Strategic Audit: Google Case

Strategic Audit: Google Case

1. Current Situation

Current Performance

Google projects an Excellent financial performance, high returns of revenue. Revenues returns in 2014 equal US$66.001 billion an increase of 18.8% and Profit of US$14.444 billion in 2014 an 11.8% increase from the year 2013 (“Company – Google”, 2016).

Strategic Posture

Mission

Google Inc. mission statement reflects the dominant position of the company in terms of it wants to achieve and what it has achieved. The mission statement: to organize the world’s information and make it universally accessible and useful (“Company – Google”, 2016).

2. Objectives

To sustain the lead as the best company maintaining website indexes databases.

To ensure effortless to information

To ensure easy accessibility of world information by offering a search engine service to everyone around the globe.

To fulfil the market demands by offering innovative products developed through immense research.

3. Strategies

Start-ups: Google employees spend 20% of the time occupied on pet projects (projects not part of their job description). Such a practice helps Google innovate and expand into previously untapped businesses. Both Google News and Gmail started off as 20% projects.

Acquisitions: Several Google’s products result from acquisitions including Google Earth, Docs, and YouTube.

Alliances: Google and Yahoo recently explored the possibility of an alliance for advertising, but the move was blocked by the federal courts.

4. Policies

Innovation is critical to product development.

Promotion of employee creativity.

Massive investment on Research and Development.

1. Strategic Managers
2. Board of Directors

The company is managed by a 10-member board of directors, there are three internal directors and seven external directors.

The board of directors passes instructions down using an executive management group.

1. Top Management

The management group oversees several subdivisions in the company such as Engineering, Products, Sales, Finance and Legal.

Each of the departments is divided into subunits. For example, the department of Sales has branches dedicated to the Asia, Americas, Europe, Pacific, the Middle East and Africa.

III. External Environment

1. Societal Environment
2. Economic

Google has accumulated a massive amount of cash, making it very vulnerable to inflation. A drop in the currency value could reduce the company’s value.

The large amount of money makes the company vulnerable to the currency market (fluctuations in exchange rates).

2. Technological

Rising use of mobile phones to access the Internet.

Increasing sophistication of social media platforms and instant messaging.

Many Tech companies are focusing designing proprietary applications to allow consumers to bypass search engines.

3. Political-Legal

Google is gradually entering highly regulated fields such as insurance, Finance, automobiles and telecommunications.

Successful antitrust trends in Europe could influence similar efforts elsewhere, especially in the United States.

Google owns high numbers of patents. This could invite litigations because of ownership disputes.

4.Sociocultural

A drop in the use of traditional desktop computers and laptops.

Increasing use of social media communication such as Facebook for activities traditionally done on using computers.

A decline in the use of traditional media like television is forcing the industry players to develop their content delivery platforms e.g. YouTube.

Popular distrust and suspicion of Google. Some people view Google as too powerful.

1. Task Environment

1. Strong competitive rivalry because of: Large number of firms, Low switching costs and High diversity of firms
2. Weak buyer bargaining power because of: Moderate quality of information, increasing demand from buyers and Small size of individual buyers.
3. Weak bargaining power of suppliers because of: A large population of suppliers and High availability of supply.
4. The threat of substitutes is moderate because of: Moderate to high accessibility to substitutes and Low switching costs.
5. The threat of new entry is moderate because of: Moderate cost of doing business, easily fulfilled regulatory requirements and High cost of brand development.

 

1. Internal Environment
2. Corporate Structure

Google has two, forming the corporate governance and nominating committee. The committee is charged with sourcing for prospective executive officers and qualified directorial candidates so that stockholders can vote on the board nominations.

The board members set the executive roster. The company management structure is divided into units such as Engineering, Products, Sales, Finance and Legal. Each of the departments is divided into subunits. For instance, the department of Sales has branches dedicated to the Asia, Americas, Europe, Pacific, the Middle East and Africa.

 

1. Corporate Culture

Google employs a standard corporate organizational structure.

The organization’s corporate culture bases its strategy on giving employees substantial flexibility to creatively innovate and develop new business concepts without excessive oversight.

1. Corporate Resources

1.Marketing

The company’s marketing strategy is based on a Viral Marketing scheme. The company has never formally involved any advertisement platform for success, it exploits the social media networks as a way of reaching a large number of customers, e-mails forwarding technique & blogpost comments.

2. Finance

Google reported revenues of US$66.001 billion in 2014, representing an 18.8% increase from the 2013 US$55.519 billion. The company’s net profit was US$14.444 billion in 2014 representing an 11.8% increase compared to the US$12.920 billion of 2013.

3. R&D

Google is testing new advertising programs that will pay site holders based on a Cost-Per-Click system. The platform, known as Cost-Per-Action, was communicated through invitation e-mail from the company’s AdSense team to Web site holders. Google is spending in the research technologies to adapt to the changing expectations and needs of the users.

4. Operations

Google emphasizes its product in the ability to offer high-performance systems that can be implemented cost efficiently and can handle massive workloads.

5. Human Resources

Google is ranked amongst the best organizations in terms of how employees are treated. Fortune magazine ranked Google top in the list of the best organizations to work for in 2008 (Fortune, 2008)

Google permits employees to allocate 70 percent of the time on the key organizations business, 20 percent of the time on related developments, and 10 percent on new project development. The 70/20/10 rule is so significant in allowing time for creative innovation. The Research and development utilize the ‘10 time’ to pursue new products or technologies.

6. Information Systems

Google promotes innovation and creativity in its workforce. It encourages employees to pursue new ideas and to consecrate 20% of the work time on their own projects. This proves beneficial as most of the new product launches came from the 20%-time allocation.

1. Analysis of Strategic Factors
2. Situational Analysis (SWOT)
3. Strengths
4. Brand equity.
5. Innovative initiatives
6. A comprehensive product mix.
7. Boasts a competent process in Research & Development.
8. Diversified business
9. Weaknesses
10. Minimal physical presence
11. Dependence on the Internet
12. Opportunities

 

1. Expand Google Fiber
2. Tap more mobile users
3. Penetrate markets with consumer electronics
4. Threats
5. Imitation of some products
6. Tough competition
7. Strategic Alternatives and Recommended Strategy
8. Strategic Alternatives

The Strategic alternatives available to google are Protection of the current market share, modification of the current market and product modification.

Protection of Market Share: Google could focus on satisfying the current market share that it holds and shield it from competition by ensuring a monopolistic situation.

Pros: High sales returns and the ability to dictate the market.

Cons: increased level of competition from mergers that may occur to counter the company’s monopoly power.

Market Modification: Google could focus on extending the length of its Product’s Life Cycle by big changes in labelling how the company’s products can be used.

Pro: ability to sell more of the product package to the same segment because of many uses.

Cons: Unforeseeable reception of the new product labelling could undermine the product’s brand.

Product modification: Google could focus on extending the Product Life Cycle by changes to the product line to keep customers more interested.

Pro: The product brand remains popular and high sales returns.

Cons: High cost associated with developing new products in terms research and development costs.

1. Recommended Strategy

Product modification should be adopted by Google.

Product modification will result in multiple product lines, allowing the company to diversify risk and exploit the already established Google reputation. Many product items in the company’s line will attract new buyers with varied preferences, thus, increasing profitability. Additional new products to the existing product line will also help in competing more broadly in the industry

VII. Implementation

Increased financing of the Research and development.

Innovative research should focus on evaluation of consumer needs and monitoring how the needs change overtime to optimally satisfy them.

Product development should focus on technological advancements and changes, since changes in technology form the key factor that dictates trends in the industry.

 

VIII. Evaluation and Control

The product development team in coordination with the Market research team should be responsible for consumer needs evaluation and crafting solutions to meet the emerging needs.

Google should be able to add a new product to its existing lines every 6 months. Product performance can be evaluated using the returns on investment. A high ROI ratio will imply that investment returns compare favorably to cost of introducing the product package.

Reference

${Instrument_CompanyName} ${Instrument_Ric} Financial Statement | Reuters.com. (2016). Reuters. Retrieved 30 April 2016, from http://www.reuters.com/finance/stocks/incomeStatement?stmtType=INC&perType=ANN&s ymbo l=GOOG.O

Chen, Y. Google Inc.: A Case Study. SSRN Electronic Journal. http://dx.doi.org/10.2139/ssrn.1976444

Company – Google. (2016). Google.com. Retrieved 30 April 2016, from https://www.google.com/about/company/

Iyer, G. & Soberman, D. (2000). Markets for Product Modification Information. Marketing Science, 19(3), 203-225. http://dx.doi.org/10.1287/mksc.19.3.203.11801

Thompson, A. (2015). Google’s SWOT Analysis & Recommendations – Panmore Institute. Panmore Institute. Retrieved 30 April 2016, from http://panmore.com/google-swot-analysis-recommendations