Google Case Study

I. Executive Assessment

Introduction

I was hired by Google to give a professional assessment of the internet search industry. Our goal is to identify some of the opportunities for growth and ways that the company can improve their competitive positioning in the industry. Through our conclusions and recommendations we believe that Google can increase their competitive rivalry and maintain a dominant position in the industry. The conclusions and recommendations compiled in our research can be found in the following executive assessment.

Conclusions

The internet search industry is dominated by several companies that are well established in this industry. Most of these companies are either subsidiaries of bigger conglomerates or are widely diversified in their product and service offerings. The two biggest firms in this industry, Google and Microsoft (with its Bing search engine), offer several products or services that create market dominance for each of them. Google holds superior market share in comparison to any other company within this industry which could be attributed to its service offerings that are conjoined with its Gmail service. This service creates a mail account for the customer and customizes their search criteria to fit their needs while also providing them with other benefits including a host of web applications.

It is quite easy to conclude that market dominance within the internet search industry could be attributed to the breadth of services that a firm offers to its customers and the overall performance of the search engine itself. Customers are likely to be brand loyal when it comes to this experience due to the fact that when a customer likes their search experience they are extremely likely to return to the same site.

Strengths of Google can be found in its diversification of services that it offers through its search engine. At the forefront of this industry are the most innovative firms. These companies are constantly coming out with new advancements and products to better the use of their search engine and the experience that the customer has while inputting their search queries.

Production costs for Google are nearly non-existent and cannot be treated like another traditional business that offers physical products either. Looking at Google's main expenses, we see that the most money that is spent within the company is for their "resources" - These resources are in the forms of technology, developing technology through research and development, and infrastructure. The next highest expense to Google is in the human resources department. Google spends a lot of money on finding the talent that can propel the company even further than ever before. This talent helps them remain the center for innovation in the Internet search industry.

Recommendations

Although Google is highly diversified in its service offerings the majority of its annual revenues are derived from advertising sales. The company's dependence on advertising could prove to be crippling in the long run in comparison to a company like Microsoft, which is diversified in several different industries. Google should create strategic partnerships with firms in other industries in order to diversify their risk. Expanding into telecommunications and further investment into voice over internet protocol (VOIP) could prove promising. Current efforts to expand VOIP services have proven to be unreliable. Further research and focus into this area could open up competition with internet communications services including Skype.

More technology integration into Google's service offerings could provide more barriers and competitive advantages for Google to expand. Offering cloud based software that integrates with all of their services including Google Calendar and Google Documents could provide the company with significant competitive advantage.

Google also has an opportunity to develop new technology in terms of offline software. Google's resources within the company are substantial enough to develop software for computer operating systems. This opportunity further helps Google to diversify its product offerings while also creating strategic fits within the organization. By using some of the same processes in developing this technology the company can save significant money in production expenses.

II. Analysis

The Internet search industry originated in the late 1990s as a result of the rise in popularity of personal computers and consumers' introduction to the World Wide Web. As personal computers became more and more popular and internet usage began to rise the need for a medium that would process search queries at a (relatively) fast rate and produce the desired results for the user became evident. The environment today includes dozens of well-known search engines and a hand full of well used ones. The main players in this industry include Google, Yahoo!, and Bing.

Dominant Economic Characteristics

The Internet search industry is a huge market with nearly $100 billion annually. Alongside the size of this market is the rapid growth rate of the market size and the competitors that make up this market. From 2004-2005 revenues in this market leaped upward by more than $11 billion. With the internet search industry being a global market firms have to remain fiercely competitive at all times. This means that new product innovation is constant and rapidly changing.

Five Forces Analysis

Potential For New Entrants

In the current environment, the potential for new entrants in the Internet search industry is extremely high. Start-up companies in the internet search industry require very high amounts of capital in order to become well established. Also, these companies require huge servers in order to be able to process the high traffic that frequents these sites. The maturity in the market must be noted when considering potential for new entrants. Although, all of the major players in this industry once started with low amounts of capital and small operations the market has matured over the last decade creating a barriers for new entrants in this market.

Bargaining Power Suppliers

Currently in this industry the bargaining power of the supplier remains low due to the fact that there are generally no inputs that Google must purchase from other companies in other industries. However, when we