Introduction
Google was born out of pure interest in the linkage structures of the World Wide Web that Larry Page and Sergey Brin shared. They managed to develop an algorithm that did page ranking and used backlink data so that it could be possible to regulate the importance of any web page out there. In 2001, “Google” got its patent; This giant search engine started getting attention as people used the WWW more often to search for the information needed. As more and more people got on the WWW the usage and making of the websites grew which meant that there was much information available, but they were hard to locate. At first, there were several search engines since everyone realized that society was getting “on” the WWW more each day. Google managed to grow with a rapid response due to a simple and user-friendly service as well as a clean and smooth design, but most importantly it had a superior page ranking ability. As Google had springboarded at the beginning, they managed to “fly” high. Google started selling advertising ads that appeared on third-party websites. Since it functioned on a “cost-per-click” model Google managed to rise above others and become a leader in the web search market in the US. Google stayed synced with the technological advances and rapid changes that started happening over the years. Its main source of revenue inflows was and still is the advertisements. The Internet became something that wasn’t frameable; it belonged to the world and it was pretty obvious that Google was going to become a conglomerate with firm pillars.
The spread and the popularity of Google were rising and the ability to have better opportunities as well as resources and capabilities led to Google’s expansion. Google was able to foresight that the information was going to have to be more useful and highly needed, which is why they turned to the development of new strategies, products, and services. The goal of this analysis is to see which corporate strategy is Google using to best appropriate its value back and how this giant can stay competitive in the red ocean of tech monsters.
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Industry summary
Today the most competitive and rapidly changing industry is a technology-based industry where Google still prevails. The industry attractiveness impacts the corporate strategy of the firm in the sense that Google decides where to hit next. I will try to conclude based on Porter’s five forces framework how Google fits the industry.
- Industry rivalry - Diffused market - not a lot of Search Engines on the market; Aggressive market; Small no. of companies
- Bargaining power of buyers - large no of users; consumers are highly diverse
- Bargaining power of suppliers - large no. of suppliers
- The threat of substitutes - a fair number of substitute options for the technological market/industry
- The threat of new entrants - a large number of globally present firms; high costs of entry
Google is a type of firm that operates in the Internet/Software/Computer/Hardware industry. Since everyone can state the obvious, that Google is a giant whose power on the “market” is unquestionable, we can say that Google holds a strong position in all of the mentioned forces. The industry rivalry is not high since there are not a lot of SE operators and Google is the most popular by far. The bargaining power of buyers and suppliers is low because the market is conducted from only a few companies and businesses could turn to each of them for the sake of a better price. The threat of substitutes is low because current companies have a strong presence and value created in users. The threat of new entrants is low due to the same reasons mentioned above and the cost of development of the technologies resources and capabilities is too high to take the risk. In conclusion, the industry isn’t as attractive especially today when there are already well and firmly-established companies who “rule the market”, the industry’s profitability is rising as the world enters the digital age but the new entrants are going to have to face the giants whose presence has been there since the beginning.
Company Performance
Google’s performance is outstanding; one of the causes of its success is the fact that they were among the first ones to enter such an industry and also the one who managed to keep up with rapid changes that were happening inside it. Google had the highest revenue source in advertising, which meant that Google benefited mostly from the advertisements that showed up on their websites. But Google didn’t stay in one place for too long. As Google grew, it knew that the market was going to change, and as the change started to happen Google decided to diversify. What brought revenues were other technologies that Google made/acquired; such as mobile apps, software, videos, etc. The table below shows their revenue sources.
What also gave them better opportunities for growth and development, besides the rapid adaptation to the market’s newest changes, was the holding company structure.
1. Google’s corporate strategy
This conglomerate is using a diversification strategy since they realized that web search is not enough to stay competitive and won’t fulfill the needs of the users. As the industry was inclined to be stuck in a mature faze, Google realized that they wanted to grow so they started to diversify. They started by launching new products that allowed the world to have different and new sources of information available anywhere and at any point in time. Google realized that if they stayed in the web search engine framework, they might get a new competitor or even a boost of competition, so, to reduce the risk they turned to going beyond their plans and they’ve created Gmail - a huge successful service platform that’s one of the most popular today. Little by little Google started creating value for its consumers and as they grew bigger, they’ve managed to create such strong brand awareness that the companies or other brands that had operated under different names or in different markets were known as Google’s property. Such a big presence allowed Google to get higher market power and use it for its biggest revenue source - ads. Google-powered a platform that filtrated ads by words and was billing it per click. Google acquired an advertisement placement platform that enabled Google to place these ads on other (third-party) websites. By developing its technology and acquiring similar helpful tools/technologies Google managed to hold its position in ad placement and ensure its revenue source.
Google started entering more and more markets which meant spreading their resources and capabilities, R&D, and structure across different “fields”. What gave them a possibility of a highly competitive advantage was the fact that they were able to use their tangible resources in every aspect of their business - acquisitions and multiple development. Since they had strongly developed technological labs, highly bright people, and well-established structures Google knew how to use these for other businesses or fantastic ideas they might have generated. It’s not only that, they’ve managed to apply and implement their technologies to other products and services which were expected to rise and conquer. As Google grew in size, whether in an awareness sense or physically, it started applying its management capabilities to other companies and strategies. They realized that they were doing well with managing Google and why wouldn’t they use the same body for a different “head”?
Google turned to related diversification - everything that Google acquired, anyone with whom it merged, or everything it created was and is related to technology in some way. As related diversification offers more chances to get better performance Google decided to fully dive into the pool of undiscovered possibilities. Google managed to achieve both operational and strategic relatedness; Their R&D labs and research centers are joined together (some physically, some via technology and collaboration) so that they can be synchronized and that their new research or innovations could be applied to other firms or “products” in their portfolio. The brands that they launch need to have some kind of a trademark. Usually, it contains Google’s name (Google+, Google Maps, Google Finance, etc.) or something similar but recognizable (Gmail).
The world is fascinated by the fact that Google grew rapidly and how well it stayed just behind the technology’s tail. Their innovation was based on well well-prepared, led, and managed system which had a different spark than the rest of the companies in the world. Google dared to categorize and ask for the people who were “above the limits!” in a way that they were ready to fully succumb to Google’s conditions. They’ve learned along the way that the best option for leading these people is not to lead them at all. Management decided to leave rules, formal elements, and hierarchy out front and just let their “smart creatives” lead themselves along the way. As they had the freedom of self-governance, they managed to make the form fit the best they stayed ahead of their competitors and they’ve translated this to other companies under Google.
Google’s vision focuses on technology development and they have a path by which they drive but in reality, they’re driving with their eyes closed. Google knows in which direction it’s heading and where it’s refocusing its companies but they don’t have a clear picture of the future and what’s their spotlight.
2. Google’s diversification: products and businesses
Chrome - Google decided to launch its web browser that would match the famous search engine itself. What’s the best way of making your product better than combining it with a compatible service? That’s exactly what Google did with Chrome. They’ve made it match the engine’s features and technology. Chrome was a delight for the user because it was simpler to use, they claimed it was safer, but most importantly it was much faster. This way Google stepped at its rival’s neck - Microsoft. As Google started its diversification, they’ve acquainted many competitors since they spread to more areas in the technology industry - Microsoft being one of them. Google had battled with “InPrivate” mode where cookies would be deleted and the tracking of the users would be much more difficult. Nevertheless, Chrome interfered with Chrome OS and became the default browser, most used today.
Mobile phone operating systems - Google “took” Android and started developing a software platform for mobile devices. It was one of Google’s most successful moves. Only one rival was highly present at that time - Apple. Why was it such a success? Because Apple had only iPhone and no other operators and manufacturers were able to produce for them. The companies were fed up with Apple’s reign and they’ve been waiting for something like Android for quite some time - enter Google. Not only did it attract Samsung, but other mobile producers as well, as technology got more developed these mobile producers grew, as well as the software itself. Developers also got into the process of “calling up” Google and offering more opportunities such as apps, software, etc. for Android.
Mobile devices - Due to the rivalry (Apple & Microsoft) Google acquired Motorola where they got an opportunity to have a variety of patents and stay competitive with the other two giants. When Google acquired Motorola an opportunity for hardware and software integration was opened. As they worked with Motorola Google probably started its Google Pixel mobile idea development back then. This acquisition just got them integrated into the network of mobile device hardware and software operators and businesses. Google just continued going down that road by developing mobile phones and tablets. As it got stronger and had a strong network it managed to stay at the top of the class - as it’s known for its tech innovation Google did not disappoint. They made Google Glass and became a supplier for home security and their control devices, where Google Assistant got integrated later on.
Driverless cars - Google’s keeping up with technology by preparing for the possible alternatives of the future. They are continuing with innovation and keeping up the speed even if it’s currently not working perfectly. This way Google is trying to keep track of how innovation is developing, which technologies can apply to other products/services, and what the people require in them and vice versa. Google X is just showing us that Google is not going to stand still. In reality, Google has acquired more than 100 companies and deals with the best technology in the world, this is just a showcase that shows us that Google’s not ready for a mature faze but it’s still rising.
Facing threats
In reality, everything that every other company faces Google does too. It’s a conglomerate that basically “owns” the internet. Its threats are everyone else's threats. Privacy and information keeping are some of the biggest threats for every operating system, software, browser, etc. but Google’s performance and presence are just too huge to take it too seriously. It might sound bad, but that’s the reality. When you think about it more, there are only a few big players that own everything online or in software and every threat is in some way neglectable. The biggest fear is the technology itself because it’s unpredictable and no giant can know what’s waiting around the corner and who’s going to grab it first. If Google disappoints its users in terms of privacy exposures then a better player could come along, but they would still have a long way to go to reach the top of the mountain on which Google is holding its place as no. 1.
Conclusion
To conclude, Google’s size can’t be measured and for some factors (Gmail, Google Search, Google Maps, YouTube) Google can’t be taken down. They are swimming with some big fish, and the technology is only developing even more so Google will have to continue adapting and think of new ways to conquer. Since its structure and strategy support diversification Google will continue to acquire, merge, and innovate to grasp more market share and to be present in all the technology-wise aspects.
Sources
- Grant, Robert M., Contemporary Strategy Analysis – Text and Cases, 9th Edition, John Wiley & Sons Ltd, 2016.
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