Overview of Growth, Development and Strategic direction of Google since the IPO in 2004
Google is a non-conventional company. Google has always been managed differently since it invention as a private company. Emphasis has always been on the environment or the atmosphere of creativity as well as challenge. It has led to the creation of Google that provides accurate, unbiased and free to access information for anyone that relies on Google globally.
The CEO said at one time it opportune time for the company to move to public ownership. Becoming a publicly owned company will have a number of importances to the employees, customers, the current shareholder and also the future shareholders. The feared however is that the standard structure which is always set for the public ownership might interfere with how Google offers its services. It is because it may jeopardize the focussed objectivity and also its independence. These two factors have been Google’s major reasons for success and are up to now considered being fundamental for its future growth.
The Google team is always of the products that they have built. Some of the products include GMAIL, Blogger, Google Talk, Google Desktop and many more. They have ensured that they have something for each and every person. Everybody is represented in the Google world. It is hoped that they will bring in more products as time passes. These products are expected to affect the world positively.
Being a private company, Google has always dwelt on long term projects. This strategy has however worked well for them. They believe that when it becomes a public company, they will do the same when they become a public company. An opinion that they give is that the outside pressure which a company gets is sometimes tempt the affected companies to sacrifice their opportunities so that they are in a position to meet the quarterly market expectations. Sometimes the companies even manipulate their financial results to make their quarter. Warren Buffets says that they want smooth quarterly annual results.
If the opportunities that arise will force the Google Company to sacrifice their long term projects for the short-term projects, they must exactly do that. The shareholders will then be requested to take a long term view.
Since the beginning of the discussion, one might be wondering how long-term goals are. The term long term is always used on projects that are expected to produce profits or generate income within a period of one year or two. It however can sometimes go very far. Due to the ever-changing business environments, time taken to consider the period as being long term is sometimes between three to five years. The total benefit found in the years is always then optimized to get the required results. Even though Google advocates for this, it is sometimes very difficult to achieve in matters of technology. It can be because of the changes that are made daily.
Companies are in most cases faced with the pressure of keeping their earnings to be in line with what the analyst’s forecasts. As a result, they tend to accept smaller and predictable earnings instead of the large and unpredictable earnings. The managers of Google believe this way of conducting business is in a way harmful, and they, therefore, want to take a different direction.
Google for a long time has had the cash needed to fund to fund their operation and also has gotten enough returns from their business operation. It has accorded them the flexibility to weather the costs and also benefit from the opportunities. It in a way will help them optimize their total earning. A good example is seen in the ads that they make. Improvements are made on each and every advert. It affects the revenue they receive in every direction. The areas that are affected by the improvements that they make are advertiser satisfaction, user, and relevance satisfaction. The improvements are released immediately even though they know that delaying them might lead to making more profits. The commitment that Google puts in their work helps them to execute quickly and hence achieve long term plans instead of making the quarters more predictable.
There are however risks that are going to affect the long-term projects for Google. The problem is that in most instances, the markets might have a problem in evaluating the long term values. When it is done, it reduces the value of the company. It would then mean that the long-term focus may be the wrong business strategy. The other competitors may then use the gap that will have been created to outdo Google in business. The investors should, therefore, take the key interest on the long-term focus of the company. The investors and the shareholders need not worry because the long-term business decisions with the stakeholders in mind and not on the accounting considerations of the business.
Even though the issue of long-term trends has been discussed in the article, it should however be remembered that the company does not plan to give the earning guidance using the traditional sense. It is because it is not possible to predict the direction that the business will take within a narrow range of each quarter. The sole duty of the company to advance the shareholders' interest and creating artificial short-term targets will have an impact on the shareholders. The impact would be a negative one. A management team which is distracted by series of short term cannot achieve their long-term objectives
The Google managers are just like it had been mentioned are coming up corporate structure. The aim is to make Google a significant institution which is aimed at making the users enjoy whatever service they desire. For it to be done, it needs time, independence, and stability. Google structure helps to bridge the media and the technology industries. In the process of changing the company from private to public ownership, a structure that will prevent outside parties to influence or take control of Google has been put in place. The structures formed will also make it easy for the management team to follow a long term and the innovative approach just like it had been mentioned.
The main effect of corporate structure is that it leaves the managers with a lot of controls in deciding the activities of the firm. The corporate structure will also ease the management's role in following long-term projects which the company plans to engage in ultimately. The example given is that the corporate structure will grant the two owners of Google 37.6 % voting power. The other stakeholders will have 61.4 % of the voting power. The new investors are expected to share the returns just like any other person, but they will however small influence on the decision-making process of Google.
Even though this structure is very new when it comes to technological companies, similar structures that have been placed in the media business have produced a positive effect. Good examples can be seen from the New York Times, The Wall Street Journal, The Washing Post Company and the Dow Jones have all used the dual class ownership system and the method has turned out to be very successful.
The media critics have pointed out that this type of structure makes the company have the time to concentrate on their main core. Being news dissemination agencies, they have ample time to spread the news and hence maximize their audience. They manage to reach very many audiences. It happens despite the fluctuations that are seen in the quarterly results of the company. Berkshire Hathaway also implemented this dual class structure and from the results obtained so far, it can be said that the advantages are numerous.
When the issue of IPO pricing and allocation is looked at, it is seen that Google always stresses on the need of having a very fair process for its IPO. It includes both the small investors’ ad even the large investors. It is important that Google as a company produces a good outcome for its stakeholders. So that the whole process is free and fair, Google has, therefore, sought to auction their products when they will be looking for IPO. The goal here is to share price that reflects the real market evaluation of Google.
Auctioning should however be known that is a somehow an unusual process for the companies that are located in the United States. It is the experience that the Google managers have had with the auctioning advertising systems which has seen through this successfully. Just like it happens in the stock markets, whenever people bid for more shares that what is available, then the price of the IPO will be higher. The goal for Google is therefore to have the price of the shares will which will be found after the sells to reflect the real price.
The main effect of corporate structure is that it leaves the managers with a lot of controls in deciding the activities of the firm. The corporate structure will also ease the management's role in following long-term projects that the company plans to engage. The example given is that the corporate structure will grant the two owners of Google 37.6 % voting power. The other stakeholders will have 61.4 % of the voting power. The new investors are expected to share the returns just like any other person, but they will however small influence on the decision-making process of Google.
Even though this structure is very new when it comes to technological companies, similar structures that have been placed in the media business have produced a positive effect. Good examples can be seen from the New York Times, The Wall Street Journal, The Washing Post Company and the Dow Jones. They have all used the dual class ownership system, and the method has turned out to be very successful.
The media critics have pointed out that this type of structure makes the company have the time to concentrate on their main core. Being news dissemination agencies, they have ample time to spread the news and hence maximize their audience. They manage to reach very many audiences. It happens despite the fluctuations that are seen in the quarterly results of the company. Berkshire Hathaway also implemented this dual class structure and from the results; it can be said that the advantages are numerous.
When the issue of IPO pricing and allocation is looked at, it is seen that Google always stresses on the need of having a very fair process for its IPO. It includes both the small investors’ ad even the large investors. It is important that Google as a company produces a good outcome for its stakeholders. So that the whole process is free and fair, Google has, therefore, sought to auction their products when they will be looking for IPO. The goal here is to share price that reflects the real market evaluation of Google.
Auctioning should however be known that is a somehow an unusual process for the companies that are located in the United States. It is the experience that the Google managers have had with the auctioning advertising systems which has seen go through this successfully. Just like it happens in the stock markets, whenever people bid for more shares that what is available, then the price of the IPO will be higher. The goal for Google is therefore to have the price of the shares will which will be found after sales to reflect the real price.
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