Analysis of Google Inc
This coursework is related to the analysis of Google Inc., one of the world's largest corporations investing in Internet search, cloud computing, and advertising technologies. Google maintains and develops a number of Internet-based services and products. Google is a company of technology sector with a focus on Internet search and online advertising. Main revenue is generated by the search engine and advertising for desktop computers and tablets. The research also reveals threats and advantages of the corporation. The only important possible threat is improving and expanding the Legal Service. In general, Google’s advantages are strong and promising, since the company is in a stage of maturity and shows stable temps of development. The company's strategy involves the expansion of activities to other promotional activity segments and mobile industry. One of the main drivers of growth may be an increase in financial flows from new lines of business. Comparative analysis shows no significant discount or premium to the market.
Keywords: Google analysis, activity threats, activity advantages
Google Inc. (NASDAQ: GOOG) is the U.S. company, which owns one of the world's most popular search engine. The firm is registered in the United States; registration number is 77-0493581. Corporate address information is as follows.
Type of Google Corporation’s business activity is providing a variety of services in information, particularly, assistance in finding information on the Internet. The main profit the company gets is from giving advertisers the possibility of accommodation for a fee of web advertising, which corresponds to the information displayed on the current page. The company is private by proprietary form. Google is a public corporation from the legal position point of view. On August 19, 2004 the company started trading its shares on the NASDAQ American Stock Exchange market. According to the company’s supplies of capital and their control, Google should be referred to the category of a national company. The main shareholders are the company’s founders, Eric Schmidt, Sergey Brin and Larry Page. The company is registered in the United States.
Google as a company should be attributed to the production type as the development of new products mainly is centrally planned, however, all of its offices are involved in the process of development because of the specificity of the products the company releases. Thus, products, developed in one of the offices, become available in all countries. Advertising is the activity that generates the bulk of Google profits; standards for its implementation are also determined centrally.
Since intra-management is implemented in a holistic manner, Google should be attributed to the type of global companies. The company's offices, mainly its subsidiaries, are located in more than forty countries, including Canada, the US, Switzerland, UK, Germany, Italy, Japan, China, Hong Kong, India, UAE, Russia, etc. (Google, n.d.). Almost all offices are involved in both engineering development and sales. Fundamental researches are conducted in the offices of the United States and Switzerland, while other countries mainly develop simple products and those intended for the local market.
Google was established on September 7, 1998 by two Stanford University students, Sergey Brin and Larry Page. The following years showed the extremely rapid growth of the company and its popularity among Internet users, as a result of which it was repeatedly awarded.
Series of Google acquisitions began in 2003, when the company bought a competing Applied Semantics company, whose products later became known as AdWords and AdSense trademarks. Later, Google bought the Pyra Labs Company, the developer of personal publications, and in 2004, acquired Picasa, based on technology, on which the eponymous service storage and image processing was later built. In March 2005, Google purchased Urchin, which is a tool for tracking and receiving statistics on web sites; this technology has become the basis for Google Analytics (Greogoriou & Renneboog, 2007). At the same time, the company has acquired AOL, Current Communications Group, Android, and Phatbits. In 2006, Google bought more than 10 companies, the largest of which was YouTube. In 2007, Google acquired another 16 companies such as Xunlei, Trendalyzer, Marratech, Image America, etc. In total, Google has acquired 102 companies (Jackson, 2011). Thus, Google is growing both by opening new offices and their own development, and through acquisition of other companies.
Supply and Demand Conditions
The main activities of Google are to provide search services on the Internet and other online services, as well as place contextual advertising, which also stands for a major part of corporate profits. Google Corporation products are divided into paid and free forms. The first is a service for placing advertisements on the Internet, based on Google AdWords and Google AdSense technology, as well as services for optimizing the websites. The second group is divided into products related to the search of information with online communication and information exchange, the use of mobile devices and improvement of the computer efficiency. Google also provides access to some new developments (Laboratory of Google) and some software code (Open Source). The company allocates 10 of its major products: Google Desktop, Gmail, Google Finance, Google Enterprise, Google Web Search, Google News, Google Earth, Google AdWords, Google AdSense and Google Maps. (Google, 2013).
Google Products’ Price
As for the paid products, the advertising technology Google AdWords sponsoring links displayed in the search results on the Internet and Google AdSense ensuring that the advertisements are placed on websites of the companies participating in Google Network contributed 99% of all corporate earnings in 2006 and 2007 and 97% of revenues in 2008; the revenue of Google in 2008 exceeded U.S. $ 21.7 billion. As in other systems of contextual advertising, the customer using Google AdWords pays transitions to the site, i.e. clicks on ads. This means that no matter how many people see advertising, the client still pays only for those referring to the site. The cost of each transition is defined by an auction in real-time. Therefore, the price of ads is not constant but ever-changing. Each advertiser indicates the maximum price he/she is willing to pay for a click on ad. If the price of a competitor is higher, then with the same CTR, Ad Rank and Quality keyword his/her ad will show one position up. Price for one keyword may vary in different regions. Google counts advertising by the number of times the ad has been shown, but in this case the advertiser pays for clicks. System is more beneficial to show those ads that will get more clicks. Not enough experienced advertiser is guided by a traditional approach to the appointment of an advertising budget since it appoints the amount that he/she is willing to spend per month.
As another example, Google Inc. has lowered the price for storage to users and businesses on their servers, Google Drive cloud storage. Cost per month of service plan to store 100GB was reduced by 2.5 times, from $ 4.99 to $ 1.99, and the tariff on 1TB decreased to 5-fold, from $ 49.99 to $ 9.99 (Bader, 2014). The company admitted that infrastructure modernization allowed them to low the prices. In addition, here is a new tariff plan: for $ 99.99 the company promises to allocate space size of the 10 TB.
By purchasing any tariff plan, the customer receives a united cloud for files (Drive), mail (Gmail) and images (Google + Photos), while this customer still has 15 GB of free volume. If a customer already owns Drive, it will be automatically transferred to the new better rates without additional charge. By reducing the cost of storage Google hopes to attract additional number of users of competing services. The company follows the strategy that it once followed after introducing Gmail; by highlighting a huge space for e-mail messages it won multiple Yahoo! and Hotmail customers’ loyalty.
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The scale of production of free Google products can be assessed by the company's market share of search queries (63.7 % in the U.S. and 64.1% in the world of Google share increased by 11% (Google, 2008). Also, along with the growing number of new products, such as Google Chrome Internet browser, Gmail and Google Maps, the number of users is constantly growing as well.
Costs of Production
Material and technical base of Google is enormous enough. The company prefers to publish minimum of information on this issue; Google's annual report refers only to the real state in the U.S. and beyond its borders (Google, 2008). In addition, information about the company's offices is also publicly available (as already noted, a total of 70 in 40 countries). Google considers its employees to be its main asset; on May 15, 2014 the number of employees was registered to be nearly 50,000 people (“Google is out to prove how diverse its employees are”, 2014). As for the technical base, according to the unofficial data, in only one Google headquarters in Mountain View the number of computers is large enough to store all available Internet data. Furthermore, approximately every 10 seconds one computer is out of the system that does not affect the operation of search engine. Unfortunately, more detailed information about the material and technical base of Google is non-disclosed, and access to it is limited.
The main Google tool to interact with other businesses is Google Network; firms enter into agreements with the Google Corporation to place the latter on the first web pages of different advertising options of technology Google AdSense and subsequently receive payment of the proceeds from advertisers (Google, 2008). In addition, many companies, such as a leading online directory of UK, Virgin Net, have an agreement with Google about using its search engine (Google, n.d.). In addition, it should be noted that Google partnered with various companies providing information on its services; the range of Google partners includes publishing houses, mapping companies, news agencies, etc..
Google Competitive Advantage
Intra Google ties play a special role, because it is through them that the stable growth is achieved. In connection with the specific industry, Google products can be designed in the same office and used in another or all at once, which indicates the importance of interaction between different offices. Thus, intra-based communication for developments’ transmission from one subsidiary to another is the foundation of Google activities.
As already noted, Google is a global company that is also confirmed by its position within the economy of the United States. In 2008, Google's revenue was $21.8 billion (Google, 2008). As noted earlier, Google refers to the services sector and retail trade on the Internet (Internet Services and Retailing), due to which for the past two years the company has taken unconditional first Fortune 500 (CNNMoney, 2008). Its nearest competitor, Amazon.com holds 130th place at the largest U.S. corporations ranking. As for the other search engines, the closest pursuer of Google, Yahoo is only at 345th place.
Google position in the world economy is somewhat weaker than its role for the U.S. economy. According to Forbes, Google is not among the fifty largest corporations in the world; its revenues in 2014 amounted to 12.2 billion U.S. dollars (“The world’s biggest public companies”, 2014).
On the basis of these data, one can see the dynamics of the position of Google in the world economy. In 2011, as in previous years, there was a steady growth of the corporation, which resulted in the elevation of its position in the Fortune 500.
Further, the researcher discusses the environment the company operates in. External environment includes the factors that are not controlled by the company; it must adapt to them. The external environment is divided into micro-and macro environment. The macro environment of Google in particular is influenced by the following factors.
- Economic situation; Internet is the sphere of the company’s activity that weakly depends on the structure of the economy. Nevertheless, the overall poor economic situation may affect the company's share price on the stock market, which immediately affects the state of the corporation.
- The political situation; Just like any organization, the Google Inc. is affected by the political situation in the world. Changing legislation has long been considered one of the greatest stumbling blocks in the development of strategies.
- Socio-cultural situation; A human cannot imagine life without the Internet. In this regard, he/she is constantly in need of targeted, rapid, systematic search for information. However, a few decades ago, the Internet was just a dream. Now a global network is a part of the culture of modern society, and while it is so this factor will only contribute to the development of the company.
- Physiography; Google Inc. is a multinational corporation with multiple offices around the world. This territorial coverage can more fully inquire for any expectations of a specific consumer.
- Scientific and technological development; One of the values of the company is the belief that the ability to meet a variety of needs for information is limitless. Scientific and technical development is a factor that helps corporations, thanks to an amazing ability to track innovative inventions, to keep up with the times and hit the consumer divining his/her wishes.
- International climate; Through its worldwide operations, the company monitors the international situation quite carefully, as the success of Google Inc. lies precisely in its multi-ethnicity and the prevalence in the world. Therefore, the company should not lose their counterparts in other countries because of possible international conflicts, etc.
Microenvironment Factors Prove Market Share
Speaking about the microenvironment, the following factors should be noted.
- Competitors; The company owns ‘Google’, which is the first search engine by popularity (77.04%) in the world, processing $41 billion 345 million queries per month, which stands for 62.4% of market share. In this regard, the competition is not as significant this factor, although in some markets Google is does not occupy such an impressive position.
- Consumers; The company is oriented on the audience of all ages and levels of affluence.
- State; Meeting the requirements of all the states where Google Inc. operates is rather complicated. Due to the nature of the proposed products, the company’s contingencies that may lead to litigation are possible.
Market Google Operates In
The whole world is the market Google operates in. Therefore, the researcher cannot state that it is mix economy market or state-regulated market. However, the best market for Google is west model market, though even here the company may face difficulties. This is due to the undeveloped Internet law regulations. The local communities accept Google as an online giant, which has no barriers and is able to expand at the same pace as the Internet itself. At the corporate level Google defies everything that even remotely relates to the scope of its business. Thus, in 2008, the company led the mobile phone market with its own Android product, which is the direct competitor to previously submitted iPhone smartphone by Apple; its Chrome browser is designed to intercept customers of the Microsoft Company. For all these reasons, it should be noted that, even having achieved considerable success, the Google Inc. develops further, becoming more and more successful.
Here is a list of Google opportunities on the basis of analysis of the external environment:
- Increase of Internet users in the world;
- Increase of the amount of advertising;
- New acquisitions
- Development of new markets
- Increasing the share of the international market
- Improving technologies
- Weak competitors
- Association with a successful company
- Expansion to other non-online markets (log creation, channel, etc.).
The method of positioning opportunities in each specific matrix features in order to evaluate those opportunities (Table 1).
Influence/Outcome Matrix of Opportunities for Positioning the External Environment
|High||Increase of Internet users in the world||New markets||Advertisement growth|
|Middle||Improving technologies||New acquisitions||International market share|
|Low||Association with a successful company||Expansion to other non-online markets||Competitors’ weakening|
Similarly, after the work is done, there are a number of environmental factors that have a negative impact on the company, i.e. the list of threats:
- Emergence of new competitors;
- Strengthening of old competitors;
- Google Brand gradually dissolves in the names of its acquisitions;
- More personalized and detailed search opportunities will lead to more problems with the law;
- Scale of Google can create problems for updating or integration of new search technologies;
- Google can get mired in litigation with respect to the fundability of the information system;
- Competitors can integrate Google search engines into their software;
- Loss of market share due to the association of competitors;
- International conflicts.
Table 2 shows a threat matrix.
Influence/Outcome Matrix for Positioning the Threats of the External Environment
|High||The law issues||Association of competitors||Strengthening of competitors|
|Middle||Litigation||Brand dissolving||New competitors|
|Low||Update issues||Search engine integration to software||International conflicts|
Matrixes given in the form of Tables 1 and 2 can detect only those features that are important for the organization, and it is necessary to use the threats that pose the greatest danger to the enterprise.
Recommendations and Conclusion
In general, Google does not have so many threats, because the company owns the first by popularity Google search engine (77.04 %) in the world, which occupies a huge market share (62.04 %) , however, the company has to develop further proving the existing services and products and creating more universal tools for web surfing and advertisement.
Google Inc. is concerned about the fact that the company is losing its precious corporate culture. Due to the huge success, the main office of the corporation has become a kind of ordinary business center having been a cozy place to work in in the past. In this regard, one of the possible recommendations could be the revival of the spirit of the past while maintaining forward motion.
Giant growth of tablet market, observed during the last few years, has provided a new platform to the company for advertising and sales services. The Google search engine attracted nearly 900 million monthly users, and the acquisition of YouTube allowed it to implement a new platform for online advertising placement. All these services are actively developing and gaining more popularity. Furthermore, the futuristic design events such as Google Glass are the highlight of what the companies lack claiming a competitive role. Such products do not generate any profit at the moment, but indicate that the company is looking far ahead and is always seeking for ways to grow and strengthen its business.
The researcher suggests that the main challenge Google may face is improving and expanding the Legal Service, because the only thing, which may hold Google back, is endless lawsuits, most of which are just hypochondriac claims of the average consumers. Thus, Google is a successful growing global company with many offices worldwide. Successful policy, along with the development of its own departments, enhances the range of products of the corporation. Google Inc. maintains an ongoing relationship with its partners and provides its customers with high quality services, which are in constant demand. In general, the researcher believes in further fairly stable and rapid growth of Google in the medium term even in terms of a crisis, making it an attractive investment target.