Google an Internet Search Service Company

Assignment on

Google: An Internet Search Service Company

Submitted to:M NAZMUL AHSAN KHAN

Faculty of BusinessAmerican International University – Bangladesh

Course: Strategic Management

American International University – BangladeshDate: 28 November, 2010

1

Google Inc.: The Company

Google was founded in 1998 by Larry Page and Sergey Brin, PhD students at Stanford

University who were fed up with the existing Internet search technology companies and their

inability to return accurate search results. Google was basically an online company that

specialized in developing a reliable Internet search engine.

Google Inc. became a global technology leader focused on improving the ways people connect

with information. Their innovations in web search and advertising have made their web site a top

internet property and the brand one of the most recognized in the world. Google maintains a

large index of web sites and other online content, which is freely available via their search

engine to anyone with an internet connection. Google’s automated search technology helps

people obtain nearly instant access to relevant information from their vast online index. The

main revenue generation of Google is by delivering relevant, cost-effective online advertising.

Different companies use the Adwords program to promote their products and services with

targeted advertising. In addition, the third-party websites that comprise the Google network use

Adsense program to deliver relevant ads that generate revenue and enhance their user experience.

Google’s Strategic Position:

Google’s Chairman of Board and CEO, Eric Schimdt, is committed to the continuous growth of

Google as a premium Internet-search company while at the same time striving to further expand

beyond just the Internet search-based services the company offered. The company needs to

introduce new internet-related services in order to develop a more enduring company not reliant

solely on internet search technology but diversified enough to remain an enduring entity. It also

is further developing its international popularity by giving options for the users to choose their

languages for the search engine.

In Google’s website www.google.com or one of more than 150 other Google domains,

information can be found in many different languages, check stock quotes and sports scores, find

news headlines and also find images, videos, maps, patents and much more. Google regularly

explores all three manners of diversification with new start-ups, with acquisition, and with

strategic alliances.

2

Start-ups: Google has a rule that employees can spend 20% of the time working on pet projects

that are not part of their job description. Such motivation helps Google innovate and diversify

into previously untapped businesses but usually still makes use of their core competencies and

capabilities. Both Gmail and Google News started off as 20% projects.

Acquisition: Several of Google’s products are derived from acquisitions including Docs, Earth,

and YouTube. These products have expanded Google’s brand and brought the previous users of

these services to Google.

Alliances: It is interesting to note the Google and Yahoo recently explored an alliance for

advertising but federal judges threatened an antitrust investigation so Google backed out. This

move did not cause a financial setback being prompt and respectful of other partners. Yahoo and

Google in fact have a history together. Back in the early 2000’s Google provided all of Yahoo’s

search results.

Google understands the wealth in diversification. Exploring new opportunities constantly over a

solid base of research could prove profitable with the use of products that can reduce cost – cost

of production, advertisements, etc. These new products are crucial in gaining leverage in the

constantly changing market and providing an alternative industry if need be. Google understands

that valuable profits and minimized risk can be garnered with international operations.

Google’s Vision & Mission:

Google’s mission is to organize the world’s information and make it universally accessible and

useful.

They believe that the most effective, and ultimately the most profitable, way to accomplish the

mission is to put the needs of the users first. Offering high-quality user experience leads to

increased traffic and strong word-of-mouth promotion. Google’s dedication to putting users first

is reflected in three key commitments:

• Doing the best to provide the most relevant and useful search results possible, independent of

financial incentives. The search results will be objective, and we do not accept payment for

search result ranking or inclusion.

3

• Doing the best to provide the most relevant and useful advertising. Advertisements should not

be an annoying interruption. If any element on a search result page is influenced by payment, it

will be made clear to the users.

• Will never stop working to improve user experience, search technology, and other important

areas of information organization.

Believe that user focus is the foundation of success to date and this focus is critical for the

creation of long-term value and not intend to compromise user focus for short-term economic

gain.

Google’s Objectives:

Google’s objective is to provide the users the perfect search engine that would understand

exactly what they mean and give back exactly what they want. Now a day’s Google became

successful precisely because of better and faster at finding the right answer than other search

engines at the time.

But technology has come a long way since then, and the face of the web has changed.

Recognizing search is a problem that will never be solved, continuously pushing the limits of

existing technology provides a fast, accurate and easy–to–use service that anyone seeking

information can access, whether they’re at a desk in Boston or on a phone in Bangkok.

As Google keeps looking towards the future, these core principles guide its actions.

1. Focus on the user and all else will follow.

2. It’s best to do one thing really, really well.

3. Fast is better than slow.

4. Democracy on the web works.

5. You don’t need to be at your desk to need an answer.

6. You can make money without doing evil.

7. There’s always more information out there.

4

8. The need for information crosses all borders.

9. You can be serious without a suit.

10. Great just isn’t good enough.

These principles were written several years ago, still now it is revisited to see if the principles are

well maintained through Google’s journey or not.

Corporate Governance

Co-founders Larry Page, president of products, and Sergey Brin, president of technology,

brought Google to life in September 1998. Since then, the company has grown to more than

20,000 employees worldwide, with a management team that represents some of the most

experienced technical professionals in the industry. Eric Schmidt joined Google as chairman and

chief executive officer in 2001.

Corporate Culture:

Google maintains a small company feel. It’s commitment to innovation depends on everyone

being comfortable sharing ideas and opinions. Its emphasis on innovation and commitment to

cost containment meant that each employee was a hands-on contributor.

Google’s hiring policy is aggressively non-discriminatory and favored ability over experience.

Google has offices around the globe and Google engineering centers recruit local talents in

locations from Zurich to Bangalore, dozens of languages are spoken by Google staffers. As

Google expands its development team, it continues to look for those who share an obsessive

commitment to creating search perfection and has a great time doing it.

Google allows employees to spend 70 percent of their time on the core business, 20 percent on

related projects, and 10 percent on unrelated new businesses. This rule is so important that

Google has people on staff to manage the 70/20/10 rule. The engineering and design staffs make

use of the “free time” to pursue new products and technologies, but even the top-level managers

adhere to the rule.

Board of Directors:

5

Eric Schmidt, Google Inc.

Sergey Brin, Google Inc.

Larry Page, Google Inc.

L. John Doerr, Kleiner Perkins Caufield & Byers

John L. Hennessy, Stanford University

Ann Mather

Paul S. Otellini, Intel

K. Ram Shriram, Sherpalo

Shirley M. Tilghman, Princeton University

Executive Officers:

Eric Schmidt, Chairman of the Board and Chief Executive Officer

Sergey Brin, Co-Founder and President, Technology

Larry Page, Co-Founder and President, Products

Nikesh Arora, President, Global Sales Operations and Business Development

Shona L. Brown, Senior Vice President, Business Operations

David C. Drummond, Senior Vice President, Corporate Development and Chief Legal

Officer

Alan Eustace, Senior Vice President, Engineering and Research

Patrick Pichette, Senior Vice President and Chief Financial Officer

Jonathan Rosenberg, Senior Vice President, Product Management

Societal Environment

Internet search is applicable to most cultures all over the world this gives Google geographic

independence. In fact, the company now has 20 offices in the U.S. and international locations in

over 30 countries working on research, sales and marketing. Google offers a personalized search

engine for more than 115 countries, and as language support improves, the company is likely to

gain market share. As now computers are more affordable, many people in developing countries

are gaining access to the internet for the first time and Google is steering them through its search

and productivity products, like Gmail, Docs, and Sites.

6

Google is well positioned in demographics because it has a relatively young user base. This is a

good side as the use of internet increases the use of search engines also increase. Internet search

doesn’t depend on factors like gender, religion etc. therefore Google has an advantage over other

businesses.

a. Economy

IT related companies like Google are relatively isolated because search and consequently

internet-based advertisements has become a staple to the world society and economy. Google’s

focus on highly targeted, measurable advertising makes it more recession-proof than many other

businesses in the technical sector. The crucial need to stay informed and constantly connected

keeps such services vibrant despite the parched surroundings.

b. Technology

Technology is obviously always improving and Google has taken specific measures to make sure

it does not fall behind. Google can use commodity computer parts (cheap components) knowing

they will fail by ensuring that every component always has a duplicate. The components are

attached to the computer with Velcro rather than screws which allows for quick swapping and

upgrading.

c. Socio-Cultural

Formal institutions have not significantly affected Google’s operations, although Google has

faced pressure from the Department of Justice to relinquish archived search terms and from the

Chinese government to censor search results. Google’s “Don’t be evil” mantra has been put to

the test as users ask whether cooperation with governments undermines their privacy and

freedoms. In 2008, Google responded to customer concerns when it added a privacy link to its

home page. This link took users to a Privacy Center where they could learn about Google’s

policies in regard to political and legal issues.

The world is increasingly becoming more connected due to the means of communication

available through the internet. And, for many people, the search giants like Google make the

internet navigable. As internet use increases among all age groups and across all cultures, we

will become increasingly more dependent on internet search. 7

In addition, most new cell phones are internet capable devices. People will use these devices for

driving directions, to locate restaurants, check sports scores, download music, and even quick

research. Google stands to benefit from this with an increased number of search queries. To

enable more people to access Google’s services from their mobile devices, the company has

released its Android Mobile Phone Platform and Operating System as well as the Google Mobile

App that can be downloaded on other platforms such as the Apple iPhone.

d. Political Legal

Google has also faced concern on copyright issues because the company stores copies of third

party web pages and images on their servers. They have responded to this criticism by releasing

a copyright information page. The page provides the relevant information regarding digital

information and provides links to notify both Google and the U.S. Copyright Office of suspected

infringement.

Task Environment: Porter’s 6 forces (Forces Driving Industry Competition)

Porter’s 6 Forces analysis is a framework for industry analysis and business strategy

development relative to the competitors of a firm.

Potential New Entrants

Google’s business is rapidly evolving and intensely competitive, and is subject to changing

technology, shifting user needs and frequent introductions of new products and services. The

barriers to entry in the internet search market are high. There are many competitors in different

industries, including traditional search engines, vertical search engines and e-commerce sites,

social networking sites, traditional media companies, and providers of online products and

services. Google’s current and potential competitors range from large and established companies

to emerging start-ups. The current competitors have thousands of servers deployed in locations

all over the world and have accumulated many years worth of data about user habits. A new

entrant would need to provide better search results at very fast speeds to compete in this highly

competitive market. When Google was founded in 1998, Yahoo, Excite, and Altavista dominated

the search market and now Google is number one search engine by overcoming all of them. The

8

market now, however, is more mature with a necessary path dependency to gather data on both

the content of web pages and the search history of users. Therefore, the threat of new entrants in

the internet search market is relatively low.

Suppliers

Google’s ad system is a reliable source of income because both the ad-making partner and ad-

receiving individual are both customers of Google’s. So as long as Google maintains its market

dominance with the search product, supplier bargaining power will remain low. Google’s cost of

revenue as a percentage of sales in 2007 was 40%. This number is the same for Yahoo

suggesting that both companies are equally efficient at maintaining supplier-seller collaboration.

Current Competitors

Google’s goal is to “organize the world’s information” and to addition they created many

complimentary products to their main internet search service. Targeted advertisements based on

the information they collect with their products are Google’s primary source of revenue. With

regard to internet search technology Google is the winning search engine.

Google’s main competitors are Yahoo, AOL and MSN. Presently, Google has nearly 60% of US

market against their search engine. This large market share helps them to improve the quality of

their search results and get ads more quickly than their competitors. Yahoo and Microsoft lag

behind Google in market shares. The competitive rivalry is strong and ongoing in this industry

because large amounts of advertising dollars flow to the website that has captured the largest

volume of searches.

Customers

The customers of Google are mainly the ad providers. Ad providers are continuously looking for

the search engines which the people use the most to attract the target customers. In this case

Google is number one as the usage of this search engine is the most depending on its fast and

reliable search results and simplicity of the website. Brand value is also a reason for Google

current success. The ongoing value creation is helping Google to capture new markets in the

9

world. Therefore the ad providers can capture developing countries through Google as the use of

internet user and search increases correspondingly. The users play a vital role for Google’s

revenue as the popularity of search engine depends on it.

Potential Substitutes

In 2008, the internet has become the mode chosen by millions of people all over the world to

request and retrieve information. So, there really is no suitable substitute for search. Information

can be organized in different ways including categories and sorted by date, but Google provides

tools to complete these tasks as well as conduct searches. A substitute product may be invented

in the future, but there are no obvious substitutes to organizing information on the internet.

Google has positioned itself well to weather each of Porter’s Five Forces of Competition as well

as stay afloat in a turbulent external environment. Google’s ability to please its stakeholders will

continue to define the success of the venture and the future of the company.

Relative-power of Stake-holders

In Google’s case the main power is on the hand of the investors and other partners. As Google is

a public company its financial stability is very important for the investors. The increase in stock

price proves that the company has a very good reputation and the financial condition is sound.

The company’s expenses are minimal because it had no inventory. But any kind of rules and

regulations in the search industry might affect the company as it may affect the world.

10

Internal Environment Analysis:

The internal environment analysis mainly involves the strength and weaknesses of an

organization. Here the strength and weaknesses are found according to Google Inc.’s current

situation.

Strength:

Google has a lot of strengths, below is given the main key points for Google’s success.

Profitable business model (S1):

Google has a very profitable business model. Its diversification in business helps to expand in

different areas of search and also increase the popularity to the users. Google’s search engine has a

huge database which helps to generate the accurate search results. Because of the huge database

Google’s business model is very hard to follow but still there are a few competitors like Yahoo,

AOL and MSN who has similar products and services.

Business Model: Google, Inc.

11

IFAS Table (S1):

Weight- 0.12 in the scale of 0.00-1

Rating- 4 in the scale of 1-5

User friendliness, reliable and fast search (S2):

Google’s user friendliness, reliability and fast search helps to gain more users day by day. The

simplicity of the search engine helps the users to be more dependable. Most of the time if a topic is

searched the results also are related in a higher rate than Yahoo, AOL or MSN. This is mainly

because of the data relativity and usage rate of the users.

IFAS Table (S2):

Weight- 0.20, in the scale of 0.00-1

Rating- 3.2, in the scale of 1-5

Brand equity

Google’s brand equity is very high comparing other the search engines. Because of its brand value

and quality search the user’s word to mouth promotion is helping Google to keep all the internet

users known to its existence and use it for the source of information. Therefore the brand equity

helps the company to gain more market share now and onwards. The brand identity that Google has

12

developed has significantly contributed to the success of the business. The importance of brand

recognition will increase due to the relatively low barriers to entry in the internet market.

IFAS Table (S3):


Rating- 4, in the scale of 1-5

Innovative initiatives

Google has taken a lot of risks in the field of information technology. Its innovativeness helps

people realize some product that they didn’t know they were missing. For example, Google Search

Personalization, Google in different languages, Google News, Google Earth etc. Who knew we

could find a global website like Google asking us in mother tongue-Bangla what we are looking

for. Therefore Google’s innovativeness is its unique strength.

IFAS Table (S4):



Work-force & corporate culture

The workforce of Google is an important factor for its organization. All innovativeness comes

from this work-force and every employee helps the organization to grow in a unique way. The

70/20/10 rule for work for the employees helps the employees to work on task that are not even

in their job description. This culture helps everyone to think out of the box once a while so the

creativeness increases giving them brilliant ideas that might be the next revenue earning project

for Google.

IFAS Table (S5):



13

Weakness:

Dependency of advertising business:

Google’s main earning is depended on advertising. Advertising completely depends on the

popularity of the search engine and its related products. The ad provider’s motive is always to

get the people’s attention for selling their products or services. In this case if Google’s popularity

decreases the ad providers might switch to others search engines to make their organization

visible to the people. Therefore, the dependency on ad providers may cause Google large

revenue if the popularity level decreases.

IFAS Table (W1):



Has products customers don’t know that it even exists:

Google has a wide variety of products and services. Some of these products are still unknown to

the people. This is a weakness as Google in unable to make the users know about products such

as Google catalogue, Google translate, Google wireless etc.

IFAS Table (W2):



IFAS TABLE:

Internal Strategic FactorsWeight Rating

Weighted Score

Comments

1 2 3 4 5

Strengths

S1 Profitable business model0.12 4 0.48

Search engine, advertising, business solutions, third party websites etc.

S2 User friendliness, reliable and fast 0.2 3.2 0.64 Related search results

14

search.

S3 Brand equity 0.18 4 0.72 Large number of users.

S4 Innovative initiatives0.12 3.5 0.42 Google earth, Google news etc.

S5 Work-force & corporate culture 0.08 3 0.24 Helps create innovation business ideas.

Weaknesses

W1 Dependency on advertising business 0.2 3 0.6 Most revenue comes from Google AdWords.

W2Has products customers don’t know that it even exists

0.1 2 0.2Google catalogue, Google translate, Google wireless etc.

Total Scores 1 3.3

The most important internal factors for Google are identified in the IFAS table are highlighted.

External Environment Analysis

The external environment analysis involves the opportunity and threats of an organization. Here

the opportunities and threats are chosen according to Google Inc.’s current situation and future

possibilities.

Opportunity:

Increasing internet users

The usage of internet is increasing day by day. Since the use of internet is spreading to developing

countries Google is taking the chance of increasing its market share as well. This opportunity is a

plus point for internet search engine providers because the industry is still in a growth stage in

these countries. Google is trying to capture the market of China but due to their local search

engine it is becoming hard to compete. Apart from the increase market Google enjoy the users

from a very young age. Technological change is helping Google to expand its users group day by

day. Therefore increasing number of internet users is helping Google to attract more ad providers

also as the user range increases.

15

EFAS Table (O1):



Technological change

Technology is changing rapidly as well as Google’s products and services. Google is the leader of

such an industry that most of the advancement creates a new level for Google to make things more

users friendly and simpler. The increase in usage of mobile phones helped Google introduce

Google applications in the mobile phones. Technological advancement creates new areas for

Google to expand its tools. For example, Nexus – Google’s creation for competing with Apple in

the mobile phone industry.

EFAS Table (O2):



Expanding to profit making opportunities

Google always seek new arenas for profit making opportunities. Different and innovative

internet devices and advertising platforms may create the opportunity for Google to increase its

revenue.

EFAS Table (O3):



Threats:

Increased competition in the search engine market

The search engine industry full of competition. It is rapidly evolving and intensely competitive, and is

subject to changing technology, shifting user needs and frequent introductions of new products and

services. There are many competitors in different industries, including traditional search engines,

16

vertical search engines and e-commerce sites, social networking sites, traditional media companies,

and providers of online products and services. The current and potential competitors range from large

and established companies to emerging start-ups. Established companies have longer operating

histories and more established relationships with customers and end users, and they can use their

experience and resources against Google in a variety of competitive ways, including by making

acquisitions, investing aggressively in research and development, and competing aggressively for

advertisers and web sites. Emerging start-ups may be able to innovate and provide products and

services faster than Google can. If the competitors are more successful than developing compelling

products or in attracting and retaining users, advertisers, and content providers, Google’s revenues

and growth rates could decline.

EFAS Table (T1):



Business model imitators

Google has a very profitable business model and there are companies who follow it. Google can face

threat if the followers create a huge data relevancy and create a faster and more reliable search engine,

but here Google is ahead of startup companies as its tough enough to create such search engine to

match with Google’s rate of relevant information.

EFAS Table (T2):



New media of advertising

Google Inc. generated 97% of their revenues in both 2008 and 2009 from their advertisers. The

advertisers can generally terminate their contracts with at any time. Advertisers will not continue to

do business with us if their investment in advertising with does not generate sales leads, and

ultimately customers, or if Google do not deliver their advertisements in an appropriate and effective

manner. In addition, expenditures by advertisers tend to be cyclical, reflecting overall economic

17

conditions and budgeting and buying patterns. If Google is unable to remain competitive and provide

value to the advertisers, they may stop placing ads, which would negatively harm overall revenues

and business.

EFAS Table (T3):



Concerns from investors

For a public company this is a very crucial issue. A company’s overall performance reflects on its

investors. Therefore the investors play a very vital role.

EFAS Table (T4):



Data privacy

The Google brand may be negatively impacted by a number of factors like data privacy and

security issues. Government might create rules and regulations if Google cannot secure data and

provide services to the users. This issue may raise if Google doesn’t maintain the data privacy

along with their services.

EFAS Table (T5):



EFAS TABLE:

External Strategic FactorsWeight Rating

Weighted Score

Comments

1

2 3 4 5

Opportunities

O1 Increasing internet users 0.15 5 0.75 Internet dependency

18

O2 Technological change0.05 2 0.1

increase in use of mobile- Google Launches Nexus

O3Expanding to profit making opportunities

0.15 3.5 0.525New internet devices and advertising platforms

Threats

T1Increased competition in the search engine market

0.2 5 1Local search engines are more popular in markets like China

T2 Business model imitators 0.05 1.2 0.06 Doesn’t impact much

T3 New media of advertising0.15 2 0.3

Might create threat initially if its not internet related

T4 Concerns from investors0.15 4 0.6

positive now, but as it’s a public company investors are important

T5 Data privacy 0.1 1.5 0.15 Government regulations

Total Scores 1 3.485

The most important external factors for Google are identified in the EFAS table are highlighted.

SFAS (Strategic Factor Analysis Summary) Matrix:

Strategic Factors Weight Rate Weighted Score

Sh

ort

Inte

rmed

iate

Lon

gComments

S1 Profitable business model 0.1 4 0.4 √ Will keep Google successful in the long run

S2 User friendliness, reliable and fast search.

0.12 3.2 0.384 √ Quality search for users to rely

S3 Brand equity 0.12 4 0.48 √ √ Helpful for intermediate and long run.

S4 Innovative initiatives 0.08 3.5 0.28 √ Helpful for long run.

W1 Dependency on advertising business 0.2 3 0.6 √ √ Only focus for revenue

O1 Increasing internet users 0.08 5 0.4 √ √ Ongoing process as technology is becoming more popular

O3 Expanding to profit making opportunities

0.1 3.5 0.35 √ New internet devices and advertising platforms

T1 Increased competition in the search engine market

0.1 5 0.5 √ √ Local search engines are more popular in markets like China

T3 New media of advertising 0.05 2 0.1 √ Might effect in the long run

T5 Concerns from investors 0.05 4 0.2 √ √ Will affect the future of the company

19

Total Scores 1 3.694

Notes:

1. List each of the most important factors developed in the IFAS and EFAS tables in Column1.

2. Weight each factor from 1.0 (Most Important) to 0.0 (Not Important) in Column 2 based on that factor’s

probable impact on the company’s strategic position. The total weights must sum to 1.00.

3. Each factor rates from 5.0 (Outstanding) to 1.0 (Poor) in Column 3 based on the company’s response to

that factor.

4. Column 4 is the factor’s weighted score obtained by each factors weight times its rating.

5. For duration in Column 5, short term- less than 1 year; intermediate- 1 to 3 years, long term- over 3 years.

6. Column 6 is the rationale used for each factor.

20

Recommendation:

The company should take upon strategies to maintain its strengths, overcome the weaknesses and threats and create opportunities to be competitive in

the search industry. Google can take the following strategies to overcome its weaknesses and threats by using its strengths and opportunities.

Google's Should Implementation Evaluation Control

Profitable business model

StrengthMaintain the strengths so that Google will remain the market leader.

Strategy:>Maintaining the quality of the search engine and create new ways to satisfy the users and relate to them.

Continuous process- Feasible

Long Term control on company's strategic position.

User friendliness, reliable and fast search.

Brand equity

Innovative initiatives

Dependency on advertising business

WeaknessTake immediate action to

diversify business in different sectors for gain more revenue.

Strategy:

>Google has opportunity to explore the world of graphics make games, design websites.

FeasibleShort Term control on company's strategic position.

>It can also create products like anti-virus software’s etc.

Feasible

>Create car tracking software’s by the help of Google Earth.

Might require permission /hamper regulations/people’s

privacy

Increasing internet users

OpportunitiesTake the opportunities and making them the strength for the company.

Strategy:>Compete with local search engines in large markets like China.

May or may not be feasible

External factors

cannot be controlled

Expanding to profit making opportunities

>Create social networking website to compete with most popular website Face book.

Feasible

Increased competition in the search engine market

Threats

Overcome threats by new start-ups, acquisitions and alliances, keep a sound financial performance to attract investors.

Strategy:

New media of advertising >R & D for new ways of advertising. Feasible

Concerns from investors >Improve quality of search Feasible

21

Conclusion:

Now a day’s Google is the most popular global search engine. Its reliability and user friendliness

attract users from all over the world. The brand value of Google is higher than its competitors,

but it doesn’t mean that this will remain always. Google needs to take strategies to be the market

leader as there are always new competitors in the search industry. These strategies need to be

updated due to frequent technological change.

22

Google an Internet Search Service Company

Documents

Transcript of Google an Internet Search Service Company