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Implications of market structure for business and consumers
In a nutshell, economists define a market structure as the characteristics of the market which encompass competitive and organizational characteristics. However, a salient feature used in describing market structures is the number of firms in the market, which in turn dictates the nature of competition and pricing mode. As such, there exist four market structures, which are oligopolistic, monopolistic, perfect competition, and monopoly market structures.
Each of the four market structures reflects a generic characterization of a real type market (Nancy and Kamien, 1982). Undeniably, the market structures direct the behavior of firms in the market. The structure dictates the price a firm will charge for its product. Besides, it is the market structure that influences not only the level of supply in the market but also the barriers to entry in the market. A perfect competition market structure consists of many suppliers in the market. Consequently, the level of competition remains relatively high as several companies attempt to dominate the market.
Given the high level of competition, the market forces of demand and supply dictate the level of prices in the market. A firm charges a price higher than the prevailing market prices risks losing its customers to its competitors charging the ‘acceptable ‘market prices. Rajan et al. (2004) further note that it is the market structure that handles the barriers to entry and exit in the market. A monopoly market structure comprises of the highest level of barriers to entry. As such, the competition in the market remains very low given that only one firm dominates the market
Is Google a monopoly?
Monopoly market structure best suits the market for internet searches. Arguably, although there exist several firms in the internet market such as Yahoo, Google takes the majority of the market share. Although, Google may not appear as a monopoly per se, its dominance in the market coupled with the abysmal share of other firms serves as to prove that Google is a monopoly. In fact, European competition watchdogs have charged Google with a monopoly. Google extenuates the salient features of a monopoly, the main one being huge barriers to entry (Rajan et al., 2004).
Google’s strong brand loyalty and brand equity make it very hard if not impossible for any other search engine to displace the company irrespective of how technically good the new firm is. Secondly, the large market share of the company cements its dominance in the market thereby eliminating any chances of fair competition (Philip, 2015) contrary to the case in perfectly competitive markets.
Question 2:
Role of the government in a mixed economy
Undeniably, in a real world, it is difficult to find a pure free market economy. Almost all economies portray a mixed system with the government playing an indispensable role in the market. Ben‐ner & Hoomissen, (1991) defines a mixed economy as an economic system in which the government and the free market forces play crucial roles in the functioning of the economy. Government plays various roles in a mixed economy as described below.
Regulation and control
Arguably, regulation of the economy serves as the primary activity of the government in an economy (Arnold, 2008, p. 496). The government regulates private enterprises through the formulation of market policies to prevent consumer exploitation by the sellers. For instance, price controls. The regulation also serves a tool through which the government ensures efficient utilization of economic resources and the allocation of such resources in a socially responsible manner. Moreover, regulation serves to control monopoly power to elude economic problems such as unemployment.
Ownership of public utilities/ direct services
Owing to the market inefficiencies and failures involved in the provision of public utilities; such as medical care, education, water, and electricity, the government owns public utilities to provide social services.
Stabilization and growth
Through the formulation and implementation of various monetary and fiscal measures aimed at the controlling various economic situations such as recession and inflation, the government enhances stabilization and growth of the economy. The government also affects the economy by adjusting taxes, subsidies, and government spending in the economy.
Direct assistance
The government provides direct assistance to firms in the form of subsidies, direct financial assistance, grants, loans, and relief to the poor and the marginalized.
Lobbying strategies employed by business
Given the government’s regulation role in an economy, businesses attempt to lobby the government to avoid the adverse effect of government policies. Some of the techniques employed by businesses include holding private and agency meetings with government officials, provision of political information to the regulator on some proposed bills, and campaign assistance (Arnold, 2008). However, corporate social responsibility serves as the main lobbying technique used by most firms. Other lobbying techniques include, but are not limited to, campaign assistance and publication of voting records.
Significance of lobbying to a firm
For a company like Google, lobbying enables the company to avoid adverse effect as a result of government legislations thus gaining competitive advantage. Lobbying ensures that government policies are always favorable to the firm. However, lobbying is not without a negative aspect to a company like Google. It comes with an increased cost to the firm, which in turn decreases the firm’s profitability. The company has substantially increased its lobbying cost in Europe (Ahmed and Robinson, 2014).
Question 3:
Google: The leading company in CSR and customer value delivery
A dozen of leading organizations such as the BBC are increasingly getting involved in a scheme that will serve to enhance the loading speed of their web articles on the tablets, iPhone, and smartphones (Lyons, 2015), thanks to the Google’s initiative for providing use for its servers. Through this initiative, Google promises its users that loading stripped-back version of the web pages will be ‘lightning fast."
Google’s director of product partnership, Danny Bernstein acknowledged the fact that if an article fails to load within 60 seconds more than 40% of the users abandon it. Lucy (2016) notes that it is for this reason that Google is seeking to deliver high-speed loading services to various organizations. Google’s dedication to supporting customer value cannot go unmentioned. Besides, worth recognition its involvement in charitable work as a means of achieving its philanthropic obligation.
The company, firmly committed to its philanthropic objective, have launched a social innovation cup for Chinese college students. The innovation cup seeks to address various social issues which among others include disability aid, poverty alleviation, and community development. The dawn of September 2008 saw Google fund the construction of more than 14 Quake Relief Hope Schools in China. Furthermore, the company is on the front line in providing grants and sponsorship to students in various countries such as Nepal, India, Vietnam, and Cambodia.
Even more importantly, Google has participated in voluntary blood donation. Consequently, the company has risen to being the World's most valuable company with a net value of approximately $ 520 billion although its success comes with some doubt whether the company dominance in the market is fair to other firms. Since its inception, the company has embraced some of the most challenging ideas in the technology world. In two years in a row, Google has topped Global CSR Rep Trak Ranking.
Among Google’s public identity factors, CSR serves as the most complex attracting huge attention from the company (Kelion, 2015). By implementing initiatives which are environmentally friendly such as the Google Green, the company has been regarded as carbon neutral; a factor that has enabled it to top the Rep Trak 100 rankings. With a CSR score of 75.4%, Google enjoys a strong CSR reputation.
Question 4:
Carrol’s Pyramid of CSR and Google’s ranking
Corporate social responsibility has its roots in the 1800s when the concept that businesses should benefit the society besides their profit maximization goal arose. Various theories and models exist to explain the concept of social responsibility. However, it appears that Carrol’s pyramid succinctly summarizes the concept. It is this pyramid that not only ignited but also drove research in CSR field from the 1980’s onward (Schwartz, 2011, p. 84). Carrol’s pyramid of corporate social responsibility distinguishes four main areas/domains of responsibilities a firm should put into consideration.
The four levels of CSR as described by Carrol include economic, ethical, legal, and philanthropic responsibilities (Carrol, 1991). Economic responsibility serves as the primary responsibility of a firm and encompasses shareholders’ wealth maximization. Legal responsibility serves as the second layer in the pyramid and requires the business to follow laws and policies regarded as acceptable in the society. Unlike economic responsibilities, ethical obligation, which rank third in the pyramid, are expected by the society. They encompass doing what is right, fair, and acceptable in the society.
Ranking top of the pyramid are the philanthropic obligations which require firms to contribute toward the improvement of the general welfare of the society. Since it’s founding, Google has placed a firm foundation and commitment in active participation in addressing global challenges such as poverty alleviation, improvement of education, and addressing climate change. Besides, the company has initiated various social initiatives in various countries such as China. Lucy (2016) notes that the company has made aggressive efforts on various fronts towards the promotion of citizenship.
Since 2006, the company volunteered 440 employees to lead more than 139 apprenticeship courses in California and other areas. Miceli (2015) acknowledges that the company is no stranger when it comes to its recognition for its accomplishments. The dawn of September saw the ranking of Google as No one on its global CSR by Rep Trak rankings. From this evidence, it is inevitable to conclude that Goggle ranks at the fourth level in Carrol’s pyramid of CSR that is philanthropic objectives due to its participation in various social activities. The fact that Goggle has topped Global CSR ranking by Rep Track for two years in a row proves that the company has the best CSR reputation worldwide (Lyons, 2015)
Question 5:
Google´s stakeholders
Undeniably, owing to the wide array of Google’s products, the company’s stakeholders are diverse. Goggle’s stakeholders arise from different groups, which the company’s business activities impact on. However, we can derive three most important stakeholders of the company from the company’s CSR activities (Gene et al., 2012). The three groups are the firm’s users, employees, advertisers and other customers.
Users
Arguably users top the list of the company’s important stakeholders. Such users include not only the individuals but also organizations who use the company’s products. Although Google does not necessarily get any payment, their behavior serves to define the company's popularity and its products' usefulness. Consequently, they directly influence the firm’s revenue and hence profits.
We can infer the reason Google prioritizes its employees from the Consequentialist theory of ethics (Freeman, 1999). The reason is that Google seeks an action that best defines the company’s popularity and public image (Musafer, 2012). Consequently, they directly influence the firm’s revenue and hence profits. Given the fact that the development of any product takes the user into consideration; Google’s most important stakeholders are the users.
Employees
Given the indispensable role played by employees in delivering customer value, the company employees rank as the second most important stakeholders. The employees dictate the company’s capabilities, especially the innovation aspect. It is for this reason that Google offers fun workplace design and competitive advantage to satisfy the interests of its employees. The Utilitarianism ethics theory best explains why Google prioritizes its employees (Freeman, 1999). The fact owes to the reason that the company aims at maximizing utility.
Advertisers and other customers
Google’s main source of revenue comes from the advertisers. According to the Utilitarianism theory in ethics, a company such as Google must maximize its customers’ happiness, which in turn results in desirable consequences. As such, the company’s financial performance rests on the advertisers and other Google products’ customers. This fact serves to prove the importance of the advertisers to the company. Through the provision of online advertising campaigns, Google seeks to fulfill the desires of its customers. The reason is that it is from customer satisfaction that the firm’s popularity increases. Consequently, the company’s market reach and popularity also increase.
Conclusion
Google has established itself as the world’s leading business giant. However, various parties have expressed their concern over the company’s use of its market strength to compete unfairly. Some of the complaints include the biased search results to favor Google’s self-interest. As such, if Google is to maintain its position as the leading business giant in the world, it must act socially responsible to all stakeholders both internal and external, hostile and friendly because they dictate its success.
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