Case Study Analysis

Anh Nguyen

Case Study Road Map

• Industry Situational Analysis

• Company Situational Analysis

• Strategy Recommendation

• Implementation Recommendation

Industry Situational Analysis

Dominant Economic Characteristics

• Market size & Growth Rate– Revenue: $39 billion (2004)– Revenue: $50 billion (2005)– Predicted growth rate (2007) 27%

• Main Rivals– Google, Yahoo!, Time Warner, AOL, Microsoft,

Ask.com, Paid search providers

Dominant Economic Characteristics

• Scope of Competition– Global Presence – Stronger competition

• Degree of Product Differentiation

• Product Innovation– Google = Domino effect

Competition Analysis

• Rivalry among competing sellers– Strong– Google’s market share dominance

• Threat of potential entry– Strong– Inexpensive start-up costs– Risk of brand new technologies coming in the

market

Competition Analysis

• Power of substitutes– Strong– Zero switching costs

• Power of Suppliers– Inexistent

• Power of Buyers (advertisers)– Moderate

Driving Forces

• Increasing Globalization

• Product Innovation

• Regulatory influences & Government Policies– Privacy Issues– Chinese Government censor

Competitive Position of Main Companies

Competitor Analysis

• Profile Competitors/Predict Moves

CompanyCompetitive

ScopeStrategic

IntentMarket Share

Objective

CompetitivePosition/Situation

Strategic Posture Competitive Strategy

Google Global

Maintain the position of leader of the search engine market

Expand through more advertisers and user access

Strongest competitor in the market

Combination of Offense and Defense Broad Differentiation

Yahoo! Global

Be among the top in the industry

Expand through new search technology (Panama) Getting Stronger

Combination of offense and defense Broad Differentiation

Ask.com Global

Be among the top in the industry

Expand through advertisement and development of brand name Still weak

Combination of offense and defense Broad Differentiation

Key Success Factors

• Technology-Related: Expertise in a particular technology

• Marketing- Related: A well-known and respected brand

• Skills and Capability Related: Product Innovation

• Skills Related: Global Distribution Capabilities

Overall Attractiveness of Industry

• Attractive Factors– Increased number of users

• Unattractive Factors– Very competitive

• Issues– Privacy

• Profit Outlook– Favorable

Company Situational Analysis

• Qualitatively: Google is a focused differentiation (or market niche) strategy • Complementary strategic strategy: offensive strategic moves, outsourcing value chain activities, and unique website strategies

Evaluation of the Current Strategy

Financial Performance Analysis

2003 2004 2005 2006

Net Revenues $1.5billion

$3.2billion

$6.1 billion $10.6 billion

Net Earning $106million

$399 million $1.5billion

$3 billion

Shareholders’ Equity $588 million $2.9 billion $9.4 billion $17billion

Shares Outstanding 160million

275million

296million

309 million

Current Ratio 2.4 7.9 12.1 10.0

• Quantitatively

Evaluation of Current Strategy

• Strong Market Position

• Proprietary Technology & Technological Infrastructure

• AdWorks and AdSense Programs

• Google Network Members

• Social Networking Domain

• Lack of Product Information

• Asia Internet Usage

• Online Ad Spending in the US

• Growth in Online Videos

• Competition from Microsoft and Yahoo

• Click Fraud and Invalid Clicks

• Data Scams

SWOT

ANALYSIS

Analysis of Company’s Price & Cost Competitiveness

• Value Chain Diagram

• Value Chain Analysis: Most vital are Sales & Marketing, Technology, and Systems Development

• Price Competitiveness comes from Delivering Online Advertising - AdWorks and AdSense

• Branching out into Different Product Lines - Google Books - Google Maps - YouTube - Google Earth - gPhone

Analysis of Company’s Price &Cost Competitiveness

Weighted Competitive Strength Assessment

• Weighted Competitive Strength Matrix

Key Success Factor/Strength Measure

Importance

Weights

Google

Yahoo

Microsoft

Ask.com

Expertise in a Particular Technology

.3 8/2.7 7/2.5 6/1.5 5/2.0

Well-Known and Respected Brand .2 8/1.8 7/1.4 6/1.4 5/1.0

Product Innovation .3 9/2.5 8/2.0 7/.8 7/1.5

Global Distribution Capabilities .2 9/1.7 8/1.7 6/1.5 6/1.6

Sum of Weights 1.00

Weighted overall Strength Rating

8.7 7.6 5.2 6.1

Weighted Competitive Strength Assessment

• Weighted Competitive Strength Matrix Analysis

- Google has superior strength over competitors - Yahoo falls in second place due to name brand recognition - Ask.com is increasing product innovation - Microsoft came in last due to lack of product innovation

Strategic Issues Analysis

• Will Google be able to compete with MySpace and Facebook to become the premier social networking site? • Will Google be able to capture the Asian Market and make China the leader in internet usage, especially by using Google as their main search engine site?

Strategy Recommendation

Strategic Inflection Point

• Government Reform• Structural Crisis• Information Explosion

Strategic Vision

• Mission/ Vision:– Who– What – Where Google stands– Where Google is heading

Strategic Objectives

• Key Strategic Objectives

– Gain 53% of U.S market share– Expand to China– Invest up to $ 20 million in

online ad spending– Diversify in mobile industry

• Key Financial Objectives

– Increase revenue in Chinese market by 19% first quarter 2007

– Double capital expenditure in 2007

– Increase in revenue by 38% in 2008 by online advertising

Strategy Options

• Generic Competitive Strategy:– Focused Differentiation

• Complementary Strategies:– Strategic alliances– Collaborative partnership– Acquisition– Offensives moves– Outsourcing its value chain

Functional Area Missions and Task Statements

• R&D Engineering• Production• Marketing & sales• Human resources• Finance

Timing Initiatives

• Immediate (1st year)• Long range (2nd through 4 years)

Implementation Recommendation

Building a Capable Organization

• Strategy Critical Position• Recruit & Retain Talented Employees• Strategy Critical Core & Distinctive Competencies• Match Organizational Structure to Strategy

Strategy Critical Positions

Managers Must:

• Thinking Clearly• Problem Solve• Positive Outcomes

Implementing:

• Solve Problems in Business• Training Day 1: Establish Problems• Training Day 2: Establish

Improvements

Recruiting and Retaining Employees

Recruiting

• Screen applications thoroughly– Loyalty – Integrity– Intellect

Retaining

• Provide Reward System• Employee Empowerment

Core & Distinctive Competencies

Core

• Hardware • Software• “Cutting Edge”

Distinctive

• Human Resource

Department

Match Organizational Structure to Strategy

• Value Chain Activities• Strategy Activities• Authority• Cross-Unit Coordination• Collaboration

Link Budget

• Supply Money to Research & Development

• Supply Money Internationally– China– India

• Human Resources

Policies and Procedures

• Providing Handbooks to Employees

• Examination of Procedures

• Probation Period

Best Practices &Continuous Improvement

• Competition: Yahoo!, Ask.com, MSN

• Prevent Competition from Benchmarking– Causing change in Information Technology

Department

Information & Operation Systems

• Developing Updates for Technology

Rewards Systems

• Full Benefits Plans• Health Insurance Plans• Fun Work Environment• Maternity Leave• Tuition Reimbursement• Gift Matching Program

Supportive Corporate Culture

• Empowering Employees

• “Can-do” Attitudes

Critical Management Behaviors

• Staying Involved with Employees• Constructive Pressure on Organization• Innovation of Core Competencies• Ethical Integrity• Corrective Adjustments

Conclusion

• Bright Future

• Continued Expansion