1. Use the “Five Force Model” to assess Google’s competitive environment. Rate each of the Five Forces as weak, moderate, or strong, and justify your ratings. I. Competitive Pressures Created by the Rivalry among Competitors sellers Google’s competitive environment regarding rivalry is strong. Google has managed to stay ahead of its rivals. Google used its large cash reserves to make strategic acquisitions to be able to develop Internet applications which would offer new advertising opportunities. As a company, Google has diverse objectives and strategies. In 2005 they launched Good Earth. Google Earth along with its companion software, Google Maps, allowed users to search and view satellite images of any location worldwide. They then enhanced the program in 2010 by adding 3D images of locations from the ground level. They’ve since launched Gmail software, Picasa web photo albums, and a translation feature in 51 languages.
Google is strong in the 5 Force Model regarding competitive pressures created by rivalry competitors because they have implemented applications that no other competitors can rival. II. Competitive Pressures Associated with the Threat of New Entrants In regards to “Threat of New Entrants”, this is a strong force for Google. Google introduced its Android operating system in 2008 and began to be a rival for Apple’s smartphone technology. The Android system increased its share of mobile searches from about 60% to approximately 95% in 2012. Google entered late into the market, but by 2010 all major mobile phone providers had added smart phone models running Android software.
Despite Google’s late entry into the market, Android’s market share had increased from 0 in 2008 to almost 51% in May 2012. Google posed a strong entry threat when they developed their Android system, and other applications because, due to their technology, entry barriers were low, as well as industry members such as Microsoft were not able to strongly contest the entry of newcomers. We believe Google put a lot of competitive pressure on Apple by developing the Android system and giving Apple a run for their money because where Apple’s Iphones once had control of the market, Google came in and took over the majority of market share.
III. Competitive Pressures from the sellers of Substitute Products Other companies, such as Microsoft and Yahoo have tried to come into the search market with substitute search applications but Google remains on top. We believe Google’s competitive environment is weak in regards to competitive pressures from the sellers of substitute product. They had the original search engine and the other companies are offering substitutes. Google has been able to sustain competitive advantage among search companies. Substitutes’ performance features, such as Yahoo’s search engine are not comparable or better. Google has been able to maintain strong relationships with internet users, advertisers, and websites. Microsoft and Gates started to feel pressure from Google and feared Google would start to develop web-based software applications comparable to Word, Excel, PowerPoint and other Microsoft products.
Microsoft tried to rival Google with its Live Search and thought it would be key to keep up with them. Yahoo, unable to keep up with Google finally reached an agreement with them in 2008 that would allow Yahoo to host Google search ads. The deal did not go through due to notification from the U.S. Justice Department that the alliance could possibly violate antitrust statutes. In 2009 Microsoft and Yahoo made a deal that would make Microsoft Bing Yahoo’s embedded search engine for 10 years. It seems as though neither Microsoft nor Yahoo could compete with Google’s search capabilities, and thus decided to join forces. The competitive environment is weak for Google here because substitutes are not meeting Google’s performance.
IV. Competitive Pressures Stemming from Supplier Bargaining Power We believe Google’s competitive environment is week in regards to competitive pressure from Supplier Bargaining Power. There are not a lot of other companies rivaling Google and its services. They have a strategy to dominate internet advertising and it seems they have been able to do just that. Google’s bargaining power is strong because they have the most users due to their development of so many different applications, thus the most advertisers contracting with Google. Industry members are major customers of suppliers creating a weak competitive pressures regarding supplier bargaining power for Google. V. Competitive Pressures Stemming from Buyer Bargaining Power and Price Sensitivity.
In regards to Buyer Bargaining Power, Google’s competitive environment is moderate because buyer costs of switching to competing products are low, but that is about the only case for being strong. However, buyers cannot threaten to integrate backward because the world is not going to stop using search Engines. Google focuses on providing the best user experience possible. They also say that faster is better than slow, which is positive for the users. They are the only company in the world possibly that wants users to leave its site as fast as possible. They also don’t allow ads to be displayed on their results pages unless they’re relevant to that page.
2. What “Industry Driving Forces” will have the most influence on Google in the next 3-4 years? Among the 12 most common industry driving forces, Diffusion of technical know-how across companies and countries, Emerging new Internet capability and applications, technological change and manufacturing process innovation and changing in societal concerns, attitudes and lifestyle certainly will influence Google the most. However, the rest the common industry driving forces still help to shape Google’s business. Diffusion of technical know-how across companies and countries. With the help of technology and transformation of education model, diffusion of technical know-how becomes much more often than does before. Therefore, online Ads, the major revenue sources of Google, have become more and more vulnerable.
Companies with abilities to offer what Google can offer for a much lower price pops up every day trying to encroach the Google’s online Ads market share. Google not only has to go to war with giant as Facebook and Apple, it also has to fight those new startups. Emerging new Internet capability and applications. As Google’s business model in based on the Internet, the development of high speed Internet, especially the mobile Internet, will certain benefit Google. It helps Google to generate more internet Ads related revenue. Because mobile internet allows Google to collect more data from customers. it enables Google to push more personalized Ads. Technological change and manufacturing process innovation.
Next 3-5 years, we are likely to witness a blossom of wearable technology that further integrates us into the digital world. The Internet browsing trend will shift more towards to mobile and smaller screen. This will requires Google to tailor their products accordingly to keep and event enlarge their current market share. Changing in societal concerns, attitudes and lifestyle. More and more people start to become aware of their personal data have been collected by companies like Google. There is a growing concern towards the online privacy. These concerns could lead to legislations and laws that are detrimental to Google’s business.
3. What are the “Key Success Factors” in Google’s industry? Google has many qualities that make them a successful company, however much of their success can be attributed to their key success factors. Perhaps the most important of these factors is Google’s strong relationship with advertisers, websites, and most importantly, Internet users. From the start, Google’s focus has been on the users and how to optimize their search experience. Their philosophy is to have a clear and simple interface, accurate and instant results, and they never make any changes that do not benefit the user in some way (Thompson, Peteraf, Gamble, Strickland.) For their advertisers, Google offers a platform to advertise directly next to search results based on keywords used in the search. They even offer specialists for larger advertiser to assist them in targeting potential customers and increasing click through rates.
Innovation is pivotal in today’s tech world, which brings us to Google’s next key success factor. Throughout the years Google has strived to provide the best available technology to their users. They have continued to better their search platform making it faster, expanding search results, and providing more accurate results with Google Instant, overall making Google the optimal search engine choice. Not only did they innovate the search aspects of the company, they expanded into other fields with the purchase of YouTube and Motorolla, the creation of their Android platform and their attempt at social networking with Google+. Along with these, Google re-created how we view the world with detailed maps, Google Earth, and street view options. This innovative spirit has kept Google in the lead thus greatly adding to the success of their company. Another key success factor of Google is their brand recognition. Google is everywhere in today’s culture, so much so that google has become apart of the English language and can be found in the Oxford and Merriam-Webster dictionaries. Having this strong of a brand recognition allows for Google to continue to grow, stay innovative, and take risks knowing that there will be a user base consistently standing behind them.
4. What is the primary strategic approach employed by Google? What are some of the more specific aspects of Google’s strategy?
The primary strategic approach employed by Google is to become the dominate internet advertising company. Through additional features that increased Google’s productivity such as Google Maps, local search, weather, airline travel information, Book Search, Gmail, Blogger, and many other features helped increase their advertising opportunities all the more.
Not only did Google earn revenue from search ads, they also recorded revenue from banner ads. This type of revenue is essentially earned through a clicking measuring system. Banner ads helped Google earn $3.1 billion revenues in 2011. Of the total banner ads revenue earned, the website YouTube generated roughly $1.3 billion. Another primary strategic approach to outperform its competitors and achieve superior profitability is by becoming not only the United States number one search engine, but also the world’s number one search engine. In 2011, their ads that were displayed on the search engine were able to be delivered in 41 different languages. In that same year, roughly 50 percent of revenues was earned through areas outside the United States.
As Google entered into other markets, they were faced with many problems and challenges one of which involved the Chinese market. Google managed to work with government officials to avoid breaking Chinese law that prohibits the distribution of information not authorized by the government. As the mobile cell phone industry started growing, Google introduced the Android operating system in 2008. This operating system was available to any phone manufacturer for free of charge. Google also allowed mobile app developers to use the Android operating system free of licensing fees. Through the apps, Google could still employ their primary strategy to become the leading advertising company in the world.
5. Identify and describe Google’s (Strengths, Weaknesses, Opportunities, Threats) Strengths:
Google is one of the most globally recognized brands in the world. Their strategy to dominate internet advertising also entailed becoming the number one search engine not just in the United States but around the world. Their platform is ideal for advertising purposes, as customers have to input what they are in search of, which in turn allows Google to charge more for advertisements. Their Android software platform does not make very much money; however, it allows Google to reach the mobile market, and thus generate more revenue as they are able to run advertisements Loyal employees: There is plenty of evidence from around the web of how much employees like working for Google. With a high-margin business, Google can afford to generously pay its engineers with exciting opportunities, trips, and free gourmet food in the cafeteria. Google has many different services and tools to choose from when using their search engine, like alerts, Google chrome, and Google finance. Weaknesses:
Google offers many services: Android, search, e-mail, photo and video sharing, Google drive, YouTube, Google maps, and many other services for free, and these services cost a lot of money and labor to update and run The company does not pay out a dividend and has not expressed any plans to do so in the future Google competes with some of the largest and most powerful companies in the world (Microsoft in the search engine market, Apple in the mobile software market)
“We are still at the very early stages of what technology can do to improve people’s lives”. Larry Page – CEO of Google Opportunities
1. Creating innovating products and devices in fresh markets: Even though Google has been stepping up to the game by building smart devices, Google can still improve people’s lives by providing convenience. The smart watches and televisions industries are considered fresh markets, therefore Google has the opportunity to thrive by dominating those markets. 2. Expanding the video search service to developing a live streaming platform to reach more market groups and generate revenue through advertisements: Google gains its’ revenue through advertising on Google websites, and Google network websites. After Google videos has been launched many years ago, there is a great opportunity to partner with cartoon networks, news channels, and other production companies to provide users with a convenient live video station that will satisfy more than one market group. 3. Google benefits from Partnership and acquisition of companies to promote technological benefits. Like acquiring with YouTube give the opportunity to access data on video search queries. 4. Expand social media platform: Using Google+ to integrate a service that fulfills more demographics’ needs. After past experiences with Orkut “Bad, bad server, no donut for you”, Google can create a social media platform that is fast, compatible for mobile apps, and targets both the casual and professional users. Instead of having multiple social media accounts for multiple purposes, Google can create a platform that competes with LinkedIn, Facebook, and Twitter. Threats
1. Google’s Rivals and duplicators of it’s success: In 2012, 78% of internet searches in China were performed through Baidu, whereas Google internet searches took only 17$ of the share. Microsoft Bing is the major internet rival to Google, and the second most visited internet destination worldwide in 2011. 2. Security and privacy breach liabilities: Because of Google’s favoritism of openness and accessibility over privacy, Google can pay huge penalties and legal settlements for bypassing privacy conditions. Google was before guilty of bypassing Apple Safari Web Browser privacy settings to place tracking files on users of Apple devices, a violation that resulted in $22.5 million in fines. 3. Potential political risks restrict Google from continuing to expand internationally: Example: Facebook was banned from several countries such as Iran, China, Cuba, Bangladesh, and North Korea.
Internet Censorship: Internet censorship is a major threat for Google’s expanding internationally. There are several countries that applied internet censorships to prevent the exposure of their citizens to unwanted information and data on the internet for political, social, and security reasons. Until 2010 Youtube was banned in Turkey and can only be accessed through Proxy server. Now Turkey is the first country to ban public domain servers provided by Google. 4. Threat of banning innovating products: An example of this threat is Google Glass, which is a device that can be worn as glasses. Google glass was banned from public places because of its ability to record others without their permissions. Google Glass is banned from banks, hospitals, classrooms, casinos and other places where recording is prohibited.
6. What recommendations would you make to Google’s top management team to sustain Google’s competitive advantage in the years to come? Innovation
Google has been the leader of search engine for many years. Now, it faces many strong competitors like Yahoo, Microsoft and Baidu. They have similar features. Innovation can help Google to be in a leading position. They can improve the searching speed, having more accurate results or adding more new features. Another things they can change is when clicking the links listed on their webpage, it would automatically open the link in a new tab. It makes easier for users to switch to different website. Google can also putting more capital in cloud computing since it’s a new technology that carries lots of advantages like saving storage cost. Expanding market:
Google can advertise more its products worldwide. Internet Explorer now gains the largest browser market in the world, but there are lots of complains about it. This is an opportunity for google to introduce its Chrome to people. For Example, in China, most people are using Internet Explorer but don’t like it. More young Internet users are shifting to Chrome. They can also use Chrome to log in Facebook. They think It has more benefits than IE browser. Diverse product lines:
Google is now doing a good job in diversifying its products. They have Google glasses, Android, google + and other things. It’s wise to continue doing so. The IT industry is gradually saturating. Developing new products would offer the company new opportunities. Increasing advertising costs:
Google it one of the most used search engine in the world plus its acquisition of Youtube. It’s a good place for advertising. Google increase advertising fee to make more profit.