Strategic Business Analysis
Introduction
The transmission of the internet has revolutionized the business arena. The use of the Internet is changing high-tech marketing overnight while different industries have been trying to use it as part of their marketing strategy. And this is what Google considered as advantage—the proliferation of the internet age. Actually, the internet does not only reconfigured the way different firms do business and the way the consumers buy goods and services but it also become instrumental in transforming the value chain from manufacturers to retailers to consumers, creating a new retail distribution channel. Website development is a powerful tool used by different business organizations around the world. It is defined as the process of achieving business objectives utilizing electronic communications technology (Bonn et al, 1998). But no one can’t deny, through the help of search engines in the Internet world businesses are also growing significantly. And since search engines was mastered by Google, the company are now creating significant changes in the current business era.
In addition, the Internet has brought about many changes to the world, particularly on how contemporary businesses are being operated. Due to this technological progress, product development became faster and better and business processes are more systematized. Indeed, the introduction of the internet to several industries has paved the way for greater progress in the future. In the music industry, the use of the internet has been an important marketing aspect, specifically in business communications (Borenstein & Saloner, 2001).
The Internet with the advent of e-commerce and search engines has revolutionized that way business is done. Without the need for physical presence and sometimes only at the touch of a button, business transactions, financial trading and even customer service is being carried on (Smith & Taylor, 1998). The Internet has proven to provide efficient communication links between companies and their clients cutting down the resources spent on public relations. The use of internet in business industry has emerged for at least two crucial reasons. Firstly, it serves as a new alternative channel of communication other than traditional branch network for customers to contact and communicate with the firms. Nowadays, more and more customers, especially younger ones who are quicker to accept new technology, are accessing remote channels-telephone marketing; computer transactions and other virtual transactions-to transact their business affairs. These on-line customers demand even more control over their personal finances and value “anytime, anyplace, anywhere” customized access to financial services (Lee & Turban, 2001).
On the other hand, a virtual team is a group of individuals whose members contributes to a common goal, but are separated in terms of time, distance and organizational boundaries. This group only communicates using information communication technology such as internet. Through virtual teaming via the internet, virtual group communication can be established in business industry. Virtual group communication is easier for individuals to feel like a participating member as electronically communicating with higher authorities towards solving problems allows people to contribute more than to voice out their opinions during a group meeting. Hence, allowing decision maker of the organization to make decisions with better information than if they were only restricted to face-to-face communication, as there is a presence of informality.
Online communication like electronic mails enables communication process even with time differences. Group members are able to attend group meetings at their location without traveling. Virtual group communication facilitates more effective communication through more inputs of information constantly and therefore resulting in lesser conflicts between group members. There is a lesser chance of one member dominating against other members. In addition, the contributions of group members are logged for future references.
Talking with the advantages of the internet, Google as in internet-based company created significant changes in the business world. The creation of their powerful search engine combined with advertising capabilities, the company are now dominating not only as a search engine company but as an overall successful Internet-based business.
Company Profile: Google Inc. Company History
Google is one of the most successful Internet-based businesses and companies since the booming dotcoms years in late 1990s and remains to be a leader (Murphy & Scharl 2007, p. 301; Henry 2006; Kumar et al 2002). The success of the Google is rooted on its outstanding organizational practices and core competencies. Google’s formula of success is not only its competent technology but also its aggressive ability to come-up with both innovative and profit-oriented projects.
Basically, Google started in January 1996 which is formerly as a research project of Larry Page and later on joined Sergey Brin during their studies at Stanford University in California as PhD students (Battelle, 2005). In their research project, they aimed to found out the existing relationships between websites that would create better ranking of results than existing techniques, which is to rank the results based on the number of times the search term appeared on a page (Battelle, 2005). Actually, this search engine was originally named as “BackRub” because of its capabilities to check the backlinks which they believe that this will also estimate the importance of a certain site. But because they believed the name “Backrub” was not appealing, then in 1997 they change it to “google” (Trex, 2009).
Page and Brin tested their idea as part of their studies, they believed that the pages with the most links to them from other extremely relevant web pages must be the most relevant pages linked with the search which became the foundation for their search engine. As for evidence, the search engine used the Stanford University website with the domain google.stanford.edu (Battelle, 2005). The domain google.com was registered on 15 September 1997 (MarkMonitor, 2009), and the company became incorporated as Google Inc. on September 4, 1998. Initially, the investment raised for the new company valuing to almost .1 million which includes the 0,000 check from Andy Bechtolsheim, one of the founders of Sun Microsystems (Google, 2009).
As of today, Google are not only known for its searching capabilities but also as an advertising medium. But formerly, both Brin and Page had been against using advertising pop-ups in a search engine, or an “advertising funded search engines” model, and they wrote a research paper in 1998 on the topic while still students (Stross, 2008). However, as argued by Stross, (2008) Brin and Page soon changed their minds as they later on permitted simple text ads.
After, Google becomes incorporated in 1998, the company moved in Palo Alto in 1999. Palo Alto is actually known as home to numerous famous Silicon Valley technology startups. Because of the continues and quick growth of the company, Google Inc. leased a complex of buildings in Mountain View, California at 1600 Amphitheatre Parkway from Silicon Graphics (SGI) in 2003 and later in 2006 they bought the place for about 9 million and named the place as Googleplex (Stross, 2006).
The Google search engine of Google Inc. Was appealing to the number of Internet users because of its simplicity and effective results (Thompson, 2003). The company also started selling advertisements associated with search keywords in year 2000 which were usually text-based in order keep up the neat page design and also maximize the speed of page loading (Google, 2009). As indicated in the company information, keywords were sold based on a combination of price bid and clickthroughs, with bidding starting at 5 cents per click (Google, 2009).
Actually, the name “Google” came from the misspelled word “googol” (Google, 2009), referring to 10100, the number stand for number 1 followed by one hundred zeros. Due to increasing popularity of the search engine Google and having found its way increasingly into everyday language, the verb “Google” was added to the Oxford English Dictionary and Merriam Webster Collegiate Dictionary in 2006, which means “to use the Google search engine to obtain information on the Internet (Google, 2009).”
Products
Google isn’t only about advertising and search engines. Actually, Google Inc. created different tools and services for the similar business environment such as advertising networks, Web applications, and solutions for businesses. The general public was also benefiting from the products and services offered by the company. Their powerful search engines are providing great information for its users.
Advertising- As stated in the 2007 Google’s Annual Company Report, 99% of Google’s revenue is derived from its advertising programs. For the 2006 fiscal year, the company reported .492 billion in total advertising revenues and only 2 million in licensing and other revenues (Google, 2009). Google is able to accurately track users’ concerns across associated sites using Double-Click technology and Google Analytics (Google, 2009). Actually, one of the known advertising product of Google is their Google Ad words which permits their Web advertisers to display ads in Google’s search results and the Google Content Network. This is done through either a cost-per-click or cost-per-view scheme. On the other hand Google AdSense website owners or website publishers may also show some adverts on their own site. Google will share some part of the earnings to their publishers every time the ads are viewed and clicked (Google, 2009).
Software- As for the software, The Google web search engine is of the most popular service that the company offers. As reported in their 2007 annual report, Google shows dominance as the most used search engine on the web with a 53.6% market share compared to Yahoo! and Live Search with only 19.9% and 12.9% market share, respectively (Google, 2009). As part of the creation of web search engine, Google indexes billions of Web pages which enable their users to search information they desire. With the use of keywords and operators, Google search engine can provide information in a time with a maximum of 1,000 results for any specific search query. In addition to this, Google has also associated their Web Search technology into some of their services such as Google News, Image Search, Google Product Search, the interactive Usenet archive Google Groups, Google Maps, and more. Moreover, Google has also now offering the public to upload pictures and videos in the internet. There are also now desktop applications offered by Google such as Google Desktop, Picasa, SketchUp and Google Earth.
Gmail- In addition to the products offered by Google, their Gmail is also one of their best innovation. Actually, Gmail is a free webmail, POP3 and IMAP service provided by Google. In the United Kingdom and Germany, it is officially called Google Mail.
Enterprise products- Aside from internet-related products, Google has also entered the enterprise market in February 2002 with the launch of its Google Search Appliance, targeted toward providing search technology to larger organizations.
Financial Status
Table 1. Financial Data
Source: Google 2008 Annual Report
The consolidated statements of income data for the years ended December 31, 2006, 2007 and 2008 and the consolidated balance sheet data at December 31, 2007, and 2008, shown in Table 1 derived from Google’s audited consolidated financial statements. From the reported financial figures, Google’s business progress has been grown rapidly since inception, resulting in substantially increased revenues, and this trend was expected to continue growing. But as indicated in the report, their revenue growth rate has generally declined over time. This decline was due of numerous business factors such as increasing competition, maintaining growth rates difficulty as Google’s revenues increase to higher levels and increasing maturity of the online advertising market in certain countries. Moreover, the recent general economic recession may result in less commercial queries by our users and may cause advertisers to lessen the value they use on online advertising, which could depressingly influence the growth rate of Google’s revenues. The core essence of Google’s advertising programs was to give useful and relevant advertising to their users which are actually reflecting to their dedication to continuously develop the overall web experience. Thus, Google was expected to take several actions concerning the improvement ads relevance displayed on their web sites and Google Network members’ web sites.
Moreover, the international revenues of Google have grown as a percentage of their total revenues to 51% in 2008 from 48% in 2007. This amplify in the portion of their revenues was derived from international markets results mainly from increased recognition of their advertising programs, boosts in their direct sales resources and customer support operations and their continued development in creating localized versions of this products in these international markets, as well as an increase in the value of the Japanese yen, the Euro, and other foreign currencies in relation to the U.S. dollar in 2008 compared to 2007. The boost in the share of international revenues derived from international markets increases Google’s exposure to fluctuations in foreign currency to U.S. dollar exchange rates (see Appendix for more financial highlights).
People and Culture
Similar to other companies, Google also take great pride with their company culture and strongly gripped on it as one of their fundamental strengths. The Google’s culture supports the iteration of ideas to resolve complex technical challenges. Additionally, the company also considers individual thinking and creativity as part of the company Culture (The Google Culture, 2009). As an example, Google encourage their engineers to devote as much as 30% of their time to work on independent projects. Many of their significant new products have come from these independent projects, including AdSense, orkut and Google News.
As traced back in the history of Google, it was first considered as technology company and evolved into a technology, software, advertising internet, and media company all rolled into one. As seen in the progress of the company over time, Google took technology innovation very seriously as they compete aggressively for talent, and their people drive their innovation, technology development and operations. As indicated in the company Website, Google strive to hire the best engineers and computer scientists that will enable them to solve significant challenges concerning artificial intelligence, systems design, data mining, machine learning, networking, testing, software engineering, distributed systems, cluster design and other areas (The Google Culture, 2009). Google are also concerned to the environment of their talents where these talented people can have rewarding jobs and create technological innovations that have a constructive effect on the world through daily use by millions of people.
With regards to the people hired by the company, they actually assembled a talented group of employees (The Google Culture, 2009). Despite the company’s rapid growth, they continuously seek to maintain a small-company feel that encourages communication and the exchange of ideas among employees. Google try to minimize corporate hierarchy to facilitate meaningful communication among employees at all levels and across departments, and Google have developed software to help us in this effort (The Google Culture, 2009). Google also believe that bearing in mind multiple viewpoints is critical to developing helpful solutions, and they attempt to build consensus in making decisions. While teamwork is one of Google’s core values, they also significantly reward individual accomplishments that contribute to their overall success (The Google Culture, 2009). As Google grow, it was expected that the compensation structures will continue that are more similar to those offered by start-ups than established companies. Google will focus on very significant rewards for individuals and teams that build amazing things that provide significant value to us, our advertisers and our users.
As of December 31, 2006, Google had 10,674 employees, consisting of 3,695 in research and development, 4,366 in sales and marketing, 1,649 in general and administrative and 964 in operations (The Google Culture, 2009). All of Google’s employees, except temporary employees and contractors, are also equityholders, with significant collective employee ownership. As a result, many employees are highly motivated to make the company more successful (The Google Culture, 2009).
As stated, the success of the Google is rooted on its outstanding organisational practices and core competencies. Innovation is very critical among the members of its workforce since it operates in global environment. Daft (2003) pointed out that managing global environment requires managers the ability to manage change through innovation and creativity. The innovative capability of Google combined with integrated process and a supportive culture creates sustainable competitive advantage. Among the considered high-leverage innovators, Google excels in ideation with overall adeptness and competence across all four stages of the innovation value chain. For example, Booz Allen (“R&D Efficiency” 2007, pp. 32) describes Google as search engine leader that creates new-fangled ideas with intense speed or what they call the “70-20-10 Rule” where the staff particularly engineers are encouraged to use 70 percent of their working time on central business functions, 20 percent on related business functions, and 10 percent on areas entirely of their own choice. Larger organisations like Google, in contrast to small ones are faster in adoption of innovations because of greater access to resources and need for strategic planning (Rogers 1995; Wolfe 1994). Due to the stiff competition among Internet companies, the encouragement of innovation and creativity is inherent to Google. Innovation as a ground for doing business in the 21st century will be the consistent tugging force that the organisation must either strive to adopt or suffer the consequences of being left behind by competitors. The Googlers (employees) are motivated to contribute their suggestions, ideas, or anything that pertains to potential profit-gaining activities through various means like meetings, intranet, and other forms of communication. In product development, they emphasise on the feasibility and user-friendliness of relevant ideas. The feasibility is supported by Google’s aim of coming-up with something original and financially viable whereas the idea of user-friendliness works toward potential users. Through innovations, Google has expanded its services and features. Google today is no longer a search engine company but a web computing applications company (Henry 2006). The upscale ability of Google is among its critical success factors that make it a sustainable competitive company in its specified industry.
Further, teamwork is another main factor for Google’s success. It is stated that engineers work in teams in pursuing projects. The team had complete freedom regarding their projects and the ways in which they will work on it. The concept of teamwork relies on the ability of every team player to communicate with all the members of the workplace situation. Furthermore, teamwork is also attributed to the positive effects upon the psychological health and well-being of organizations member (Carter & West 1999). Understanding of the importance of teamwork will be limited to the group in focus. When team forms, a “team mind” also forms through the sharing of information and pooling of knowledge (Stokes & Kite, 1997). The promotion of teamwork despite the absence of clear management structure among engineers and project managers is effective because of efficient process of communication among the Googlers. Organisational communication is also a core competency. Communication within organisational context serves a number of fundamental functions (Brown 2001) as surveys focusing on areas of improvement among corporations states that it usually ranked as key element within the organization (Harris, 1993). Eckhouse (1994) suggested that communication serves four major functions within a group or organization: control, motivation, emotional expression, and information. Googlers’ communication process is free and open. This serves as the pathway through which ideas, suggestions, and insights that would potentially generate change and new features in the system are discussed. Communication also keeps and maintains values and relationships necessary to keep the system of the united organisation. Googlers are encouraged to extend communication initiatives among various departments. Upper management including Sergey and Larry are deliberate in supporting the open communication process. Communication is evident during lunch at the cafeteria, meetings on Friday afternoons, etc. Petit, Goris and Vaught (1997) noted communication’s function in allowing employees to conduct meetings, make memos, provide feedback and share corporate-wide information. However, it is important to consider that the communication provided by the organisation is clear and consistent from within all levels. It must address both organisational and individual employee concerns. Management behaviour will influence employee behaviour more than the words included in a communication. Employees assess the communication to see if the company policies, changes and other concerns meet their needs and the company as well. Furthermore, the efficient feedback system of Google exemplifies their communication process in both internal and external business environment.
On the aspect of HRM, Google has a distinct recruitment procedure that is bounded on the increased importance on valued intelligence and brainpower more than experience. David (2003) identified recruiting as part of the overall management function of staffing. Conversely, Spencer (2004) emphasised that staffing requires both the process of attracting and selecting prospective personnel’s capabilities and competencies with the company position. Recruiting potential Googlers are based on academic proficiency and human intelligence. The diversity of skills and qualities of applicants is recognised because Google management believes that it can contribute on its progression. There are also unique advertising techniques in job postings, effective referral system, and campus recruitment. Generally, Google upholds the key HRM functions namely: attracting a quality workforce, developing a quality workforce, and maintaining a quality workforce (Sims 2002; Schermerhorn 2001). It has been recognized that HRM is a crucial element in an organization’s life since its beginning because it is considered as an important tool to maintain competitive advantage (Wilson & Rosenfeld 1990). In this emerging system, the critical factor in production has shifted from machines and equipment to the “knowledge” worker (McGregor 1991). This may be the reason why Google management pays particular attention to academic performance of its applicants. The employees are also given the opportunity to enjoy through various recreation programs and other perks. The HRM practices of Google work at some specific areas of the organization but not all, thus, some criticism are identified.
All in all, the main factors that contribute to the success of Google are: the ability to innovate, outstanding teamwork among Googlers, effective communication, and distinctive recruitment procedures.
Business Model
Accordingly, strategic or effective management is known as the process of formulating, implementing and assessing cross-functional decisions which enables different firms to achieve their organizational objective (Drejer, 2002). With this definition, strategic or effective management is said to give focus on integrating marketing, management, finance, research and development production/operations and computer information system to sustain competitive advantages. This definition is said to be in the contemporary business, however, in line with the perspective of the top management, strategic or effective management is the ability of the firm to choose the markets in which the company’s distinctive capabilities gain competitive position. In addition, the management views strategic or effective management as the one which is adaptive and incremental in nature and aims on fulfilling the expectation of the stakeholders. Accordingly, stakeholders are composed of the management of the company, the employees and staff the customers, communities and other shareholders and rivals. The management aims on having a strategy which enables them to provide the needs of these stakeholders (Campbell, 2002).
In doing so, the management is trying to find ways to meet the needs of the stakeholders and this is done through constant communication. By means of communication, the management has been able to clearly relay the purpose of the company to sustain competitive advantage. It has been also believed that key to having strategic or effective management is through empowering their stakeholders, allowing them to be part of the decision making process and enabling them to be part of the business operations (David, 2001). The management perspective of strategic or effective management is to deliver superior stakeholder experience through direct, comprehensive stakeholder relationship and support programs tailored to satisfy stakeholders need.
In the case of Google Inc., it can be said that the company has been able to use several strategic business model to be able to stay in their competitive position and to be able to provide quality services to their target audiences. One of the business models used by the company is the diversification of their business portfolio into the world wide web. Accordingly, the main goal of the Google Inc. to diversify is to cater to the emerging needs of the market. In this regard, the Google Inc. has been able to launch the Google’s multi-sided market. Basically, the Google’s multi-sided market enables the company to make profit out of network effects (See Figure 1).
Figure 1. Google’s Multi-sided Market Model
In this manner, Google enables them to have a reliable pricing system. With their scalable architecture, this model was considered by some as disruptive business model. However, this model has the ability to broaden significantly the market of potential advertisers since it also possess efficient ad system and relevant ads.
Like other companies, the business models in Google are perhaps the most crucial part of their progress and development. As Google Ltd. grows there is also so much talk about how the web changes traditional business models. But there is little clear-cut evidence of exactly what this means.
In the logical idea, a business model is the method of doing business by which a company can sustain itself—that is, generate revenue. The business model spells-out how a company like Google does makes money by specifying where it is positioned in the value chain.
As with other companies, some of their business models are quite simple. It somewhat goes like a company produces a good or service and sells it to customers. If all goes well, the revenues from sales exceed the cost of operation and the company realizes a profit. On the other hand, there are other models can be more complexly woven. Broadcasting is a classic example. Radio and later television programming has been broadcasted over the airwaves free to anyone with a receiver for much of the past century. The broadcaster is part of a complex network of distributors, content creators, advertisers (and their agencies), and listeners or viewers. Who makes money and how much is not always clear at the outset. The bottom line depends on many competing factors.
But compared with the broadcasting model, the internet commerce in which Google mastered gave rise to new kinds of business models. Similar to the approach of the previous Microsoft, Google are now dominating the web market. But the web is also likely to reinvent tried-and-true models. Business models have been defined and categorized in many different ways. This is one attempt to present a comprehensive and cogent taxonomy of business models observable on the web. The proposed taxonomy is not meant to be exhaustive or definitive. Internet business models continue to evolve. New and interesting variations can be expected in the future.
The models are implemented in a variety of ways, as described below with examples. Moreover, a firm may combine several different models as part of its overall Internet business strategy. For example, it is not uncommon for content driven businesses to blend advertising with a subscription model.
Business models have taken on greater significance recently as a form of intellectual property that can be protected with a patent. Indeed, business models (or more broadly speaking, “business methods”) have fallen increasingly within the realm of patent law. A number of business method patents relevant to e-commerce have been granted. But what is new and novel as a business model is not always clear. Some of the more noteworthy patents may be challenged in the courts.
The web advertising model is an extension of the traditional media broadcast model. The broadcaster, in this case, a web site, provides content (usually, but not necessarily, for free) and services (like email, IM, blogs) mixed with advertising messages in the form of banner ads. The banner ads may be the major or sole source of revenue for the broadcaster. The broadcaster may be a content creator or a distributor of content created elsewhere. The advertising model works best when the volume of viewer traffic is large or highly specialized.
With respect to the numerous business models used by Google is the portal. Although Yahoo! is the leader of this model, Google also considered it. Actually a portal is somewhat a search engine that includes varied content or services. With this, a high volume of user traffic makes advertising profitable and permits further diversification of site services. A personalized portal allows customization of the interface and content to the user. A niche portal cultivates a well-defined user demographic. Aside from this, Google also uses the so-called Query-based Paid Placement which sells favorable link positioning (i.e., sponsored links) or advertising keyed to particular search terms in a user query, such as Overture’s trademark “pay-for-performance” model. Apparently, no one can’t deny that Google dominates the contextual Advertising / Behavioral Marketing whereas freeware developers bundle adware with their product. For example, a browser extension that automates authentication and form fill-ins, also delivers advertising links or pop-ups as the user surfs the web. Contextual advertisers can sell targeted advertising based on an individual user’s surfing activity. With this, it is also evident that Content-Targeted Advertising which was pioneered by Google was also performing expressively since it extends the precision of search advertising to the rest of the web. Google identifies the meaning of a web page and then automatically delivers relevant ads when a user visits that page.
Actually, business advertising model of Google lies under their Adsense Program (see Figure 2).
Figure 2. Monetizing the Web with AdSense
With the said model, it allows the user click on ad displayed on a website and then the Advertiser pays Google but Google also gives a percentage of that amount to the website displaying the ad. This model also considers the relevance of the ads displayed in publisher sites. This model was also known for its scalability to both websites and advertisers. The model was also easy to use whereas it is possible to embed images or even banner advertising.
Google’s Strength and Weaknesses Strengths
Google Inc. as web-based company and uses search engine that allows searches relevant data is one of the key strength of the company with considerations of the high brand awareness of its users in which most f us know the term “Google it”. In this manner, if we type in certain keywords, search engines like Google will find the most appropriate data in accordance to their relevance. Moreover, Google products also support web-service. This feature is actually for software developers but by knowing the web-service of a search engine, we don’t need any more creating own search engine to create applications that support searching the web. An example is the firefox browser, Internet Explorer and Chrome. These applications also enable Google as search bar. In addition, Google Search engines index a page on a regular basis. Thus, if an updated web site search engine will know about it. Google also supports the search engines Localized search. Meaning, search based on the location of visitors are recognized. An example is Google, if you type google.com in Indonesia, it will redirect to google.co.id.
With regards to the strength of Google Ltd as business, the company is currently considered as leader in the U.S. core search market with more than 64% (April 2009) of the searches conducted. As reported in their 2008 financial report, Google was the leader in the U.S. search advertising market with 76% market share. The public perception towards Google was also the company’s strength which is actually part of Google’s philosophy i.e. “you can make money without doing evil”. The company has also significant infrastructure base supported by strong revenues of about ,795.6 million in 2008, i.e. increase of 31.3% over 2007.
Weaknesses
Businesses are bound to assess their weaknesses to do some improvement. In Google, one of their weaknesses was the interruption or failure of some of Google’s services. Actually, this is due to different business factors affecting the company. The current global financial crisis was one of the factors. The inabilities to hire or retain key people and scale operational processes are also part of the weaknesses of Google. Aside from this, there were also top management issues and lack of product integration problems emerging in Google that adds-up to company’s weaknesses.
Google’s Threats and Opportunities Opportunities
As for the opportunities, Google’s internet business was a force far more powerful than Yahoo. As quoted from the company’s Annual report, in the fourth quarter of 2007, Google managed to record a profit Google to U.S. $ 1.21 billion while Yahoo in the same period, only reaching a profit of U.S. $ 206 million. In the year 2008, Google is also expected to continue to master the search engine market with a percentage of 65.1 percent while Yahoo is far behind with about 22 percent market share alone.
And during the last few years, Google has done offering a radical new approach to the search world. Google defines a new marketing concept, escaped from the destruction of the dot-com businesses and attract funds enormously which is currently the one of the hotly discussed company in the history of Silicon Valley since they exceeds all its competitors.
Google has become a gateway to instant knowledge. Hundreds of millions of people use them to satisfy their curiosity, their needs, their fears, and their obsession. All this produces what is called Battelle “Database or Data Warehouse Full of Meaning”. But Google’s certainly not to be complacent with the achievements. Because of the more serious competitors to attract users. The era of Web 2.0 makes the search giant should be extra careful because it could be considered less players will overcome them, because it has the features and services that interest users. These are the opportunities for Google:
Ø Increase in US total online ad spending from .9 billion (2007) to .4 billion (2012) Ø Increase in search advertising at a 12% CAGR and display advertising at a 13% CAGR from 2007 to 2012 to 2012 Ø Larger definition of search marketing including new forms of advertising such as some sorts of social media Ø Advertisers’ spending on rich media will more than double from 2007 to 2012, while video spending will almost quadruple Ø Almost 1.3 billion wireless subscribers worldwide will embrace local mobile search services by 2013
Threats
MSN is ready to rival Yahoo and Google. Microsoft seems endless trying to be topnotch IT companies in the world, regardless of Microsoft’s core business trying to take over certain throne mastered. As a business that is held by Yahoo and Google. Yahoo mail with email 1 GB capacity has become one of the largest free email providers in the world, while Google has become the world’s largest search site. With this, Microsoft was trying to take the throne by considering MSN Giga capacity. In this virtual world competition are increasingly moving especially when Microsoft tried to take over the internet business. About the success or failure, it was just too early to think if Yahoo and Google will sink like Apple and Netscape.
Currently, many analysts predict that Google will continue to be the king of search engines. However, it is not impossible position will plummeted from the throne. Because of the huge capital alone cannot be guaranteed if they will be able to win the competition in the current information age.
There are some instances in which other small companies can beat the big companies because of the fast moving and intelligent look at opportunities. Competition in the field of search engines will become increasingly strict, they must continue to innovate with new technologies and manage the right strategy. The following are threats present in Google’s business environment.
Ø Privacy concerns
Ø Antitrust suits against Google
Ø Copyright infringement suits
Ø Acquisition difficulties
Ø Intense competition
Ø Disruptive innovations
Ø Inability to control points of entry
Ø Open source’s ecosystem threats
Ø Financial crisis impacts on search marketing and online advertising trends
Ø Foreign exchange risk
Reflection: Google’s business strategy was “insane”
A strategy is a plan that integrates an organization’s major goals, policies, decisions and sequences of action into a cohesive whole. It can apply at all levels in an organization and pertain to any of the functional areas of management. For the marketing department, specifically, there may be pricing, product, promotion, distribution, marketing research, sales, advertising, merchandising, etc. strategies. Strategy is concerned with effectiveness rather than efficiency and is the process of analyzing the environment and designing the fit between the organization, its resources and objectives and the environment. Strategic market planning is motivated by the assumption that the planning cycle is inadequate to deal with the rapid rate of change that can occur in a firm’s external environment. To cope with strategic surprises and fast-developing threats and opportunities, strategic decisions need to be precipitated and made outside the planning cycle. It is useful to have a real time information system rather than periodic continuous monitoring of the environment. In addition, efforts to develop strategic flexibility are likely to be helpful. The latter involves strategic options that allow quick and appropriate responses to sudden changes in the environment (Proctor, 2000).
In order out get the best out of opportunities presented to the business, there should be a systematic approach to planning and implementing strategic marketing plans. The strategies that were made first-hand should be well-integrated into the strategic marketing plan and aligned with the overall organizational objectives for such strategies to become fully beneficial to the company. Plans and strategies do not implement themselves and there are often problems in implementing strategies. There is often resistance to change and new ideas. As such, there is a need to anticipate this resistance, which is one of the purposes of having a strategic plan. After the hurdle of resistance change and with excellent change management, the marketing department could then work towards the attainment of the goals and objectives which are specifically stated in the strategic plan. As stated, strategy should at least “systematic”, but in the case of Google, it was “insane” according to Microsoft chief executive Steve Ballmer.
Talking heads like to say that Google is like Microsoft 20 years ago—a fledgling company led by young, iconoclastic engineers who aim to change the world with omnipresent, innovative technologies. Critics of both companies think Google could in due course grow so large that, just like Microsoft, it will trudge on its competitors and strong-arm those that get in the way. As proof, they cite areas in which Mountain View has already managed to surpass Redmond. Google’s search engine leads both Microsoft’s and Yahoo’s in its number of users. Moreover, Microsoft has lost more than a dozen of its best and brightest employees (as well as the former head of its China operations) to Google, and set up its own outpost near Microsoft headquarters to attract defectors who don’t want to move from Seattle to Silicon Valley.
But those who fear that Google is aiming for world domination fail to remember one significant fact: Though Google must battle against Microsoft, Microsoft never had a Microsoft to compete against. Microsoft’s deep pockets—more than billion in cash—and its continued dominance of desktop computer operating systems have already forced Google to make a number of costly decisions that are hurting its bottom line. Google recently paid billion to Time Warner for a 5 percent ownership stake in AOL. That defensive maneuver was driven entirely by Time Warner’s simultaneous negotiations with Microsoft, which was willing to pay big bucks to knock Google from its perch as AOL’s search engine of choice.
In addition, Google fears that Bill Gates will leverage the ubiquity of his operating system by embedding MSN Search in the next version of Windows for new computers. To keep Microsoft at bay, Google is paying millions of dollars to Dell, one of the largest PC manufacturers in the world, to make Google the default search engine on its new machines. Google may be a giant, but Microsoft is still many orders of magnitude bigger.
But despite of this, and considering the business strategy of Google as seen in the evaluation of strengths, weakness, opportunities and threats of Google, it can be easily identifiable that the new online advertising companies have absolutely no chance than to follow Google. But their biggest threat was Yahoo and Microsoft. The two giants have the capacity to grow even bigger but none seem happy with the advertising and search industry and this is what Steve Ballmer are saying, the current growth strategy of Google was insane. Ballmer said that Google was growing too fast, but they had failed to make a success of efforts to diversify beyond search with ads. Ballmer believed that a random collection of people doing their own thing might not add value which is currently the practice of Google as they allow their engineers to spend 20 per cent of their working hours on personal schemes.
Amidst the successful reputation of Google in the Internet industry, there are few criticisms in the organisational culture of the Company which was raised by Ballmer. Ballmer are actually attacking the weakness of Google such as absence of clear management structure, poor employee relations and work ethics, and its informal work culture.
An organisation must have a core management structure. Although Google has Sergey and Larry plus Schmidt as key figures, the rest of the staff are not strictly structured. Organisational management structure is a basic element in planning and decision-making (Thompson & Strickland 2003; Kay 1996). On the case of project engineers and even the rest of the workforce, the unclear definition of management structure can lead to organisational conflict. Recognising the diversity of skills and Googlers, conflict is a risk because employees have differing values and experience differing situations (Darling & Walker 2001). The lack of hierarchy resulted to confusion about control and decision making power. To address such, management theories serve as established body of knowledge that will guide the manager in making excellent decisions for the benefit of the whole organisation. Similarly, the understanding of management structure is directly linked to enhanced organisational performance requiring Google’s management to review its organisational composition, job positions, and area of control.
Google is acknowledged with a unique recruitment process yet some aspects of the process are criticised. Some critics describes Google’s recruitment process is narrow. Companies worldwide undergo changes and utilize various job selection and recruitment methodologies (Butcher & Clarke 2003, pp. 477). For Google, there is a need to re-evaluate and study the HRM functions particularly its recruitment policy to meet the demands of the target market. A lot of organizations began to significantly switch their people-managing policies and systematise them in new directions (Budhwar & Debrah 2001, pp. 9). It is acknowledge that selection and recruitment of potential Googlers is directed to the attainment and accomplishment of companies’ goals in the global scene (Boxall & Purcell 2000 pp.183). Knowledge, skills, and abilities (KSAs) that include job-related information and the necessary human abilities to perform certain job activities (Nelson 1997, pp. 39) should be considered by Google HR team rather than academic proficiency. The importance of valid KSAs cannot be overstated, as the relationship between them and individual performance in the organization is well-established (Davis 1995, pp.132; Gatewood et al 1994, pp. 235). It is accepted that quality, competence and flexibility among the employees had efficiently replaced quantity of task accomplished and imperceptive obedience gained through extensive experience.
Further, they are also called upon its problematic employee relations and work ethics as seen on the unjust treatment of contractual employees and inefficient organisational behaviour. Around 30 percent of Google’s total employees are contractual, not given any employee benefits, and treated unfairly. To solve such problems, hiring, training, and providing pay and benefits to employees are essential tasks that must be accomplished by the organisation. For example, the 12-hour working day is arguably stressful especially when expectations are needed to be exceeded (i.e. the workloads and task requirements) among employers and employees. Stress lowers the efficiency of the employees to perform their tasks. According to Crampton and colleagues (1995), in order to help organisations alleviate stress within them, they must consider the forms of stress management. The major stressors in the workplace must be properly identified and assessed, and the concerned personnel must help their employees identify their major personal sources of stress. Furthermore, the employees must be assisted in identifying their own stressors and stress tolerance levels. Before learning how to deal with stress, employees first have to identify those stressors which they react to because not everyone responds the same way to the same stressors. To aid this process, organisations might provide health risk appraisals which test for their employees’ levels of stress. In general, the knowledge and management of an organisation’s human resources is pivotal to its responsiveness. In order to achieve this, the role of HRM needs to change from reactive to proactive. If HRM is to be used to an organisation’s competitive advantage it needs to go beyond merely attracting and retaining good people. As according to Ulrich and Yeung (1989), it should strive to gain a complete understanding of its workforce and develop organisational systems and processes that enable individuals to add value within a larger organisational unit.
On the issue of work ethics, Googlers are branded to be arrogant at times and never kept their appointments and always turned up late for clients’ presentation. According to Vickers (2005), ethics is a moving target. Social values change over time as influenced by a composite web of factors. To solve this, the HR leader/manager is the key person that upholds the welfare, matters of concerns, as well as conditions of the entire workforce. With this given intricate set of tasks, the need to identify its overall role is imperative as it determines the scope of its managerial functions and power. The presence of strategic planning in management minimizes the potential pitfalls of the said process such as uncertainty (Matthews & Scott 1995, pp. 34; Roney 2004, pp. 8). Managing workplace diversity is also a potent solution. Diversity is one of the most effective strategies that manage individuals with different characteristics who eventually create the team (Cross 2000, pp. 137). It seeks to address issues related to human resources, internal communications, interpersonal relationships, conflict resolution, quality, productivity, and efficiency (Aronson 2002, pp. 46; Cross 2000).
All in all, the negative issues of Google are not yet reflected to its current organisational performance. However, it is forecasted that such negative issues are threats to its success. Its organisational culture is claimed not to be set to manage its growth. With these given negative aspects of Google, they surely have their own organisational plans and initiatives of addressing such difficulties. But who knows? This strategy could be effective since Google already done their strategic planning.
Strategy and strategic planning are not the same things. One focuses on forward thinking, opportunity assessment, and the future. The other focuses on mapping a comprehensive plan to achieve the vision. Each requires separates attention. Unfortunately, many businesses today, particularly marketing people, do not understand this critical difference which is why they continue to do the same things year after year – or at best only make incremental progress toward noble goals. Often the difference between success and failure is not doing the right or wrong things. Rather, it is doing the right things in the right order.
With all the attention that strategic planning and implementation has received over the years, it is important to keep in mind that that strategy planning and implementation are dynamic and interactive parts of business involving a complex pattern of actions and reactions. The acceptance that both approaches are important and complement each other should be foremost in the mind of those who want to utilize the potential benefits of strategy and strategic planning. Although they are different in some aspects, what both ultimately aspire is the growth of the organization. Unity in the application of these two concepts, coupled with the support of people within the organization is the key to successful marketing operations.
Although it has been observed that strategy and strategic planning are not the same, it should also be noted that throughout the paper, the emphasis is that these two go hand-in-hand. Strategy and strategic planning in today’s highly competitive environment can no longer be relegated to the higher echelon of the company and then imposed on the rest of the organization. Survival demands that everyone in an organization contribute not just their labor, but their minds and spirit as well. Involving and empowering employees to react appropriately and quickly to solve problems on their own requires understanding and ownership of the why of the endeavour. Therefore strategic planning, after strategy was effectively incorporated, should involve all the members of the organization and not be restricted to the participation of the guiding members those at the top management.
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Appendix
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