Challenges of Expansion to Foreign Location

Research Analysis

A publicly traded company can be defined as a company which has at least one listed public stock exchange. The company also issued the company ownership securities to investors in the public. Through initial public offering the company becomes public once approved by the regulator of the security exchange market (Budiharjo, 2018). Google is one of the publicly traded companies in the US. Google is a US based company which organizes information from the world and makes it centrally located for accesses and use by various users.

The market structure for Google is oligopoly. This is because Google competes with other competitors such as the mobile operating systems in the market place. Google has the largest market share of 90 %. The market is dominated by a few number of companies who dominate the industry. Google has earned a massive market share through offering products that are differentiated at a fair price. In the industry, Google competes with various search competitors such as Amazon, Yahoo, AOL, and Microsoft’s Bing

As it is in every market, the market in which Google operates has its own share of barriers, which prevent new companies from entering the market. One of the barriers is the competitive response in the market. The market has giants and well established companies such as Google and Yahoo who are aggressive and the main territorial players. The companies aggressively compete to prevent the newcomers from gaining the market share (McDonnell, 2018). The competitive responses discourage the newcomers and also provide an environment that is not favoring them.

The cost of operation and the startup cost in the industry are ideally high. This is because the market requires high investment on modern technology as well as expertise. The search engines also need to be comprehensive, fresh and of high scale to avoid copying. This requires a tremendous amount of capital to start and also maintain thus acting as a barrier to new entrants. The fixed cost is also high making it rigid to compete with the large companies. Economies of scale are another barrier to entry of this market .This is because the existing firms have already exploited the scales, thus discouraging the incumbents (Mohr, 2019). Other barriers to entry of the market includes pricing, rules and regulations, along with technological advancement

Government policy is also a major barrier in this market. The policies of the government limit and also prevent competition from new firms. This is achieved through licensing and product testing regulations. New companies that fail to meet the requirements of the government opt to withdraw from the market and buy into to another market with few regulations.

Access to the major distribution channel is another barrier in this market. This is because the already established competitors have much control of the logical distribution channels due to the relationship which is long standing. Hence persuading the channels of distribution to accept the new products will require the new entrants to offer some incentives such as promotions, discounts or cooperative advertising. This increases the expenditures thus reducing the profitability of the incumbent firms

Generally the barrier to entry in this market includes the high startup cost, economies of scale for the existing firms, competition and also a high degree of control by the existing firms on raw materials. This barrier limits competition (Nurboja, 2017). This may reduce the level of creativity and also innovativeness in the market as the company will already have dominated the market hence no threats.

There are various macroeconomic indicators that show the performance of a company. This factors either results in the fall of a market or the rise of a given market. One of the factors is the stage of the business cycle. Google is in the growth stage. This is the expansion phase, which is characterized by increase in profits, increase in the demand of the products, increased sales, increased output and high level of employment. At this stage the prices of the factors of production increases with increase in output (Nurboja, 2017). The stage is characterized by a lot of innovations and advancement of the products.

Gross domestic products explain the rate of growth of the economy. In 2017 the GDP of US increased by 2.3%, 2.9 % in 2018 and 3.1% in 2019.This confirmed the US as the largest economy. The inflation rate in US has dropped from 2.1% in 2017 to 1.9% in 2018 and the 1.5% in 2019 as shown in the table below (Vermaat, Sebok, Freund, Campbell, & Frydenberg, 2017).The rate of inflation affects the quantity of goods and services that a company produces as well as the quantity those customers can purchase. The reduction in inflation rate has reduced the cost of doing business in the US and thus Google can earn more profit out of the favorable environment. :

Year	Inflation Rate
2016	1.26%
2017	2.13%
2018	1.9%
2019	1.5 %*

Increased rate of unemployment reduces the purchasing power of the customers. The businesses will suffer as the consumers will not purchase more goods and services due to lack of income. The rate of unemployment in the US has reduced from 4.9 in 2016 to 4.8 in 2017 and then to 4.4 in 2018 (Vermaat, Sebok, Freund, Campbell, & Frydenberg, 2017). The customers, therefore, have more income to spend, thus increasing the sales of the company. This has enhanced the Google’s growth due to increased revenue.

The federal fund rate for the US is at 2.25 % which indicates an economy that is healthy. This shows that the environment favors business deals. The current prime rate is at 5.5%. The federal rates and the borrowing rates will make it possible for Google to borrow money from banks and utilize it for business development. The loans will be easier to obtain and with favorable interests.

The demand for Google products has increased over time due to the increased internet activities. This is due to the effectiveness and the convenience of the products such as the search engine (Vermaat, Sebok, Freund, Campbell, & Frydenberg, 2017). Most of the products are also offered for free increasing the demands. Google products have the normal demand and supply curves as shown below.

Some of the recommendations that would help Google maintain their market shares includes developing merit products such as educating the public on matters relating to information technology, advancement in the field of information technology bringing about new products for Google, investment in product differentiation and also increase the customer focus to ensure that their customers are satisfied. Google should also focus on developing new products, embrace flexibility and also ensure that the company’s management is conversant with the current market trends as well as the evolving technology. Google should also increase their relationship with the customers. This will make it easier for Google to form their product consumers as their brand agents. Through implementations of these strategies Google will continue enjoying their large market share as it is currently.

References

Budiharjo, B. (2018). Google, Translate This Website Page-Flipping through Google Translate's Ability. Proceedings of the Fourth Prasasti International Seminar on Linguistics (Prasasti 2018). doi:10.2991/prasasti-18.2018.84

McDonnell, J. (2018). Economics for the Many. Brooklyn, NY: Verso Books.

Mohr, P. (2019). Economic Indicators.

Nurboja, B. (2017). Efficiency and Market Structure of the Banking Industry in Southeast Europe: Doctoral Dissertation.

Vermaat, M. E., Sebok, S. L., Freund, S. M., Campbell, J. T., & Frydenberg, M. (2017). Discovering Computers, Essentials ©2018: Digital Technology, Data, and Devices. Boston, MA: Cengage Learning.