Case Study on Google
Competitive Strategy Assessment 2 Case Study Google Inc. INTRODUCTION This Business Report primarily addresses 4 questions asked on the Google Inc. case study. Information is primarily obtained from the case study and from publicly available news reports and articles. KEY QUESTIONS 1. What were the key factors behind Google’s early success? A number of key factors contributed to Google’s early success. Google had unassailable competitive advantage in the form of PageRank algorithm that can efficiently index web pages and delivers highly relevant searches to users.
It avoided competing head to head with yahoo, etc by choosing not to diversify to portal positioning. Instead, Google focuses on developing its strategic assets (Makides, 1997) and licensing its search technologies to Yahoo and other 3rd party sites. Operating under a duopoly market structure (Lewis, 1999) and under an expanding market, Google encountered less competitive resistance. Staying true to its competitive advantage and focusing on its search services, Google grew quickly.
Google was able to adopt a very competitive pricing strategy in paid listing and was offering a lower CPC and higher revenue split than its competitions. And by ensuring a higher click through rate, Google became the search engine of choice for both the paid-listers and users alike and was able to capture cross-side networks effect. (Eisenmann, 2006) Google was able to translate its reach and pervasiveness of its search engine to paid listings revenue.
Google’s reach also enables it to avoid the traditional overheads required for advertizing to make itself and its services known. Google’s also seek out new market space (Kim, 1999) and the move to provide free unlimited e-mail web storage also greatly built its base of loyal customers and good-will. Google’s corporate values, corporate culture and service offering was well “fitted” for the industry. By fostering and encouraging a culture of innovation, Google was able to reap the benefits of new monetizing new ideas that came out. . Should Google pay AOL more than 100% of the revenue generated from AOL searches? How did Microsoft’s maximum affordable bid for AOL’s search traffic compare with Google’s? a. Given that Google is already sharing 85% to 90% of the ad-revenue collected with AOL the question of paying more than 100% of the revenue generated does not seemed like a significant one especially in the light of Google paying way over the odds for 5% of AOL shares.
While the one-off decision by Google to pay a high premium for AOL’s share can be justified from the perspective of a defensive play to ward off a possible entry by Microsoft a very dangerous competitor with deep pockets, entering a contract to pay over 100% of the ad-revenue is not justifiable even though there may be justifications with regards to cross-subsiding and the risk of higher acquisition/conversion cost. Paying more than 100% may not meant much in term dollars but the resultant loss of bargaining leverage may be too high a price to pay. b.
With hindsight, given that Microsoft bid failed it could be speculated that the bid is inferior to Google’s. If so, did Microsoft misread the potential of the AOL deal to make serious in-roads into the search market? Google on the hand saw the need to snuff out Microsoft’s foray into its lucrative market. 3. In addition to enhancing its core search business, should Google diversify into new arena? Which would you recommend: 1) building a full pledged portal like yahoo’s 2) targeting Microsoft’s desktop hegemony 3) becoming e-commerce intermediary like e-Bay?
It’s interesting that while Schmidt was deflecting the question that Google might create its own web-based operating system, he added that “there was a great deal of strategic leverage for Google in building an ecosystem around content and advertizing and that it is an extension of Google’s search mission. ”. He went on to say, “Google is in the business of making all the world’s information accessible and useful”. I would strongly recommend Google to pursue a solution that can challenge or substitute desktop computing even if Microsoft is toying with the idea.
Consider the amount of information that is just sitting in desk-tops, note books and servers around the world. Information, that is useful and can be made accessible. Of course, there must be means and protocols establish for users to secure their private and proprietary information but by and large most information is shareable. I imagine, one day, in the near future when all of one’s files which have been designated as shareable, are indexed and becomes searchable by people around the world.
Shareable information can be traded for a fixed or negotiated according to a fee sharing plan with Google. Google then facilitates or mediates the payment electronically. This is just a small example of what a web based desk-top replacement solution can do. People can store data online and keep a copy in the local drive. We can do away with the expensive OS upgrades and extend the life-span of the hard-wares we have. Software support will also be kept to the minimum. It is not only a more sustainable model but one that is more nvironmentally friendly as well. The list of benefits can only grow. As web services becoming more prevalent, the move to replace desk-top will gain momentum and as in its early days, Google can yet again take the lead and change the way we access and find information for the better. 4. Do you view Google’s distinctive governance structure, corporate culture and organizational processes as strengths or potential limitations? Google’s distinctive governance structure, corporate culture and organization processes reflect the co-founders emphasis on innovation.
From the very beginning, both Sergey and Larry had intended for the company to grow and do its business in manner that is consistent with its corporate values. In essence, Google is a company that promotes innovation and pushes the envelope all the time. Google’s governance structure however, can be a potential limitation. Google’s over reliance on the co-founders and Schmidt may be a liability in the long run. In the event one or more of these leaders cease to be with the company, the probable impact can only be described as negative.
However, as the company grows certain adjustments are needed to ensure that its size does not stifle creativity and innovation. Google recognizes this as well and as Schmidt explains, “Google has begun to hold regular meetings at which employees are encouraged to present new ideas to me, Larry and Sergey. ” It has also begun giving some projects more resources and independence than usual. Both moves are designed to ward off conservatism that can set in as companies mature. It has also put in place technological tools, such as Google wave, to promote innovation and collaboration. This certainly bodes well for the company.
I believe this culture of innovation itself would position Google to innovate and adapt its own organizational processes to keep itself true to its corporate cultures. “Making our own rules” is proving more and more relevant especially in times of economic uncertainty. REFERENCES Eisenmann, Thomas, Oct 2006, HBR, Strategies for two sided market W Chan Kim, Jan/Feb 1999, HBR, Creating New Market Space Lewis, Geoffrey, 1999, Australian and New Zealand Strategic Management; concepts, context and cases Makides, Constantinos C. , 1997, HBR, to diversify or not to diversify http://www. internetworldstats. com/emarketing. htm
