Analysis of the Annual Report From Google
Analysis of the Annual Report From Google
Introduction
Google is the largest search engine company of the 21st century. The company is currently making profits worth billion of American dollars through hosting ads for its clients. Google faces competition from companies such as Yahoo and MSN owned by the giant company Microsoft Corporation. The company has to offer differentiated products to its customers to ensure it continues enjoying massive following. Google presence is worldwide having offices in Africa, Europe and other continents. The analysis of Google through annual reports has to take into consideration mission and vision statements against the performance of the company, evaluate how organization’s strategic goals link to Google’s mission and vision. Similarly, we will conduct competitive and market analysis of the organization, apply the appropriate strategy that maximizes the organization returns to shareholders among others. The aim of the paper is to review and analyse the annual report from Google to ascertain its operations and financial performance in the market.
Google’s mission is to organize the global information and make it accessible and useful worldwide. The company’s management believes that the most efficient and feasible way to achieve its mission is to make the need of the customer their priority (Bhatia and Sachdeva, 2012). They believe that providing a high-quality customer experience would increase traffic and powerful word of mouth promotion. They have developed a best search engine, which understands exactly what users mean, and gives back relevant searched results. The management has extended the organizational mission statement by defining principles for the company. The company has done its best in offering the most applicable and useful search outcome based on its financial incentives. The vision of Google is to create a website that benefits all users and publishers.
The company wishes to do its best in establishing the most significant and useful advertisement. It believes advertisements should not encounter any form of interruption. In case any component of a search engine is affected by payment to the management, it will make it vivid to its users. Google has managed to live to its mission because it works constantly to improve the user experience, search technology and other relevant areas of information organization. The company lives to its mission and vision because its services are moving beyond the mere discovery of content provided by others. Google provides users not only links to recent news reports, but also enables a degree of customization of the selection. The management believes that their user focus is based on their success in the future and this focus is vital for the creation of permanent value. Management argues that they have no plan to compromise their user focus for economic gains in the short-term period.
Financial Performance
The annual report retrieved from Google’s 2012 10-K report indicates that the company has a positive trend in both the ability to generate revenue and net income from the year 2008 to 2011. From the 10-K report, Google’s majority revenue comes from advertising business, which stood at 97 % in 2010 and 96% in 2012 (Google Inc., 2012). Google is projecting the advertising business will continue to grow because of the shift of advertising transactions from offline to online. However, the growth rate will decline over time because of increased competition and increasing maturity of the online adverting market.
Google reported revenue $29,321, $37,905 and $50,175 million in the years 2010, 2011 and 2012 respectively (Google Inc., 2012). The profitability and liquidity ratios measure the company’s strength in implementing its strategy. This has helped Google to command 57 Percent of internet searches in the United States. This large market share enables the company to improve the quality of their products and target ads quicker than its competitors. This establishes a sort of self- perpetuating draw for customers as the products improve constantly.
Competitive And Marketing Analysis
Google as a search engine is facing huge competition from companies such as Yahoo and MSN. The competition is presently being moderate because of the ability of the company to develop new products for its customers ahead of its competitors. The new products are marketed before the competing companies are able to develop similar applications. One of the widely used Google applications is the Google Map (Bhatia, & Sachdeva, 2012). Users locate places without paying any amount of money to use the application. Google through its Gmail account allows customers to back up their contacts and send free SMS. The service has forced companies like Yahoo to follow suit, but their product has failed to gain enough market like Google.
Google Inc. has developed social websites such as G+ and Buzz to deal with competitors in the industry. The social websites help people to interact and share personal information that is not available within its public search engine. The company social websites are unable to compete with sites such as Facebook. The reason Google entered the social website industry was because of its inability to access information on sites such as Facebook (Jones, 2007). The information on such sites can only be availed by people who are logged into Facebook.
The company is facing competition in providing operating system in the mobile telephony industry. Companies such as Apple and Microsoft are developing new smart phones that are countering Google’s influence. The smart phones developed with android platform are cheaper, therefore enjoy a huge share of the low-income earning population. Microsoft developed cheap smart phones, but their sale has not increased because of less number of applications available for its users. The android platform applications are mostly free compared to the windows phones applications that customers have to buy (Cheng-Chieh, Zeng, Jianfeng, and Arunabha, 2008).
The competition in the phone industry is stiff because of the huge number of participating organizations, but Google has maintained leadership since rivals fail to match Google’s standards. The core strategy for Google success is Viral marketing. Since Google has never employed any advertisement for its success, it only depends on the social media networks to reach out to the large number of potential customers. This is done via the forwarding power of e-mails and comments of blog spots. It continues to enjoy the number one position in the industry through viral marketing.
Google Strategy
According to Akan, Richard, Spralls and Marilyn (2006), Googles’s strategy is created on a powerful foundation of broad differentiation of complementary products. These products serve to increase the use of other products and promote brand awareness. Many of these unique provisions include its Docs and spreadsheet productivity suite, picasa image organization and editing program, Google Earth and maps. These products are meant to differentiate the company’s advertising business and expand the image of the Google brand. The company reinforces its brand image by maintaining its name in nearly all its products. From a Google perspective, the more uses a person has for Google products, the more opportunity there will be to show them ads.
Differentiation Strategy
The search engine market has multiple players making it necessary for companies to be innovative. Google is at the forefront of buying innovations from developers and integrating them with their search engine. The unique products like Google calendar on its Gmail account make customers remain loyal to the business. The algorithm used in the search engine keeps on improving to ensure customers get the best search results. The improvements in algorithm allow customers to use voices to search for items across the web. The algorithm is able to rate websites and products online, refining the client searches (Bhatia and Sachdeva, 2012). The search engine has developed localized searches where clients can specify the geographical location of their searches.
The localized searches allow advertisers to decide on the market they want to cover with their products. Drivers and tourists for navigation purposes use the Google earth software. The application is compatible with Android smart phones, which are an innovation from Google developers. The application keeps on improving because Google sponsors workshops where individuals participate in mapping their locations. The Google map API is distributed to developers for free so that they can integrate it with their application. The free API makes Google Map appear on most websites that require providing direction to clients. The ease in using of the API allows developers to buy other codes that are sold by the company. Rival business competitors like Microsoft have not developed a mapping application that has clear images like the ones used on Google. The mapping applications developed by Apple is poorly rated making it unpopular among most clients.
Google has invested in Google drive, which is a product that allows customers to back up their data online. Google drive allows consumers to edit documents generated by Microsoft software without downloading. The application allows people to share documents while setting the limitation of each user of the application. The sharing and editing capability makes it attractive to professionals working in offices since they can develop a document as a group. The group members do not have to meet to make a document related to their work, therefore saving cost and time. Microsoft in trying to follow suit has started to deploy their applications online. The Microsoft applications have not gained popularity compared to Google’s because of the huge cost charged per usage. Yahoo which is the closest rival is yet to develop applications that match Google drive capability. The use of Google drive requires customers to simply have a Gmail account.
I chose the differentiation strategy because it enables the company to provide several unique products and services to its diverse customers. This has made the company to cushion itself from its competitors by using advanced technology (Stefan and Keller, 2009). Consequently, capturing of the global market has increased the company’s profits and maximized its shareholder returns. Moreover, the workforce at Google maintains secretly many of the company’s algorithmic codes. Since it is difficult to copy intangible products, this makes Google maintain its competitive advantage and continues to do so for long which the aim of maximizing shareholder returns.
Alliances and Acquisitions
Several Google products are obtained from the acquisition such as Docs, Earth and YouTube. These products promote Google’s brand and attract the previous users of these services to Google. For instance, Double-click add the banner component of Google is an advertising business and brings along important revenue to Google’s Income Statement. It is vital to note that Google and Yahoo have tried to form an alliance for advertising but there was antitrust investigation, which made Google not to go with the move. This back out did not affect the financial position of Google and the company can still enter into an alliance with other trustworthy partners.
Yahoo and Google alliance can be profitable because they share a history. In the early 2000, Google offered Yahoo’s search results. Google has tried several alliances in order to capture the market. One example is opensocial, which enables the company to create applications that operate in different websites. The alliance seeks to find means of diverting attention from Facebook, which is the biggest social networking site (Stefan and Keller, 2009). By creating open Handset alliances Google promotes the use of its open source Android operating system.
This alliance seeks to influence the capabilities of both phone companies and independent publisher to compete with Microsoft’s windows Mobile platform, RIM’s Blackberry and apple’s iphone (Jones, 2007). This will help Google in diversifying its wealth. Exploring new opportunities will help the company to have a solid foundation that would prove feasible through the use of its products and reduction of cost. These new products are vital in gaining leverage in the constantly changing market and offering an alternative industry if there is a need. Google understands that valuable profits and minimized risk can be garnered with international operations.
Employee Motivation
Google is often lauded for its good treatment of its employees. Although it has been ranked at the top of the list of the best companies, Google should offer its employees with an open collaborative culture where ideas are exchanged and application of new ideas is developed. The company should try to motivate its employees by striving to be transparent in their workings by making sure employees are aware about the company’s announcements and new product. The company should employ the Tech Talk technology properly to convey information and communicate with employees (Stefan and Keller, 2009). Google should use employee compensation plans that motivate and retain employees into the company.
The company should encourage rapid and strong growth with powerful employee satisfaction. This enables the company to gain a globally diverse workforce with different views where employees are rewarded for performance. The company’s $ 1000 cash bonus and 10 percent raise paid to all of its employees in 2010 are examples of the length to which the company acts to motivate and retain top talent. This was vital since Google’s stock price decreased by 4.7 Percent in 2010 (Jones, 2007). Therefore, Google should try to manage and motivate its employees to discover new and innovative ways to maintain a powerful corporate culture.
Ethical Issues
The differentiation strategy employed by the Google Company is supporting and discouraging ethical issues. Google is committed to satisfying the interests of users, as well as its policy conviction that expands access to information to anyone who wants it. The differentiation makes the workforce at Google to keep many of the algorithm’s criteria secret (Jones, 2007). This makes it difficult to imitate intangible products, hence discouraging unethical issues. To differentiate its product, the company ends up providing products to customer at low prices, therefore faces quality control measure challenges. This brings about ethical issues and concerns because for a company to produce a product at low cost, it tends to compromise some ethical practices.
In order to match the differentiation strategy, Google uses different tax laws in different countries to obtain the most favorable tax rate. This enables the company to arrive at the low tax rate of merely 2.4 percent (Charles and Jianbin, 2012). The procedure raises an ethical issue on whether it complies with a moral responsibility towards other competitors involved. Similarly, the current project called Google street view where the company takes photographs of streets and places all over the world for anyone to access brings ethical issues as it is considered as an obtrusion of the citizens’ privacy. Despite several lawsuits, the company has refused to quit the project because the product brings more benefits than drawbacks.
Furthermore, Google provides free software to its customers as mentioned earlier, while selling others at low prices. The company is known to provide evaluation copies of its software to online users.
Google has opened offices in countries all over the world to offer customized services. The regional offices are charged with ensuring local content is integrated in the Google search engine. The focus on the growth of the smart phone mobile telephony industry has enabled Google to capture more than 40% of the handheld devices market. The huge numbers of consumers are provided with cheap or free applications they enjoy using on Android devices. Although this might raise ethical issues where Google is seen as not complying with the censorship rules, the differentiation brings the need for diversification of the business in different regions.
This strategy poses threat to other competitors who might view it as unethical. Differentiation strategy helped Google to develop Google.cn into China market in 2006, which brought ethical issues on compromising its principles by entering the China market (Charles and Jianbin, 2012). During the differentiation process, Google makes its information transparent by stating the differentiated products are in accordance with the law and policies. However, this would be an ethical issue because search results may not comply with the relevant laws, regulations and policy and cannot be displayed. However, differentiation strategy is meant to help the company to have a competitive advantage in the market and should not be seen as an ethical issue.
Conclusion
In a recap, the analysis of Google indicate that the mission and vision help the organization understand exactly what customer mean and give back what they want. The mission and vision have helped the company to achieve optimal organizational performance. The financial performance analysis indicates the company is financially stable and can afford expanding globally. Similarly, the strategies used are in a position to maximize organizational returns of shareholders. The company should implement appropriate employee motivation techniques, which helps to attract and retain customers. Motivating employees to find new and innovative ways of doing things helps to maintain a powerful corporate culture. The differentiation strategy has helped the company to diversify and have a competitive advantage in the global market. The strategy has helped Google Inc. to capture different segments of the market at a low cost. Despite ethical issues that Google has faced in the process of expanding its profits and market niche, it remains the best search engine company.
References
Akan , O., Richard , S., Spralls, S., & Marilyn , H. (2006). Critical tactics for Implementing Porter's Generic Strategies. Journal Of Business Strategy, 27 (1), PP. 23-28.
Bhatia , A., & Sachdeva, A. (2012). Strategic Analysis of Search Engine Giant: A Case Study of Google Inc. International Journal of Computing & Business Research, (2229- 6166).
Charles, A., & Jianbin , J. (2012). Ethics, strategy and user relevance: The case of Google.cn (Response to: Google vs. China’s “Great Firewall”: Ethical Implications for Free Speech and Sovereignty). Technology in Society, (34), 182–184.
Cheng-Chieh, C., Zeng, F., Jianfeng, L., Arunabha, S. (2008). Analysis of Google’s Strategy on Android MS&E 270 Company Paper. Creative Algorithms.
Google Inc. (2012). Annual Report, retrieved November 16, 2013 from
http://investor.google.com/
Jones, J. (2007). Research strategic analysis of search engine giant. International Journal of Business, Vol. 22, no. 2, pp. 61-66.
Stefan, & Keller , A. (2009). “Ex Ante Identification Of Disruptive Innovations In The Software Industry Applied To Web Applications: The Case Of Microsoft's Vs. Google's Office Applications.” Technological Forecasting & Social Change, 76 (37), 1044–1054.
