Business Analysis of Google
Google is an American multinational corporation, specializing in the provision of internet and search engine services. The organizational financial position outlines sustainable growth and strategic fit. Over the past three years, the organization demonstrated 35% growth in basic revenue, reaching USD 75 billion by the end of the financial year 2015.
Google is a no-conventional company with strong focus on innovation and research and development. The organizational mission statement is "to organize the world's information and make it universally accessible and useful”. Since the company was founded in 1998, it grew into a billion dollar business with the strong focus on excellence and innovation. When it comes to the impact of the organizational mission and vision statement, the focus on all three levels of innovation, incremental, radical and breakthrough along with the consistent attempt to bring excellence in every operational and commercial step, these element highlight the unique customer experience and Google lifestyle signature that company aims to transfer to their public. Google sends the core message to the client, stating that the organization will continue offering new, high-quality solutions, which not only "listen" to the customer, but offer solutions, which revolutionalize the business environment and make Google stand well ahead of the competition (Sadler, 2003).
Another important role of the vision statement, outlined in the organizational long-term strategy is the benefit for the community and social environment. The company promises to organize all the data and ensure that it is accessible and available to everyone in the world. Such promise goes beyond the objective of the company but emphasizes the attention that Google gives to social justice and environmental projects as a whole.
Porter’s Five Forces
Porter’s Five Forces analysis is an effective tool to look at the external environment of the organization, understand the competitive profile of the market and create a multifaceted perspective on how to build the competitive strategy to reach sustainable advantage (Porter, 2008). The model suggests that the core forces, determining the impact of external environment on the company include rivalry, bargaining powers of suppliers and buyers, a threat of new entrants and threat of substitute products.
Rivalry
Bargaining Power of Buyers
Bargaining Power of Suppliers
Google suppliers are the organizations, which advertise their product through Google search engine and related service. In the highly concentrated market with only limited amount of large firms taking control of the prices and entry, suppliers bargaining power is relatively strong. Switching cost for the companies and individuals from less to a more effective engine is extremely low and the costs of entry to the market are not high to create natural barriers for smaller players. Moreover, the nature of the business does not give many options to the companies, like Google to control the suppliers,as the internet is very easy to access the companies depend on the technology behind its product.
Threat of New Entrants
As it was previously mentioned, barriers to entry the market are very low as the starting capital in the industry is relatively low, while infrastructure in many cases can be shared, allowing the companies to optimize their costs and ongoing operational expenses. Additionally, governmental regulations in the majority of developed countries are very limited and favorable for new market entrants. At the same time, the success of the companies depends on the traffic of their products and services, and, thus brand recognition and image of the company are critical. This demands strong financial inflow in marketing and promotional strategies, building on natural barriers in the industry (Aaker, 2001). With that in mind, the threat is seen as limited for the organization in the middle and the long-term.
Threat of Substitutes
One of the core objectives and strategic goals of Google is to diversify the income stream. With that in mind, the company continues to invest in new markets and innovative projects. But the revenue from advertisement undoubtedly remains the key area for the organization. Many companies on the market are able to compete with Google by providing advertisement space, especially the organizations, which benefit from the massive traffic. That said, Apple and Comcast build on substitute product, offering advertisement space in massive traffic e-commerce websites. Additionally, Amazon, Facebook, and even Instagram are seen as strong competition for the search engines, as with the enormous market space and customer traffic on their e-commerce platforms, the organizations allow their users to connect directly with trends, products, news and brands in a one-stop-shopping solution. With that in mind, the threat fo substitutes are significant and should be given an appropriate attention in a long-term planning of Google.
SWOT Analysis
SWOT analysis looks at internal, strengths and weaknesses and external environment, opportunities and threats, and allows more comprehensive and four-fold view on the organizational current position and strategic options. The below table outlines the major elements in each of the areas.
Based on the finding, it is possible to outline that the major challenges, which the company is currently facing and will have to focus in a long term are the growing competition from substitute products and potential saturation and maturity of the advertisement market. Given the growing competition in the sector, such market trend can present the significant threat and negatively affect the organizational bottom line. Google is one of the strongest and most innovative brands on the market. Moreover, 30% market share in total digital advertisement market is difficult to imitate. This gives the organization very strong financial position to build on innovation and diversification strategies. The market is becoming increasingly mobile, with the companies in the industry slowly “eating” profits of traditional organizations like Google. It is critical that te company addresses these threats by building on the opportunity in add-on products, such as Google Play, and innovative gadget market. By doing so, Google will not only be able to diversify, but also increase its brand recognition and offer more complex and attractive solution to its customers. Additionally, Google entered the operating system market through acquisition of Motorola, while this acquisition is yet to be evaluated, the success of the strategic move depends on the Google's ability to use the growing popularity of Android operating system and build on mobile solutions, which enable the access to substitute market products ( Kuntze and Matulich, 2009).
Strategic Options for Competitiveness
Google company has the very forward-thinking approach to building the sustainable competitive advantage on the market. There are a number of strategic, operational and tactical levels actions, which could be taken in order to further focus on the competitiveness of the organization. First of all, it is evident that the market trend in the near and the long-term future will be to shift to mobile technology. This will continue placing pressure on the digital companies, technological development, and the direction, in which innovation and Research and Development (R&D) strategies will evolve. With that in mind, and considering the financial capacity of Google to reinvest in incremental innovation and breakthrough technology, it is important to further explore the strategic diversification options in Android operating system and software, which would contribute to unique customer experience offered by Google and leverage the current weakness of the lack of compatibility. Secondly, the company is known for its innovation culture and customers expect revolution and breakthrough technology. This image is a critical element of suppliers and customers loyalty. It is important that the operational level strategy of the organization focuses on developing innovation focus groups and building on two directions: search engine innovation and Google Software and gadget department (Saddler, 2003).
When it comes to the potential options, available to the company with regards to a type of strategy, Google should remain consistent in its choice to be non-conventional. This means that the company should at the same time pursue the growth strategy and product differentiation. It is important to mention that, while many of the acquisition endeavors were not successful until the moment, for the size of the organization that Google is, innovation and growth through acquisition is critical, as it gives the speed and responsiveness to the market, where the product lifecycle is extremely short.
Strategy Communication Plan
Based on the recommendations, outlined in the previous sections of this document, it is evident that the organizational strategy is aligned with the market and signifies the position, which adequately addressed the opportunities and threats of the market. One of the critical success factors is the communication strategy. Google is an open company, which proud itself on a unique working environment and transparent communication with the external stakeholders. That said, the communication strategy for the long-term plan should be three-fold: aggressive social media campaign, direct-to-supplier advertisement, and promotions and formal reporting through organizational annual and semestral reviews and financial statements as well as the on-going update through web-based sources. Additionally, given the recommendation to restructure the innovation and R&D teams to three departments, the company should develop an internal communication strategy,which will involve workshops, direct departmental meetings, and intranet social communication strategy. This will ensure alignment of strategic, operational and tactical levels as well as will reduce the resistance to the change management strategy to a minimum.
Governance Mechanisms
Google governance mechanisms are designed to reduce the inefficiency and increase the responsiveness of the company to the external environment. One of the mechanisms that the company uses is the internal control.This includes a company-wide Performance Management System. This mechanism is an effective tool to align the three levels of an organization and ensure that strategic goals are effectively and correctly translated to the tactical level staff. Google recognizes the role of motivation and personalized benefits to building on collective productivity. With that the company offers a wide range of incentive-based benefits and pay schemes (Friedman, 2015).
Another mechanism, used by the company, which constitutes the major debate in business literature is the recently announced triple-class structure, created to ensure that the founders hold on to the full control over the company, even in the situations, where it results in the use of company stock for employee compensation (Jackson, 2015). While this mechanism offers increased control over the organizational structure and decision-making process, it and negatively affect managerial motivation due to over control and the lack of freedom and delegation of responsibility. Google is seen as the extremely innovative employee, focusing on individual contribution and innovation. The triple-class structure can build on a controversy in this situation.
Effectiveness of Leadership
One of the common ways to describe leadership at Google is as distributed. The reality shows that the company tries to build and maintain throughout the years democratic leadership style. Manimala and Wasdani (2015) argue that Google is in the transition stage from democratic to transformational leadership. An insight into the company allows highlighting several effective initiatives. One of them is the 70-20-10 approach, where employees are expected to devote to Google's core business 70% of their time, 20% of their time is allocated for off-budget projects and, finally, 10% to pursue own ideas. Additionally, the company has the extremely attractive rewarding scheme for innovative idea implementation and entrepreneurship within the company. Another signal of transformational leaderships and democratic governance is the decision-making strategy for the ideas, based on their merit, rather than the directive from the founders.
At the same, some of the initiatives of the company, such as the above-mentioned triple-class structure, draw back on the transition to transformational leadership culture and outline the bureaucracy and accessive control from the top management team. Additionally, the company pursues acquisition strategy in many situations. This may be increasingly complex in this "free-thinking and innovative organizational structure. With that in mind, it is possible to make 2 recommendations: reduce the control of the triple-class structure and delegate further down the organizational hierarchy, giving more speed to the transitional leadership. Secondly, ensure more specific and cross-departmentally aligned performance measures and Key Performance Indicators (KPIs), which can be easily understood by the employees, coming along with new acquisitions (Aaker, 20010.
Corporate Social Responsibility
Google is a large international company, operating in the sector, highly reliant on the government infrastructure and social structure of the countries. The success of the operations, therefore, depends on an organizational ability to improve and benefit from technological advancements and favorable legislation in the industry. With that in mind, Google places a lot of effort to work along with public and non-for-profit sectors. Several major projects, such as Google China Social Innovation, Earthquake Relief effort in Sichuan and Google Grant program, awarding free AdWords to social projects, serve as evidence of Corporate Social Responsibility (CSR) effort and can classify the organization as CSR-driven (Google,2015). At the same time, it is evident that Google has several issues with regards to the human rights and social justice, related to the I.P lawsuits and labor rights in some of the developing countries(Mullerat and Brennan, 2011). This indicates the potential areas of focus on the development of more comprehensive Code of Conduct and special training programs which will increase the compliance rate and further improve the organizational image, which is already based upon a reputation of one of the best global employers.
References
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Mullerat R. and Brennan D. (2011). Corporate Social ResponsibilityÇ The Corporate Governance of the 21st Century. Alphen Aan den Rijn:Walters Kluwer. Print.
Aaker, A. D. (2001). Developing Business Strategies. 6th Edition. New York: John Willey & Sons. Print.
USSEC (2015). Google Inc. Annual Report Form 10-K. United States Securities And Exchange Commissions. Retrieved 15 June 2016, http://www.sec.gov/Archives/edgar/data/1288776/000165204416000012/goog10-k2015.htm
Porter, M. (2008). Competitive Advantage. Creating a Sustainable Superior Performance. Berlin: Simon and Schuster.. Print.
Friedman J. (2015).How Google Manages Talent. Harvard Business Review [Online]. Retrieved 15 June 2016, from https://hbr.org/2014/09/how-google-manages-talent/
Kuntze R. and Matulich E. (2009). Google: Searching for Value. Journal of Case Research in Business and Economics. 1(1). 1-9.
Jackson E. (2015). Google's Paranoid Governance Structure Has Made It Less Innovative, Not More. Retrieved 15 June 2016, http://www.forbes.com/sites/ericjackson/2012/04/13/googles-paranoid-governance-structure-has-made-it-less-innovative-not-more/#7ea19479547b
Manimala M. and Wasdani P. (2015). Distributed leadership at Google: Lessons from the billion-dollar brand. Ivey Business Journal [Online]. Retrieved 15 June 2016, http://iveybusinessjournal.com/publication/distributed-leadership-at-google-lessons-from-the-billion-dollar-brand/
Google (2015). Corporate Social Responsibility. Google Website [Online]. Retrieved 15 June 2016, http://www.google.cn/intl/en/about/company/responsibility/
