1BUSINESS STRATEGIC ANALYSIS Executive summary The aim of this report is to discuss about the major business strategies being initiated by Google in their global operation. It is identified that they are practicing diversification strategy, industry interdependency strategy, differentiation strategy and strategic alliances. In addition, the external business factors relevant for the business of Google are also identified and they are reviewed from the perspective of the business strategies of them. The industry competitiveness factors are also reviewed in the line of the business strategies of Google. It is identified that their existing business level strategies are well aligned with that of the major external factors. The internal strategic competencies of Google are also forming the strategic intent of Google. Lastly, it is identified that the existing business strategies of Google are having a few minor gaps. A few recommended steps are discussed in this report on the basis of these gap areas in this report.
2BUSINESS STRATEGIC ANALYSIS Table of Contents Introduction......................................................................................................................................3 Identification of the business level strategies of Google.................................................................3 Diversification strategy................................................................................................................3 Strategic alliances........................................................................................................................4 Industry interdependence.............................................................................................................4 Generic strategies.........................................................................................................................4 External environment analysis.........................................................................................................5 Political and legal factors.............................................................................................................5 Economical factors......................................................................................................................5 Technological factors...................................................................................................................6 Porter five forces analysis................................................................................................................6 Bargaining power of the buyers...................................................................................................7 Bargaining power of the suppliers...............................................................................................7 Threat of new entrants.................................................................................................................7 Threats of substitutes...................................................................................................................8 Competitive rivalry......................................................................................................................8 Resource based view analysis..........................................................................................................8 VRIO analysis..............................................................................................................................9 Strategic fit analysis.......................................................................................................................10 Strengths....................................................................................................................................10 Weaknesses................................................................................................................................10 Opportunities.............................................................................................................................11 Threats.......................................................................................................................................11 Marketing warfare strategies.........................................................................................................11
4BUSINESS STRATEGIC ANALYSIS Introduction In the current business scenario, it is important for the contemporary business entities to align their business strategies in accordance to their business environmental factors. This is due to the reason that if the business strategies of the organizations cannot get matched with the environmental factors, then their effectiveness will be affected and will ultimately affect the business viability (Drnevich and Croson 2013). In view to this factor, majority of the leading businesses are initiating multiple choices of business level strategies to get aligned with different environmental perspectives and to deal with the diversity in the current market affairs. Thus, the more coordinated will be the business strategies of the entities, the more will be their probability of getting succeeded in the market. Speaking of the leading multinationals in the current time, Google is the frontrunner with having their presence in almost every country across the world. They are also one of the top 5 technology companies in the world, which shows their intensity of operation currently. In view to their extensive business operations, they are also following diverse number of strategies. Each of their strategies is being designed in enhancing their vertical and horizontal growth in the market (Bharadwaj et al. 2013). However, it is also important to review the effectiveness of the key business strategies being followed by Google in order to identify their utility in the real world situations. This report will discuss about the key business strategies being initiated by Google along with reviewing their alignment to the business environmental factors. This will involve a number of strategic tools to have the proper understanding about the gaps between the desired strategic intent and practical outcomes. On the basis of the identified gaps or in order to enhance the effectiveness of their existing business strategies further, a few recommended steps will also be discussed. Identification of the business level strategies of Google Diversification strategy Prior to the analysis of the effectiveness of the business level strategies being followed by Google, it is important to identify the major strategies being initiated by them. It is reported that
5BUSINESS STRATEGIC ANALYSIS Google is following diversification strategy in terms of their offered products and services. With the help of this strategy, they are offering different services such as search engine, mobile operating system, internet browsers and email services. On the other hand, in terms of the product diversification, Google is offering mobile devices (PIXEL), glass and smart speakers and watches (Chen et al. 2014). This is helping them in extending their business operation in different business sectors and catering to larger customer segments. Strategic alliances Strategic alliances are one of the most effective and efficient ways of expanding the business in different sectors in minimal time. In the case of Google, they have acquired a number of entities in relation to their growth policies. For instance, Google acquired SkyBox in 2014 to have the access to the satellite technology and to enhance the quality of their Google map services (Jiang et al. 2013). In 2007, they have acquired DoubleClick to improve their online advertising business. However, their major and most famous acquisition is the Android operating system back in 2005. This helped Google to enter in the growing smartphone market and change the existing trends. Currently, Google powered Android operating system is the market leader across the world. Industry interdependence This business level strategy being initiated by Google is quite unique and distinctive due to the reason that there is no other evidence of such strategies by others. According to this strategy, Google is positioning itself as the backbone of the original Equipment Manufacturers (OEMs) and others (Edelman 2015). For instance, almost all the smartphone manufacturers in the world expect Apple are depending on the Google powered Android operating system. On other hand, Google AdSense is the most popular online advertising tool for the business. Hence, according to this strategy, Google is not only serving to the end customers but they are also extending their business operation through the business to business model approach. Generic strategies Apart from the expansion and specific sets of strategies being followed by Google, they are also practicing generic strategies including differentiation. In terms of the differentiation
6BUSINESS STRATEGIC ANALYSIS approach, the innovative factors of Google are helping them to offer distinctive experiences to the users as compared to their competitors. For instance, search results of Google are more accurate and extensive compared to that of Yahoo and Bing (Banker, Mashruwala and Tripathy 2014). They are also following differentiation strategy in terms of hardware also. For instance, the features being offered in their Pixel smartphones and Google Glass are unique and one of the kind in the global market. This is helping Google in initiating intensive growth strategy by means of distinctive value propositions to the customers. External environment analysis Analysis of the external environment is important to the have the understanding about how the business strategies of Google are aligned. PEST factors will be discussed in the following section. Political and legal factors As discussed earlier, Google is having their presence in almost every country across the world. Thus, the differences in the political factors in each of the countries are being faced by them. In this case, the industry interdependence approach of Google is effective in dealing with different political factors due to the reason that majority of the political challenges being faced by Google are in terms of investing and operating in the particular host country (De Villa, Rajwani and Lawton 2015). Thus, Google is not directly operating in the countries with having complex legal and political scenarios, rather through their industry interdependencies; Google is providing their services by third party vendors. For instance, smartphones in any countries are using the Android operating systems and this is helping Google in generating revenue even without having their physical presence in the particular region. This is also helping Google to prevent the political and legal challenges to be faced by investing or operating directly in a particular country. Economical factors Differences and fluctuations in terms of economical factors are being tackled with the diversification strategy of Google. This is due to the reason that different regions are having different sets of economical conditions and uniformity in the product and service strategy will
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7BUSINESS STRATEGIC ANALYSIS not be fruitful to serve all the markets in similar category. Thus, with the help of different products and services, Google is meeting the different economical scenarios across the world. For instance, Google Pixel and Glass are available majorly in the developed and developing countries while their email services and search engine are available across all the countries. The diversification strategy of Google in terms both price and offerings is also helping them in dealing with the different economical conditions (Lai, Lin and Lin 2015). This is due to the reason that some of their offerings are premium such as Pixel and Glass while the search engine and online services are majorly being offered in more competitive price points. This is also helping Google to deal with different economical conditions in the global market. The intensity of the competition is also getting fended off by the diversification strategy of Google due to the factthatwithhavingmultipleproductsandservices,theyarecompetingwithdifferent competitors in different business sectors (Zinovieva et al. 2016). Hence, the risks involved in facing similar competitors in the single business sector are not evident for Google. Technological factors Google is a technological firm and thus the technological factors are having more relevancies on the business operation of Google. However, the major challenges in terms of technological factors are rapid changes and innovation. Google is competing in a highly competitive market and they are in need of rapid development of their technological offerings in order to stay competitive in the market. In this case also, the diversification strategy of Google is well effective due to the reason that intensity of technological development is different in different business sectors (Saviotti 2018). For instance, challenges to be faced by Google in terms of their hardware business can be adjusted by their business in online sector. In addition, the growth strategy of Google in terms of acquisitions is also effective for Google in dealing with the technological factors. This is due to the reason that the recent past history of Google shows they have acquired technological firms only. It is helping them to get the access to different technologies and offering more innovative products in the market. Porter five forces analysis Apart from the recent external factors, it is also important to review the effectiveness of the business level strategies of Google in regards to the dealing with competitive forces. In this
8BUSINESS STRATEGIC ANALYSIS case, the Porter five forces analysis will be used to identify the major competitive factors and the extent to which the business level strategies of Google are dealing with them. Bargaining power of the buyers Bargaining power of the buyers is low for Google due to their extensive presence in the market. Google is offering a number of necessity services to the customers and there are no close competitorsofthem.Forexample,searchengineservicesofGooglearehavingdistant competitors in the forms of Yahoo and Bing. Thus, in this case, the diversification strategy of Google is effective in dealing with the bargaining power of the buyers. This is due to the reason that diversification strategy has enabled Google to cover the majority of the business sectors with their services and products and reducing the viable options for the customers (Gaudin 2017). In addition, the strategic alliance strategy of Google is also helping in restricting the bargaining power of the buyers due to the fact that acquisition of the leading technological firms is reducing the competition for Google as well as reducing the options for the buyers. The differentiation strategy of Google is also contributing in reducing the bargaining power of the buyers due to the reason that distinctive value proposition is also not getting offered by their competitors and thus buyers are having fewer options. Bargaining power of the suppliers Bargaining power of the suppliers for Google is also low due to the reason that they are less depended on the external suppliers. Majority of the services and products of Google are developed in-house and presence of external partners is limited. In this case, the diversification strategy of Google is effective due to the fact that with this strategy, they have emerged as the leading technological firm and enough brand value to take on their suppliers (Heese 2015). Moreover, with the acquisition strategy, the available option for the suppliers is less other than the Google. Threat of new entrants Threat of new entrants is low due to the reason that new entrants will not be able to match theeconomiesofscaleandmarketpresenceofGoogle.Thiswillrequirehugecapital investments and expertise to take on Google. This advantage of Google is being gained with their
9BUSINESS STRATEGIC ANALYSIS extensive diversification, acquisition and industry interdependency strategy. With the help of the extensive diversification strategy, Google is being able to create huge exposure in the global market, which is difficult for the new entrants to catch up (Luttgens and Diener 2016). On the other hand, with the help of the industry dependency strategy of Google, majority of the entities from different sectors are connected with the services provided by Google. Thus, it will be difficult for the new entrants to cater to these customers, which are already covered by Google. Threats of substitutes Threat of substitutes for Google is moderate due to the presence of their competitors in the market. This is due to the reason that threat of substitutes for Google in the online service sector is low while the threat of substitutes for Google in the hardware sector is high. For instance, Google is the market leader in the online services such as search engines, browsers and email services and their competitors are trailing much behind even though they are offering the same services. This advantage is mainly being gained by Google due to their differentiated approach due to the fact that the distinctive features, which are innovative and more productive, are helping to attract the major section of the market. Moreover, this strategy is also helping Google in offering better value proposition to the customers over their competitors. However, it should be noted that the threat of substitute is high in the case of hardware business of Google. For instance, Google Pixel smartphone is having huge competition in the market from other brands along with their other gadgets. In this case also, the differentiation strategy of Google can be effective due to the reason that the distinctive will be the value proposition for the customers, the more will be the potentiality of fending off the threat of substitutes. Competitive rivalry Competitive rivalry for Google is high considering the number of entities operating in the intensely competitive scenario. However, the diversification strategy of Google along with their differentiation and acquisition strategy is helping to fend off the competitive factors along with acquiring the major market segments. Resource based view analysis
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10BUSINESS STRATEGIC ANALYSIS Apart from the business environmental factors, it is also important to review the alignment of the business strategies of Google with their available resources. In this case, the resource based view will be used. According to this model, the major tangible resources of Google are Physical and financial resources while the intangible resources of Google are their patents, human resources, technological resources, trademarks and brand value. VRIO analysis ValuableRarityInimitabilityOrganizational capability Financial resources Human resources Technology Brand value Trademarkand patent According to the above VRIO analysis, all the available resources of Google are valuable in nature and this is further getting enhanced with their initiated strategies. For instance, the use of the financial resources in developing newer innovations is adding value along with acquiring the other firms, which is denoting the organizational capability of Google. In addition, the skills and expertise of the human resources are adding value to the process of Google. Moreover, their individual skills and expertise cannot be imitated. The effective management of the diversified businessofGooglewiththehumanresourcesfromacrosstheworldisdenotingthe organizational capability of Google in managing them (Hsu and Ziedonis 2013). Technology is also adding value in terms of adding more innovative value to the offerings. Moreover, with the acquisition of other technological firms, the organizational capability of Google is further getting enhanced. The brand value of Google is adding value by offering the customers the sense of trustworthiness. The diversification strategy of Google is further increasing the brand exposure for Google in the global market. It is difficult for the other competitors to catch the brand value of Google considering their level of market penetration.
11BUSINESS STRATEGIC ANALYSIS Strategic fit analysis Strategic fit analysis is important to determine the coordination of the business level strategies of Google with that of their internal capabilities and limitations. In this case, SWOT analysis will be involved to identify the key internal factors of Google and they form the basis of their strategies. Strengths One of the major strengths of Google is their brand value as the brand name of Google along with their logo is one of the most recognized in the world. Thus, it is easier for Google in introduce new services and products in the market leveraging the brand value. This strength is forming the basis of the diversification strategy of Google by which different products and services are offered using the Google brand name. Another major advantage of Google is the higher penetration in the smartphone operating system sector where they are controlling the majority stake. The acquisition strategy is well fitted with this strength due to the reason that acquiring the Android in 2005 helped Google to penetrate in this sector (Ahmad et al. 2013). Lastly, the access to innovative technologies is strength for Google and based on this, the differentiation strategy is being initiated. Thus, it can be concluded that all the major strategies of Google are fit with their strengths. Weaknesses OneofthemajorweaknessesforGoogleistheiroverdependenceontheonline advertising. This is due to the reason that currently, the major revenue for Google are coming from their online adverts only. Thus, even though they have diversified their business in different sectors, revenue generation is not at proportion. Another weakness for them is lack of control over the flow of information in their online services and this caused number of incidents (Yuan, Wang and Zhao 2013). In this case, their strategic alliance strategy will be beneficial due to the reason that acquiring any firm with having the technology of controlling the online flow of information will help Google to gain the access. Opportunities
12BUSINESS STRATEGIC ANALYSIS One of the major opportunities for Google is diversification on newer sectors. This is due to the reason that considering the huge brand value of Google, diversifying in new sectors will further increase their business potentiality. The diversification strategy of Google will be beneficial for them due to the reason that it will help them to ensure more business revenue and volumes. In addition, Google is also having the opportunities in terms of providing cloud services. In the recent time, the cloud services are getting more popular among the business fraternity (Garg, Versteeg and Buyya 2013). In this case, the acquisition strategy and industrial interdependencies strategy will be effective for Google due to the reason that acquiring the firms with having expertise in cloud technology will serve the purpose for Google and initiation of the industrial interdependency strategy will help Google to introduce business solutions with cloud technology. Threats Emergence of the competition will always be the threat for Google due to the reason that there are number of technological firms such as Microsoft and Apple are operating in same sector. These firms are having the capability to compete with Google. Thus, the diversification strategy of Google will be effective in mitigating this threat due to the reason that the more diversified will be the market presence of Google, the less will be the threat of competition in the same sector. Another threat will be in the forms of government regulations due to the reason that increasinggovernmentregulationsandinterferencecanposedifficultiesinthebusiness operation of Google (Stevens, Xie and Peng 2016). They have already faced this issue in operating in China. In this case, their industrial interdependency strategy will be effective due to the reason that if they cannot operate directly, then they can initiate the business to business route. Marketing warfare strategies Based on the existing business level strategies of Google, it can be concluded that there are different warfare perspectives being followed by them. This is due to the fact that Google is practicing both defensive as well as offensive marketing strategies in their business operations. For instance, in terms of the offensive marketing warfare approaches, Google is continuously developing and improving their areas where they are having market leadership status such as
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13BUSINESS STRATEGIC ANALYSIS email and search engine services. This is helping them to stay immune and protect their leadership position from the opposition’s attack (Bekoglu and Ergen 2014). This is also helping Google to have prevented the close competition for their online services. Strategies such as diversification and acquisitions are the part of offensive warfare strategy of Google through which they are maintaining their market leadership position. On the other hand, in terms of defensivewarfarestrategies,initiationofthedifferentiationstrategyandindustry interdependencies is being initiated by Google. This is due to the fact that differentiation is helping Google to offer distinctive value propositions and stay unique from their competitors (Hill and Martin 2014). This is mainly done to immune their existing offerings from the potential attacks of the competitors. On the other hand, initiation of the industry interdependencies will also help Google to safeguard their interest by covering the larger business sectors prior to their competitors. Recommendations It is recommended that prior to the development of new sectors; Google should first ensure the success probability of their existing offerings. This is due to the reason that there are number of areas such as the Google Pixel has not got success in the market. Thus, the existing business strategies of Google should be first enhanced over initiating new ones. It is also recommended that Google should initiate acquisition strategy in different sectors also other than the technological firms. This will help Google to have more extended presence in different markets and will also complement their diversification strategy. Initiation of the market focus strategy should also be initiated. It will help Google to have different strategies for different customer segments and thus the future potentiality will be more favorable for Google. Conclusion Thus it can be concluded that business strategies being initiated by Google are well effective and competent enough in view to their external business factors. In this report, it is identified that there are number of challenges being faced by Google in terms of their global business operation and majority of their business strategies are well aligned with them. It is
14BUSINESS STRATEGIC ANALYSIS identified that even though the business level strategies of Google are well effective but still there are few minor gaps being identified and based on these gaps, a few recommended steps are discussed in this report.
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