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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
2
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
3
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
9
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
13
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.
14
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
15
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)
16
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.
17
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
18
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.
19
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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