Achieving and Maintaining Corporate Leadership
Case analysis
Presented to the Department of Management
Lesson 8 Case #2: Google (As of 2005)
By Radionell
GRBA 853 Strategic Management & Business Policy
November 21, 2007
Case Analysis: Case #2
Radionell
Google
Background
Vision/Mission The vision of Google is that “A perfect search engine will process and
understand all the information in the world” as quoted by Sergey Brin. Also, as the mission is
stated on the website, "Google's mission is to organize the world's information and make it
universally accessible and useful.” Because Larry and Sergey, the co-founder of Google was sick
of major portal site’s lack of capability for providing relevant information, they decided to make
a powerful search engine. The motive of the co-founders is embedded to Google’s mission:
organizing and providing all information available in the world. The mission can be reiterated by
‘commitment to advanced Internet search technology’ and ‘providing easy and time-saving way
of obtaining relevant information.’ The vision and mission reveals the important factor that
Google wants to improve the quality of living by making communication in Internet easy and
efficient. Therefore, the company aspires to be at the leading edge in terms of the satisfaction of
all Internet users, shareholders, employees, customers, and communities. In addition, Google
announces the ten components of philosophy as follows:
1. Focus on the user and all else will follow.
2. It’s best to do one thing really, really well.
3. Fast is better than slow.
4. Democracy on the web works.
5. You don’t need to be at your desk to need an answer.
6. You can make money without doing evil.
7. There’s always more information out there.
8. The need for information crosses all borders.
9. You can be serious without a suit.
10. Great just isn’t good enough.
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Goals/Objectives Google’s goals and objectives are well aligned with its vision and mission. To
organize and provide more information available in the world, the company has set a goal of
making Google accessible to people in more languages and in more countries. Currently, Google
provide its service in 88 different languages, and the company plans to increase this number.
Also, the company has a goal of establishing more effective and efficient way of advertising. In
other words, it wants to create a single complete advertising system which is easy to use for
everyone.
Strategies
Management developed a strategy for Google focus on improving Internet search
technology, diversifying into new Internet related services to achieve more balanced business
model, meeting increasing demands of the international markets, and improving general
administrative capabilities. To maintain the largest market share in Internet search segment,
Google needs to continuously improve Internet search efficiency. As major competitors are
feverishly trying to close in Google’s Internet search supremacy, only advanced technology will
guarantee to remain the current popularity.
In a nutshell, Google’s current strategies focus on ways to develop an effective
differentiating enterprise-wide strategy, increase commitment to Internet search
technology, appropriate and well-timed investment, operational excellence, and revenue
enhancement.
Based on these strategies, Google will concentrate on new opportunity of growing
strengths and capability to excel competition.
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Case Analysis: Case #2
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Situation Analysis
Internal: Resources, Competencies, and Advantages
Google is one of the fastest growing companies in any industry. For the fiscal year of 2004,
Google had a profit margin of 12.52 percent, ROA of 21.05%, ROE of 25.97%, and a revenue
growth of 117.56%.
Resources: Google has several resources to deliver unique search experience and relevant,
cost-effective online advertising. Among those, very creative, innovative, and technologically
proficient workforces are the company’s major resource. In addition, a well-established database
is also one of great resources to efficiently provide service.
Competencies: Google has a variety of competencies that set them apart. At first, Google
makes the Internet search easy, speedy, and accurate for users. In other words, Google’s core
competency is the fact that it has established unique and superior Internet search technology. A
buzzword ‘Googling’ represents the phenomenal success of the technology. As mentioned above,
the company’s innovative and technologically proficient workforce has made this technology
keep ahead of competition, and this continuous innovation is another distinctive competency of
Google. Secondly, the unique business model of “targeted online advertising” and “cost-perclick pricing” which has been developed by Google is another distinctive competency of the
company. Although competitors have adopted this model, Google is far ahead of competition
with regards to technology and brand recognition. Because the model generates great value, such
as time-saving and easy-to-use, to customers, it is more likely to increase sales of clients; hence
Google’s. Another distinctive competency is a Google’s philosophy about pop-up ads. Simply,
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Case Analysis: Case #2
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Google does not use any multimedia banner ads and colorful ads on its home page. The only
time users see these ads is when users’ search enquiry is relevant to the ads. Although relevant
multimedia banner ads beside search results are keys to success in this segment, not pursuing
these ‘pop-up’ ads sets Google apart from competitors at this moment because it often annoys
users. These factors all make Google very competitive in this industry.
Advantages: Google’s advantages come from its unique and well-timed positioning in
Internet search industry. Although there were several powerful portal sites when Google first
came in, no competitors thought that ‘searching’ is a promising or revenue generating business
model. Therefore, Google was first in the market in terms of provider of ‘searching’ as a product
or service. Another advantage of the company is the fact that Google is a relatively small and
agile company compared to major competitors. The company has only small number of brick
and mortar facility. It allows Google to move and react more quickly than competitors in this
high velocity environment.
Strengths
There are several strengths that Google can use to gain market share and increase
profitability, but there are also some weaknesses that it must improve in order to remain
competitive. Google’s strengths can be summarized as follows:

Superior and unique Internet search technology

Strong brand image

Well-established corporate culture which makes the creative atmosphere for successful
innovation of products or services
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
Financial resources available for R&D

Leaders in search related services

Having a market-oriented and technologically professional workforce

Agile and flexible to the change of relevant environments

Unique business models, such as ‘AdWords’ and ‘AdSense’ which turns out to be very
profitable models

Having a huge database including customer preferences

Having a capability of providing competitive services in images and catalog compared to
major competitors
Weaknesses
Although Google is a leader in Internet search industry, it has several weaknesses and the
weaknesses are must be eliminated or reduced.
The weaknesses include:

Too reliant on Internet search service

Lack of loyalty or far behind competitors in terms of the number of members due to
Google’s focus on non-membership related service

Virtually no switching costs to users in this industry

Not focusing on potentially promising ancillary services, such as business solutions

Not having auction platform

Arrogance in dealing with prospective advertisers in terms of keep switching teams
already assigned to cases, in other words poor administrative company structure
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
Lack of experience to be a independent portal compared to competitors
Critical Success Factors
There are seven critical success factors for a company in computer service industry. Those are:
1. The successful recruitment of a quality workforce
2. The ability to offer multiple products or services
3. Having a strong brand image and loyalty
4. The ability to offer innovative products or services
5. Having a good relationship with clients, advertisers, and computer manufacturers
6. The ability to manage confidentiality of customers
7. Having a capable legal and lobbying team to protect property rights and to deal with a possible
anti-trust suit
The most important CSFs are the ability to recruit a quality workforce and obtaining
a strong brand image. Because the industry is characterized by ‘word of mouth’ and
‘continuous innovation,’ these two factors play critical role in computer service industry.
Critical Failure Factors
There are also critical failure factors such as being unable to create innovative services in
advance to competitors, losing confidentiality. The inability to prevent identity theft is one of
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critical failure factors. One disastrous event of losing confidentiality can devastate the entire
good image a company ever built.
External: Trends, Issues, major competitors, and Competitive Forces
Trends: There are several external trends, issues, and forces that Google must consider in order
to remain competitive.

Increasing number of Internet users and E-commerce customers

Blogging and User Created Contents (UCC)

Increasing concern of identity theft and Internet confidentiality

Convergence of technology, such as computer and mobile device

Fast pace in innovation and product transformation and development

Increasing number of competitors who using “targeted online advertising”

A growing market for search based advertising domestically and globally

Increasing demand for multimedia search

Growing demand for wireless technology
Issues: Major issues should be forecasted and scanned before it severely affects the company.
Current issues of the industry can be the criticism concerning Google’s monopolistic power in
the search segment. The issue is critical because it would force the government to set another
regulation which could be very unfavorable to the company.
Major competitors: There are three major competitors in the information technology service
industry. They are MSN, Yahoo, and AOL.
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1. MSN: MSN is a subsidiary of Microsoft Corporation. Microsoft has seven product segments:
Client, Server and Tools, Information Worker, Microsoft Business Solutions, MSN, Mobile and
Embedded Devices, and Home and Entertainment. MSN has strength in its membership services,
financial resources from Microsoft, and its ability to offer business solutions and web page
design and development for small new businesses. On the other hand, the company’s weaknesses
are its “inability to mount a platform for online auctions and its ineptitude in the sale and
distribution of still images and other multimedia products. Also, it seems to be having a hard
time to recruit and retain quality and technically proficient workers. Although several issues,
such as anti-trust concerns regarding Microsoft’s attempt to embed its search software into
Windows, impede MSN’s aggressive movement toward the Internet search segment, the parent
company’s capability to offer a wide range of software and service plus a huge financial resource
is a great threat to Google.
2. Yahoo: Yahoo classifies its business into three categories: Search and Marketplace,
Information and Content, and Communications and Consumer services. It place second to
Google in terms of the number of search service and leads the competition in all other Internet
services. The company has strength in huge registered membership, domain name registration,
web site design & development, web hosting for small & new businesses. It has weaknesses in
managing and assuring confidentiality about members’ information, lack of ability to link its
search engine to established services, and no platform for online auctions. Yahoo’s current
strategy focuses on “extending the marketing platform and access to Internet users through the
distribution network of third-party affiliates.” This strategy is clearly a big threat to Google.
3. AOL: AOL is a subsidiary of Time Warner Inc. Time Warner’s business falls into five areas:
America Online, Cable, Filmed Entertainment, Networks, and Publishing. It place fourth in the
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Internet search segment behind Google, Yahoo, and MSN. The company has strength in secure
website and the variety of services it provides. On the other hand, it has weaknesses in “its
inability to effectively market to non-AOL Internet service subscribers” and current weak
position in the Internet search service. However, regarding the current development of interactive
communication technology, its current good position in the variety services might be a great
threat to Google. For example, if Time Warner successfully combines the search service to the
cable television and broadcast networks which it already well established, the event will create
substantial revenue source to the company while Google loses a very promising market.
Competitive Forces: Using Porter's Five Forces Model, the Internet search service industry
can be summed up as:
Threat of New Entrants – High: There are no strong barriers to entry due to low start-up costs,
virtually no regulation.
Rivalry among Existing Firms – High: Competition is fierce. Major competitors, including
MSN, Yahoo, and AOL, which offer very competitive, have strength in membership related
Internet service eager to compete against Google in this segment by using their strength in
market share, user loyalty, and brand identity.
Bargaining Power of Customers – Low: although customers’ bargaining power is increasing
largely due to the increasing trend of self-creating website or blogging to Ad themselves, they
have little power and intend to negotiate the contents or services of Internet search service
providers. Furthermore, customers do not exactly know how Google or other companies
calculate advertising fees.
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Bargaining Power of Suppliers – Low: Majority of Internet users unintentionally or
automatically supply information to the service providers by searching something using the
providers’ search engine. Although some information must be paid to use, it is not a big issue for
the firms in this industry, in general.
Threat of Substitutes – Low: although there are a number of traditional substitutes i.e.
newspaper, television for obtaining information, people, in general, think that the search engine
is more efficient and time-saving for finding relevant information than the substitutes .
All in all, the industry is quite profitable and promising in terms of low threat of substitution,
little bargaining power of both customers and suppliers, except for high threat of new entrants
and fierce rivalry.
Opportunities
The opportunities available to the company are the following:

The increasing number of internet users and e-commerce customers keeps the
computer service industry growing and profitable as long as the company maintains
competitive edge against competitors.

The opportunity for global expansion of business is also increasing concerning the
growing computer technology, personal income and number of internet users overseas.

The acquisition of innovative firms which offering unique services.

Alliances or joint venture with innovative firms

The technological advances in other areas, such as mobile device, wireless technology
will bring another opportunity to expand market presence.

Growing demand for multimedia search and growing demand for target advertisement
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Threats
The threats to the company are the following:

Growing concern of “Click fraud,” identity theft, and hacking (the increasing chance of
losing confidentiality by identity theft)

Entrants of new / innovative competitors with more powerful Internet search technology.

Major competitors’ increased focus on target advertisement using their advantage
of established memberships and a variety of non-search Internet services

Major competitors’ intend to develop more advanced Internet search technology,
such as Microsoft’s next version of the windows system, “Longhorn.”

A high level of unpredictability with regards to the direction of innovation
Alternatives and Analysis
An array of options may exist for Google, including the following:

Focus on current business and its distinctive competence by continuing to develop a
superior search engine (proposed by Larry Page) and focus on R&D to develop advanced
search engine or platform for mobile device, especially smart phone, considering the
trend of convergence.

Focus on expanding business scope by adding a broad range of services and
communication tools (proposed by Sergey Brin) and focus on diversifying services by
offering membership-related services
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
Focus on expanding globally by forming alliances or acquiring foreign companies
which offer major portal services in their countries.
1.
Focus on current business and its distinctive competence by continuing to develop a
superior search engine. It is a winning formula that had been proven by the success of
Google. The benefit of this alternative is that it allows Google to remain a dominant force in
Internet search technology. It allows the company to keep focusing on doing what it does
best. This would allow the company not only to sustain revenues from current business but
also to find additional sources of revenue. It also could leverage R&D of superior search
engine for other mobile devices. The alternative is feasible because the company has
strength in (1) its ability and culture to develop innovative technology and services (2) a
quality workforce. This alternative could win against the competition because “Google is
the segment leader in market share with regards to Internet search technology” and has
established brand name recognition and international popularity. Google could further
expand its superior service into the international arena and a mobile device market. It also
could develop advanced advertising technique such as “cost per impression,” and “target
advertisements to specific geographical locations and to user interests” to increase Internet
search market share. The major drawback to this alternative is that Google might be forced
by potential entrance of superior search engine to loose lots of market share and revenue
source because the company does not well diversify its business to absorb the shock. A Way
around this drawback is for Google would be able to introduce other revenue generating
services aside Internet search, such as providing online business solutions and web page
design.
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2.
Focus on expanding business scope by adding a broad range of services and
communication tools (proposed by Sergey Brin) The benefit to this alternative is that
Google could reduce the risk of not having a wide range of services. It would allow the
company to build a solid membership base which will increase the probability of generating
advertising revenues through increased online activity. The alternative is feasible because
Google has enough profits and financial flexibility to expand into other areas. In order to
win against competition, Google should use its superior Internet search technology and
strong brand name and recognition as a platform to compete against major competitors.
Furthermore, the company should establish a very secure service to assure members in terms
of confidentiality and credibility. The drawback to this alternative is the risk of not focusing
much on its distinctive competence and the risk from potential administrative inefficiencies.
Also the company would require a large capital investment in developing and marketing new
services. Ways around this drawback would be for Google to benchmark the best practice
of restructuring a company’s structure and to put necessary administrative effort to make this
change smoother.
3.
Focus on expanding globally by forming alliances or acquiring foreign companies which
offer major portal services in their countries. The company has a capability of providing an
interface for over 88 languages and has an international popularity. Based on these features,
Google might be able to successfully expand to foreign Internet searching service market.
The benefit to this alternative is that Google might be able to establish its brand name and
acceptance in foreign Internet search markets and increase profit. Also, it allows Google to
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diversify risks. The alternative is feasible because the company has strength in brand
recognition, international popularity, and financial flexibility. This alternative would win
against the competition because Google might be able to bring its worldwide brand image
to leverage its brand power in domestic markets to gain more market share. The major
drawback to this alternative is that the company would lose some of focus on domestic
market, and the initial investment would require large amount of capital to acquire foreign
firms, and there is possibility of unfavorable pressure to set a regulation against Google by
the foreign and domestic government and competitors, such as antitrust regulation. Also the
risks form different business environment (legal, social, exchange risks, and others) would
force the company loose substantial profit to fit into the environment. Ways around this
drawback are for Google would be able to successfully lobby the foreign government and
competitors to provide favorable condition. The company would be able to prevent any
shock from the different environment by through investigation of the country, society, and
others.
Recommendations
Select the combination of Alternative 1. Google should focus on current business and
its distinctive competence by continuing to develop a superior search engine. The company will
maintain its competitive edge against major competitors by further improving its powerful search
engine. The company will also preoccupy a good position in mobile device market by
providing software or platform for the mobile devices. By doing so, the profit and market share
of Google in the industry will be increased. In addition, the company will be able to obtain more
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benefit from this focus on its core competence because current trend shows that the demand for
Internet search service is far away from saturated, rather it is increasing. Moreover, Google’s
brand image, reputation, and international popularity will be increased because of expanded
market presence into every possible device with which can search information. Finally, the
possibility of providing more delicate and right-on-target advertisements will be increased; hence
profits from advertisements also will be increased. The strategy of focusing on what it does the
best will be the best one for Google to gain more market shares and to remain a top competitor in
the growing Internet search industry. In short, the alternative provides the most potential for
growth and profitability based on the expected state of the future business environment, and
will allow Google to increase its leadership in the industry.
Implementation
For successful implementation of this alternative, Google should develop a set of
objectives to minimize and control possible risks or setbacks of focusing too much on one
thing. Google would be able to diversify risks by providing auxiliary services, such as e-business
consulting or webpage development. Moreover, Google should make current customers and
business partners more loyal to the company by providing some incentives based on purchasing
history. Also, the company must fix current poor administrative structure to prevent prospective
advertisers from turning against the company. Along with, Google should create another revenue
source by focusing on third party web sites operated by smaller firms or independent ‘star’
bloggers. Additionally, Google could find another revenue stream by finding ways to licensing
search technology software to major computer manufacturers and mobile device producers
to inbuilt a Google search tool bar as a default. Furthermore, Google should expand the search
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service not only for online catalogs but also for another promising area, TV home shopping
catalogs.
Needless to say, Google should keep recruiting a quality workforce and keep improving
the capability of current employees. A maintaining the unique and creative corporate culture
could be one way of helping the company to recruit the quality workforce. In Addition, Google
should preoccupy the mobile device and Wi-Fi Internet search service market to maintain
competitive edge. The company should be flexible to the change of industry environment, and it
should be agile to react against possible counterattacks by major competitors and possible
antitrust or privacy-related obligations.
Contingency plans
Management should develop contingency plans to protect the company from possible
unfavorable events.

What if Google fails to prevent identity theft or losing confidentiality? In this case,
Google should provide customers the information about exact cause of the event and
damages from it as soon as possible. Also, the company’s reaction and plan to prevent
future accident should be informed quickly. Moreover, Google needs to prepare the legal
procedures for this kind of event in advance.

What if there is a new entrant of competitor with more powerful Internet search
technology? Google needs to preset the procedures of reaction with regards to the new
competitor’s size, popularity, and financial strength. For example, if the competitor is not
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popular, big, and financially healthy, Google could buy the firm in advance of major
competitors. On the other hand, if the competitor positions itself firmly in the industry
before Google notices it, Google would make an alliance with the firm.

What if there is a severe antitrust movement or privacy-related criticism which will
result in the establishment of regulation? Google needs to have a capable legal and
lobbying team to deal with this kind of event or suit. If possible, Google should prevent
this event in advance. If not, Google must react very promptly to minimize possible
damage.
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