Romeo Joson
2/3/15
Operations Management M3 A2
Google Company
Google Company is a multinational corporation that specializes in offering internet related service and products such as cloud computing, internet search, online advertising and software. Most of the company’s profits are derived from its online advertising service, AdWords, which works by placing advertisements near list of related search results. The company was founded by Sergey Brin and Larry Page both while students at Stanford University in 1998. Currently, Google is headquartered in Mountain View, California in the United States. Google has a chain of products, partnerships and acquisitions under its name such as Gmail email service, Google Drive cloud storage, Google Docs office suite, Chrome browser, the Android Operating System, Google Fiber broadband service among many others. Google has over 50,000 employees distributed in its offices in the United States and around the world. It ranked one of the largest and most profitable companies in the world while being one of the best companies to work for (Battelle, 2010).
Google has grown to tremendous heights since its founding in the 1990s to the huge economic giant it is today. The company is dominant especially in the information technology industry, and part of its success can be attributed to its business strategy. Looking at the company's range of products and their services, an underlying logic and structure in their business strategy can be formed. Google offers quality products and services such as video hosting, document management, cloud computing all at no charge. The company goes to extreme lengths to please its customers. Under this disguise to attract users is a strategy referred to as the ‘Four E’s’ strategy.
The first E in its business strategy is Earn. Google Company mainly earns through advertising with a whopping 95% of its revenue coming from their advertisement customers. Google sites are networks that the company uses to let a ‘closed loop' of their business customers interact with target users through advertisements. AdWords, which is Google's main advertisement service, distinguishes between users and customers. The service is loaded with contact information for customers to book advertisement slots. Though other services for revenue generation have been created such as storage charges, business applications, and YouTube channels, they only add up to 5% of the total income.
The second E is Entice. Google's every service and product offer has only one goal behind them, to attract as many users as possible. It does this mainly by making these addictive products as tantalizing as possible as there are cheap and quality utilities. Through attracting many users, Google is ever trying to reach its mission of creating the largest possible market for advertisements. Their advertisement business only prospers by ensuring frequent visits and longer duration of stay in their Google properties. Other than enticing new users, Google products also defend against competitors who may steal their usage time such as Facebook, Netflix, etc. For example, the creation of the Android Operating System was to defend Google's internet time against the iPhone.
The third E in Google’s Four E’s strategy is to Expand. Google understand how hard it is to find new customers frequently to meet the competition and demand in the market. Hence, its strategy is to expand or increase the leisure time. Through increasing this time, they ensure that users are spending more time in their products hence increasing duration of stay for the advertisers. An example is Google’s launch of self-driving cars. This ensured that users are free to relax while driving without worrying about fears of navigation. In their leisure time, they can then listen to Google music or work on Google Docs, etc.
The final E is Experiment. Google is always coming up with new products and services as well as upgrading present ones. The goal is to meet all possible users' needs as well as attracting users of other products or services. For this reason, Google Company facilitates experimentation through creation of experiment laboratories called Google X labs where their employees can carry and incubate their latest projects. Additionally, Google encourages their employees to use 20% of their work hours in personal projects that they are passionate about. Many of Google's wide range of products have been created and launched this way.
Google employs a wide range of competitive plans to ensure that their users do not divert to their competitors' products. One dominant plan is to ensure that its search engine continues to be the top in the world. To maintain this competitive advantage, Google builds its infrastructure of servers, bandwidth, storage systems and hardware that are constantly upgraded to support the fastest searches. In addition, the search engine is being upgraded to meet all user needs. For example, the creation of the Google Toolbar allows users to conduct searches without leaving their homepages. Google has also expanded to mobile phones with its creation of the Android Operating system ensuring its competitive advantage in the mobile sector too. While the costs are high, it still maintains its foothold against competitors such as Yahoo, Bing, iPhone, etc. Hence, users keep coming back to Google.
Google's internal assessment can be done using a SWOT analysis. This analysis entails looking at the company's strengths; its weakness, new opportunities and finally threats that the company faces.
Google Company boasts of a number of strengths over the years. A dominant strength is its open sourced products and services. Many of Google's products can be used with any mobile device or operating system. This openness is the key to why many of their products are leading in their markets. A second strength is the company's financial situation. Google is one of the most profitable companies in the world with nearly $11 billion profits that is 22% of their total earnings. With $48 billion cash and only $7 billion debt, few other companies can claim to be financially strong enough to compete with Google. Another strength is the company's wide access to internet users worldwide. Google has about 79% access to the total search market users in desktops and 89% of search market users in mobile phones. This makes up a large market where the company can promote and sell its products. Google also has strong patents portfolio. Google is one of the top businesses worldwide in terms of the number of patents added. Gaining of intellectual property such as Google's acquisition of Motorola adds a strong advantage over its competitors. Google also offers a level of product integration that cannot be compared to any other tech organization. Their products are brilliantly integrated with each other forming an ecosystem that serves to enrich customer experience that finally encourages use of their products. Their products can be used in almost all platforms hence can also be integrated with other company's applications. Finally, Google's culture of innovation is a strength that has served it well for many years since its foundation. It is ranked one of the most innovative companies in the world (McCue, 2012). The company offers new unique products year on and many more in development stages.
On the other hand, there are a number of weaknesses that drag Google down. One is its reliance on only one source of income, advertising. While, in the short run, the income from online advertisements is substantial to the company, in the long run the company may experience declines in income. This is because the market for personal computer is declining hence decrease in the number of internet searches through this. Also, it is hard to monetize mobile phone users who will soon represent the highest market for online advertisements. A second weakness is the presence of many unprofitable products. Google's release of a wide range of products and services also adds to the bulk of ones that add little or no value for the company therefore only make losses. Finally, there is an increase in the number of patent litigations against the company over breached patents or intellectual properties. These litigations are not only costly but distracting and time-consuming at the expense of making innovations.
There are many opportunities available for Google. One opportunity is the growing number of internet users particularly in mobile phones. The company can seize this opportunity by making innovations that would better display advertisements in these mobile devices hence increasing their income. Another opportunity is in obtaining new patents through acquisitions of companies with strong patents portfolio. For example, its acquisition of Motorola led to obtaining of over 15,000 more patents. More acquisitions like this should be made. There is also an opportunity in the electronics industry. Google has already launched a couple of electronic devices such as tablets, notebooks, and smartphones. Google could strengthen its entry through introducing more devices for more customer groups resulting in tighter integration of the company's software products. Finally, Google's fiber cables that offer 100 times as fast speeds compared to current providers should be heavily invested on and marketed as the company would have virtually no competition in that sector.
Finally in the SWOT analysis are the threats Google faces. One outstanding threat is the growing number of mobile phone internet users. It is hard to monetize these users as there is less space to place advertisements compared to personal computers. Increased number of mobile phone internet users means a decrease in the number of personal computer internet users hence decline in advertisements that would eventually lead to decline in income growth for Google. Another threat is competition from Microsoft, that is continuingly gaining a share in internet searches. Microsoft's introduction of Windows operating systems for mobile phones also curves out a considerable market share in the mobile operating system market. Both developments in the two fronts are a direct challenge to Google's search engine and Android OS.
The external environment of Google can be analyzed by looking at four areas around its business vicinity: political, economic, socio-cultural and technological. Google plays a significant role in the political environment through its search results and video sharing site, YouTube. YouTube, for example, allows politicians and their parties to conduct effective and cost friendly campaigns and communication methods. The search engine is constantly used to find information about political activities (Catone, 2007). In the economic environment, Google is unique in that unlike many other companies, the demand for its products is only but increasing as a result of more businesses needing advertising services. Whether the economy stays the same, changes for the worse or the better, the profit levels for Google are likely to increase still since most businesses opt for online advertising. Google's socio-cultural environment is dependent on the number of internet users that a region or a country has. The greater the number of internet users, the greater the potential for demand for their services from these regions or countries. Consequently, Google has a low percentage of users in fewer developed regions such as Asia and Africa where a small number of the population has access to the internet regularly. The technological environment today is such that people do not have to use traditional desk computers to access the internet. On Google, this means that there is an increased frequency of users in its technological environment while also strong competition from Facebook, Apple and other search engines due to the popularity of socio-networking and slow Google response to technological developments in the mobile phone sector.
Most companies follow a traditional organizational structure that uses a vertical approach where decisions are made at the top most levels, and consequent orders sent down the organizational hierarchy. In Google, however, a cross-functional organizational structure is used. This structure uses a horizontal approach, and it is more of a team approach to management. A standard hierarchy is used where at the topmost are professionals who handle the administrative work for the company. At this level, we have the Chairperson and Vice Chairperson, CEO, Chief Information Officer, Senior Manager, Administrative Head among other senior-most positions. The next level in the hierarchy is Executive company level that consists of professionals who handle all the firm's executive duties. These are team leaders for their various departments and handle professionals under them. This level includes the Network Architect, Chief Marketing Officer, Chief Sales Person and Business Analyst among many other departmental heads. Finally, we have the Operational level that consists of professionals who handle pre-specified areas as per their expertise. They include application engineers, database commissioner, help desk technician, software programmer, etc.
Despite having a standard hierarchy, employees have substantial leeway to engage in projects without much oversight. Google encourages a culture of forming teams among themselves to handle specific projects as per the team’s choice. The team may then appoint a team leader who then presents the project, ideas or suggestions during the frequent meetings that the employees have directly with their top executives. In this way, decisions are free to be made by any Google employee. Additionally, the company has a Chief Culture Officer who ensures that this team culture and other relevant cultures are well adhered to by the company heads.
Google is known by many for having an informal and somewhat haphazard business process design. This opinion is because of the wide range of random product releases yearly from blog search engines to browsers to mobile operating systems. However, there is a simple design process and reasons for its simplicity. The business design process in Google starts with the formation of a team of the employees. There is no required number of members and additionally, these members are free to join other teams, defect or leave at any time. These team members come up with an objective say designing a project. Depending on the objective, the teams follow different processes in order to finally meet that objective. For example, if a team decides to start a project of creating a product such as a browser, the team itself should oversee the whole process which typically involves carrying out extensive researches, consultations and discussions regarding the qualities of the product. The team that should consist of its designers then implements the discussed design structure and releases its prototype in Google Labs. From there, the team may alter the design depending on the feedback they receive from the public. There are two reasons for this simple business process. One is to allow as many releases as possible in order to increase the probability of finding ultimate success on one of them. The second reason is to avoid disconnect if the projects were handled by different departments at different steps. This disconnect would have led to the final product, not being the originally planned one.
Google Company is regarded as one of the most ethical companies in the world. Despite this, the company faces a number of ethical issues that face the management of the company. One ethical issue has been displayed on pages and sites that are offensive in particular regions. For example, the Chinese government publicly portrayed its displeasure of pro-democracy websites and further wished that Google censor such sites. To avoid these occurrences, Google should conduct extensive research on areas where it operates and reach prior agreements with the region’s administrations about its operations in order to avoid future conflicts. Another potential ethical issue is intrusion of privacy. Google gathers a lot of data from people who use its search engine and uses it to improve corporate efficiency. However, many find this an intrusion of privacy and some have even gone to court to sue the company. To remedy this, the company should carry out extensive civic education to the extent at which it uses the gathered data in order to reassure users that their personal information is safe and will be disregarded after use.
References
Battelle, John( 2010). The Birth of Google. Wired.
McCue, T. (2012). 50 Innovative Companies in the World. Forbes.
Catone, J (2007). How Google is Changing the American Political Landscape. Read Write Web.
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