Busn11082 Organisational Strategy: Google’S Corporate Assessment Answer

Introduction:

Google has become a revolution in the world of internet. It has become a milestone in the internet related products and services. in was founded by Larry Page and Sergey Brin in 1998, and since then, there has been no looking back for them. Google has many products and services, such as, search engine and browsers, cloud computing, online advertisements, hardware, software, smartphones, glasses etc. It is the most visited website of the world. The other Google websites, such as, YouTube, Google Photos, Google drive and Blogger are included in the top visited websites (Google.co.in 2017). The company is world’s most valuable brand. Initially, the founders incorporated Google as a privately held company, and in August 2015, the company announced to reorganize the company structure, as a conglomerate to bring all the different brands of products and services under a single umbrella, named Alphabet Inc. Google remains the leading subsidiary of internet related services for this umbrella. After the restructuring was complete, Sundar Pichai was appointed as the CEO of Google and Larry Page became the CEO of Alphabet Inc. (Grant 2015).

The following report focuses on the analysis of a case study on Google’s corporate strategy. It addresses various aspects of corporate strategy and example of Google’s strategy. It also addresses the topics like, if Google has clear vision of its goals, evaluation of its product and business diversification, if Google needs to refocus on it strategies, how the company can delineate corporate boundaries and if any product or service should be abandoned or sold more. Lastly, the influences on the decision making strategies of Google will be discussed in this report.

According to the Forbes List, Google ranks second in the world’s most valuable brands, following Apple and followed by Microsoft.

Table 1: Market Position of Google as per Brand Value

(Source: Forbes.com 2017)

As of May 2017, Google’s Brand value is $101.8 billion, with sales volume of $80.5 billion. Apart from this, Google also features in other lists by Forbes. For example, it ranks 2 in America’s Best Employers, 4 among Canada’s Best Employers, ranks 39 in the Global 2000 (2015) in which it is positioned at 121 in Sales, 25 in Profit, 200 in Assets and 2 in Market value, and it holds the 47^th position in the list of Innovative Companies (published in 2013) (Forbes.com 2017).

Figure 1: Market share of Google search engine in 2006

(Source: Smart Insights 2017)

Figure 2: Market share of Google search engine in 2017

(Source: Smart Insights 2017)

Figure 3: Market share of Google Android (2016)

(Source: scand.com 2017)

Google’s Corporate Strategy:

Corporate strategy refers to the direction of business operations that an organization follows to achieve the goals and objective of the business and accomplishing success in the long term. In other words, the corporate strategy of an organization encompasses the corporate actions of the organization that enables it to achieve organizational goals while achieving the competitive advantage. It is a continuous process of engaging the investors to trust the organization with their money and increasing the equity of the company (Johnson et al. 2013).

The corporate strategies pertain to different aspects of business operations of an organization. The most common type strategies used in the companies are the growth strategy, cost leadership, product differentiation strategy, price-skimming strategy and acquisition strategy. The growth strategy includes the introduction of new products or adding new features to the existing products. It is aimed at increasing the revenue growth. It is mainly long term strategic initiatives for higher level of revenue (Rugman and Verbeke 2017). New products, new distribution channels, diversification are part of growth strategy. Horizontal integration, vertical integration and diversification of business are part of growth strategy. Cost leadership strategy allows the organizations to sell their products or services at the lowest price possible to remain competitive in the market and earning massive revenue through huge volume of sales to remain market leader. Walmart is the biggest example for cost leadership strategy in retail. Product differentiation represents the production and supply of different products to gain competitive advantage and get higher revenues. Price skimming strategy refers to high pricing of a product during its introduction in the market to recover its production and marketing cost and acquisition strategy is the investment of capital to acquire another company (Schijven et al. 2013).

Among the other strategies, Google has used the growth strategy and product diversification strategy. Google is not only a search engine company, but it has launched numerous internet products based on the internet. Through the introduction of Alphabet Inc., Google has created an umbrella or a parent company to bring together all the companies under the same roof, but with different stream of operation management. By this, Google accepted to the investors’ demand for transparent business by separating the main source of profit, that is, search engine from the other businesses. However, some found that, this move is about prioritizing the technology based products diversification over the interests of the shareholders. It is a growth strategy based on product differentiation strategy (Glowik 2017). The strategic choice of the company is directly related with the business nature and characteristics of the internet industry. The intensive growth strategy helps the organization to maintain its position as the most valuable brand. The generic strategies helped Google to become a major player that influences the competitive landscape of the industries. According to Ledenyov and Ledenyov  (2016), under the intensive growth strategy, product development and differentiation are the key strategies for creation of Alphabet Inc. Since, Google has been involved in numerous other products and services, apart from the search engine business, it was important to create a new parent company to bring together all the other businesses under same roof, while the search engine remains primary business.

If Google has clear vision about its goals:

Vision is how a company visualizes its future. It is known as the short statement about the company, which guides the business operations of the company. It is a specific statement that says what the company is going to do over the years to run the business successfully and what it is planning to achieve through its business. It represents the guiding force of an organization. Google is no exception. The major motto of Google was to organize the information of the world on all types of things and make it universally accessible and useful (Google.co.in 2017). Hence, the search engine was its main product and then it launched browser Google Chrome. When Google started to diversify its business in the latter half of the last decade, people were skeptical about it. The company was going in thousands of different directions with thousands new products at the same time. The business world asked if the company had any idea about their business direction. The company soared high with specific target of becoming the best in the business of all products and it became the most valuable brand in the world (Grant 2016).

When the company created Alphabet Inc., it established the structure for offering greater independence to different businesses of Google and also established that greater integration of all the brands is not their intention or direction of business. The founders wrote that creation of Alphabet would make the businesses more clear and accountable. Once more, Google established itself as a highly diversified technology firm with aligned structure for business under a single parent company (Glowik 2017).

Evaluation of business and product diversification of Google:

Google was started in 1998 as a search engine. With their vast information, speed and user friendly interface, the search engine business became a sensation. With increasing popularity of the search engine, the company grew and eventually started to diversify its business into multiple products and businesses. Firstly, it expanded its horizon in the search engine based on the data of people’s searches. Google introduced image search, maps, academic article search, books, satellite image, news, patents, video, finance, web blogs, and panoramic street photographs of majority of the cities of the world (Haucap and Heimeshoff 2014). It launched Gmail in 2004 and various software and services to communicate, create and manipulate 2D and 3D images, create webpages, create documents, time management, and for social networking. However, these new products and services did not bring much revenue, hence, the company expanded its advertisement based revenue model. In 2000, it launched AdWords, the primary source for advertisement revenue. Google acquired AdSense in 2003 and expanded its advertisement based revenue sources (Grant 2015).

Google made a revolutionary move by entering into the web browsers and telephones in 2007 and 2008. It launched the Android mobile development platform, which was a milestone in Google’s business and became a competitor to Apple’s smartphones and tablets. A large number of smartphone manufacturers, like, Samsung, Motorola, adopted the Android technology and currently there are 1.5 million Android apps available in the market. With time, Google even improved the Android platforms and launched those with catchy names (Bassett 2017). Google Chrome was launched in 2008, and was a better competitor to Microsoft’s IE with an incognito browsing option. It brought about improved speed in browsing. Chrome is the most popular web browser till date. It also launched Google Playstore for mobile apps, web store for Chrome apps, and Chromecast to connect the television with mobile or tablets. All these have become extremely popular in the past few years (Bharadwaj et al. 2013).

The company moved into the hardware business when it bought 6000 mobile device related patents in July 2011 from Nortel Networks. It bought the struggling Motorola and started to make handsets with Android technology in partnership with Motorola. However, when Samsung tried to replace Android with their own OS, Google sold Motorola to Lenovo in 2012 but continued making specialized handsets such as Nexus brand with HTC, LG and Huwaei. The expansion in hardware was also reflected in making Google Glass and home security and control devices (Goldbach 2016).

Apart from the major diversifications in web browsers, android technology and mobile devices, Google has diversified its business in other arenas also. In the field of social networking, Google was pioneer by introducing Orkut to the world. It also launched Google Buzz and Google Friend Connect. However, after Facebook took over the virtual world, all of these sites by Google lost their popularity and Google became aware of the threats. It made a last attempt by launching Google Plus in 2011, but that failed too.

Google forayed into the world of self-driven cars, Project Loon, in the Google X labs, where they encourage to innovate and invent new ideas for the world. It is working on Project wing, which is airborne drone, Makani Power, which generates power from the turbines mounted on the tethered kites, development of power battery for mobiles and many life science projects. Thus, it can be said that, apart from the social networking ventures, Google has been extremely successful in product and business diversification (Blackburn, Hart and Wainwright 2013).

Google needs to refocus:

From the recent business activities of Google, it can be said that, from 2004 to 2014, the company grew massively. The number of employees increased from 2840 to 53,600 and this had put immense pressure on the informal management process. The company focused to create an umbrella to bring all the brands together, to provide them greater scope to grow more independently. However, the company acknowledged in 2012 annual report that, unless it could manage its growth effectively and efficiently, its products and services would suffer. The increased number of acquisition, such as, AdSense, Motorola etc. had also contributed in shifting the focus from efficient business operations to challenges from the acquisitions. The diversification of business into numerous directions has led to some failures of the company. For example, the fourth time venture of Google in the social networking through Google Plus failed as it could not compete with the market leader Facebook. Similarly, Google acquired the struggling mobile manufacturer Motorola to make own branded smartphones by using Android. This venture has failed too due to poor quality of handsets by Motorola. It had to sell Motorola to Lenovo at a minimal cost. Too many products possess the risk of mismanagement of resources and lack of efficiency in the business operations. The company also faces regulatory challenge of antitrust. Although Google had managed to capture the market for internet search and Android as a monopoly, it faces challenges of privacy concerns and antitrust. Hence, the company should refocus on its mission of organizing the world’s information and make it universally accessible, as acquisitions are putting more cost burden on the company than the revenue. The creation of latest technology based conglomerate does not guarantee the boundaries that could be set around Alphabet’s ambitions or activities. Thus, it can be said that Google should refocus on improving its existing products and service, than going for increasing the number of acquisitions.

Table 2: Most successful and unsuccessful products of Google

Delineation of Google’s corporate boundaries and businesses or products to be abandoned or sold:

After the launch of the parent company Alphabet Inc., Google should go back to its basics. It should delineate the corporate boundaries to its base business, that is, search engine, advertisement based revenue and web browsers. It should expand its operations and must define the new boundaries for the new company Alphabet in the similar manner as it did for Google (Grant 2015). The company established its business on the mission of organizing the information of the world and making it universally acceptable and useful. The simplicity of this idea attracted people to their search engine. It should remain true to its values and mission even for the new company. According to Larry Page, the company must improve in its products and services for providing the users more suitable and appropriate search results at an increased speed to increase customer satisfaction. This policy should be followed for Alphabet also.

The advertisement based revenue sources should be increased, since it is the primary source of revenue for the company. The delineation about the corporate boundaries for Alphabet frames the motives and objectives for the company. While introducing Alphabet to the world, Larry Page wrote that, the new company is excited about getting to do more ambitious things, with a long term view in mind. It would empower new as well as great entrepreneurs and the organizations to flourish. The company would invest for efficient utilization of the scale of resources and opportunities lying ahead. Improvement in the transparency and in the oversight of the actions would be in the agenda of Alphabet. Greater focus should be put in making Google even better and this way, improving the lives of more and more people in the coming years. Alphabet is created to give more independence to the businesses under the brand name of Google and give them the opportunities to flourish. All these businesses would have a strong CEO, who would be working together with Larry and Sergey to achieve their individual business goals (Grant 2016).

It can be recommended that Google should abandon selling the social networking site, that is, Google Plus. Since, Facebook has become the market leader in the social networking, there is no point for Google or any other company to try their luck in this field. Facebook is continuously improving its features and services, which makes it a monopoly in social networking and creates barriers for other companies. Hence, Google’s venture in social networking is an unsuccessful one. It is profitable for the company to abandon Google Plus and redirect the resources in the profitable businesses (Clark, Wakabayashi and Barr 2016).

On the other hand, the company should increase their sales of advertisement generating products and services. Since, this was the basic source of revenue of the company and the popularity of Android and Chrome web browser are increasing with time, Google should focus on selling more advertisements through these channels. It should also expand the App store to allow more app makers to sell their apps and should put more advertisements on those apps (Hoejmose, Brammer and Millington 2013).

Influences on the strategies followed by Google and the complexity and ambiguity of strategy decision making:

Google was established on the basis of the idea of doing something different and doing it best. It was not formed as a conventional company. The founders wanted to do more important and meaningful things for the mankind by utilizing the resources efficiently. Many crazy things done by the founders have become extremely popular later on. Hence, it can be found that, Google did not sit idle when it comes to technological revolution. They did not get comfortable with their existing products and services, rather they kept on innovating and inventing new technologies to capture the big growth areas. To stay relevant in the industry, the company focused on product and business diversification with improved and new technology and introduced many new products and services. Thus, it can be said that, the drive to capture the market and become a market leader in everything they do has been a major influence on the corporate strategies of Google (Cusumano 2016).  From the case study, it can be understood that trends, technology, competitors and culture influence the development of corporate strategy of Google.

The complexity of strategy decision making refers to the challenges faced by the company during decision making. Too much diversification of business leads to mismanagement of operations and inefficient allocation of resources. It becomes hard to control too many separate businesses (Pisano 2015). This has been one of the major factors behind the formation of Alphabet Inc. The hard competition with Apple, Microsoft and Facebook in various fields of technology has led to improvement of the technology and services by Google. Through thousands of products and services, the company captured the larger market share. On the other hand, the ambiguity also resulted from the competition in the market (Teece 2017). Whether to form a parent company and if it is formed, then how the operations could be framed was the biggest ambiguity for Google during strategy decision making.

Conclusion

It can be said from the case study, that, being the most valuable brand of the world, Google has established its position in the market of technology. Starting with the simple search engine, the company captured the technology world in a massive way within just a decade. It diversified its business into numerous products and services and by creating Alphabet Inc., it brought all the brands under a single roof. Google has promised to provide larger independence to these separate companies and make the transactions more transparent. Through product diversification, Google adopted the growth strategy and also adopted vertical integration by implementing interdependence among the various industries. It is also found that, just like the search engine business, it should focus on the basic mission of the business for Alphabet also, so that the brand image does not get hampered. It faced challenges as well as dilemmas while strategic decision making, as the company reputation is heavily dependent on the new company Alphabet Inc. However, the founders are hopeful about the success of Alphabet just like the way Google succeeded.

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