Discuss competition in the search industry. Which of the five competitive forces seem strongest and weakest? What is your assessment of overall industry attractiveness? To remain leading, it is critical to analyse competitive-level by understanding competitors’ strengths and weaknesses so as to buff up own defences and plan for strategic responds against changes (Bergena & Peteraf, 2002). In view of search engine, a categorized-list of competitive companies is shown in Figure 1.
Figure 1. – Competition in Search Engine
Using Porter’s Five Forces, an analysis of the industry’s attractiveness and competition are illustrated in Figure 2 (Porter, 1998).
Figure 2. – Michael E. Porter Industrial Analysis
Figure 2 depicts Intensity of Rivalry as the strongest force in the industries. Having only small and fixed amount of competitors in the industry, this causes intense competition due from close-imitations on any first-mover service-strategy (Benzinga, 2014). In addition, with no consumer switching cost between competitors, it impels company to constantly innovate and diversify so as to reach out to more consumers. It also depicts Threat of Substitutes as the weakest force. Presently, there are extreme-low or no direct substitutes for the capability of organizing information like the internet. However, the existence of online and offline materials such as E-library, E-books, newspaper, Library and Encyclopedia may considered as possible substitutes.
Nevertheless, these materials do come with the cost of monetary and time values when one purchases any encyclopedias or visits the library. Hence, with internet being total cost-free, they are hardly comparable and substitutable to the search engines. Overall, the attractiveness of the industry remains low as the market is already well-defined with strong rivalry within. This industry characteristically, is classified by McLoughlin & Aaker (2010) as the ‘Red Oceans.’ However, it is also critical to note that the internet is limitless. Viney, D. (2007) highlighted that; during the establishment of Google in 1996, Yahoo!, Altavista and Excite were the leaders but today Google has outrun them completely.
How is the search industry changing? What forces seems most likely to bring about major change to the industry within the next three to five years?
Today, we are easily accessed to search engine through computers, mobile devices and tablets. There is an obvious trend in the raise of the mobile search cum advertising, evidently depicts the relation between mobile devices with search industry; an indispensable mutual-supplementary (Curwen & Whalley, 2010). This form of relationship coupled with the influence of social-networking; have drastically evolved today’s search industry. Mergers and acquisition among technological-leading companies may thus, take place in coming years to create such integration that provides a one-stop-solution to all consumers.
The introduction of Cloud-Computing technology has impacted software market by a large extend (Jansa, 2013); transforming the way how consumers are customizing in terms of data storage. Although this platform is presently not at its optimal-form and still requires improvements, integrating this capability into search systems can be observed in the coming years to further value add to consumers.
Liu (2004) stated that the development of internet has encourages consumers evolve rapidly. The intense usage of search engines no longer desire for quantitative searches but commanded for qualitative searches; reducing time wastage on irrelevant information during searches. Furthermore, privacy coupled with security has always been a controversy (Solove, 2007). This influenced search companies to take serious approaches to their system. All these demands are resulted from evolutional change of consumer’s bargaining chip in present market. Henceforth it can be expected that search engines will be plunging into deep-specialization in fulfilling consumers’ basic demands.
Technology has always been the greatest force that drives today’s changing world yet alone the search industry (Feist, Beauvais, Shukla, 2010). It has greatly contributed to the causes of internet’s close-relationship with mobile devices, new-introductory of Clould-Computing and changing demand of consumers. These forces are therefore likely to bring about drastic changes to the industry for the next three to five years.
What are the key factors that define success in the industry? What are the key resources and capabilities required of successful search engine companies? How do these compare to the key success factors of the Smart Phone industry? Key success factors are prerequisites for companies to possess before entering into an industry in competing successfully as illustrated in Figure 3 (Total Success Center, 2014).
Figure 3. – Key Success Factors of Search Industry
As illustrated under ‘Google’s Success Determinants’; it depicts why Google is the most successful search engine (Cusumano, 2005). To be successful, key resources of search engines revolve around high-end technology coupled with talented software engineers. This results in possessing key capabilities to formulate breakthroughs and maintaining such standard over time. Comparing the key success factors between the search engine and smartphones industry, it is highly similar in many ways. However, with the characteristic of these industries lie differently on the tangibility of its end-products.
This leads to the difference in key success factors where the smartphones industry possesses the addition-required factor of hardware-design (Wharton University, 2012). Today, the taste for smartphones’ design changes constantly where larger-screen and slimmer outlook are the present trending. Reisinger (2011) identified that consumers are attracted to the physical outlook of a smartphone which contributes to their purchasing-decision. Henceforth, this is not applicable in the context of search engine industry where consumers can hardly attain any form of tangibility from its services provided.
Describe Google’s customer value proposition and profit formula linked to its business model. What strategies has Google relied upon to build competitive advantages in the industry? Google places high customer value proposition both on its consumers and customers. In the aspect of consumers, Google emphasized in providing unique consumers experiences by first providing a user-friendly platform on its search engine and Andriod system (Meyer & Schwager, 2007). This retains the loyalty of its consumers that prevents switching and built up a strong consumer base for its customers. In view of its customers, Google strategically enables its services to close up the gap between customers and consumers (Hayes & Bodhani, 2011 ); technologically allowing only related-advertisements that fit directly into the interest of its consumers. This promotes win-win situation for all parties under Google’s entity. These factors can be illustrated through the use of Porter’s Value Chain Model shown in Figure 4.
Figure 4. – Google’s Value Chain Business Model
In Google’s profit formula, its annual revenues made a huge leap from $220 thousand to $29,321 million in 1999 to 2010, profiting a total of $8505 million in year 2010. This was only made possible when Google decides to involve advertising strategies onto their search engine platform in 1999 (Gamble, 2011). Google’s core competency has always been its innovations which built up present competitive advantages. To be innovative, Google first strategy was to evaluate itself internally; a resource-based view approach. Through a Commitment-Orientated HRM system, Google attracts and retain talented-elites into its workforce.
Its renowned Googleplex has cultivated behavioral acts of innovation and provide amply to its employees; giving them the trust to break into new grounds that strengthen its competitive advantages. With application to Porter (1980)‘s Generic Strategies; it answers to Google’s questions: Its stand in the eyes of consumers and its competitive stance. Google has adopted a Differentiation strategy firstly through its high placement of customer value proposition on the broad target market. Subsequently, it differentiated away from competitors by adding strong sense of uniqueness into its services provided. By utilizing on both resource-based viewing and differentiation approaches, Google continues to achieve more market share with sustainability of its competitive advantages.
Have Google’s business model and strategy proven to be successful? Should investors be impressed with the company’s financial performance? How does the company’s financial performance compare to that of Microsoft, Apple and Yahoo? Please conduct a financial analysis to support your position – you may wish to use the financial ratios presented in the Appendix of the text as a guide in doing your financial analysis of the company. In 1999, Google first introduced advertising strategy into its business-model with the subsequent launch of AdWords in 2000. This resulted in major leapt of annual income from initial $220 thousands to $86 million in 2001 as shown in Appendix 1 (Gamble, 2011). Following that, Google-Search was opened to public companies that charges based document-amount utilized; enhanced with security features that guard corporations’ sensitivity, it further increases customers’ satisfaction and revenues generated.
Google’s strategic R&D investment has also created superior-positioning in Internet advertising. The development of in-house features increased influx to Google-site which expands its platform in serving advertisements to consumers (Gamble, 2011). For instant, Google was able to reach out both its customers and customers worldwide, through its 41-language translating feature (Google Developer, 2014). In result, half of their revenues in 2010 were yielded outside United-States. In conclusion, Google’s business model and strategies have proven successful as it remarkably boosts company’s financial performance from 2004 at $3,193 million to 2010 at $29,321 million in terms of overall-revenues; as shown in Appendix 1. With reference from Appendix 1, 2, 3, 4 found in Gamble (2011), the percentage on sales’ return and growth have been computed in Figure 5, 6 to illustrate investor’s impression through comparison with Microsoft, Apple and Yahoo.
Figure 6. – Percentage in Return on Sales
The table shows that Google was unable to compete with Microsoft and Apple despite pulling ahead of Yahoo in terms of sales’ return. Microsoft has achieved the most desirable result. In view of sales’ growth, it depicts that Apple surpasses the rest consistently every year, while Google remains relatively stagnated. Through comparison of both table, Google’s financial performance was not as impressive to a large extend. Despite having steady growth, Google no longer exhibits the rate of breakthrough they had back in 2001; with reference to Appendix 1. Investors with long-term vision would invest with Google’s stability, whereas most investors having only short-term intent; would invest with Microsoft’s and Apple’s impressive growth rate and returns.
What are the company’s key resources and competitive capabilities? What competitive liabilities and resource weaknesses does it have? What opportunities exist? What threats to its continued success are present? Instead of using SWOT Analysis to illustrate Google’s assets, a breakdown of four individual factors and implications are shown in Figure 7, 8, 9, 10 (Taylor 1998).
Figure 7. – Google’s Key Resources
Figure 8. – Google’s Competitive Capabilities
Figure 9. – Google’s Competitive Liabilities
Figure 10. – Google’s Resource Weakness
Opportunities & Threats
Google services are highly integrative with each formulating an ecosystem that encourages consumers’ usage (Jurevicius, 2013). With Google’s current dominance over the search engine industry, it has the potential opportunity to monopolize the entire industry through continuous innovation. However, with the internet being limitless; any emergence of better alternatives to search engine will directly threaten Google’s capabilities in sustaining long in the industry. Furthermore, close rivals like Yahoo often imitates Google’s in-house features and may produce a modified version that outwits its initial intent. This pose immersed threat to Google as over 90% of its income are generated from online search and advertising. Over the years Google has staged itself well globally, having 50% of its revenues coming outside United States.
This provides them the opportunity to break deeper into more countries in specific to the China’s market (Marketline, 2014). However, Google remains barred from this humongous market due to government’s regulations and intense challenges from Baidu; China’s owned search engine. In addition of threats, adverse changes in foreign rates also impacted greatly on Google when, in year 2008, Google’s sales-return could have being higher if it was not caused by stagnancy is foreign exchange rates. Okazaki (2005) identified mobile advertising trending to be the strongest ads-platform in coming years.
Google’s interest must focus towards relating advertisements onto this platform with its expertise in smartphones software and online-advertising (Smith, 2010). Nevertheless, software giants like Apple and Facebook are threats to Google if they decide to integrate-forward to provide search capabilities on their own platforms. Given to the consumers’ base possessed, they could easily gain over the market share over time in terms of search capabilities or smartphone software.
What recommendations would you make to Google’s top management team to sustain its competitive advantages in the search industry? How can it best capitalize on its strategic initiatives in Smartphones, iPads, Cloud computing, emerging markets and other ventures? In an era capitalized by
swift technological changes, organizations are recognizing innovation as crucial competitive advantage (Spender & Grant, 1996). Today, Google stormed the search engine industry with 68.69% global-shares (Netmarketshare, 2014). This is only achievable through the sustainability of such competitive advantage which critically contributed to its successful pursuant in being the market leader over the decade. Stross (2008) identified that leadership in technology is an end-product of constant innovation on strategies and technological infra-structure. Evidently, there is a profound connection between being innovative and the market leader. Henceforth, first recommendation for Google is to capitalize intemperately on such aspiration eternally as it impels the organization to stay innovative consistently in regardless. For more than 20 years, researchers have agreed the significance of human resources for innovation (Schuler, 1986; Van De Ven 1986). Truly, Google exhibited high-investment to its employees with renowned example of Googleplex. However, it is often misconstrued that internal-employees are the only asset. With present’s businesses widely related, it commands HRM-system to be more comprehensive; to involve all external entities that contribute business performance (Lepak & Snell 1999). There-forth, second recommendation for Google is to have its HRM-system collaboration-orientated. Collaboration-orientated HRM deeply enhances qualitative relationship with external entities which formulates a catalyst for Google’s core competency and Economic of Scope. Under positive circumstances, Google may proceed onto forming strategic-alliances which enhances mutual-strategic advantages and profit-outcomes (Gamble & Thompson, 2009). These will come effective as Google ventures deeper into smart phones and cloud-computing market. With powerful financial background, Google should consider applying Vertical-Integration that generates cost savings for other investments and competitive-strengths’ increment (Gamble & Thompson, 2009). To put into practical, Google may integrate backwards onto manufacturing activities for its smart phones and tablets instead of relying on current manufacturers. Furthermore, Google may also integrate forward in setting up own physical-stores instead of distributing. Ultimately, Google can ride onto such integrations to enhance its competitive-positioning and increase profitability (Gamble & Thompson, 2009).
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