Graduate Student
Strategic management is essential if a company intends to achieve its goals. There is a need for a clear course of actions based on the environmental scan, strategy formulation, implementation, evaluation, and control. A company can gain a competitive advantage over the others in the industry taking into consideration all these aspects. It is through good strategies, customer and employee satisfaction that saw Google grow to become a giant corporate in the internet search industry. However, according to Ryan (2010), recent studies indicate that the company revenues have reduced to a significant figure as compared to its performance from inception to the year 2011. The price of the company shares have also reduced over time and many investors feel the company faces the danger of strong competition in the internet search and advertisement.
There are some that believed that the company's revenue will keep on escalating having recorded a high growth level and even overtook initial companies in the industry such as Yahoo. As its financial reports demonstrate, there is a sharp decline in revenue facilitated by some factors in the industry. Some experts attribute the reduction in profit margin by the organization to the rapid growth and expansion in size that calls for better strategies in management. The management admits of the company having a challenge, but they believe something can be done to reclaim back lost profits and revenue for the company.
Environmental scan
An environmental scan of the company's operations in the internet search and advertisement industry will be essential in providing a clear outline of what Google needs to do to increase its revenue. The current business trends have demonstrated a move towards the use of the internet by many organizations. Over a long time, Google has been one of the preferred companies to offer organizations and individuals with advertisement and access to internet services. Google has been able to gain international preference from many internet users across the globe with a variety of services. The need to remain competitive and retain its customers has seen the company move to develop new competitive products.
Some of the products that have been embraced by Google in its strategy to retain its customers include the Google docs, calendar, Gmail, groups, reader, and blogger. However, competitors are also designing strategies to ensure they remain in the market despite the wide market coverage by Google. Some have moved to offer specialized advertisement services based on particular niches such as entrepreneurship. Some companies are developing mobile applications to ensure their customers get the required information at easy without having to search using Google. The competitive environment in the industry has turned to be very stiff with the rapid changes in technology. The expansion of Google has come with challenges such as the copyright, patent, and trademark legal liabilities. Some of the patents, trademark and copyright issues have played a big role in reducing the profit margin of the company through compensation.
The 5 forces Model
The porter's five forces of competition demonstrate some of the aspects that have posed a big challenge to Google business. The five forces of competition in the industry according to Potters include the bargaining power of the consumer and suppliers, competitive rivalry, the threat of substitutes and new entrants.
Purchasing power of the consumers
The needs of the consumers are evolving at a first rate based on the changes in technology. Many customers and advertisers using Google are beginning to demand better and effective services from internet search companies. The fast growth of Google has seen many advertisers use it to reach their intended audience. The high number of adverts on Google has seen advertisers compete for space, and some get dissatisfied with the services they get. The cases of dissatisfaction are not only facilitated by the lack of enough visibility for all the adverts but also increase in the number of Internet swindles. Advertisers and network members are moving towards platforms with specific services or niches. The move poses a threat to the business of Google since the number of advertisers will reduce significantly. Considering that much of the company revenue comes from advertisements, such actions from the customers and network members will be a big blow.
Bargaining power of suppliers
Suppliers are an essential aspect of any business. They play a big role when it comes to profit margins. The suppliers can raise the prices of services and commodities offered by companies. The suppliers effect may also vary depending on how unique their service or product is and the significance to company operations. Software and hardware materials are critical to the operations of Google. However, the company seems to have minimum challenges when it comes to suppliers of essential materials for operation. Despite the good relations with their suppliers, Google may need to switch suppliers in a bid to curb the security threat that its content users and advertisers face. Switching suppliers entail some cost that may cut into the profit margins of the company. Few alternatives to suppliers make their bargaining power to increase. Based on the time and market conditions, suppliers are likely to pose a big challenge to a company business. When there is high competition and the need for innovativeness, suppliers are likely to have a high bargaining power because of high demand. Good management needs to have a strategy to engage the suppliers in offering the right services and materials necessary for an increased customer satisfaction to maintain its competitive advantage.
Competitive rivalry
Competition rivalry has been one major aspect in the internet content provision industry. The friction has seen Google face off with some major competitors providing similar services and products. One of the major competitors in the industry includes Yahoo that was the first company to start offering the services. Despite the success of Google in beating Yahoo in the industry and emerging as the preferred company, Yahoo still poses a high competition threat to Google. Another competitor to Google in the industry is Bing a company owned by the Microsoft Corporation. Bing is believed to be the closest competitor to Google because of Microsoft unique marketing strategies that have seen Big grow at a fast rate. Google needs to devise strategies to ensure that it can compete with companies such as being. The two traditional search engines have played a major role in reducing the profit margins for Google.
The other aspects and companies posing a competition threat to Google include vertical search engines. The vertical search engines are gaining preference among many advertisers and network members that previously used Google as their main content providers and advertising platform. The e-commerce sites are also another aspect that poses a threat to the revenues and profits earned by Google. Companies have adopted the use of niche specific platforms to access the needed services and information as compared to Google. For example, the travel industry has adopted a platform (Kayak) that travelers can use to access information related to traveling. This has reduced the number of travelers using Google to seek information related to traveling as it was before.
Similarly, the medical services industry has its platform and applications that people can get information from without necessarily having to go to Google. The initiative has reduced the number of medical and healthcare adverts placed on Google. Users prefer landing information related to healthcare services on this site instead of checking from the many files on Google that might not be specific and cost a lot of time. It is essential for Google to have strategies to deal with such competitions aspects that are gaining preference among many advertisers, network members, and users.
Social networks such as Facebook and Twitter are also posing a high competition threat to Google services. Current studies demonstrate a high preference for social network sites by people. The increase in the use of social networks has attracted the attention of advertisers to these sites in a bid to reach potential customers. The move to post advertisements on social sites has taken a big share of Google advertisement revenue which is a major source of income for the company.
Besides the traditional forms of advertisement, there are other competitors from the mainstream media that also play a significant role in reducing the revenue and profit margins of the company. Television forms a major platform of advertisement, similarly, the newspapers and radio are a preferred platform for advertisement because of the high number of the audience likely to be reached through these mean. Having provided an alternative advertisement and information platform different from radio, magazines and television, Google needs to devise strategies to ensure customers regard their platform with high standards to remain competitive. Besides these forms of competition for advertising revenue, inventions have increased in the technical world and organizations are coming up with customized mobile application. The mobile applications are also posing a competition threat to Google because people have the chance to access direct information related to a particular, niche, company or service.
Threat of substitute products and services
Google faces the challenge of substitute services in the internet search industry. The invention and preference of social media by many people in the society has shifted the attention of advertisers from seeking Google services to pitch into the social sites where they are certain of the audience. The social media sites have become an alternative advertisement and information sharing platform for making Google lose a significant amount of its revenues. Companies such as Bing offer alternative platforms with which people can get information and place advertisements besides Google. The marketing strategies done by Microsoft Corporation have proven to be effective following the increased preference for this information search company by consumers. If people find Google to be unpleasant or not meeting their needs, they have an alternative service provider such as Bing and Yahoo.
Mobile phone applications have also become an alternative option for internet information and advertisement. Companies are moving towards designing of mobile phone applications with their customized information that makes it easy for users to get any material they need. Similarly such companies use the applications to advertise to the consumers. The threat of substitute products and services from existing companies is high, and Google needs to devise strategies for such challenges.
Threats in of new entrants
With the rapid changes in technology and a shift in customer needs, many companies are engaged in research on how to make profits out of the growing number of people using the internet to get information. It is not clear on the number of new companies likely to get into this industry. However, it is expected that there are many companies yet to come in the industry because of the attractive revenue. This is evident from the development of substitute services from the existing companies and entry of new others.
The potter’s five forces of competition demonstrate the possible challenges that Google is likely to face from different angles within the industry. Therefore, the company management needs to develop strategies along the five forces to ensure reduced chance of losing revenue and profit margins to existing and new competitors.
Based on the company operations analysis and environmental scan, there are several strengths, weaknesses, opportunities and threats that need to be addressed for it to remain competitive in the industry. A SWOT analysis of the company demonstrates some factors within the control of the company and others beyond its control that can help it gain a competitive advantage of exposing it to the risk of losses.
A SWOT analysis of Google
Strengths
Some of the strengths that Google has in its operations include the strong financial base. The strong financial position of the company places it in a better position to gain a competitive advantage over the other players in the industry. Using its wide scope of financial resources the management of Google can invest in the best forms of technology to help deliver satisfactory services to its customers. The strong financial base of the company can help it have access to the best-skilled individuals to help carry out the technical activities. The strong brand of the company helps it sell to the world; Google is a globally recognized brand, and people are likely to embrace its services as long as they meet their needs. Launching of new products and services by the company is much easier than an emerging company.
Weaknesses
The company also has some weaknesses in its operations besides the strengths. Some of the weaknesses that have been found by researchers in the internet search and content industry to be affecting Google include the poor security measures for its content, advertisers and network members. There have been claims from the public of personal information of network members being used for fraudulent activities.
Google needs to enhance its security measures if it intends to retain its customers for a long time. Some advertisers get defrauded by impersonators who pose as service providers. The users end up paying a lot of money for adverts that do not bear any fruits. There are also misleading links used by swindlers on Google that are making people lose confidence in the services. The swooshing and a high number of people who prefer the brand has made adverts increase on the platform making it difficult for people to get the right information. There is a mix of information on the platform, and customers need to go into the filtering process which makes it tiresome, and this makes such clients opt for other sites that are likely to offer specific search results.
Opportunities
The internet search and content provision industry bears a lot of opportunities to the Google Company. Given the rapid technological development, the company can take advantage of this to devise good strategies for a competitive advantage. The Financial resources that the company is in possession can allow it buy out new and upcoming companies. In addition to this, the company can seek partnerships and mergers to increase its sources of income. The company can build on its strong brand advantage to diversify its services or move into other ventures. The company can use its resources to redesign its services provision by enhancing security and privacy of the users. The company can acquire the best skills in the market because there are smart individuals in the market willing to offer quality services at a good remuneration.
Threats
Google faces many threats in its operations one being a reduction of its profit margins due to the entry of new players in the market and substitute products. Customers prefer new products that meet their need even if it means paying an extra coin for such services. Ability to meet customer needs is what makes other companies such as Bing grow at a first rate. Discriminatory regulation is also another big threat to the operations of Google. As studies indicate, Google pays a big amount of taxes to the government. However, there is also a high risk of an increase in taxes because the development in technology may simply mean increased revenues for the company.
The other form of threat that the company faces is the legal liability that comes as a result of infringement of the copyright, trademark, and patent regulations. The company has so far faced several copyright and trademark cases that have cost it a lot of its revenues. Such matters need to be handled by the company because they pose a high threat to its operations.
Strategy formulation and implementation
The management of Google needs to define strategies to address some of the issues reflected in the environmental scan and analysis of the company. Some of the strategies essential for managing the company effectively to a sustainable competitive advantage include hiring or training a security team to deal with information and content security. As the analysis demonstrates, there are a lot of security reasons such as impersonation and swindles that are making customers lose confidence in the company. By addressing the security challenge the company will be in a position to regain the confidence of its advertisers and increase revenues.
Another aspect that needs to be addressed by the company management is the organization of information where customers can find the information they need in a short time without having to engage in a lot of filtering processes. The company should also work on the quality of content it offers to customers to help retain its customers for a long period in the competitive industry. Strict copyright, patent and trademark regulations will help save the company of the high amounts of money it spends on compensating content owners and publishers. This will help Google regain its lost profit margins over the recent past. Engaging in corporate social responsibility is also a good strategy to help the company regain its customer confidence and good reputation.
Evaluation and control
The success of the strategy can be evaluated through the number of people using Google and the level of advertisements coming in after the negative issues are addressed. It is also possible to evaluate the effectiveness of the strategy through the willingness of shareholders to put in more resources to grow the company. The demand for the company shares and the trend in profit share can provide a good evaluative criterion. The social media platforms and reviews from users, advertisers, and network members are critical in evaluating the strategies. The information received from these evaluation criteria can be used to control diverse aspects of the strategy depending on effectiveness.
Recommendation and conclusion
Google needs to engage in continued research on the best ways to remain competitive in the current world of business. The company should use its strong brand and vast resources to get the right skills, technology and strategist to carry its business to another level. However, to ensure that this happens, the company needs to address the challenges it faces as pointed out in the SWOT analysis and environmental scan. Security of information and customers; copyright, patent, and trademarks; organization of information based on niches, ethical practices, corporate social responsibility, employee motivation and improving quality should be a priority. If the company management stresses on these aspects in its strategy, Google will continue having a competitive advantage over others in the industry.
Reference
Ryan, P. A. Google Inc. (2010): The Future of the Internet Search Engine. N.p
