Google Search and Services

The major product that Google Inc. runs is their extremely successful search engine, www.google.com. By the year 2009, Google had grown considerably and had expanded to include many more services that were available on the web (Johnson, Scholes, & Whittington, 2008)

Some of these services are Google Chrome, a lightning speed web browser, Google Images for searching for images on the web, Google News which aggregates news from thousands of sources worldwide, Google Docs which allows users to create new documents and share their other documents online, Google Translate which helps translate web pages to different languages, Google Blog Search which searches within millions of blogs around the world, Google Scholar which helps in the search for scholarly articles, Google Adwords which helps advertisers place advertisements on the web and Google Adsense which monetizes websites by publishers serving advertisements on the Google Adwords network. These are but a few of the various services offered by Google.

Google is the most used search engine all over the world, and it is available in multiple languages. Google even has local search engines using public domains like google.co.uk for the United Kingdom, google.com.au for Australia, google.it for Italy.

Company’s mission and vision statement analysis

Google’s mission is “to organize the world’s information and make it universally accessible and useful.” Vise, 2006.

This mission is a uncomplicated and clear statement of what Google wants to achieve through its activities and it is reflected in the activities of Google and their financial performance.

Google does not have a clear vision statement but they have ten philosophies from which a vision statement can be generated. These philosophies are focused on the user, dealing with one thing at a time, being fast and timely in delivery of products, web democracy, being mobile, making money in the right channel, getting more and more information in their index, making information available across all countries, seriousness without being official, and doing the best at all tasks. From these philosophies, we can see that Google has a vision to make the world an open place where everyone benefits. Even though the company is meant to make money, money should be made through the appropriate channels and the company strives to provide the best to their consumers. It can also be seen that the company does not necessarily believe on what is on the outside in terms of wearing a suit or being official.

Google is known around the world to be a global leader in technology and is involved in many activities to make the web as open as possible. Google does not charge end users for most of their services by they have a freemium model for some services such as Gmail where they provide some storage free but charge for extra storage Cowan, 2009.

Google is investing predominantly in new products and services. As reported in their 2010 annual report, they have invested substantially in mobile, enterprise and display which the company views to be their future. Mobile phones and other devices are increasingly growing in popularity and this is part of the reason why the company is shifting in this direction Google Inc., 2010.

This is in line with the company’s mission to make information available and accessible to all.

Organization’s strategic goals

Google focusses more on their long-term goals rather than the short-term ones Kirby, 2009.

Google Inc. has many goals which the company strives to achieve. Each of their products has a specific goal. However, there are the unified goals which the company has. One of the principal goals is that of making the web open to all. The 2010 annual report states that the company was founded to connect the general public with their much needed information Google Inc., 2010.

This goal is what drove the company to what it currently is. Google is built around the premise of an open source of information. This is what the Google brand is best known for all over the world. This goal is in tandem with the organization’s vision and mission since both the company vision and mission state that the company wants to make information accessible and available to people all over the world.

One of Google’s specific products, Google Adwords which is the company’s advertising program which is auction-based has a goal of delivering ads which are related to the content web surfers are viewing or searching for. This is the main income generating activity of Google Inc. As per Google’s vision, they would like to generate income through legit activities that are not of any evil nature. This is what Google has done with their Adwords program. Adwords advertisers pay on a cost-per-click basis whereby the advertiser only pays when a customer clicks on the ad. This means that advertisers only pay what is essential for their business which are clicks leading to the ad’s target page. It is not always that an advert is seen and it leads to a particular behavior.

The company’s financial performance

From the 2010 annual report filed with the SEC, Google reported revenue of $29.321 billion which represents a 23.9% increase from the $23.651 billion reported for the fiscal year ended December 31, 2009. When looking at the trend in the company’s revenue for the past 5 years, the company has had increasing revenue by at least 20% every year. The company’s earnings before tax has also been increasing year by year. In the year ended 31st December 2010, the company reported income before taxes of 10.796 billion and the income after taxes was about $8.505 billion representing a 30% increase from the $6.52 billion reported for the year ended December 2009 Google Inc., 2010()

About 96% of Google’s revenue comes from their AdWords platform. In the years 2008 and 2009, the company’s revenue from AdWords was 97%. This 1% reduction for the period ended December 31st 2010 can be attributed to the company gaining other products that increase revenue for the company such as their third party ad agencies such as AdMob and DoubleClick. The company also licenses their enterprise products to earn additional income. Another product was also introduced which is the Google ads for television. These also helped to increase the revenue of Google from other activities other than their AdWords program Google Inc., 2010.

However, as can be seen, in as much as Google has introduced new products and services to help increase their revenue, the company’s earnings significantly comes from their AdWords program since despite adding these new products, the drop in percentage revenue was just 1 per cent.

The company’s revenue is affected by many factors. One is the seasonal variation in usage of the internet. For example during the Black Friday/Cyber Monday shopping days, there can be seen a whopping usage of the internet as millions of people scour the web for advertising coupons and crazy sales promotions. During this period, as Google reports, they receive an enormous amount of revenue as advertisers place adverts on the Google AdWords platforms and these adverts receive many clicks as shoppers want to see these sales promos. Generally in the summer months, internet usage goes slow thus decreasing the company’s revenue. Such changes in trends cause huge fluctuations in the quarterly reports of Google.

Since Google is a global company that charges for their products in U.S. dollars, the company experiences problems caused by the fluctuation of currency exchange rates. For example, in 2010, the dollar strengthened against many currencies, especially the Euro, and this negatively impacted the earnings of the company for the year 2010 as compared to the results for the year 2009. The company thus developed a program to manage the risk of foreign exchange fluctuations. However, the program will just help to mitigate the risk and not to eliminate it altogether.

Competitive and marketing analysis

The table below shows a SWOT analysis of Google Inc.

Helpful for achieving the objectives

Harmful to achieving the objectives

Internal

Strengths

Google is the most popular search engine around the world

Very little marketing is required since Google is a well-known brand all over the world

Google products all have a simple user-friendly interface which even novice end users feel comfortable using.

Google has low costs of operation since they use cost effective equipment which are low cost but efficient in running their system.

Google does not favor any advertisers in their advertising products.

Google’s products are available in many countries and are localized to the content of that country or region.

Google has a low cost per click rate which encourages advertisers.

Weaknesses

Contextual marketing is seen by some marketers to have less influence than general marketing.

Google has a complex business model which looks confusing to some business analysts.

Due to the large amount of data that Google handles, they are less accurate in their search results. Only about 50% of their web searches are answered with accuracy.

Google does not provide attractive content like that provided by their two biggest competitors, Yahoo! And MSN.

External

Opportunities

Google’s system is scalable. They can add new servers with ease without necessarily

Google can develop new products and they will catch on with ease since their brand is already well-known the world over.

Threats

Google depends on some technologies built by their competitors and these contracts cannot be easily terminated.

Since there are no barriers to entry of competitors, new businesses are attempting to venture into this field though they have been unsuccessful.

The company’s strategy of differentiation

Michael Porter (1980) stated that there are three main business strategies that can be adopted by a company or organization. These three strategies are the sources of competitive advantage for any company. The first strategy is that of cost leadership. Michael Porter asserts that the company which is the low cost leader in the market always gains the largest competitive advantage from the others Porter, 1980.

This low cost has to be achieved by producing the lowest cost of operations. Here, the advantage created by cost is what is being looked at. The company must strive to cut off huge amounts of expenditure on each step of the value chain process.

The second strategy is the differentiation strategy. This is where the company strives to deliver differentiated products and services that meet customer needs by creating a competitive advantage for the company. To produce differentiated goods and services, the company must divide the market into segments and then make target goods and services based on these market segments Porter, 1980.

This strategy usually produces higher cost goods and services and has been used widely by larger airlines such as British Airways.

The third strategy that was brought forth by Michael Porter is known as the niche or focus strategy. This strategy involves the situation where the company is bootstrapped and thus cannot afford to run a cost leadership strategy and can neither differentiate their products. The company then narrows down their products or services for a specific niche. A company adopting this issue or niche strategy can choose to mash it up with a cost or differentiation focus Porter, 1980()

The strategy of differentiation is the best for Google and is what the company has been using for many years. Differentiation gives a towering return to investors since it provides quality goods which are different from those offered by competitors and these products and services are usually sold at a higher price resulting in massive returns for investors. The Google brand is well-known all over the world and the most notable thing after building brand recognition and brand awareness is to create a different view of Google from their competitors and this is why the strategy of differentiation would work best for Google Inc.

A merger/acquisition strategy

Over the years, Google has acquired over 150 companies. Its largest acquisition to date was that of the purchase of Motorola Mobility at the premium price of $12.5 billion. These companies that Google has acquired include AdMob, dMarc advertising, Doubleclick, reCAPTCHA, YouTube, Postini, DailyDeal, Punchd, Sparkbuy, Aardvark, On2 Technologies and TalkBin.

One scenario in which an acquisition would work best is that with Morningstar Inc. Google Inc. competes majorly in 3 industries and has over 50 different products and services. Morningstar Inc., on the other hand, also competes in 3 industries and has about 13 different product and service groups. Should the two companies merge, it would result in a 1% overlap in the products and services offered by the two different companies. Google Inc. And Morningstar Inc. do not share any suppliers. However, Google Inc. has 6 suppliers whereas Morningstar Inc. has none.

Google Inc. As the buyer operates in the sectors of Business and public services, consumer services and technology. Morningstar Inc. operates in the sectors of consumer services, finance and technology. Morningstar Inc. operates Morningstar.com as their product which is similar to Google Finance (www.google.com/finance).

An acquisition of Morningstar Inc. By Google would enable Google add Morningstar.com to their publisher network and display advertisements whose content is related to finance published on Morningstar.com. Data on morningstar.com will also be available via the Google Finance network which will mean that Google will help investors to get more information on their various portfolios. It will also enable Google to provide various data, software and research material from Morningstar.com via Google Finance to investors.

This acquisition will also help Google to expand its foothold in the Finance industry by increasing the amount of information provided via the Google Finance platform. Investment and other news that is available via Morningstar.com will also be available via the Google News platform.

Quote data that is available via Morningstar.com and InvestData can also be made available via the Google Finance platform. It will also help Google Finance to provide a service of portfolio management and analysis which will attract more users to the Google Finance platform. This acquisition will help better Google’s products and increase their revenue.

The company’s rewards system

With 96% of Google’s revenue being generated from advertising, a pay for performance model is best to motivate employees towards generating the highest revenue achievable. Pay for performance is a payment scheme which uses financial incentive to move the teachers towards meeting certain targets/standards or quality. It has two main aims, first is to make the employees to focus on the strategic priority at stake, the second part is motivation of the employee by rewarding him/her for the excellent performance Gabris & Ihrke, 2000.

This is where financial incentive is used to drive the employees towards meeting certain previously set targets/standards or quality. The program’s goal is to better the effectiveness and the quality of the services on offer to advertisers and, therefore, it will increase the spending of advertisers on the Google AdWords platform.

Google currently has a Transferable Stock Option (TSO) program. Under the TSO program, eligible employees receive stock options which they are allowed to trade in an online auction which is managed by Morgan Stanley. This TSO program was established in the year 2006. However, for a more effective way to motivate and compensate employees, a pay for performance program should be established since it has been tried by various other companies and proven to be the better option in motivating employees towards generating more income for the company.

When the employees are more dedicated towards marketing Google’s products and services, they will give more of their time and effort for this. The pay for performance model has been tried in various other sectors such as with teachers and has been proved to work Forrest E. Adams, 1987()

The company’s ethical business behaviors

Google has a strict code of conduct that all employees and board members are required to follow. There are serious ramifications for those found contradicting the code of conduct. An example of this is the termination of employment or disciplinary action. Contractors and consultants who are hired to work with Google are also required to follow the parts of the code of conduct that govern how they relate with the company. The code of conduct has seven cardinal chapters. The first is on serving the users. This deals with ensuring all products are built with integrity and provide usefulness to the end user. It also governs how the company should be responsive to user feedback and give them privacy and freedom of expression. The next chapter is on respect for each other. This states that Google is an equal opportunity employer who provides a safe and productive environment for workers that is free from alcohol and drugs. The third chapter is on conflicts of interest. It details how personal interests should be balanced to avoid any conflict of interest. How employees are expected to conduct themselves outside the company and how inventions are handled.

The fourth chapter is on confidentiality of partners, competitors, current and former employees, contractors and consultants. This chapter also defines what is described as confidential information. Chapter five describes the protection of Google’s assets such as all data and information there, their network, equipment and facilities, etc. The sixth chapter is on ensuring the financial integrity of the company. This details how Google’s money is spent, contractors and suppliers hired, record keeping procedures, recording of transactions, and much more. The seventh and final chapter deals with obeying the law such as competition laws, trade control laws, and anti-bribery laws.

Conclusion

Google Inc. may be thought to be a company that is “stuck in the middle” when one looks at Porter’s Generic strategies. However, Google actually uses the strategy of differentiation. The company uses the strategy of differentiation to increase its market share as well as keep consumers or customers purchasing and using Google products. The company markets its products aggressively and builds innovative products which are appreciated the world over and not just by targeted to a specific niche or smaller target market. This has greatly helped the company become a well-known brand all over the world as well as increase their revenue as can be seen in their financial reports over the last 5-year period.

References

Cowan, L. (2009). Google’s Big IPO, Five Years Later. [Article]. Wall Street Journal – Eastern Edition, 254(40), C3.

Forrest E. Adams. (1987). A comparison of teachers’, administrators’, and school board member’s attitudes toward merit pay for teachers in selected school districts in south-central Pennsylvania.

Gabris, G.T., & Ihrke, D.M. (2000). Improving Employee Acceptance Toward Performance Appraisal and Merit Pay Systems:The Role of Leadership Credibility. Review of Public Personnel Administration. 41-53.

Google Inc. (2010). 2010 Annual Report. Mountain View, CA: Google Inc.

Johnson, G., Scholes, K., & Whittington, R. (2008). Exploring corporate strategy: text & cases. Essex: Financial Times Prentice Hall.

Kirby, J. (2009). How Google really does it. (Cover story). [Article]. Canadian Business, 82(18), 54-58.

Porter, M. (1980). Competitive strategy. New York: Free Press.

Vise, D.A. (2006). Google. Foreign Policy (154), 20-24.

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