it be Google maps,

calendars, drive, OS or the advices how to rank

better in a search index. Google’s products can

also be used with any OS or mobile device

without a charge. Google openness is the key

why Google is the number one in many products

and services.

Everything that Google offers is of premium

quality. The products are aimed at solving

customer needs and problems by providing

excellent customer experience.

Google is one of the most profitable companies

in the world with earnings nearly $ 27.55 billion

revenue $ 7,9 billion net income. Few other

companies are so strong financially to compete

with Google.

Google has an access to 79% of the world

desktop search market users and 89% of the

world mobile search market users. Combined,

these internet users represent an extremely large

market that Google can use to promote and sell

its products and services.

In 2012, Google added 1,151 patents and was

the 21st business worldwide in terms of number

of patents. Intellectual property is the key in

competing against competitors and Google with

Motorola’s acquisition gained a strong

advantage over its competitors.

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Weaknesses

W1 Lack of product

integration

W2 Unprofitable

products

W3 Patent litigations

.20

.15

.15

2

2,5

3

,40

,37

0,45

Many products can not success in many

countries

Google has many products and services that add

little value for the business and make only

losses, thus decreasing firm’s profits.

Google is often involved in litigations over the

breached patents and other intellectual property.

These litigations are costly and time consuming

and distract the company from innovating rather

than litigating

Total Scores 1.00 3,62

Corporate Structure

Corporate Culture

It’s really the people that make Google the kind of company it is. They hire people who are

smart and determined, and we favor ability over experience. Although Googlers share

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common goals and visions for the company, we hail from all walks of life and speak dozens

of languages, reflecting the global audience that we serve. Google strive to maintain the open

culture often associated with startups, in which everyone is a hands-on contributor and feels

comfortable sharing ideas and opinions. In our weekly all-hands (“TGIF”) meetings—not to

mention over email or in the cafe—Googlers ask questions directly to Larry, Sergey and

other execs about any number of company issues. Google`s offices and cafes are designed to

encourage interactions between Googlers within and across teams, and to spark conversation

about work as well as play.

Strategic Factor Analysis Summary (SFAS) Matrix

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Strategic factors

(select the most

important

opportunities/ threats

from EFAS and the

most important

strength &

weaknesses from

IFAS)

We

igh

t

ratin

g

Weigh

ted

scores

duddu

S

H

O

R

T

I

N

T

E

R

M

E

D

I

A

T

E

L

O

N

G

Comments

S1 Open source

products and services

S3 Financial situation

W2 Unprofitable

products

.15

.10

.15

.75

.50

.37

.

X

X

X

X

X

To organize the world’s

information and make it

universally accessible. Let it

be Google maps, calendars,

drive, OS or the advices

how to rank better in a

search index

Google is one of the most

profitable companies in the

world with earnings nearly $

27.55 billion revenue $ 7,9

billion net income.

Google has many products

and services that add little

value for the business and

make only losses, thus

decreasing firm’s profits.

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1 2 3 4 Duration

5 5

6

W3 Patent litigations

O1 Growing number

of mobile internet

users

O2 Culture of

innovation

T2 Unprofitable

products

T4 Competition from

Microsoft, Yahoo,

Apple and smaller

competitors

.10

.10

.10

.15

.10

50

.50

.50

.40

.40

X

X

X

X

X

X

X

X

Google is often involved in

litigations over the breached

patents and other intellectual

property.

Google has an opportunity

to create a platform that

could be used to better

display ads for mobile

device users and increase

firm’s income

According to Boston

Consulting Group (BCG)

Google is the 2nd most

innovative business in the

world.

If Google continues to

introduce new products that

add little value and only

make losses, the company’s

profits will fall.

Microsoft , yahoo an apple

is gaining a market share in

internet searches and is

playing an important role

against Google.

Total scores

Total Scores

1.0 3,92

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Generating a TOWS Matrix

Strengths (S))

S1 Open source products and services

S2 Quality and customer experience

are the primary objects

S3 Financial situations

S4 Access to the largest group of

internet users worldwide

S5 Strong patents portfolio

S6 Culture of innovation

S7Product integration

Weakness (W)

W1 Lack of product

integration

W2 Unprofitable

products

W3 Patent

litigations

Opportunities (O)

O1 Growing number of

mobile internet users

O2 Culture of innovation

O3 Worldwide internet

growth usage

O4 Growing into electronics

industry

O5 Google fiber cables

O+S

- Move into non-internet

markets (i.e. Magazines, TV,

Travel) (O3+S6)

- Investing to non developed

countries by using low cost

strategy (S7+O1)

- Focus on mobile advertisement

market (S6+O1)

O+W

-Make new

programs and

improve them on

social networking

space (O2+W2)

-Invest to increasing

worlwide online

systems (O5+W1)

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Internal

Factors (IFAS)

External

Factors

(EFAS)

Threats (T)

T1 Growing number of

mobile internet users

T2 Unprofitable products

T3 Replacement of web

search by social media search

T+S

- Make competetive mobile

google applications (T1+S6)

- Adapt to Asian market

(T1=S7)

T+W

Innovate new product

and service more

integrated (T2+W1)

Adopt to mobile

market (T1+W2)

Porter’s generic competitive strategy

Low Cost Strategy Differentiation Strategy

- Low operating costs

- Same technology used for all

aspects of the business

- Development of customer loyalty

- No payment required creating and

managing online advertising accounts

- Unique formula

- High customer utilty

- Strong brand value

- Using a patented system PageRank

Google currently pursues the generic business level strategy of differentiation by offering

many unique products and services to many different kinds of customers.  The web search

engine is the most popular service offered by Google as it provides user the most reliable way

to search.

Google web search engine has differentiated itself from its competitors by using a patented

system PageRank. PageRank comes across search inquiries by computing a recursive score of

web pages based on the weighted sum of the PageRanks of the pages linking to them (Levy,

2010). This means that related web pages can be accessed based on a users search interest

instead of based on how many times a search term occur on a webpage which is how

competing search engines work.

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Google claims that PageRank is one of its search engine’s main competitive advantages due

to the several features.

Google`s product that supports its differentiation strategy is Google`s internet search- driven

advertising. GoogleAdWords specialized for advertisers who want to reach a qualified

audience as efficiently as possible. The ease of creating ad text and manage online

advertising accounts with no large upfront payment required is also differentiates. Google

product from its competitors as well as the ads appearing across Google`s growing roster of

partners. Advertisers can even target customers in specific geographical locations. (Google,

Advertise your business on Google 2010)

The biggest advantage of Google`s differentiation business strategy is the development of

customer loyalty. Google`s web search engine currently holds 66 percent of global internet

searches. (Brandt 2009).

In 2010. Google announced completion of new web indexing system called Caffeine (Grimes

2010) . Caffeine proides 50% fresher results for web searcher than previous index, which

makes Google search engine more competitive.

Additionally, Google launched Google Instant, which reduce the time needed for the search,

provide predictions and more dynamic results. This option previously was the competitive

advantage of Bing, however currently Google time needed for the search is much less

than Bing’ (Wanger, 2010). Moreover, instant impacting the price of paid search campaigns

and AdWords, which previously was higher than competitors. Currently the pricing range for

Google search engine can be viewed as moderate comparing to the competitors (Copeland,

2010), which provide company with extra competitive advantage. 

At the same time Google was using product development strategy by improving their search

ingine technology exponentially., adding host of new features within just five years of time

span which help them dominating the world market.

Conclusion

For over a decade, Google Inc. has been a leader in technological innovations, providing

quality products and services to both consumers and other business entities. A review of the

corporation’s 2010 Annual Report, as well as analyses of financial data from prior years,

reveals that Google has continued to prosper and expand immensely as a result of its

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successes. Examinations of the company’s current financial position using ratios and

comparisons to competitors suggest that Google is currently in a secure financial position in

many respects and is likely to maintain this position in the immediate future. The corporation

that continues to enhance internet technology everyday can be expected to remain a

household name for many years to come.

There is evidence to show that Google’s business strategy is indeed realistic, rationale, and

viable and not as insane as claimed by Microsoft CEO, Steve Ballmer. The company have

shown that they are capable of dominating all the associated businesses and activities on the

internet. They have so far being aggressive in the search engine industry and for now there is

no formidable challenger. They have also added more value to their brand name with all the

strategic acquisitions they embarked upon since 2001. Truly speaking, unless something

dramatic occurs in the realm of information technology; there is least probability that Google

will collapse or fail. Even if they were to fail, it will create a big catastrophe in the

information technology industry market which will be difficult to fulfil by any company.

Google’s business strategy has been accepted worldwide by the masses through the patronage

of their services. The top management of the company headed by CEO Eric Schmidt needs to

be more proactive in their recruitment and retention strategies so that expertise staff do not

leave the firm to other arch rivals such as Yahoo, Microsoft, and AOL. Gather (2009) sums

up that Microsoft and Yahoo can try everything, but the large majority of people around the

world will always "google" things, not "yahoo" or "bing" them, as Google has become a part

of the language and culture more than any other internet search engine. And this will always

give Google an upper hand in business because its strategy is indeed not insane.

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Question :

Google, an online company that provide a riliable internet search ingine, was founded in

1998 and soon replaced Yahoo as the market leader in Internet Search ingines, By 2010

Google was one of the strongest brands in the world. Nevertheless, its grows by acquisition

strategy was showing signs of weakness. Its 2006 acquisition of Youtube had thus far not

generated significant revenue growth. Groupon, a shopping website, rebuffed Google`s

acquisition attempt in 2010. Is it time for a strategic change?

In my opinion, Google inc still should keep its strategy. Because, a review of the

corporation’s 2010 Annual Report, as well as analyses of financial data from prior years,

reveals that Google has continued to prosper and expand immensely as a result of its

successes. Examinations of the company’s current financial position using ratios and

comparisons to competitors suggest that Google is currently in a secure financial position in

many respects and is likely to maintain this position in the immediate future. The corporation

that continues to enhance internet technology everyday can be expected to remain a

household name for many years to come.

Hovewer, Google has to make some changes in its current strategy. For example Google

should invest to developing countries by using low cost strategy. Now mostly people is

using mobile phones and tablets instead of using laptop or computer. So It is recommended

for google to make some easy working applications for mobile phones.

In addition., Google should bring cheap internet for all over the world. We know that in some

countries internet providers are still expensive. If Google invest in this sphere, it will be

profitable.

Futhermore, There are still some small changes is needed for Google inc such as :

- Move into non-internet markets (i.e. Magazines, TV, Travel)

- Adapt more to Asean market

- Make new programs and improve them on social networking space

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