International Strategic Management and Innovation
Executive Summary
The case study “The importance of being Googley” talks about the strategic development of Google and new innovations of Google that contributes to the market of technology and software. This report is focused on analyzing the macro environment of Google and discussing the competitive advantages this company have. In order to do these tasks, PESTLE analysis of the USA, and Porter’s five forces of Google has been conducted in this study. Finally in the conclusion it has been said that Google focuses on the customer centric business instead of competitive marketing strategies.
1. Introduction
Strategic management is a process of management that includes planning, controlling, analyzing, implementing strategy of organization. This assists organizations to set the necessary goals and objectives as well as helps organizations to make decisions. In addition, innovation is a process by which all organizations can introduce new technologies and new processes to update the market as well as to increase popularity. Google is a technological company situated in the US that includes search engines, online advertising technologies, software, hardware and cloud computing. The aim of the study is to analyze macro and micro-environment strategy, success factor, business model & business strategy and innovation strategy of Google.
2. Analysis of Macro-environment
The PESTEL analysis of Google helps to access the company’s external factor as well as macro-environment. This includes the analysis of many external factors such as company’s political factors that affect the company’s information technology, search engine, advertising as well as business strategy, etc. Moreover, it is known that the technical factors such as technology related external factors, online advertising and other factor related technology is recognized by PESTEL analysis.
Political Factors
Google’s business strategy, position as well as business profits and revenues are influenced by political factors such as many policies and government factors information. It is noted that through the PESTEL analysis, the factors that can affect the Google business strategy and information technology are identified. Some political factors are as follows.
- It is known from PESTEL analysis that wider free business unity, a common political factor, is a key point that gives advantage to the Google. It gives a positive impact in exportation of company’s products such as pixel and Smartphone.
- It is realized from PESTEL analysis that a stable external as well as macro-environment helps in growth and development of Google. Moreover, it is seen that a stable political market is a major feature that helps to additional development of technology in future.
- It is noted after doing PESTEL analysis that now there are many state-sponsored online platforms in the US market. Therefore, competition is increased and it is challenging for Google to compete with them (Veselovsky et al. 2019).
Economic Factors
It is realized that economic factors of Google such as company’s growth, profits, and revenues are a key point that is affected by the external environment as well as by the macro-environment. Some external factors include competition of market, growth of the market, market stability that affects Google’s economical factors (Varsani, 2018).
- It is noted from PESTEL analysis that economic stability in the market is an opportunity for Google that increases the profit and revenues of the company as well as helps in growth and development. Moreover, in the US that is a key factor for improving the growth as well as technology of Google. Apart from that, the company enlarged their business strategy for this (Nechaev et al. 2017).
- It is realized from PESTEL analysis that the cost of renewable energy is decreased that provides a positive impact to Google as well as that also helps in further development of programs regarding renewable energy. Furthermore, as per view of Kohl et al. (2016), functional stability is increased for that.
Social Factors
It is noted from PESTEL analysis some social factors such as customer’s perception affects the growth and development of Google. Some social external factors include use of social media, increased conflict and competition against online companies affected adversely to the market of Google. Apart from that, it is known from Al-Hawary et al. (2016), multiplicity of online users in increased that is a great opportunity for Google and it helps in business growth and new innovation.
Technological Factor
Technological factors of Google such as technology development, technology innovation are affected greatly by technology related external factors and macro-environments. All peoples in developing countries use the internet; therefore, the access to the internet is rising rapidly. This escalates the technology market of Google as well as it motivates Google Company to innovate new technologies. Apart from that, it is noted from Ozkan-Canbolat et al. (2016) transformation of people to digital platforms such as uses of Smartphone, android system, Google pay is a major factor that helps Google company to develop business strategy as well as to increase innovation of new technologies.
Ecological Factors
It is noted from PESTEL analysis that some external ecological factors are affecting the market and technology of Google. Google innovates new green technology that attracts all people and it increases the business strategy of Google (da Silva Etges et al. 2017).
Legal Factors
It is noted from PESTEL analysis some external legal factors such as strong rulers and regulation as well as strong restriction affects the business strategy and technology of Google. It increases the dependency of the company as well as it helps to innovate new services such as digital advertising (Rahimi et al. 2017).
3. Analysis of Micro-environment and Competitive Success Factor
Google is a most well known successful technological company and the porter’s five forces helps in analysis of micro-environment. In addition, it also helps to understand business strategy and capability of management systems. The macro-environment of Google such as the company’s target market, competitors, new innovation, and threats are analyzed by Porter’s five forces. Moreover, the external search market, cloud services, and digital advertising industry are analyzed by Porter’s five forces. The Porter’s five forces are as follows.
Strong Rivalry or Competition
It is noted according to Porter’s five forces that the competition is very strong for Google and this competition keeps a restriction in the company’s growth and technology innovation. The strong rivalry of Google includes the other online services industry such as apple, Microsoft, IBM, yahoo, etc. Therefore, it affects the business market and internet services of Google. Google innovate new technology such as chrome casts, pixel devices, and other advertising services to compete with this industry (Kim, 2020).
In the market, various types of products are introduced; therefore, it is a major force for Google. In addition, many other companies provide the same product at an affordable price; therefore, customers switch to low cost products. It increases competition with the technology market, also a key factor of Google (Foerderer, 2018).
Dealing power of Google Buyers
It is known from analyzing the porter’s five forces that bargaining and dealing power is weak forces that affect business strategy of Google. Furthermore, it also affects the making decisions for higher authorities in the company. In spite of the high demand of this product in technology in customers, bargaining power does not affect more. Moderate knowledge of customers is also a focus that affects the business strategy and market of Google. It is known from Porter’s five forces that bargaining or dealing power is managed by Google’s marketing mix (Harracá et al. 2017).
Dealing Power of Suppliers
Google has a huge amount of suppliers and there is no problem to deal with the suppliers because of sufficient amounts. Moreover, it is realized from Porter’s five forces, this is very easy for Google to shift from one supplier to another. Mainly the Google Company wants to deal with online suppliers because there is diversity in product development. Therefore, bargaining power with the suppliers is very weak according to Porter’s five forces (Fukugauti, 2019).
Threat of Substitutes
There are many substitutes in the market such as radio, televisions, print media, advertising channel etc. therefore, according to Porter’s five forces analysis, it is noted that it is a great challenge for Google. It is recognized that it is very easy for customers to shift from Google product to another product because of the variety of substitutes in the market. Therefore, it is a strong force for Google as well as it also affects the business and market of Google. Apart from that, the other substitutes with the same feature as Google technology are obtained by the customer at affordable price; therefore is a moderate force for the company according to analysis of Porter’s five forces (Foerderer, 2018).
In addition, many customers are attracted by low feature to low price ratio substitutes, therefore, it is noted by analyzing Porter’s five forces that is a weak force of Google. It affects the company’s growth and business many times.
Challenges of New Entrants
Competition in the technology market is increased and some new entrants include new start-up company products with the same features as Google technology, others technology company affects the market growth and technology of Google. It is noted from analysis of Porter’s five forces that when a new start-up company provides the same product at low prices that affects the growth and revenues of the company. It is a moderate force for Google. Apart from that, in spite of being the Google is very popular brand, it is challenging for newcomers to sustain their business as well as to increase their business growth in the technology market. Therefore, it is noted by analyzing Porter’s five forces, a newcomer’s entry is a moderate threat for Google (Schmitt et al. 2019).
Value chain analysis of Google is an analysis that helps companies to scrutinize the business strategy as well as it helps to identify business activities and competitors of Google. It is noted the success factor of Google from value chain analysis. The successful factors of Google are as follows.
Google Inbound and Outbound Logistic
Google creates very necessary inbound logistics. Every person in the world uses Google top search every time for information and it is free of cost. Therefore, it is a distinctive feature of Google that gives positive feedback as well as helps to get success in business. In addition, various types of tools and technology and hardware are innovated by Google that helps all companies to check invoice status, payment, communicate with others etc.
Google has other outbound logistic and Google expand their business by selling physical products such as smart watches, pixels, phones, chrome cast etc. it also opens their stores in London that is also another key success factor of Google (Kim, 2020).
Google Marketing and Sales
Mainly Google sales is conducted through online but now Google company started offline sales that increases their product availability as well as it also increases their net revenues and profit. Some popular online networks such as digital advertising, innovation of new tools and technology are key developmental factors of Google’s company success (Chen et al. 2019).
4. Analysis of Business Model and Business Strategy
Value Proposition/Differentiation
In terms of the value proposition of Google, they build up value for their customers and market rank. In order to provide a convenient service to the customers this company has developed a search engine that can be accessed free of cost as stated in the case study “The importance of being Googley”. The store developed by Google for huge varieties of applications is named to be Play Store. This store offers most of the applications for free and all of them are built up with a user friendly interface (Golovin et al. 2017). Targeted text based search and advertisements contributes to the high market rank of Google around the world. Moreover, monetization by content creation is another key strategy of this company to increase revenue and hold their market position. In order to differentiate Google from its market rivals such as Facebook, Microsoft, the company focuses on developing new and innovative technologies (Li et al. 2017).
Business Model Canvas
Business model is an essential tool for Google to grow and survive in the market of technology and software. On the other hand, the business model is important to operate the company in a well planned way and attract investors and customers. As stated in the case study, the business model canvas of Google can be better understood if it can be grouped based on the key areas. These key areas of Google’s business model are partners, activities, resources, value proposition, channels, customer relationship, customer segments, cost structure and revenue streams (Plantin et al. 2018). In terms of business partners, Google considers its suppliers and distributors as key components of the company. Software and hardware developers play the roles of suppliers for this company and maintaining a healthy relationship with these suppliers is an important tool of the business model.
Distributors of Google play an important role to increase the sales of the company and influence people to use it as their internet search engine. One such distributor of Google is Synnex Ltd. that provides a global supply chain for this company (Wineburg and McGrew, 2016). Open Handset Alliance (OHA) is another key business partner of Google as they provide an open standard for the mobile users using Google since 2007.
Key activities of Google include research and development of new technologies contributing to the continuously growing industry of technology and software. Moreover, adding new features to the existing technologies is another essential activity performed by the software designing team of Google. Regular activity to keep an eye on the cyber security model for these existing technologies and providing updates for further improvement is keeping Google on top of the list (Wingfield et al. 2016). In addition, maintenance of the huge offerings and infrastructure of the company occupies most of the parts of key activities. However, some other activities of Google include marketing, strategic development, leadership management, forecasting the market conditions and managing customer relationships.
Key resources of Google are their servers that redirect the users to a particular destination they are searching for. Data Centers, IPs and other related infrastructures of IT are some other essential resources of this company (Al-Maroof and Al-Emran, 2018). Human resources, patents, proprietary materials and licenses are the strengths of this company to survive in the market. In terms of value proposition of Google, they create value to provide their users with easy and effective search engines for making advertisements. Moreover, accessing and storing data from the entire world and presenting the customers with access to those are important areas of Google’s value proposition.
Figure 1: Business Model Canvas of Google
(Source: Martin-Martin et al. 2017)
In terms of business channels, Google relies on two types of channels and one of them is to reach the customers and the other is to reach its network members. In case of reaching the customers, the official website of Google and other Google affiliated websites are the ways used by this company. On the other hand, network members and advertisers are provided with services by support and sales teams. These two teams also work for managing a healthy relationship with the customers by solving their queries and providing proper services on time (Martin-Martin et al. 2017). In terms of customers segments, Google considers three main groups which are network members and content providers; advertisers and users. According to the provided case study, this company considers the people as users who are able to use the provided information in a constructive way. On the other hand, advertisers are essential as they provide services at low cost than traditional marketing methods. Finally, in terms of using the ad sense services of Google, network members and content providers are considered.
In terms of Key costs, list of considerable for Google are marketing and advertising costs, IT infrastructure maintenance costs, and expenses for research and development. The main revenue stream of Google is its advertisement based search engines and it contributes to almost 96% of total revenue (Këpuska and Bohouta, 2017).
Strategic Resources and Capabilities
Google is one of the fastest growing IT companies in the world and along with its search engine, double click, and GPS services are new additions to their list. New technological innovations and huge brand equity are playing the role of strategic resources for this company. In terms of brand equity, Google has always focused on providing customers with user friendly interfaces of their technological offerings. In order to make the technologies more acceptable, Google has launched the applications of their technologies (Shapovalov et al. 2018). These applications are helpful for the customers as they do not have to use a browser for accessing those offerings by Google. This company is regularly working for innovation of new technologies that will increase their customer range along with generating revenue.
Development of new and innovative technologies is one of the key strengths for a company to give competitive advantages in the technological market. According to a report of 2018, Google had spent 21.42 billion dollars in the research and development department (Ventayen et al. 2018). Google’s browser, map, play store, email and various other offerings for enterprises and web developers are considered to be the best products in the market. In addition to this software, Google is also famous for its Android Operating System (OS) and another recent invention that is Pixel Smartphone.
Billions of people are using Google as their technological products are making people’s lives easier. According to the case study, the customer base has developed to be stronger in recent years with the increasing use of internet and Smartphone. As informed in a report of 2018, total revenue growth of Google from its customer base was 136.8 billion dollars (Bijl et al. 2016). Google can be termed to be a global brand as it serves people worldwide with its innovative technologies and services. Moreover, ease of use of these applications with smart devices has made this brand more acceptable among others and contributed to the list of its competitive advantages. Billions of individuals and enterprises around the globe can access these applications for free of cost. That is an essential fact for the growing customer base of this company.
The large product line of Google has contributed to its high growth and revenue generation in the competitive market of technology and software. The most important and popular product of Google is its user friendly search engine that is supported by its broad advertising world (McMahon et al. 2017). Along with this, several other products offer access to any individual from any part of the world contributing to the growing success rate of this company. Google exclusively focuses on developing a proper HR team that is important for creating a distinct brand image in a competitive market.
5. Analysis of Innovation Strategy
Google innovates many types of new technology that helps to bring success to Google Company. Google follows diffusion of innovation theory that assists Google companies to find new ideas and strategy regarding innovation.
Diffusion Innovation Theory
Diffusion of innovation theory is a theorem by which individuals get ideas about innovation as well as it can suggest how the technology is used to innovate new things. The main functional people of diffusion of innovation theory are the innovators, early adopters, early majority, late majority, and laggards.
The innovators suggest ideas about new innovation and early adapters established new technologies by applying new ideas. Early majority is a person who can do research before buying this product. Late majority follows the early majority and is affected by innovation. Laggards adopt the new innovation. Google Company focuses on this theory and this theory assists Google Company to develop this innovation in technology markets. Google used this theory to start a new program, regarding technology (Foerderer, 2018).
Some common new innovations of Google are discussed here.
Google Chrome Book
Google chrome book is a type of linux-based computer by which every person can perform their task with the help of a chrome browser. It mainly runs with the operating system and this chrome book is a very popular innovation of technology of Google (Harracá et al. 2017).
Google Maps
Google maps includes manual mapping, government data, satellite imagery that helps all people to find out the exact places. It is a very innovative application of Google that helps shipping companies to find out the exact location as well as it helps all business men to travel to other locations (Schmitt et al. 2019).
Google Assistant
Google assistant is a virtual subordinate that helps all people to perform tasks, make notes, etc. It also helps to communicate with other smart phone devices. This is a great development of Google Company that updates all peoples of the world.
Google Scholar
Google scholar is a platform where all types of journal research paper is available and it is used by all students around the world. It is noted that this platform includes various types of books, journal paper, academic articles etc and it is a free of cost or limited cost version. This helps all higher education students and much information has been gathered by this platform (Senarathne, 2019).
Google Translate
It is a very contemporary innovation of Google Company that includes a platform of translation. It includes translation of 13 languages that helps all communities’ people to communicate with other community people. The bonding between various communities became strong as businessmen can expand their business in various countries. Therefore, this application developed by Google not only improves communication, it also improves the growth of organizations and revenues (Pfotenhauer, 2019).
Google Analytics
It is an online marketing tool that helps to analyze the products data, products strategy, products dimensions, product performances, metrics etc. Mainly it is used by marketers to increase their supply worldwide and is also a great innovation of Google.
Google Doodle
It is a Google logo that is changed by every event, holidays, celebration based on country. It is a very innovative idea of Google that also gives chances to all artists for making this doodle.
Google Photos
Google photos is an innovative idea of Google that helps all people to get any important photos and any occasion based photos in any device by addressing email. It is a great facility for people.
Google Street View
Google street view is a platform like Google maps and Google earth; however, it includes a 3d picture of the street. It helps all people to see live pictures of the street as well as it helps to know the traffic situation of the street. Mainly it eases the peoples travelling; therefore it is a great innovation of Google (Barlow et al 2019.).
Google Meet
Google meet, a very innovative innovation of Google is mainly a video calling app by which all people communicate face to face with others. During COVID-19, in lockdown situations, it helps worldwide to communicate with others. Classes, business meetings, office meetings are done by this app. This app developed by Google is a very safe application that saves all personal information and identities (Foerderer, 2018).
6. Appraisal of Organization’s Strategic Situation
Business Strategy and Competitive Successes of Google
| Business Strategy | Competitive Advantages |
| Price | Low price help to get more customers |
| Cost leadership | IT infrastructure is helpful |
| Product development | Unique product is available for better customer target |
| Low cost | Maintenance of search engine equilibrium |
| Innovation | Employee motivation and product differentiation is facilitative |
Table 1: Business Strategies and Competitive Advantages
(Source: Created by learner)
Prices given by the consumers are justified according to the quality of product received by them
Google started its journey in 1998 and even at that time several PC Magazines reported Google to be one of the 100 fastest and efficient search engines in the world. Between 1998 and 1999, the number of queries became as high as 500000 on a daily basis (Engel, 2016). By 2010, Google search engines experienced more than 516 new features and the list is increasing till date. This search engine serves more than 3 billion daily searches that contributed to the increased market share to 67% by 2012 (Pichai, 2018).
A proper cost leadership is essential to develop a good fund management and pose a clear image in front of investors
Google runs its business in a competitive market of technology and software; therefore it faces several competitions from various IT companies. According to the case study, this company owned 36 data centers in 2008 in the United States along with Taiwan and Malaysia. More than 900000 servers were reported to be active in the same year and it was estimated to grow as high as 10 million by 2018 (Moon et al. 2019). In the third financial quarter of 2013 Google reported its investment to be 2.3 billion dollars for the improvements of their IT infrastructure. According to annual reports published by Google, inventions of 2013 were higher by 50% than 2012 (Golovin et al. 2017).
Development of products that are unique and spreading brand awareness among the customers
One of the most important competitive advantages of Google is uniqueness of products and services. Since the starting of its journey, Google has acquired more than 100 brands including YouTube in 2006 and Motorola Mobility in 2011 (Martin-Martin et al. 2017). This has contributed to the increased market share of the company which is almost 20% greater than its rivals. Google has expanded their R&D to the Smartphone industry in 2007 and by 2018, Android had the largest numbers of downloads (Al-Maroof and Al-Emran, 2018).
Providing services to the customers at very low cost or free of cost
Google’s search engine and other technological offerings of this company provide free access to the customers. The applications that charge money for access is ignorable that has contributed to the increased market and customer base of this company (McMahon et al. 2017). On the other hand, other web developers and IT brands charge for the services same as Google and this has increased the acceptability of this company.
Focusing the innovations and marketing strategy to grab small local markets
Google motivates its employees to show their creative skills in the workplace that is helpful for the company to get ideas about new technologies. This company focused on customer feedback telling about new features that have to be added to the existing technologies. In terms of marketing Google adheres to internet based marketing to reach a broader range of people within a short time (Kreiss and McGregor, 2018). Advertisements of Google are not irritating, therefore, attract more customers to the brand and affordable services provided by this company are essential for their growth in local markets.
VRIN Analysis of Google
Value
Google is famous for its fast and effective services to its customers in terms of fulfilling their needs. Customers use Google’s search engine to search literally anything very common or uncommon and Google has answers to everything. This service with vast information is helpful for the company to maintain their market position (Pichai, 2018). In addition, Ad Sense system of Google is helpful to generate revenue on the basis of advertisements shown in their applications. Advertisements are an important source of income for this company as there is huge traffic of advertisements in the search engine of Google (Engel, 2016). Moreover, targeted texts based search engines of Google helps the users to search for something they do not have a clear idea about. This factor contributes to the increasing acceptability of the technologies provided by this company.
Rarity
Google’s search engine provides relevant data as results and these outputs seem to be significant at the customers’ end. Other market rivals of Google, such as Yahoo and Microsoft also provide search convenient engines (Moon et al. 2019). Competitive advantage of Google in this case is the search results shown by it provide links to redirect users to their desired destination. Moreover, the framework developed by this company in terms of user interface is convenient for the consumers. Unlike other search engines, Google’s home page is made up with very few words and in spite of this; people can access the world of the internet within seconds (Senarathne, 2019). Moreover, Google focuses on its marketing and advertising strategies in such a way that does not make irritating advertisements. Moreover, this company never bargains with its clients for selling or buying their products and raw materials.
Inimitability
Google’s search results are hardly imitable as a highly developed infrastructure is needed for providing so many pages of relevant data within seconds. Google’s huge number of servers works in accordance with each other via a large size of RAM and a broad computer memory (Al-Maroof and Al-Emran, 2018). Each search contributes to the refining of the search results that is helpful to provide the customers according to their preferences. In addition, being the largest shareholder in the market, Google’s search engine adopts new information faster than its competitors. It is difficult for any competitor to adapt to a fast searching capacity as of Google without going through a continuous refinery practice. Google has developed a technology that groups the meaning of keywords according to its fields that is helpful for users to find their desired one (Martin-Martin et al. 2017). Moreover, the value of this company for customer satisfaction than profit gain is keeping them in a unique position.
Non-sustainable
According to reports, some non-sustainable factors of Google are its limitation in terms of functionality in comparison with other website developers. Moreover, customers have reported that Google is not very friendly for business purposes as it does not provide enough customization (Bijl et al. 2016). Another factor that is considered to be unsustainable for Google is the URL for their site. These URLs start with “sites.google.com/site/” and it seems to create a long source address.
Innovation Strategy of Google
In terms of innovation strategy, Google has adopted a strategy that focused on customer satisfaction more than competition with its market rivals. As stated by the developers of Google, meeting the customers’ need is the most important factor to sustain in the market of technology. On a successful outcome, every other criterion to be successful will be achieved accordingly (Goldblatt et al. 2016). New innovations of this company are claimed to be useful in the daily lives of their customers and make their tasks easier. This ideology has contributed to the increased loyal follower base of this company and continuous revenue generation (Pichai, 2018). Proper use of the funds invested by their shareholders in the projects is helpful to create a transparent image of the company in front of customers and investors.
7. Conclusion
It is concluded that Google is a very popular technology company that expands their business worldwide. They follow various strategies to develop their growth, net revenues and profit. The study shows PESTLE analysis for identifying macro environments. It is seen from PESTEL analysis, some external factors such as some political factors such as government policies and regulation that affects positively. Some technological factors, economical factors, legal factors affect growth and development of technology of Google. The micro-environment is analyzed by Porter’s five model analysis. Some threats and opportunities are identified by this analysis. The study shows that the Google inbound and outbound logistics, Google sales and Google marketing is a success factor of Google. Google follows the diffusion of innovation theory and several new applications can help all customers as well as the business strategy and growth is increased.
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