Thursday, May 23, 2013

GOOGLE

GOOGLE Google was started by Larry Page and Sergey Brin in 1998, the firm was incorporated, and was later reincorporated in 2003 in Delaware. The firm provides search services with a great deal of the revenues of the firm being derived from advertisement. The adverts are offered in the firm of AdWords and AdSense. The firm had its initial public offer (IPO) in 2004; it raised a total of 1.67 billion dollars. Following the IPO, the firm had a market capitalization of 23 billion dollars (Miller, Vandome & McBrewster, 2010). The mission of the company is to organize the world’s information and make it accessible and available universally. The vision of the company is to provide their services and applications to users in the most accessible formats and languages. The values of the company include focus on the user rather than to serve the organization. The second value is focus on solving only one problem which is the search problems the users face. Thirdly is to provide answers to the web users promptly and fast without any delays thus increasing their efficiency in service. Also, the firm also has the value of democracy in the web works. Moreover, the firm also focuses on making money without resorting to evil means and also the realization that the information need is cross boundary and thus the company purposes to satisfy this need. Another value of the company is to accept and deal with new challenges in order to make the work fun. Finally, the company focuses on the provision of the best service (Google, 2012). The primary stakeholders of the firm include the users who are served by the various products of the firm, the advertisers who are the major source of revenue for the firm. The Porter’s 5 forces model is used to analyze the industry environment of Google Inc. so that the competitive position of the firm can be established. The model has five considerations; they included the threats of substitute products, bargaining power of the consumers, bargaining power of the suppliers, industry rivals and finally threats that are posed by new entrants. The various five forces that are shown above are important in thee pricing as well as the determination of the competitiveness of the firm in the industry in which it operates (Nehls, 2011). The bargaining power of the suppliers is an important factor that must be considered by any firm. The suppliers of the firm are mostly the people who put their adverts in the firm. The domination of Google in the industry is a strong point for the firm as it has greatly given the firm a high power against the suppliers. The firm’s suppliers have a low bargaining power. The threat of new entrants is low due to the high barriers to entry. First, there is the high brand recognition of the players in the industry. Secondly, there are the huge costs that are required for startup. Thirdly, the new entrants must be able to provide faster searches than the firm that are already in the industry, if they are to successfully enter into the industry. This is limited by the low R&D capabilities. The above have significantly reduced the any threats that can be posed, thus a low threat of new entrants (Nehls, 2011). The threat of existing firms is mild to high especially following the introduction of new products and services which have greatly competed with those that are provided by Google. Most of the competitors of the firm have substantially moved into the revenue generation through adverts placed alongside search results. Google’s revenue from targeted advertisement has dropped to approximately 108 percent from 115% in 2011 mostly due to the increasing competition from the existing search service providers. However, the threat is made mild due to the market share of 57 percent thus enabling the company to increase the quality of targeted ads and search results faster than the firm’s competitors who stand at market shares of 23 percent and 11 percent for yahoo and Msn respectively (Google, 2012). However, due to the large influx of advertisement dollars into the industry, there has been a fierce rivalry between the firms (Grant, 2005). Google must therefore focus on increasing the reach of the targeted adverts. The threat of substitutions is high especially following the entry of Facebook etc. that have led to the increase of social media marketing. This has significantly led to an increased competition in the advertisement sector as both are perfect substitutes of each other. The threat to entry is made more serious due to the non-existent switching costs (Nehls, 2011). The firm has tried to counter the threat through launching social networking sites such as Google+ and Orkut. Finally, the bargaining power of the consumers is also a significant factor which the organization must consider. First, the firm has to satisfy the needs of both the web users and the organization which put up their adverts. The users of the services provided by Google are becoming more complicated and are increasingly demanding all the products that the firm offers for free. It is also complicated to determine the exact features that the users of the web want to see thus calling for significant usage of polls to determine the general directions. Finally there is the backward integration and its associated threats mostly in the cases where the suppliers are purchased so as to reduce the dependency of the firm on their supplies (Grant, 2005). The firm must continue to offer its services for free if it’s to continue reaping its income from the peoples’ viewership and targeted adverts. SWOT is important in making strategies in a firm. The strengths include the high brand loyalty which has made it greatly dependable and reliable. Also, Google has a simple interface that is easy to use. Thirdly, the firm has a low operation costs especially in the use of the low cost UNIX servers which allow for easy indexing of the webpages. The firm also has a very high expenditure on R&D which has placed it at the heart of innovation. The weaknesses at Google include high rate of spamming which greatly affects the ranking technology that is used by the firm. The Google’s Cost Per Click advertising and the ranking policy affects the revenues of the firms as well as the uncertainty regarding the location of the various adverts on the pages. The automated indexing also affects the search algorithms especially for local searches. The weaknesses include too much liquidity, low utilization of assets, little presence in social networking, increasing costs of maintaining the data center, lack of ability to monetize YouTube and also the political issues that face the company (Boone & Kurtz, 2010). The opportunities that the firm has include the presence of its own browser (Google Chrome), growth of the internet usage, the increased acquisition of other firms and the growing prospects for online ads, increase service to handheld devices, and the use of localized vendors paid advertisements. Finally the threats that the firm face include increased competition (from AOL, Bing, Yahoo, and MSN etc.), issues of privacy and the rising threat from Facebook, increased legal suits of the company and requirements for new technologies (Kurtz & Boone, 2009). To deal with the threats and weaknesses, the firm will focus on reducing the legal suits through clear indication of how the information will be used. The firm should also focus on reducing the discrimination in the search results, to deal with the competition; the firm can diversify its operations to include more on social networking (Boone & Kurtz, 2010). The firm should also use the strengths and weaknesses to improve the competitive position of the firm. The high brand recognition of the firm can be used to cash in on the increased number of people who use the internet. This will ensure an increase in the revenue levels for the firm. The firm can also use the high expenditure abilities and the high M&A ability to create new products that will help to solidify the competitive position of the firm (Boone & Kurtz, 2010). The various strategies that the firm should adopt to increase it competitive ability and the profitability include diversification, especially regarding the products that the firm offers. The firm can use both concentric diversification where the firm can add new products which are related to those that it already does provide. Secondly there is conglomerate diversification which ensures that the firm can add new products and services which are unrelated. The diversification strategy is informed by the fact that the firm has a high amount of assets that are not invested (Bamford & West, 2010). The firm using its massive R&D, the mergers and acquisitions, and available capital can diversify its operations using the cash. The diversity will increase the firm’s ability to increase its profitability by the large revenue base and the reduced level of competition from the firms that have been acquired or merged with the firm. The diversification can also be used to focus more on using innovation so that it can continuously remain competitive. The recent corporate governance issues include; the high rates of lawsuits that are facing the firm especially with regards to the issues of the usage of the various data related to privacy. Google has been involved in carrying out different activities that are geared towards increasing the level of privacy of the data about the users. There is also the issue of the differences in culture especially due to the high number of employees who have different cultures. The firm has focused on increasing the synergy between the different members of the firm. Innovation is still the main focus of the firm (Google, 2012). Also, Google is also affected by the fact that there has been an increase in regulatory scrutiny which has affected the firm in some ways. The legal and regulatory changes have led to the firm incurring higher costs, changing the various business practices and in some instances threatening to decrease the usefulness of the various products and services that are offered by the firm. The firm has focused on issues of complying with the various regulations and ensuring that the law suits against the firm are significantly reduced. In conclusion, Google is a firm that will continue to dominate the internet market as well as make use of the various technologies, strengths and opportunities to increase its profitability. The firm should diversify its operations so that the various threats that the firm faces for instance the high rate of competition can be dealt with adequately. Google will continue to be a very competitive and profitable venture into the future. References Bamford, C. E & West, G. P. (2010), Strategic Management: Value Creation, Sustainability and Performance, Mason, OH: South-Western/Cengage Learning. Boone, L. E. & Kurtz, D. L. (2010), Contemporary business, Hoboken, N.J.: Wiley. Cengage Learning. Google (2012), Google, Retrieved on 04/09/2011 from http://www.google.com/intl/en/about/corporate/ Grant, R. M. (2005), Contemporary strategy analysis, Oxford, U. K.: Blackwell Publishing Kurtz, D. L. & Boone, L. E. (2009), Contemporary business, Mason, OH: South-Western Miller, F. P.; Vandome, A. F. & McBrewster, J. (2010), History of Google, New York: VDM mischief, Norderstedt, Germany: Druck and Bindung. Nehls, E. F. (2011), A Business Analysis Project on Google Inc.: A Market Leader Running Into Performance, Mason, OH: South-Western/Cengage Learning.