Google has come a very long way in defining the culture of the Internet epoch. Larry Page and Sergey Brin, Google’s pioneers, developed a web search engine referred to as BackRub in 1996. BackRub changed to the modern day Google, which has continuously instigated a series of events resulting in the transformation of how companies conduct their business over the Internet. Presently, Google Inc. offers internet-related services and products, such as internet search, software, advertising and cloud computing technologies. The company’s establishment has spurred a chain of products, acquisitions, and partnerships. Google’s consistent utilization of its competencies in challenging the strategies of the world’s leading technological innovators have significantly contributed to its success. Regardless of Google having an excellent technological position, there are impending challenges linked to the abilities of its competitors to dislodge it. In this regard, this paper conducts a situational analysis of Google, identifies problems facing Google, and develops necessary alternatives that are helpful in solving these problems.
The process of evaluating the situational analysis is referred to as Strength, (S), Weakness (W), Opportunities (O), and Threats (T) (SWOT) analysis. It involves assessing the internal business environment (strengths and weakness) and the external business environment (opportunities and threats) (Hitt, Ireland & Hoskisson, 2012). SWOT analysis reveals the competitive position of the organization in the industry. Besides conducting the SWOT analysis, this segment will integrate the competitor analysis and resource commonality.
The first strength of Google is its open source services and products. The company’s aim is to make information accessible and helpful worldwide (Hitt, Ireland & Hoskisson, 2012). This mission is depicted by Google’s products, such as Google calendars, drive, maps or OS that emphasize ranking information based on relevance. In addition, the company’s products can also be integrated with any mobile device free of charge. The openness of the company’s products has significantly contributed to the success of its products and services.
The second strength of the company is efficient to search. Google Search dominates the global internet use. Google is the most popular engine with at least a 65% market share internationally. With regard to the search market, competitors such as Yahoo! and Microsoft have a small share compared to Google. According to the Economist (2010), Google Search engine serves as the gateway to the Internet. Consequently, the engine gives Google several advantages over technology rivals.
The accessibility to the largest number of internet users gives Google excellent strengths. According to online statistics, the company boasts of having accessibility to at least 79% and 89% of the desktop and mobile search market users (The Economist, 2010). Put together, the search engine internet users pose an enormous market share that the company can utilize in promoting and selling products.
Google’s first weakness is the overreliance of advertisement. Very large shares of Google’s revenue are drawn from advertising. In 2013, Google earned nearly 86% of its revenues from advertisement. In the event that competitors manage to penetrate the online advertising market, Google might lose most of its revenue. Nevertheless, the company began diversifying its revenue sources by investing in the mobile industry.
External Environment Analysis
Google has several opportunities to exploit in the industry. Firstly, the increasing number of mobile internet users poses an excellent opportunity (The Economist, 2010). The increasing number of mobile users widens Google’s advertising market through a device. Through the mobile devices, Google can display ads to a wide range of consumers.
Secondly, non-search advertisements also pose an excellent opportunity for Google. The company’s non-search business comprises of display advertisements, mobile, and Apps. This business segments can grow considerably to higher levels than the present levels (Hansell & Markoff, 2006). In addition, the non-search business segments seem to be developing at a very faster pace than Google Search Engine business that has constant streams of income.
Google also faces threats in the industry. The bulging number of internet users every day is a threat despite posing significant opportunities. It is hard for the company to monetize the mobile internet market since there is extremely little space on mobile phones. Besides, the increasing number of mobile internet users translates to fewer desktop searchers and lower revenue (The Economist, 2010).
Secondly, Microsoft is a threat to Google since it poses a considerable degree of competition. Microsoft is gradually penetrating the market share in web searches. The partnership between Yahoo! and Microsoft further intensify the competition in the search market segment (Hitt, Ireland, & Hoskisson, 2012). In addition, Microsoft launched its Window Mobile Operating System in order to compete with Google’s Android. Consequently, Microsoft is a threat to both web search and mobile market.
The four companies are a leader in the technology industry. They share some similarities in resources. Google has research and development capabilities (The Economist, 2010). The company spends a huge amount of money on research and development, consequently, it has necessary resources aligned to this strategy. Since its products are virtual, the company does not invest in constructing warehouses, distribution channels, and hiring sales labor. According to The Economist (2010), Google does not have such resources, but it boasts of research and development resources. In 2009, Google’s research and development expense were about 12% of its sales (The Economist, 2010). This was higher than the general administrative expense, which was about 7% of the sales during the same year. The company cuts costs linked to other resources, such as human capital, in order to invest in research and development activities.
Microsoft also invests in research and development resource acquisition, but not as aggressively as Google does. Microsoft trades physical commodities to its virtual products. As a result, the company spends millions of dollars on marketing itself. In 2009, the company spent about 22% of its revenue on sales and marketing (The Economist, 2010). This is a clear indication that the company invests in sales labor. Similar to Microsoft, Apple sales physical products, which implies that it must invest in distribution resources and human capital. Yahoo! Inc.’s resources seem to reflect those of Microsoft given their business relationship.
Yahoo! Inc., Microsoft, and Apple Inc. are Google’s main competitors. These competitors have attempted to penetrate the four market areas of Google, which include web search, advertisement, applications (apps), and mobile (Hitt, Ireland & Hoskisson, 2012).
The first market segment common to all these companies is online applications market. Google builds its application for the present connected world. Google Apps is a set of cloud computing tool that includes several products. Some of Google Apps include Gmail, Google Docs, Google and Calendar among others (The Economist, 2010). Gmail is a Google email application. Google Docs refers to a set of online editing tools comprising of spreadsheets and presentations among others. Of all apps offered by Google, Yahoo! Inc. offers only Yahoo! Mail. This is the first commonality between Yahoo! Inc. and Google Inc. (Hansell & Markoff, 2006). Microsoft, through Microsoft Business segments, sells competitive applications such as Microsoft Office Web Apps. Microsoft Live email competes with both Yahoo! Mail, and Gmail. Therefore, Yahoo! Mail, Microsoft Live email and Gmail application target the same consumer. Google has the largest market share when it comes to online application market share. Apple does not offer any products that compete with Google’s online application products. In other words, it does not target Google’s market share in an online application.
Secondly, Yahoo! Inc., Microsoft, and Google compete in the advertisement market. According to the case, Google’s revenue from ads accounts for about 97%. Google advertises through Gmail and Google Search (Hitt, Ireland, & Hoskisson, 2012). However, it recently began advertising through YouTube. Yahoo! Inc. advertises through its Yahoo! Shopping, Yahoo! Travel, Yahoo! Real Estate, Yahoo! HotJobs, and Yahoo! Autos among others. Based on these names, Yahoo! classifies ads based on the products. Microsoft advertises through the Microsoft adCenter (The Economist, 2010). Google also has the largest market share globally in the online advertisement market. Similar Apple does not participate in the advertisement business, and, therefore, poses no threat in this line of business to Google.
Thirdly, Microsoft and Yahoo! Inc. compete with Google in the web search market. Apple does not have a search engine, which implies that it does not compete in this market segment. Google has Google Search Engine, which is the most powerful search engine in the world. Microsoft has Bing search engine, while Yahoo! Inc. has the Yahoo Search. Google has the largest market share globally in relation to this segment (Hitt, Ireland & Hoskisson, 2012).
Lastly, Google experiences intense competition in the mobile market, with all the four companies offering products of almost equal value to that offered by Google. Google, through the contribution of the Open Handset Alliance, developed the Android Operating system for mobile devices (Hitt, Ireland & Hoskisson, 2012). Android is a key player in the bulging world of portable tablet computing. Apple Inc. offers iPhone and other related services. Microsoft developed the Windows Mobile operating system. With a growing number of mobile internet users, the three companies have intensified competition. The sales of figures of each company keep fluctuating. Thus, it is hard to predict the market leader in the mobile market.
Google Strengths and Strategies in the Four Market Segments
With regard to the search market segment, Google focused on several primary areas linked to search comprehensiveness and relevance in which it seeks improvements (Hansell & Markoff, 2006). These key areas include objectivity, ease of use, global accessibility, several access platforms, and enhancing internet experience. The company understands that its search engine is the backbone of its other business activities. As a result, the company continues to increase capital expenditure in order to target these key areas. The impact of research and development resources, coupled with increased spending, has led to better products, massive internet traffic, an entreaty for advertisers, and a standard that is unattainable by competitors (Hitt, Ireland & Hoskisson, 2012).
In relation to the advertising market, Google uses a single overarching strategy to deliver targeted, cost-effective, helpful, and relevant advertisements to the user. According to Google, advertisements are simply information that describes search results (The Economist, 2010). Through its strategy, Google has been capable of earning most of its profits from advertisements. In order for a customer to advertise using Google, he or she bids to have the ad displayed next to search results for specific keywords.
With regard to the apps market, Google uses the cloud computing strategy. The Economist (2010) pointed out that the cloud computing is the cornerstone of Google’s strategy. According to the Economist (2010), Google cloud refers to a network comprising several low-cost servers. The cloud stores massive amounts of data, such as multiple mirrors on the World Wide Web. Through this strategy, Google has improved the experience of internet users by making searching faster. In the technological industry, speed can differentiate a company from its competitors. Hence, the fastness of search distinguishes Google Search from Microsoft’s Bing and Yahoo! Inc’s Yahoo! Search.
With regard to the mobile market, Google uses a cost leadership strategy. According to Hitt, Ireland, & Hoskisson (2012), Google’s mobile strategy encompasses two major components namely free rich products, and free distribution of Android OS to mobile phone manufacturers. Most of Google’s applications are open source, which implies that they are free for everyone to change as required. The “free” business model is scaring competitors from investing in the apps market.
Assumptions and Missing Information
Google’s SWOT analysis from the case does not contain all the information needed. The missing information is important in making critical recommendations concerning its competitor analysis. In order to fill up the gaps in the SWOT analysis discussed above, additional information from secondary sources especially from the Internet was considered. Some of the missing information from the case study is discussed below.
With regard to Google’s weaknesses, the case does not discuss the issue surround patents and the unprofitability of some of the products. Patent lawsuits are a weakness to the company. The company is frequently engaged in lawsuits over infringed patents and intellectual property. According to Hitt, Ireland, & Hoskisson (2012), such lawsuits are becoming time-consuming and costly for the company. These litigations divert Google from innovating and gaining a competitive edge. Google’s unprofitable products are also a weakness to the company. Moreover, Google has several services and products, which add little or no value to their business while consuming the company’s resources. These products decrease Google’s profits. The two unmentioned weaknesses constitute the company’s internal environment, which is important in examining its competitive position.
With regard to opportunities, the case does not mention the opportunities linked to acquiring patents. According to the Economist (2010), the obtaining of patents via acquisitions poses a significant opportunity for the company. According to the Economist (2010), it is necessary for Google to acquire more patents in order to compete successfully. Google can achieve this by acquiring firms having a strong assortment of a portfolio. In 2012, Google acquired Motorola and obtained at least 17000 patients from the company (Hitt, Ireland & Hoskisson, 2012). With regard to threats, the case study does not mention the effects posed by social media networks, such as Facebook, on Google’s traffic. According to the Economist (2010), social networking websites, such as Facebook, are a potential threat to Google’s internet market share. Google has to share web traffic with social networking sites, such as Facebook. Consequently, having realized this, Facebook has invested in online advertising because of the massive traffic it enjoys from social networkers.
In consideration of Google’s external and internal environmental conditions, the SWOT analysis does not reveal insights into improving the company’s efforts to compete or improve performance (Hitt, Ireland & Hoskisson, 2012). Despite Google having an excellent technological position, there are impending challenges, and problems, linked to the abilities of its competitors to dislodge it. The three main problems that Google faces include the handling of the escalating China, management of Android platforms, and reacting to the increasing concerns of customers over privacy.
Escalating China Scenario
China is one of the world’s most populous nations and poses significant opportunities for many multinationals, including Google (Hitt, Ireland & Hoskisson, 2012). However, the Chinese market has many restrictions imposed by the Communist Party of China. These regulations require Google to submit its content to the government before disclosing it to the public. Google has to decide whether to serve this market or violate its own privacy policies. Besides the political struggle with the Chinese regulatory authorities, China is a home of Baidu, Google’s main regional competitors (Hitt, Ireland & Hoskisson, 2012). Failure to serve the needs of Chinese internet users will give Baidu an opportunity to dominate the region, cutting Google’s profit.
The growing number of internet users poses significant challenges when it comes to safeguarding user’s private information (Hitt, Ireland & Hoskisson, 2012). Historically, information leaks and data system attacks have been devastating. Whereas the increasing number of internet users presents an opportunity to Google, it also poses challenges. Whereas the company has comparatively few main privacy concerns, there are speculations that what would happen in the event of data leaks. Currently, the only notable privacy concerns raised include the Google Buzz and Wi-Fi eavesdropping. Therefore, such concerns negatively affect the company’s reputation, which might, in turn, reduce market share.
The mobile is an excellent opportunity for Google. However, the company faces challenges linked to its sustainability (Hitt, Ireland & Hoskisson, 2012). It experiences increased competition from two major companies such as Apple Inc. and Microsoft. In addition, it is also hard to monetize these mobile markets.
Development of Alternatives
Having defined the three problems faced by Google, this segment develops necessary alternatives for alleviating the issues. In other words, this section identifies three strategic alternatives that can help Google address the threats and weaknesses in order to remain competitive. Below there are some of the alternatives proposed in this section:
- With regard to the escalating China scenario, Google should not engage in the moral battle with the Chinese government and its censorship regulations. According to Hitt, Ireland & Hoskisson (2012), censorship is a dispute that will consume much time and resources, and, therefore, gives Google competitors to achieve a competitive edge;
- With regard to privacy concerns, Google should use its research and development resources to innovate secure applications that will guarantee internet users data security;
- With regard to the mobile market, Google should examine the pros and cons of monetizing the mobile market. This should be done as quickly as possible before competitors, such as Microsoft and Apple, devise appropriate modes of capitalizing on this opportunity.
Evaluation of Alternatives and Recommendations
Obey Chinese Censorship Laws, and be Vocal about these Laws
China is a potential market for many multinationals. Most of them have to decide whether to conform to the country’s laws or abandon its operations. For Google, there is an opportunity cost linked to penetrating the Chinese market. Google can choose to engage in the moral battle with the Chinese government, and give its competitors time to acquire a competitive advantage or choose to abandon the market and maintain its competitive advantage. In both cases, the likelihood of the Chinese government allowing Google to provide uncensored information is not known. However, Google can take a passive role by abandon the market, and be vocal about its views on the matter given its business philosophy and nature. Google should focus on other parts of the globe, and prevent Baidu from acquiring any market share outside of China.
Guarantee Security of User Data
Privacy concerns might damage Google global image, which might decrease its sales (The Economist, 2010). Currently, Google has no privacy issues, except those arising from Google Buzz and Wi-Fi eavesdropping. Continued speculation might raise more concerns from users, who might avoid the search engine and Android mobile phones. Google has massive research and development resources that can be used to guarantee internet users of their privacy. Again, the company will have to choose whether to dedicate its resources to addressing the privacy concerns of consumers or dedicating resources to its advertising business (The Economist, 2010). The first alternative of dedicating resources to deal with impending data leak speculations will earn the company a positive global image, which will, in turn, result in improved sales. This is a long-term strategy in that its impacts might not be realized within a few years. The second alternative is a rather short term, but it might lead to poor global reputation in the long term.
Monetization of the Mobile Market
The mobile market is an excellent opportunity. However, Google faces two alternatives linked to monetization of this market. Firstly, the company can choose to advertise using mobile devices. Mobile phones have an extremely small display area, as compared to desktop computers (Hitt, Ireland & Hoskisson, 2012). Consequently, rendering adverts on a user’s mobile phone might cause annoyance, which can discourage internet users, and channel traffic to competitors, such as Microsoft and Yahoo! Inc. Secondly, Google can choose not to advertise using mobile devices and maintain internet traffic. By choosing not to advertise, Google will forego profits linked to mobile advertisements. On the contrary, Google might forego internet traffic and earn profits linked to the mobile advertisement. Based on these alternatives, the company should not consider advertisement in monetizing the mobile market.
Google market can be segmented into four critical areas that include mobile, search, advertisement, and app. In relations to the mobile market, Google uses a cost leadership strategy. With regard to the search market, Google uses a single overarching strategy to deliver targeted, cost-effective, helpful, and relevant advertisements to the user. With regard to the Apps market, Google uses the cloud computing strategy. The strategies used in each of the markets differ from one another. Situational analysis of Google revealed three critical problems that included escalating China situation, privacy concerns, and monetization of the mobile market. With regard to the escalating China scenario, Google should not engage in the moral battle with the Chinese government and its censorship regulations. With regard to privacy concerns, Google should use its research and development resources to innovate secure applications that will guarantee internet users data security. With regard to the mobile market, Google should examine the pros and cons of monetizing the mobile market.