In short, you will perform a comprehensive strategic analysis and implementation plan of the firm’s general strategy to achieve its short and long-term goals and objectives. We will use the Strategic Audit as a guide to build your grand strategy. Remember, you will be performing the assignment from the perspective of the CEO and you will design a strategy that takes into account every aspect of the firm’s history, vision and mission, market and financial positions, culture, and values. The following is part of this assignment which you need to do (about 10 pages): The whole document is also uploaded, but you only to do this part. VII. Implementation 7.1 - Implementation program 7.2 - What must be done 7.2.1 - Program activities 7.2.2 - Action Steps 7.2.3 - Who implements strategy 7.2.4 - Matrix of change 7.3 - Organizing for action 7.3.1 - Corporates structure 7.3.2 - Job Creation 7.4 - Action Plan CEO Project (Apple) Table of Content I. Current Situation 1.1-History 1.2-Current Performance 1.2.1- Ratio Analysis 1.2.2- Competitor Comparison 1.2.3- Industry Comparison 1.3-Mission 1.4-Objectives 1.5-Strategic Posture 1.5.1- Corporate Strategy 1.5.1.1- Directional 1.5.1.2- Portfolio Analysis 1.5.1.3- Parenting Strategy 1.5.2- Business Strategy 1.5.3.- Functional Strategy 1.6- Policies 1.7- Alignment 5 5 5 5 6 7 7 7 8 8 8 9 9 9 9 10 10 II. Corporate Governance (Tianran) 2.1 - Board of directors 2.2 - Top management 12 12 13 III. External Environment: Opportunities and threats (SWOT) (Tianran Lin/Yiyun) 3.1 - Natural Physical Environment: sustainability issues 3.2 - societal environment 3.2.1 - Economic 3.2.2 - Technological 3.2.3 - Political Legal 3.2.4 - socio cultural 3.3 - Task Environment 3.3.1 - Threat of new entrants 3.3.2 - Bargaining power of suppliers 3.3.3 - Threat of substitute products or services 3.3.4 - Bargaining power of buyers 3.3.4 - Rivalry among existing firms 3.3.6 - The 6th force 3.4 - EFAS Table 14 14 14 14 14 14 14 14 15 16 16 16 16 16 16 IV: Internal Environment: Strengths and Weakness (SWOT) (Roy & Henry) 4.1 Core Competencies (Roy) 4.2 VROI Analysis (Roy) 4.3 Business Model (Henry) 16 16 16 16 4.5 Corporate Structure (Henry) 4.6 Corporate Culture (Roy) 4.7 Corporate Resources (Henry) 4.7.1 Marketing 4.7.2 Finance 4.7.3 Research and Development 4.7.4 Operations and Logistics 4.7.5 Human Resources 4.7.6 Information System 4.8 IFAS Table (Roy) V. Analysis of Strategic Factors (SWOT) 18 18 18 18 18 18 18 18 18 18 (_Heidi） 5.1 Situational analysis (SFAS Table) 5.2 Review of Mission and Objectives 18 19 19 VI.Strategic Alternatives and Recommended Strategy (Amina, Rosario) 6.1 Tows Matrix 6.2 Strategic Alternatives 6.2.1 Pros and Cons 6.3 Recommended Strategy 6.3.1 Corporate Strategy 6.3.2 Business Strategy 6.3.3 Functional Strategy 6.3.4 Policies 19 19 19 19 19 19 19 19 19 VII. Implementation (Shiyu, Xiaoxi) 7.1 - Implementation program 7.2 - What must be done 7.2.1 - Program activities 7.2.2 - Action Steps 7.2.3 - Who implements strategy 7.2.4 - Matrix of change 7.3 - Organizing for action 7.3.1 - Corporates structure 7.3.2 - Job Creation 7.4 - Action Plan 20 20 20 20 20 20 20 20 20 20 20 VIII. Evaluation and Control (______) 8.1 - Measuring performance (Reecha) 8.2 - Balanced scorecard (Nadja, 8.2.1 - Financial 8.2.2 - Customer 8.2.3 - Internal Business process 8.2.4 - Learning and Growth 20 21 21 21 21 21 21 IX. Appendix 21 X. Works cited 21 I. Current Situation 1.1-History Apple Inc., formerly known as Apple Computers, is a multinational corporation founded by Steve Job and Steve Wozniak on January 3, 1977, in Cupertino California. For over three decades Apple computers was solely manufacturing personal computers until Jobs installed a new corporate philosophy of “recognizable products and simple design” which initiated with the first iMac in 1998. It did not take long for Apple to establish itself as the top seller in a variety of electronic products. 1.2-Current Performance Apple’s current company performance is fairly solid as their stock prices keep rising. The current stock price of Apple is $144.18, which is about a 1.02 percent increase from the previous price. Logically, in order for a company’s stock price to rise, their overall performance has to also rise. Hence, we can see that Apple’s performance is increasing due to its rising stock prices. 1.2.1- Ratio Analysis Based on the three ratios chart, we can principally realize Apple company’s financial health has been variation. In 2014, the current ratio has been dropped 63.34%, which refers to a sign that there might have a problem occurred inside of the capital management. By comparing all fiveyear’s asset turnover rate and return on assets, we discover that Apple possesses the highest value on both of ratios in 2016. Within the asset turnover rate, it presents Apple’s capability of efficiency with lowest profit margin because every dollar Apple sales will reflect 134% turnover. In addition, Apple also owns 28% of Return on Assets, and it has been increasing continuously during the period of 2014-2016. Therefore, we could know that Apple has been improving its total assets, and make the company more manageable and profitable. 1.2.2- Competitor Comparison Apple, Inc. Holding 6.8% of the market share, the company is famous for its Mac line which includes Macbooks, iPhones, iPods, and iPads. Apple’s products are known for being easy to use, along with proprietary software and applications. Dell, Inc. Dell holds 12.1% of market share and designs, develops, and manufactures computer systems. Dell also provides IT consulting and other services, while earning its reputation in supply chain management and e-commerce. HP, Inc. Holding 9.5% of market share, HP provides desktop and notebook PCs, workstations, smartphones, and tablets. 1.2.3- Industry Comparison In an era governed by technology, products such as computers, smartphone, etc., have become essential in most households. As these products are becoming more and more standardized, with portability a primary choice for consumers, price competition is fierce in the industry. In recent decades, production has gradually shifted from the United States, Japan, and Taiwan, to China and Southeast Asia. 1.3-Mission Apple's current mission is to provide "the best personal computers in the world, along with OS X, iLife, iWork and professional software and leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App store, and is defining the future of mobile media and computing devices with iPad." By this statement Apple describes their purpose of the company's existence and their focus on producing high-quality products. 1.4-Objectives The objectives of Apple Inc. are made known to employees instantly and business objectives are set. However, individuals are measured by their contribution to the success of the objectives of the company. The primary objective of Apple is to create groundbreaking products and make its name to become a trendsetter in the global market, and Apple also plan to expand its business chain of stores worldwide in order to make the product available to every retailer and customer. (Paczkowski) As an premium branded company, Apple continues to sustain its premium pricing while gaining market share as well as increasing profit margins. In addition, the company has build the biggest name in the tech world; maintaining and expanding its branded name is also the objectives for Apple to dominate in the competition. 1.5-Strategic Posture Apple pursued many differentiation tactics in its strategy by its innovation on design, quality and customer service, and targeted customers from all market. Consumers are less sensitive to price due to their brand loyalty. 1.5.1- Corporate Strategy Apple Inc. creates value for it’s consumers, team, and investors by creating a long-term vision to create and provide innovative products to consumers. They provide easy to use products designed to create a lifestyle brand that create value and comfortability. The company focuses on the growth of their iPhone by continuing to compete with companies like Samsung and LG in the smartphone industry. They focus on being one step ahead of other companies as it reflects upon their corporation as the leading technological global company. 1.5.1.1- Directional Apple’s directional plan is to keep up with consumer demands and implement the latest technology into their products to essentially grow their business and increase profits. 1.5.1.2- Portfolio Analysis The BCG Matrix of Apple inc. shows the diversity of products Apple introduced into the electronic market. Apple Inc. generates a little profit from Apple TV product, and iPhone and iPad are rising stars. The Mac air and Mac pro are in cash cow place, but they have shifted to portable and mobile so makes them in the dog section. The big multi-part desktop which is fading away could be also considered in the dog category. 1.5.1.3- Parenting Strategy Apple’s parenting strategy is essentially making a decision on its mergers and acquisitions. Apple makes a decision on which companies to buy or not buy to increase its portfolio and market share. A prime example of one of Apple’s parenting strategies is when they bought the company Beats by Dre and incorporated it into their products. 1.5.2- Business Strategy Business strategy of Apple Inc. attempts to secure competitive advantage in existing produce, and Apple Inc. incorporates various business strategies in order to secure competitive advantage in mobile communication and computer segment. They provide product differentiation by having a unique design and operational functionalities. 1.5.3.- Functional Strategy Apple Inc. began the launch of iPhone since 2007 and redefined the appearance and function of smart phone. In 2010, the company introduced its ipad which is a revolution of the computer industry. Iphone and ipad runs iOS operating system allow the product to have touch screen, keyboard and Wi-Fi all in one device. The invention of ipad established an new image of computer and drove many competitors to the market, but the functional strategies save Apple from its declining and lead the business to higher level of success. 1.6- Policies Apple Inc. has certain policies in order to guide and provide its consumers with proper service. Its policies associate with customer-care, security, sales and refunds, hardware warranties, and legal information and notices. Apple Inc., a thriving and successful company that is known worldwide, sells thousands of its products to its consumers every day; therefore, as a customeroriented company, it seeks to maximize customer-satisfaction by providing wonderful service to its consumers. For instance, Apple created the Genius Bar, which is located in every retail store, in order to assist its customers with their purchased products and answer any questions or concerns regarding the items. Most importantly, as one of the largest tech companies in the world, it prioritizes to protect its consumers’ personal information online and to respect their privacy by upholding these policies. 1.7- Alignment Apple has a skilled workforce that is willing to deliver the best services and follow through with the vision set by the managers and top CEOs of the corporation. According to Forbes magazine, even after many failed innovations, Apple has always stuck to the practice of doing everything itself, thus, creating cutting-edge hardware. Apple has instilled the drive to achieve greatness with every service and every new innovation into their employees. Apple has tried to focus on the unique aspect of what it stands for and that is “creating something different”. For example, Apple was the first corporation that took a risk in creating an intuitive user interface and new sleek designs. With every other corporation following similar trends, Apple stood out in offering something different in the shape of new iPhone models every year and at the same time introducing new and catchy gadgets such as the Apple watch. II. Corporate Governance (Tianran) 2.1 - Board of directors Source: http://quotes.wsj.com/AAPL/company-people For Apple Inc., there are eight members on the Board of Directors. Former Chief Operating Officer of the company Timothy Donald Cook has served as currently Chief Executive Officer, and Arthur D. Levinson is the chairman of the Board of directors. Most members of BOD are prestigious and have been involved with Apple for at least seven years with experience of top executive position such as Duke University and Nike Inc. 2.2 - Top management All executive list The Apple management hierarchy as shown above refers to the management structure of the company. Co-founder Steve Jobs established this hierarchy management system and used to be at the top of the management hierarchy until 2011. According to the management system, at the top of the management is the board of directors who have the highest amount of power and most on the line over the success of the company. The board includes the CEO of the company, the Chairman of the board and other eminent corporate individuals with considerable share in the company’s equity. The next in the list of Apple management hierarchy are the Vice President positions. The individual VPs have considerable freedom but are all ultimately required to report to the senior VPs and the CEO. The teams which assist the above mentioned VPs consist of the positions which make the third tier of the Apple management hierarchy. The number and the kind of managers/ executive which make up the teams of these VPs depend on the nature of the respective department they are heading and the requirements within. The hierarchical division at this level is done on the basis of the products in the Apple rooster. All in all, the apple management hierarchy is said to be based on the spoke and wheel approach, where the CEO is at the center of all operations. III. External Environment: Opportunities and threats (SWOT) (Tianran Lin/Yiyun) 3.1 - Natural Physical Environment: sustainability issues 3.2 - societal environment 3.2.1 - Economic 3.2.2 - Technological 3.2.3 - Political Legal 3.2.4 - socio cultural 3.3 - Task Environment External environment of an organization which influences its capacity to achieve business objective. Any business or purchaser with coordinate contribution with an association might be a piece of the task environment. Therefore, the presence of Apple relies upon the outer factors, for example, competitors, customers and suppliers. By analyzing those variables, which is based on Porter’s five force, will make the company association. 1. Competitors In economics, competition is not only a situation that people are seeking a restricted resources in a similar zone endeavor with others, it is also the action of game in which each of the general population or groups is endeavoring to win, or a specific occasion at which this action happens. According to the diversity of Apple products, it implies that Apple products contends in a wide range of business sectors, and each of which might have different mar 2. Customers: 3. Suppliers: 3.3.1 - Threat of new entrants Since Apple has a solid brand picture, advancement, and administration, it improves troublesome level for new participants to go up against. In addition, because of Tim Cook’s generation organize expertise, it is a staggering resistance against low-end unsettling influence from new members. New contestants will encounter issues planning or beating the creation arrange cost structure. Therefore, the threat of new entrants that could debilitate the piece of the overall industry of Apple is direct. As Maverick (2005) state, “This is primarily due to two factors: the extremely high cost of establishing brand name recognition.” Apple has a creative group that grasps innovation. Due to this reality, they will stay focused in the market.Adversary associations are distributing colossal adds up to showcase their items to the shoppers. For instance, HTC, Huawei, Lenovo, ZTE, and BenQ are the new contestants that stances tremendous rivalry in the business. Enormous measures of capital their items the market. This will at last prompt rivalry from the adversaries. 3.3.2 - Bargaining power of suppliers 3.3.3 - Threat of substitute products or services 3.3.4 - Bargaining power of buyers 3.3.4 - Rivalry among existing firms 3.3.6 - The 6th force 3.4 - EFAS Table IV: Internal Environment: Strengths and Weakness (SWOT) (Roy & Henry) 4.1 Core Competencies (Roy) 4.2 VROI Analysis (Roy) 4.3 Business Model (Henry) Apple’s business model is a combination of various others including direct sales, indirect sales, freemium, and subscription model. They have multiple revenue streams, which makes it unique and provides them with strategic advantage. The direct sales involve Apple’s retail stores, network carriers, and third party retailers that sell their product. This is because salespeople are selling the iPhones, iPods, iPads, and macbooks directly to you. [to be continued] 4.5 Corporate Structure (Henry) 4.6 Corporate Culture (Roy) 4.7 Corporate Resources (Henry) 4.7.1 Marketing 4.7.2 Finance 4.7.3 Research and Development 4.7.4 Operations and Logistics 4.7.5 Human Resources 4.7.6 Information System 4.8 IFAS Table (Roy) V. Analysis of Strategic Factors (SWOT) 5.1 Situational analysis (SFAS Table) 5.2 Review of Mission and Objectives (_Heidi） VI.Strategic Alternatives and Recommended Strategy (Amina, Rosario) 6.1 Tows Matrix 6.2 Strategic Alternatives 6.2.1 Pros and Cons 6.3 Recommended Strategy 6.3.1 Corporate Strategy 6.3.2 Business Strategy 6.3.3 Functional Strategy 6.3.4 Policies VII. Implementation (Shiyu, Xiaoxi) 7.1 - Implementation program 7.2 - What must be done 7.2.1 - Program activities 7.2.2 - Action Steps 7.2.3 - Who implements strategy 7.2.4 - Matrix of change 7.3 - Organizing for action 7.3.1 - Corporates structure 7.3.2 - Job Creation 7.4 - Action Plan VIII. Evaluation and Control (______) 8.1 - Measuring performance (Reecha) 8.2 - Balanced scorecard (Nadja, 8.2.1 - Financial 8.2.2 - Customer 8.2.3 - Internal Business process 8.2.4 - Learning and Growth IX. Appendix X. Works cited Work cited Brunette, Brandon. "Apple Inc Objectives and Strategies." N.p., 21 July 2015. Web. 06 July 2017. Paczkowski, John. “Breaking Down Apple’s Retail Distribution Strategy.” Allthingsd. Web. 06 July 2017. Dudovskiy, John. "Apple Business Strategy - Product Differentiation in Design and Functionality." Research Methodology. N.p., 12 Mar. 2017. Web. 06 July 2017. "Policies." Policies - Shopping Help - Apple. Apple Inc., 2017. Web. 06 July 2017. AAPL Income Statement | Apple Inc. Stock - Yahoo Finance. (2017). Finance.yahoo.com. Retrieved 8 July 2017, from https://finance.yahoo.com/quote/AAPL/financials?p=AAPL [http://www.investopedia.com/ask/answers/042315/what-apples-current-missionstatement-and-how-does-it-differ-steve-jobs-original-ideals.asp] From left to right: Larry Page, Eric Schmidt and Sergey Brin 2010 Was The Year Of Google Kacey K. Chea TABLE OF CONTENT I. CURRENT SITUATION...................................................................................................4 ● HISTORY...................................................................................................................4 ● CURRENT PERFORMANCE...................................................................................4 ○ RATIO ANALYSIS........................................................................................5 ○ COMPETITOR COMPARISON...................................................................5 ○ INDUSTRY COMPARISON..........................................................................5 ● MISSION....................................................................................................................6 ● OBJECTIVES.............................................................................................................6 ● STRATEGIC POSTURE............................................................................................7 ○ CORPORATE STRATEGY............................................................................9 ■ DIRECTIONAL..................................................................................9 ■ PORTFOLIO ANALYSIS..................................................................10 ■ PARENTING STRATEGY.................................................................13 ○ BUSINESS STRATEGY.................................................................................13 ○ FUNCTIONAL STRATEGY..........................................................................13 ● POLICIES...................................................................................................................13 ● ALIGNMENT.............................................................................................................13 II. CORPORATE GOVERNANCE.......................................................................................14 ● BOARD OF DIRECTORS.........................................................................................14 ● TOP MANAGEMENT...............................................................................................15 III. EXTERNAL ENVIRONMENT: OPPORTUNITIES AND THREATS (SWOT)............16 ● NATURAL PHYSICAL ENVIRONMENT: SUSTAINABILITY ISSUES...............16 ● SOCIETAL ENVIRONMENT...................................................................................16 ○ ECONOMIC...................................................................................................16 ○ TECHNOLOGICAL.......................................................................................16 ○ POLITICAL-LEGAL......................................................................................17 ○ SOCIO-CULTURE.........................................................................................17 ● TASK ENVIRONMENT.............................................................................................18 ○ THREAT OF NEW ENTRANCE....................................................................18 ○ BARGAINING POWER OF SUPPLIERS.....................................................19 ○ THREAT OF SUBSTITUTE PRODUCTS OR SERVICES..........................19 ○ BARGAINING POWER OF BUYERS...........................................................20 ○ RIVALRY AMONG EXISTING FIRMS.......................................................20 ○ THE 6TH FORCE..........................................................................................20 ● EFAS TABLE.............................................................................................................21 IV. INTERNAL ENVIRONMENT: STRENGTHS AND WEAKNESSES (SWOT).............23 ● CORE COMPETENCIES.........................................................................................23 ● VRIO ANALYSIS.......................................................................................................23 ● BUSINESS MODEL..................................................................................................24 ● CORPORATE STRUCTURE...................................................................................24 ● CORPORATE CULTURE........................................................................................25 ● CORPORATE RESOURCE.....................................................................................25 2 ○ MARKETING...............................................................................................25 ○ FINANCE.......................................................................................................26 ○ RESEARCH & DEVELOPMENT................................................................27 ○ OPERATIONS AND LOGISTICS................................................................27 ○ HUMAN RESOURCE...................................................................................27 ○ INFORMATION SYSTEM...........................................................................27 ● IFAS TABLE..............................................................................................................28 V. ANALYSIS OF STRATEGIC FACTOR ANALYSIS (SWOT)........................................28 ● SITUATIONAL ANALYSIS (SFAS TABLE)...........................................................29 VI. STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY......................30 ● TOWS MATRIX........................................................................................................31 ● STRATEGIES ALTERNATIVES..............................................................................32 ● RECOMMENDED STRATEGY................................................................................33 VII. IMPLEMENTATION.....................................................................................................33 VIII. EVALUATION AND CONTROL.................................................................................34 X. WORKS CITED.................................................................................................................35 3 I. CURRENT SITUATION 1.1 -HISTORY Larry Page and Sergey Brin, two graduate students met at Stanford University in 1995 and began exchanging and forming ideas that lead to the founding of Google in 1998. The company was founded upon $100,000 of funding from Sun Microsystems, a deal engineered by top executive - Eric Schmidt, who is now Executive Chairman of Google’s Board of Directors. “The name Google was chosen as a play on “googol”, a mathematical term for the number one, followed by one hundred zeros.” It is said that the founders used this term because it related to the web, which is “exponentially growing”. Google grew quickly and was instantly recognized as being a better search engine then its competitors. By the turn of the century Google could be used in 15 different languages, which made it internationally recognized and expanded its number of users around the world. Mid 2004 shares of Google began to be offered making the company public. In 2006 Gmail a Google free email service became available, and many other Google services followed such as Google Docs, Google Apps, Google Chrome, and many other technological services that Google now offers known as “Google Technology”. By 2010 Google was seen around the world as a leader in the technology world. Due to its rapid growth as a search engine and the implementation of all of its services, products, and applications Google became among the strongest, and most recognized brands. 1.2 - CURRENT PERFORMANCE In the past six years Google’s financial statements show they had extraordinary revenue growth. It is expected for a decrease in growth due to the online advertising market reaching its maturity, as well as stronger competition. 4 1.2.1 - RATIO ANALYSIS The current ratio of Google in 2010 is 4.158. Current ratio is total assets over total liability. Generally ratio that ranges from 1.5 - 3 means the companies are doing well in terms of assets over liability. In this case, Google’s current ratio is at 4.158, which is over 3 meaning; Google is generating more assets than its liability. In 2010 Google’s debt to equity is .25. The debt to equity is the amount of debt a firm takes into finance their assets, therefore, the lower debt equity number the better. Quick ratio tells the short-term liquidity in the firm, it also measures the short-term debt. A higher quick ratio means how fast a firm paying off their short-term debt. In this case, Google’s quick ratio is 4.16. 1.2.2 - COMPETITOR COMPARISON 1.2.3 -INDUSTRY COMPARISON As people around the world increasing their use of the Internet, marketing space grows; this has made an increasing number of companies want to reach the constantly increasing number of Internet users. Google's currently dominant position in the market gives them an advantage. The search engine providers’ market share that Google holds in the US continues to grow. Additionally the use of other programs that Google offers such as Google Chrome and Gmail continues expanding since their introduction. Google's advertising revenues depend on this large and expanding user base. 5 1.3 - MISSION Beginning Mission: To create the ultimate search engine to help users tame the unruly and exponentially growing repository of information that is the Internet. Current Mission: To organize the world’s information and make it universally accessible and useful. Google’s mission is to serve 3 primary groups - users, advertisers and Google network members and content providers. Users are a bulk a Google’s consumers so it is of utmost important to satisfy its users and ensure retention and ‘stickiness’ across its products by providing a pleasant UI and UEX which will urge the consumer to continue to use Google’s products and ensure long term sustainability. Secondly, Google generates 97% of its revenue through advertisers who understand user behavior through search history and offer ads based on demographics such as age, gender and geographic location. Lastly, network members and content providers gain access to AdSense which allows revenue sharing among companies, thus strengthening business relationships. 1.4 -OBJECTIVES ● Ease of access to information: Google sticks to its roots of search engine technology by providing the best possible search results based on freshness, speed, relevance and comprehensiveness. Founder Larry Page admits, “Access to information will play a key role,” in terms of global economies, politics and societies. Google’s search functions empowers access to information across borders, languages, cultures, tablets, mobile phones, desktops, operating systems, etc. and aims to offer its services and target as many platforms as possible. ● Free communication for all: Google has democratized the communication industry as it aims to offer free communication and enhance interactivity among its users. CEO, Larry Page takes pride in the creation of Gmail as it entered the market by offering 100x the space offered by leading competing rivals, and now has over 10 million users. ● Provide relevant ads: It is no unknown fact that ads are a predominant portion of what pays the bill for Google. However, the company is focused on providing a user experience of utmost quality that is fast, precise and extremely intuitive and easy to use. The company’s belief is as follows: “Put your message in front of potential customers right when they're searching for what you have to offer”. Enabling support activities not only ensures sustainability for Google, but it also empowers businesses around the world through its AdWords advertising platform, which operates through an auction system. Simply said, the highest bidder gets their ad displayed on Google properties. ● Enhance video offerings through Youtube: The acquisition of Youtube was a massive win for Google as it opened up whole new playing field in sharing and accessing video content. Youtube enables users to access video content whenever they want and on any device, and 6 also share it with the world. Youtube’s sign up services are extremely easy to set up an account and upload videos within a few seconds or minutes. Google strongly believes video is a powerful medium and the company is devoted to vastly allocating resources in enhancing Youtube’s services and strengthening its dominance in the video sharing space. ● Enable livelihoods through online Google products: As mentioned above, Youtube is an extremely powerful medium in terms of effectively propagating digital information. Google embraces the motto, “A video is worth a million words,” thus affirming video’s necessity and ability to spread information more efficiently than any other form of media. For example, Salman Khan, founder of online education resource platform Khan Academy, quit his full time job as a hedge fund manager to create a virtual resource where he explains principles in subjects ranging from finance to chemistry. He has uploaded over 2000 videos, which have been viewed more than 45 million times. Thus, individual aspirations to transform the education industry are a small example of how people may make a livelihood through Google’s useful product offerings. Furthermore, more than 1 million people use AdWords as a sole medium of expanding business through marketing and finding users through clicks within Google’s search results. ● Focus on mobile: Nearly 10% of Youtube’s views come from mobile devices. This magnificent feat was fuelled by enhance network connectivity and the introduction of advanced cell phone offering from Samsung and Apple’s iPhone among others. The PC is slowly losing its market share as information is easier for the user to access on mobile devices on the go and convenient to carry because of its small size. 1.5 - STRATEGIC POSTURE ● Shape the future: Google made the Internet more attractive to new and current users. They made global information very accessible to everyone. Google sets a standard for other and future companies who want to be in its industry. People use Google to help ease their web search tasks and Google provides that for their users and they demand perfection and creativity from their employees. Google has exceeded their top competitors Yahoo and Microsoft Bing in the field of search engine. Google’s Android operating system began to become a deadly threat to Iphone’s IOS. Google has turned mobile phones with their efficient operating system into a true smartphone. Android is catching up with Apple mobile application market. The war between these two giant mobile operating systems will revolutionize the smartphone industry within the near future. ● Adapt to the Future: 7 ○ ○ ○ ○ ○ ● Google is looking to stay competitive in the future, which is why they have made many key acquisitions in 2010. In 2010 Google bought travel software firm ITA. “Today, almost half of all airline tickets are sold online” Marissa Mayer, vice president of search products and user experience at Google. With this acquisition Google has leaped forward against their competitors because it helps make it easier for business and busy suitors to book their flights while on the go. One of the biggest issues of Google is security breach. A company is as big as Google is always prone to theft. In August 2010, Google acquired Zetawire, a Canadian company that allows consumers to make payments on their smartphones using near field communications (NFC) technology. All credit, debit, and check payment systems are now securely embedded in your phone. This helps reduce the risk of identity theft, a crime that has rose dramatically within the past years. Google also trying to stay on top of the food chain by completing the acquisition of Phonetic Arts, it creates synthetic voices that will read words in a natural, expressive way. With this Google mobile will be able to keep up with the Iphone giant. “In 2009, Google Docs was introduced. It allowed a user to upload all file types, including ZIP files, in order to work with those files online.” (Case study, Page 568). This is very useful for students and working professionals because it allows users to edit and contribute to the documents in real time. It also eliminates the hassle of carrying portable flash drives. Reserving the right to play: ○ In order for Google to survive in the future, they must continue to become the most secure and reliable source of web searches and mobile processor. It tries to reach the number one spot in web search engine and mobile operating system by acquiring those companies. They have made it clear that they want to stay competitive in the near future. To work at Google, all employees must know the following ten things: (1) Focus on the user and all else will follow. (2) It’s best to do one thing really, really well. (3) Fast is better than slow. (4) Democracy on the web works. (5) You don’t need to be at your desk to need an answer. (6) You can make money without doing evil. (7) There’s always more information out there. (8) The need for information crosses all borders. (9) You can be serious without a suit. (10) Great just isn’t good enough. 8 1.5.1 - CORPORATE STRATEGY Google makes money through advertising. “To maximize profits, it is in Google’s interest to learn as much as it can about its users. With more information, it can sell more accurately targeted ads, and therefore more expensive ones”. Their goal is to be the leading innovator in providing information and in modern technology including mobile, search engine and cloud computing. 1.5.1.1 –DIRECTIONAL Google’s directional strategy is leaning towards growth in mobile and social strategy. “When using Google products, the company already knows who your most important contacts are, what your core interests are, and where your default locations are.” This makes it easier for users because they are using products that already know their preferences. “Google’s 2010 acquisition of AdMob boosted the company to the head of the class of mobile ad networks, with a commanding 59 percent share of all US mobile ad revenue according to IDC.” 9 For Google, their smartphone subscribers are only trailing behind those of Black Berry, which is plummeting, but for Google their subscribers have increased 3 folds over the year. The acquisition of AdMob helped Google excel in becoming the leading competitor against IOS. 1.5.1.2 – PORTFOLIO ANALYSIS ● Google, owner of the world's most popular search engine, will widen its lead in the $877 million U.S. market for mobile advertising, ending the year with a 59 percent share, according to research firm IDC. During the year, Google has taken more than half of the mobile ads market shares from its main competitors (Yahoo & Microsoft). This was the turnaround year for the company because it gained the public trust in mobile business. ● In 2010, for the month of August, Google's share dipped slightly to 65.4 percent from 65.8 percent. This small dip could lead to a big problem if Google doesn’t do anything about it. ● During that short falling month of Google. Yahoo gained more customers. “Web users ran almost 15.7 billion explicit core searches in August. Out of those, Google led the pack, of course, with 10.3 billion searches. Yahoo claimed second place with 2.7 billion searches, a gain of 3 percent from July, while Microsoft came in third with 1.7 billion searches, up 2 percent from July.” Google needs to continue to provide the best search results on the web and keep it basic and simple in order for their dominance in search engine to continue. Google 2010 Quarterly earnings: First Quarter: (April 15, 2010) Total Assets: $42,871,000,000 Revenues: 1 United States: $3,196,000,000 2 United Kingdom: $842,000,000 3 Rest of the world: $2,737,000,000 a Total Revenue: $6,755,000,000 ● ● ● Cash and cash equivalents at end of period: $9,192,000,000 Dividend Yield: 5.9% Closing stock price of $567.12 of our Class A common stock on March 31, 2010. ● “Growth rate has generally declined over time, and we expect it will continue to do so as a result of a number of factors including increasing competition, the difficulty of maintaining growth rates as our revenues increase to higher levels and increasing maturity of the online advertising market in certain countries.” 10 Second Quarter: (July 15, 2010) Total Assets: $48,045,000,000 Revenues: 1 United States: $3,288,000,000 2 United Kingdom: $770,000,000 3 Rest of the world: 2,762,000,000 a Total Revenue: $6,820,000,000 ● ● ● Cash and cash equivalents at end of period: $10,713,000,000 Dividend Yield: 5.7% Closing stock price of $444.95 of our Class A common stock on June 30, 2010. Third Quarter: (October 14, 2010) Total Assets: $53,342,000,000 Revenues: 1 United States: $3,517,000,000 2 United Kingdom: $840,000,000 3 Rest of the world: $2,929,000,000 a Total Revenue: $7,286,000,000 ● ● ● Cash and cash equivalents at end of period: $10,198,000,000 Dividend Yield: 5.4% Closing stock price of $525.79 of our Class A common stock on September 30, 2010. Fourth Quarter: (January 20, 2011) Total Assets: $57,851,000,000 Revenues: (Accumulative from the past three quarters) 1 United States: $14,056,000,000 2 United Kingdom: $3,329,000,000 3 Rest of the world: $11,936,000,000 a Total Revenue: $29,321,000,000 ● ● ● Cash and cash equivalents at end of period: $13,630,000,000 Dividend Yield: 5.4% Closing stock price of $593.97 of our Class A common stock on December 31, 2010 Sales/Revenue (2010) = $29,321,000,000 11 Google’s market share by the end of 2010 was 84.33% according to the historical data analysis on Google.com. According to the data, Google was a giant amongst the Internet service providers. They are still the leading company in the industry. Google has more than half of the market share and they are still renovating to make human life easier and information around the world easily accessible (sticking to their current mission statement). High Growth High Market Share Google’s star product is Android OS. The mobile industry has boomed because of Apple iPhone IOS revolutionized the mobile industry, but not everyone is happy about the IOS because it requires users to purchase products, Apps and updates only though Apple. Google’s Android OS is an open platform for users. It has become one of IOS greatest competitor. Android IOS has the second highest market share in the mobile industry. Google still hadn’t found a way to make Youtube a constant revenue generator. Youtube is a growing demand for users because it allows anyone anywhere to upload and watch the uploaded videos for free. YouTube’s videos viewed grew 139% to 12.2 billion in November and unique visitors grew 32% Y/Y to 129 million. Youtube is a growing product for Google and Google needs to keep investing in the site in order for it to keep growing. Low Growth Low Market Share Google’s cash cow is their powerful online search engine. They have and continuously making money from it. In 2009, Google website made $15,723 Million and increases to $19,444 Million in 2010. The search engine is one of Google’s main steady cash stream for the company. Their total advertising revenue in 2010 is $29,321 Million. Google is looking to jump into the social media world next year, but this will be hard for the company to do so because Facebook and Twitter are already a well known established social media site and retaining customers from them are hard and very costly. This is why Google Plus is in this box; they must not go through with project and continue on with search engine and mobile. 12 1.5.1.3 – PARENTING STRATEGY Google’s parenting strategy centers on examining its business unit to its strategic factors. Google has long established a center of excellence through its search engine, and recognize its strong capabilities and value creation that its search engine creates. Even the word Google has become a popular word to use for Internet search. With its search engine as a shining example of Google’s excellence, the company pursuit to uphold the same excellences throughout all of its other services and products, as well as current and future acquisitions. 1.5.2 – BUSINESS STRATEGY Within the business strategies, Google chose to focus on differentiation to increase its competitive advantage. To continue to establish itself as the premier company for Internet searches and technological advance and innovations, Google continues to provide new products, services, and increased its company acquisitions to diversify its portfolio. The product rollout of Gmail and Android, as well as the acquisition of Youtube are just some of the many examples of Google’s effort to diversify, and increase its competitive advantage among its growing rivals. 1.5.3 – FUNCTIONAL STRATEGY Google Uses Human Resource Management Strategy to maximize productivity, as well as to achieve its corporate and business objectives, therefore Google set out to hire the best and the brightest people for the company. Google value its employee very highly, and gives out various benefits to their employee. By retain its talent pool, Google is able to keep a steady stream of innovation, and pull ahead of its competitors. Google also employs a diverse workforce, which often shows an increase in higher productivity after a growth strategy. 1.6 - POLICIES "Google policy is to get right up to the creepy line and not cross it. With your permission you give us more information about you, about your friends, and we can improve the quality of our searches. We don't need you to type at all. We know where you are. We know where you’ve been. We can more or less know what you're thinking about." Eric Schmidt, CEO of Google. Google works better when 1.7 – ALIGNMENT Google’s current mission is to organize the world’s information and make it universally accessible and useful. They want to serve 3 primary groups - users, advertisers and Google network members. 13 Google has produced many useful products for all of their users, currently their most recognized and used include Google Docs, which is a free, Web-based word processor, spreadsheet, presentation and data storage service. Gmail a free, advertising-supported webmail. Google Chrome a web browser, Picasa an image organizer and image viewer for organizing and editing digital photos and integrates photo-sharing, Google Earth a virtual globe, map and geographic information program, and many more programs. Overall, it can be observed that Google’s mission and strategy are in alignment. It could be said that their strategies and actions exceed their mission. The company over-delivers in launching its products, which do not only necessarily “organize the world”. Therefore, one may conclude that the company is accomplishing their mission, but additionally doing much more for the better. II. CORPORATE GOVERNANCE 2.1 – BOARD OF DIRECTOR 1 2 3 4 Nine current members on the Board of Directors Former Sun Microsystems executive Eric Schmidt has served as Chairman of the Board two different times, and is currently. The Google founders Larry Page and Sergey Brin are members of the Board of Directors. Most members have been involved with Google for at least 5 years. All of the members are very prestigious, having or having had additional top executive positions such as top positions of the best Universities, and other organizations. 14 2.2 – TOP MANAGEMENT Larry, Sergey, Eric, and other members of the senior management team are what make it possible to execute Google’s business strategy. The future success of Google depends largely on the continued service of key members of the senior management team. In particular, Larry Page, Sergey Brin, and Eric E. Schmidt are critical to the overall management of Google, as well as the development of the technology, the culture, and the strategic direction. All of the executive officers and key employees are at-will employees. The loss of any of the current management team could seriously harm business. 15 III. EXTERNAL ENVIRONMENT: OPPORTUNITIES AND THREATS (SWOT) 3.1 –NATURAL PHYSICAL ENVIRONMENT: SUSTAINABILITY ISSUES According to the Google case study from the textbook. The only physical environmental issues that could possibly impact Google is the seasonal changes. Different seasons could impact Google’s profit earning due to the companies inquire less or more advertisements for their products and services. For example, in the clothing or shoes, or fashion industry in general. Firms will have stocked inventory that are from last season. Those products from the previous seasons become less valuable. These retail firms need to get the passed season product out of their hands by advertising sales or distribute them to outlets. These retail firms would need Google’s advertise division to help get rid of the passed season products by the end of the year. While Google is helping the firms to catch more customers’ attention, these retail firms are also helping Google generating profit. Every Time these advertisements appear on Google, customers who are interested, even though they do not buy it, when each user clicked in, Google can earn the profit from the retail firms that they are advertising for. 3.2 – SOCIETAL ENVIRONMENT Google established itself as one of the most used search engine around the world. To tailor to it’s international customers, Google adapted its website so that it will appeal to the various culture, religion, and values from different countries. One major factor that pushed Google to change and restrict some of its content was due to government pressure from countries such as China, Germany, and France, where some information are deemed too sensitive and negative to be posted publicly. 3.2.1 – ECONOMIC Many companies during 2010 were indicating slumps and slow growth due to the economic downturn from the previous years. Google recovered and overcame the general economic outlook by taking advantage of the growing technology and Internet sector. The company continues to expand its search engine services as well as other services across the globe, and see increases in profits. Google continues to acquire more companies, and helped Google stabilized and expand the company. 3.2.2 – TECHNOLOGICAL Google’s continue to acquire more company to complement and improve its services. Companies like AppJet was acquired due to its real time collaborative editor for Google Doc, while Agnilux was merged to provide server technology start up for Google’s Android platform. Due to Google’s heavily reliant on advertising revenue, any disruption from its online search services, and falsify visits will hurt Google greatly. Problems from fraudulent clicks, spammers, can all potential hinder Google’s profit margin because of refunds to advertisers, and the lost of confidence from its customers. Failure to keep the servers online due to natural disasters, hackers, and 16 infrastructure problem has also hindered Google’s services in the past. To try to lessen the impact of these technological issues, Google has contingency plans set up, and are exploring new ways to cover and solve the issues. 3.2.3 – POLITICAL-LEGAL ● Google has encountered some political issues especially when concerning foreign countries. Many other countries laws and politics do not align with the US and therefore an international company such as Google must personalize according to each country. One such country is China; Google was having trouble with the Chinese market because of their laws. But in March of 2010 Google announced, “it will end its self-censorship of harmful information in accordance with Chinese law”. This triggered many discussions; many believe that multinational corporations should abide by their host country's laws. ● Google being and online company deals with many legal issues concerning the Internet and its content. One important issue that arises from this is the constant application of laws to protect against content on the Internet. This affects Google because these laws could affect their ability to provide useful products and services to users. ● In addition Google has faced concern on copyright issues because the company stores copies of third party web pages and images on their servers. They have responded to this with the release of a copyright information page. This page provides t information regarding digital info and ● Provides links to notify both Google and the U.S. Copyright Office of suspected infringement. 3.2.4 – SOCIO-CULTURE Everyone is becoming more connected to one another due to the new innovations in communication available especially through the Internet. Google helps people be able to navigate the Internet. “As Internet use increases among all age groups and across all cultures, we will become increasingly more dependent on internet search.” Additionally, most existing phones are now Internet capable devices. These mobile devices are used for anything you can think of; maps, to locate any place on earth, staying updated with sports, download music, and even quick research. Google benefits greatly from this considering they are an all-technological Internet based company. Google is continuing to find new ways to help people get connected with services through mobile devices, the company has released its Android Mobile Phone Platform and Operating System as well as the Google Mobile App that can be downloaded on other platforms such as the Apple iPhone. Also Google is using their cultural awareness and social competence to maximize its profits by tailoring products to the regional needs of its users. 17 3.3 – TASK ENVIRONMENT The existence of Google depends on the external factors such as: competitors, customers and suppliers. These factors or what make the organization. 1 2 3 Competitors: Competition is what drives for improvement. Organizations want to win, they want to triumph over others threatening their top place and Google’s competition keeps it pushing to be the best and offer the best to all of its users. The goals that Google sets are in accordance with the competition and they strive to achieve these goals set. Customers: All organizations exist because there is a market for what they offer; Google is all about the users. If Google didn’t have loyal users and new users every day they would not be able to continue expanding or even existing. Additionally Google strives to maintain their loyal users and continue acquiring new users, to do this they cannot sit by idly, they need to continue providing better and newer products and services Suppliers: The suppliers in the case of Google would be those adding advertisements. The advertisements added help generate a large portion of the revenue. Google needs to keep their suppliers happy and generate views for them to help them generate business. 3.3.1 – THREAT OF NEW ENTRANCE Almost all firms will face potential threat of new market and industry competition. It is somewhat ubiquitous. However, the more stable, and strongly positioned a company is, the tougher the challenge for the new firms to compete with the firms that already established its position in its industry. In this case, Since Google specializes in being the number one search engine in the world; there are many challenging barriers for the new competitors to step into this industry. Being able to start a search engine, one needs to have a good financial back up or background to be invested by the bank or other firms. In this case, Google is already one step ahead of other competitors. Since Google already has the strong infrastructure and popularity, it allows Google to have extra strengths and advantages to deal with the threat of new entrants. Although Google specializes in its search engine, and it is unlikely that competitors will develop new search engine to overcome Google in the near future, other competitors can focus on developing mobile software, applications, or software for small businesses to compete with Google’s current applications such as Google maps, translation, cloud, drive, plus and many more. Another potential threat of new entrants is the social media sites. Before Facebook, Tumblr, Instagram, Twitter and other social media sites came out. Google dominates being the number advertising sites. However, for example, Facebook has become the number one site where people visits once or more a day. The uprising social media sites can be a potential threat to Google because it gives the advertisers more options to choose whether to let Google advertise their products or Facebook. Overall, Google does not have to worry about the upcoming threat of new entrants for at least the next 20 years. One main reason of it is that, not only Google had already established its position in its industry, but also innovating applications, software to benefits online consumers, small 18 businesses and education. Google continues to innovate, gives the public of an image of how aggressive they are to strive for success. Google is already not one step, but steps ahead of its competitors, and with its aggressive innovating attitude, it will only leave its competitors far more behind. 3.3.2 – BARGAINING POWER OF SUPPLIERS When it comes to the bargaining power of supplier, it is not so relevant or significant to this organization because Google itself is the supplier. Google supplies information, application software, innovative new technologies, real time software, and so on. In other words, Google’s best supplier is the online Internet surfer. Any surfer that uses Google, are practically Google’s supplier. However, there are still some important factors that Google depends on in order to survive. For example, since it is free for the surfers who use Google, Google needs to find another way to generate profit. Therefore, Google largely depend on the long-term support and investment of online advertisers. According to the Forbes.com, Google generate 97% of all the revenue from advertising for other retail firms. In this case, all the advertisers are pretty much Google’s main supplier. However, Google is also the advertisers suppliers. Because Google is not the only option for the advertisers to choose to advertise one, at the same time, those advertisers are not Google’s only option. The relationship between Google and its advertisers are suppliers and customers, and the relationship can be reversed. However, advertisers having other options to advertise their product are one of the main reasons why it has leverage and bargaining power. If all the advertisers choose to not use Google instead they use Bing, or Yahoo to advertise. Not only Google will lose its customers, but it will also help its competitors such as Bing or Yahoo to grow. In this case, losing customers which leads to help competitors grow is a lose situation. 3.3.3 – THREAT OF SUBSTITUTE PRODUCTS OR SERVICES Since Google has already established its searched engine position in the industry. It is hard to compete with Google because of its continuous innovation. In this case, Google plays in a defensive role to protect itself from the threats. However, one the major substitute products or services that Google is facing current, are Microsoft’s Bing, Yahoo, and Bing in the Chinese market. Although Google are known as the number one search engine, but it needs to be constantly innovating not only on search engine, but also stepping into other categories, which it already had. Another potential threat of substitute products or services that Google encounter is social media sites, such as Facebook, Instagram, twitter and so on. Google generates 97% of the revenue from advertising for retail firms. However, due to the raising popularity of social media sites, many advertisers choose to invest in the social media sites instead of Google. Overall, Google has already been a well-known search engine in public’s eyes. However, it has yet attracted the biggest market, which is the Chinese market. According to AOL.inc, there are more than 400 millions of users that China but over 90% of them use Baidu. Google needs to step into the Chinese market, in order to maintain its position in the long run. 19 3.3.4 - BARGAINING POWER OF BUYERS In this case, Google’s biggest buyers are the online surfers who use Google. Google generates 97% of the income from advertising. However, the major reason advertisers choose to invest in Google is that Google provides, free and the best services to online surfers. Which attracts more and more Internet surfer’s everyday. As Google’s brand loyalty increased, advertisers would want to invest in Google because they know many users use Google’s search engine. 3.3.5 – RIVALRY AMONG EXISTING FIRMS Although Google are known for its search engine abilities, it has also stepped into many other categories such as mobile software, hardwares and applications. Because Google has reached out of the search engine categories, its competitors also increased. In the search engine, industry, Google’s major rivalries are the firms that we addressed earlier Yahoo, Bing and Baidu. In the mobile industry, Google has recently bought Motorola; it is one less big competitor for Google. However, there are still other existing firms that potential stand as threats to Google in the mobile industry, which are Apple, Samsung, HTC, and Apple’s IOS. Google has also come up with Google Doc, Drive, Cloud, Plus and many other cloud services to compete with Microsoft Word. Many small businesses and School choose to use Google services over Microsoft because it is a cloud service, which means people who are given access to, are able to view and edit the documents at different location. Another major, and most factual advantage Google holds is that all the services we mentioned above, are free of charge. 3.3.6 – THE 6TH FORCE The sixth force that Porter mentioned, is the Relative Power of Other Stakeholders. These stakeholders can be special interest groups, creditors and shareholder, governments, unions, creditors and shareholders. One of the main concerns that Google is encountering is government regulation. Google serves as an internationally, which also means it will have to satisfy different consumer, and countries, with different cultures, and regulations. For example, Google could not satisfy the Chinese market because Baidu indexes more or most Chinese pages, when Google indexes mostly English pages. In U.S, Google is the number one search engine, however it needs to take the Chinese market shares in order to sustain its position. 20 3.4 – EFAS TABLE I V. INTERNAL ENVIRONMENT: STRENGTHS AND WEAKNESSES (SWOT) External Factor Analysis Summary (EFAS) Opportunities Weight Rating Weighted Score Comments Mobile partnerships 0.13 and enhancements 5 0.65 There is a mobile device in most pockets today, Google is following and adding to this trend to continue expanding. Innovation of products in the market 0.11 4 0.44 The future is coming fast and Google is leading the innovations and encouraging more in the market. Expansion by acquisition 0.08 2 0.16 Google has currently acquired many companies and if they continue, there is no stopping its growth. Online market 0.05 2 0.1 People using the internet for all products and services will help grow Google Threats Weight Rating Weighted Score Comments Competing search engines 0.14 3 0.42 Yahoo and Bing still hold a large share of the market. Competing ecommerce sites 0.15 4 0.6 Amazon and Ebay are older and already had loyal customers. Legal Issues 0.05 2 0.1 Concerning the distribution of certain material to specifically minor. Security Issues 0.09 3 0.27 Google needs to be able to protect the privacy of its users. Intellectual 0.08 2 0.16 Google has to protect 21 Property Total Scores themselves from possibly being imitated. 1 5.98 Opportunities Mobile: Google partnering with android is helping enhance the mobile world with the creation of applications and other services. Additionally they offer these free of cost, simply with having the mobile device you have access to their services. They are focused on developing easy to use ad products to help advertisers extend their reach, help create revenue opportunities for our publisher partners, and deliver relevant and useful ads to users on the go. Innovation: Google needs to continue to innovate and provide products and services that are useful to users, if we don’t then may not remain competitive, and our revenues and operating results will be affected. Employees: Google hires the best and brightest minds. If they continue to keep their standards at the highest levels then are likely to continue having the best ideas, products and services. Expansion by acquisition: Google has already acquired many strong companies such as YouTube and others. If they continue adding their name to existing and widely used companies their recognition will grow and will continue to gain loyal customers and users. Online Market: Everything is available through the net, products and services. Google is a leader in technology and the Internet. Threats Competing search engines: Bing is becoming a serious competitor to Google with the help of Microsoft and its marketing power. Competing e-commerce sites: E-Commerce sites such as Amazon and Ebay are older and were for their shares of the market. Legal Issues: Google gives the ability to access anything on the web, which could give them legal issues. Many US and international laws restrict and even prohibit distribution of certain materials. Security Issues: Security breaches are always possible with all of the information on the internet, Google being a site used for internet searches and providing information they could be liable for the release of prohibited information. Intellectual Property: Google has many trademarks because of all of the services and application they have created. There is the threat of having their trademarks imitated; therefore they need to keep their guards up. 22 IV. INTERNAL ENVIRONMENT: STRENGTHS AND WEAKNESSES (SWOT). 4.1 – CORE COMPETENCIES Core competency is when a firm understands what its competitive advantage, and utilizes the advantage to create unique offering to its customers, creating a unique organization. In this case, Google understands its power in the search engine industry, and rate of innovation. Google generates 97% of its revenue from its advertisers. By offering consumers, free services such as Google doc, Drive, and so on. Google then attracts both consumers and advertisers to invest in it. This is one of the core competencies Google holds and hard for the competitors to copy because of Google’s advantage in the power of search engine. Another major core competency Google has is the rate of innovation. Although Google is already a well-known search engine firm, it does not stop Google from developing outside of the search engine category. Google has developed Android platform, which helps Google reach into the mobile industry. By combining the search engine power and its mobile applications, allows Google to provide consumers a one of the kind services. 4.2 - VRIO ANALYSIS Value Rareness Imitability Organization Customer Service Yes, Allows users to quickly search or Google their questions and preferences. No, Google is the top search engine company, but it also competes with Yahoo and Bing. Yes. The Internet has a very low barrier to entry and anyone could use and create anything. Yes, because it follows their mission statement to organize the world information and make it universally accessible and useful. Google Mobile Yes, due to the profitability on the growing mobile market, Google intend to grow and lead the way into the future of mobile platforms. No, because it is an open platform where anyone could reprogram the device. No, because Google has a patent on their Mobile services. Yes, Google is experienced with its search engine and has tremendous resources to start up and market its mobile platform. Google Applications (Docs, Groups, Reader, etc.) Yes, many small businesses and school organizations Yes the Google Doc service is rare because it specializes in Yes, it is possible for other firms such as Yahoo, Bing to come up Yes, Google attracts consumer by providing many services. 23 choose to use, for example, Google Doc because it allows them to edit, view the documents together at different locations. cloud services. All the data are saved within the Google cloud drive. Although Microsoft has Microsoft Word, but it does not provide cloud services, which restricts users from viewing, editing the documents at different locations. applications like Google Doc. However, because of the Google brand loyalty and the advantage of being the first in the industry, consumers will choose to use Google other than other tech giants. Not only its services benefits individuals, but also educational organizations and small businesses. 4.3 - BUSINESS MODEL Google’s business model helps them gain and retain profit by being the best information provider service agency. When someone wants their questions answered, they usually go online and Google their thoughts. And when they use Google search engine, Google receives a small portion from the website that you click on Google.com. Google’s mission is to organize the world’s information and make it universally accessible and useful. The more Google knows about you, the better the service Google provides you. When using Google products, the company already knows who your most important contacts are, what your core interests are, and where your default locations are. This allows Google to be one of the best customer service providers in term of technology, search engine and mobile. The more users they gain, the more companies will want to advertise with Google, which allows them to gain more revenue. 4.4 – CORPORATE STRUCTURE Google’s corporate structure is coped with multidivisional functional structure. The value chain of Google are the based of management positions. Because Google is a global corporation, it is necessary to divide its management into different regions. In Google’s management positions, each of them is in charge of a section. For examples, engineering, marketing, sales, products, and so on. In the product section there is a product management segment. Marketing section there is a marketing management segment. Every value chains within Google corporate structure have its own segments that are accounted for each section. Google also specifies in hiring young, innovative employees. Google needs the constantly, creative young adults to help its corporate structure grow fast, and grow as a whole. Google is not looking for someone who is good at particular area, or specialists in one department. Google is looking for employees who are good at everything Google needs him to be, and that just a couple years, but in long term. 24 4.5 - CORPORATE CULTURE Google claims its corporate culture vision is to strive for an open culture. Or what Jack Welch mentioned in his book “Winning”, Candor. Google says that it wants its employees to be able to express, contribute ideas to the company whether you are a CEO, top managers, or new hired employees. According to Google, it has weekly all hands (TGIF) meetings where Googlers are able to ask questions directly to board members such as Larry, and Sergey. Google believes that everyone, not just board members, have the obligation to contribute, and give ideas to further improve Google as a whole. Another corporate culture Google specifies is the working environment, according to Google.com, it states, “Our offices and cafes are designed to encourage interactions between Googlers within and across teams, and to spark conversation about work as well as play.” By providing Googlers an enjoyable, and relaxed environment, it allows the Googlers to have motivations, and drives to work for Google. Google also claims that it favors ability over experience. Google wants employees who are innovative, creative, and young. 4.6 – CORPORATE RESOURCE Google spent $3.76 Billion in the R&D department in 2010. This is the second highest investment in R&D after Microsoft. It shows that Google really wants to stay competitive in the future. Google is a company that is really about giving customers ease of access to information. They keep improving this area, which they are really good at every year and the investment spent on the R&D department helps strengthen the company. Employees are their most important resource because it is the employees that come up with new ideas of innovative technologies that make Google who they are. They only hire top-notch students and young geniuses to work and intern at their facility. This shows the world that Google is serious about modern innovation and staying creative in the future. 4.6.1 – MARKETING Google recently became a powerful brand after knocking its competitors, Yahoo and Bing. When Google became a verb, the company has done its job in penetrating the market. Gathering the world’s information is helping Google gain more users and more companies wanting to feature in their search engine; through this Google gains revenue through pay per click. The company has switched the marketing strategy towards mobile because Google believes that in the future, products will reach customers faster than the traditional advertisements of radio, TV, or the Internet. Going into mobile, Google can further generate more revenue by running the advertisements through Android platform. 25 4.6.2 – FINANCE Google continues to show strong financial result from year 2004 all the way to 2009 as seen on the income statement. Despite a significant drop to $307.65 million in stock price in the year of 2008 due to the economic recession, Google’s revenue continue to increase, managed recovered it’s stock price to its previous level to $619.98 million at 2009. With its increasing profit margin, Google continue to reinvest into its R&D, services capabilities, and company acquisitions. (Dollar amount in millions) 26 4.6.3 – RESEARCH & DEVELOPMENT Heavily invested in its R&D branch, Google worked on various projects to provide new innovation and services to its customers. Google hired the best and brightest people to work in its research development, and also reward those who are pursuing research in mutual interest. The company worked on many research projects such as the advancement of artificial intelligence software enabling automobiles that can drive by it. Google also established a research program in the company with multiple research areas and publications, discovering new ways to improve Google’s infrastructure, computer coding and programs, and various new discoveries that aids the scientific community. 4.6.4 –OPERATIONS AND LOGISTICS As of 2010, Google is only operating with software and online search engine. There have been rumors that Google is looking into cloud computing after 2010. If this is true, it will put Google on top of the rest of their competitors because they are the best online solutions in bring information back and forth to consumers and businesses. 4.6.5 –HUMAN RESOURCE Google is an online-based company and like any other companies, they need human resource to succeed. By hiring the brightest and talented workers, Google is able to stay ahead of their competitors. They also need people’s information as much as possible because when using Google products, the company already knows who your most important contacts are, what your core interests are, and where your default locations are. From those information provided, Google is able to bring user experience to the best of the consumer likings. All and all, employees are Google’s main human resource to stay competitive now and the future. 4.6.6 – INFORMATION SYSTEM In order to maintain power and becoming the best web search engine, Google has been rigorously working to gather information about everyone as much as possible. This is their best way to move forward because it aligns with their mission to provide information worldwide. When they bought AdMob, it allows them to benefit more when people click on their website. Google has becoming one of the world’s leading information providers to the public. The more information they could collect the more users will go on their site and the more companies will pay Google to do advertisement. Going into the mobile industry is also good for Google and the market because as of 2010, Apple IOS seems to dominate the market in a way a monopoly company would do. With Android platform, Google can bring back the competition and with competition, products are best and prices are low. 27 4.7 – IFAS TABLE Internal Factor Analysis Summary (IFAS) Weight Rating Weighted Score Comments Strengths 1 Growth Rate .1 5 0.5 Google’s growth rate has always been consistent 2 Human Capital .15 5 0.75 Employees are rewarded for their performance 3 Brand Recognition .15 5 0.75 Established its position in the industry 4 Android Platform .05 4 0.2 Reach into mobile market 5 Online Applications .1 4 0.4 Benefits online users and small businesses Weaknesses 1 Variety of Services .05 2 0.1 Increased of Cost 2 Antitrust Probes .15 4 0.45 Attempt to Monopolize Search Engine Industry 3 Chinese Market .1 3 0.3 Unable to satisfy Chinese Consumers 4 Tax Avoidance .05 2 0.1 Exploiting legal loopholes to avoid tax 5 Privacy .1 2 0.2 With so many information within Google, they must do a better job to protect them from increasing hackers Total Scores 1 3.75 Strengths Growth Rate: Google’s Growth rate has not only been consistent but also growing much faster than its competitors. Not only Google provides retail firms for online advertising, it only provides hardware, software to further benefits the individuals, small businesses and educations. Employees: According to Forbes.com, Employees in Google benefits from free haircuts, gourmet food, on site doctor, and the death benefits. If a former Google employee passed away all his stocks 28 will vests immediately and life insurance payout. And they will be paid half of what they made in Google for the next 10 years. The major advantage of Google providing such great employees benefits is to give its employees more drive and motivations to work hard, and work as a team. Let the employees know they are valuable to the company. Brand Recognition: Google has established its position in the search engine industry. In public’s eyes, Google has already become a verb. Not only Google has a strong recognition in the web, it is also reaching out to developing softwares, hardwares to benefit the public; they are Android, Google mail, Google drive, Google plus and many other applications to benefit school educations and small businesses. Google Nexus, both phones and tablets will fall under Google’s Hardware. Android Platform: Although having the Android platform is not yet helping Google generate profits, however, it helps Google to reach into the mobile industry. By stepping into the mobile market with Android platform, Google can further generate more revenue by running the advertisements through the platform. Provides best online software: According to Forbes.com, many school and small business organize their internal structure by using Google’s software such as Google mail, Google Drive, and Google cloud. Students use Google Documents to allow them to share and work the projects together at different locations. Google Document also allows small businesses leaders to view employee’s presentations, files overseas. Weaknesses Variety of Services: Google provides many services to the online users, but also individuals, schools, and small businesses. However, most of the services that Google provides are free of charge. This “free of charge” could be a potential threat to Google because it costs a lot of money for Google to maintain its security, and updates. Antitrust Probes: According Time Magazine, Google is using its dominant power of the search engine to key out its competitors information, and advertisements. Google would give the priority to the advertisers that paid Google. This action was being investigated by FTC, and many other competitors such as Microsoft, FairSearch, Yahoo, has urged federal action against Google. Chinese Market: Although Google has established its position in the U.S. It is also important for Google to get the consumers outside of U.S., for example China. China is currently the biggest market of online users, however, according to AOL.inc, there are approximately 420 millions of people who have Internet access in China, and 97% of them uses Baidu. Google needs to get this sector of market share in order to stabilize its position. Major reason that the Chinese consumers choose to use Baidu over Google is that Baidu indexes Chinese pages; While Google indexes mostly English pages. 29 Tax Avoidance: By exploiting legal loopholes, Google was able to avoid more than 3 billion dollars worth of tax between 2007-2009. The company significantly lowered its tax rate to 2.4% even though the average corporate tax is well over 20%. Tax avoidance by Google decreases government revenue significantly, and affects the company’s reputation negatively. Privacy: Not only individuals depend on Google, but also businesses and school educations. In the near future, people are concerned that how secure is Google. Will the data be revealed, especially for corporations? Google needs to work on its security system and tells the public how will they manage the data that are saved on its cloud service. V. ANALYSIS OF STRATEGIC FACTOR ANALYSIS (SWOT) 5.1 SITUATIONAL ANALYSIS (SFAS TABLE) Weight Rating Weighted Score Comments S I L S Human Capital 0.15 5 0.75 Innovative ideas and creativity S Brand Recognition 0.15 4 0.6 Consumer’s loyalty to Google W Antitrust Probes 0.1 3 0.3 Attempt to Monopolize Search Engine Industry W Chinese Market 0.1 3 0.3 Needs to gain more users in the Chinese market x O Mobile 0.1 4 0.4 Compete and win market shares against Apple IOS x O Innovation 0.15 5 0.75 One of Google’s greatest strength is innovation. They’ve done by meeting customer needs with modern technologies that makes life easier x x T Competing search 0.15 3 0.45 Competing with other tech giants, Yahoo, and x x 30 x x x x x engines T Bing. Competing ecommerce sites 0.1 Total Scores: 1 3 0.3 Competing with firms that hold the advantage of being the first in the industry, such as Amazon and Ebay. x 3.85 VI. STRATEGIC ALTERNATIVES AND RECOMMENDED STRATEGY Tows Matrix: Internal Factors (ROW) -External Factors (Column) 2 Strengths 2 Weaknesses 2 Opportunities 1. Employees - Google only hires high educated. Top-notch young employees. Google are looking for employees that are good at many things, not specialists in one particular area. According to Google jobs, things changes fast within Google like the internet speed. Google is looking for people that are good not just right now but long term. 2. Research and Development - Although Google has already established its position in the search engine industry, it is still constantly innovating outside of the search engine category such as Android Platform, Google Doc, and many other services. 1. Mobile Market - Although Android platform stands as a weakness when it comes to generating revenue. However, by innovating Android platform, it allows Google to step into the Mobile market, to further advertise in the mobile industry. 2. Variety of Services - By providing free services such as Google Doc, although Google is not generating income from Google doc, it attracts consumers to use Google Doc and gain more brand loyalty. When Google established its brand loyalty, it will then attract advertisers to invest in Google. 2 Threats ST – Strategies that use WT – Strategies that minimizes 31 Strengths to take advantage of Threats 1. Intellectual Property Although heavy investments have to be made to protect Google’s intellectual property, the value of those properties will increase in the long run. By protecting the intellectual property, the unique services allow Google to secure its lead in the market, and gain higher revenues from ads and consumers. Weaknesses to avoid Threats 1. Youtube Acquisition- When Google took over Youtube on 2006, it minimizes weaknesses to avoid threat by using Youtube’s popularity to keep the advertisers from investing in Youtube. If Google did not buy Youtube, it could potentially lose advertisers who choose to invest in Youtube over Google. 2. Employees - They hire and recruit mostly young intellects with very creative minds to 2. In 2010 Google bought work with Google. By doing travel software firm ITA. so, they keep the company “Today, almost half of all intact with current products and airline tickets are sold online” technologies that are appealing Marissa Mayer, vice president to the younger generations. If of search products and user such employee is hired by their experience at Google. With this rivalry, it will make Google less competitive. acquisition Google has leaped forward against their competitors because it helps make it easier for business and busy suitors to book their flights while on the go. Strategies alternatives According to the tables and analysis of this company, we conclude that Google needs to improve in the Chinese market and fair play. China is a growing country and many believes that they will lead the world in economy comes 2030. It is not easy in penetrating their market due to their ample volume of population and brand loyalty to their own Chinese search engine, Baidu.com. When Google became global, the board members did not take in the fact that each country has its own law on the Internet. Now that they are aware of this, Google must continue to perfect their search engine to align with each country’s law. Playing fair is also a good business practice. Google was accused of monopolizing the search engine industry when they were blamed for censoring out their competitors information on their search engine. This action was being investigated by FTC, and many other competitors such as 32 Microsoft, FairSearch, Yahoo, has urged federal action against Google. Google must conduct their business practice fairly and ethically. Google is also jumping into the social media world. They are trying to create a social interaction platform, called Google Plus. We think that this is a bad idea because Facebook, Twitter, Instagram, Myspace, etc. already are established companies in that area. Winning customers over from them is really hard and costly if Google is starting from scratch, which they are. Google Plus just started and Google gains the least revenue and customers. They need to discontinue with the service. We see that the best approach for Google is to either acquire or partner up with one of the top social network companies. This may be costly also but the amount of customers that they will bring is worth the risk. Having brand recognition is what all companies shoot for. Google has become such a powerful brand that they have gained insurmountable of followers worldwide. For example, if a normal brick cost one dollar per brick and if Google decided to make bricks too, chances are that Google could charge more than the normal brand and would still sell. This is power of brand recognition. Google has that and they need to continue and stay improving in this area. Recommendation According to this case study, we recommend Google to keep investing in human capital and brand recognition. The company is now known as having the best work environment for employees for they are mainly hiring employees that are in the top 10% of their school only. Human resource is important not in just Google, but every company that ever existed needs human capital to succeed. Google made sure they hire only the best of the best. Google needs to continue on scouting for the best talent and skills, for they bring innovation, creativity and modernity, which is what Google, is known for. Another recommendation is that they must win over the Chinese market because it offers many benefits once Google can win them over. In order to do so, Google must obey China’s Internet law. With China’s population, Google could become the most valuable company in the market in the search engine industry. VII. IMPLEMENTATION Google has become the most successful company through purely advertising. They’ve made information available to Internet and mobile users globally. They have become a multi billion-dollar company through providing users with quick and available information. Most of the Internet users are switching from Yahoo!, Bing, AOl and ASK.com to Google because Google has become the prime example of a company that put their users first. All Google products are user friendly and because customers are switching to them. They need to continue to concentrate on users. 33 Google’s mission is to organize the world’s information and make it universally accessible and useful. They have implemented this mission into each of their employee. Each of Google’s product and service allows users to access information anywhere via Internet connection. So far, Google has aligned their mission with their strategies. They must keep up the good work in order to stay competitive. VIII. EVALUATION AND CONTROL Google is one of top companies in the world. They have done so through careful selections of selecting employees, following and implementing their mission statement and creating products that are affordable and user friendly. By doing the following, Google has knocked of their top competitors, Yahoo! And Bing, in the search engine industry. They have also neared their mobile competitor, Apple IOS, and Google has projected that they will gain more market shares from IOS in the near future. According to this case study, Google has met their most of their objectives expect they must make improvement in foreign policy law and continuing on fair practice. 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