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On Google s Expansion Strategy

On Google s Expansion Strategy

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Published by Onur Saka
Today, Google is again in the headlines; the internet and technology giant acquired American telecommunication pioneer Motorola for $12.5 Billion, to strengthen its mobile business1. The offer is Google’s largest ever in their acquisition portfolio, and it is 63% above the closing price of Motorola Mobility shares on Friday. Shares in Motorola have already raised more than 50% in one day, and the ripple effects of the acquisition enjoyed by some other technology companies. Research In Motion and Nokia enjoyed their climbing stock markets which is mainly a result of greater appreciation of patents. Further than that, it will cause much deeper effects in whole technology world.
Today, Google is again in the headlines; the internet and technology giant acquired American telecommunication pioneer Motorola for $12.5 Billion, to strengthen its mobile business1. The offer is Google’s largest ever in their acquisition portfolio, and it is 63% above the closing price of Motorola Mobility shares on Friday. Shares in Motorola have already raised more than 50% in one day, and the ripple effects of the acquisition enjoyed by some other technology companies. Research In Motion and Nokia enjoyed their climbing stock markets which is mainly a result of greater appreciation of patents. Further than that, it will cause much deeper effects in whole technology world.

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Categories:Types, Business/Law
Published by: Onur Saka on Aug 18, 2011
Copyright:Traditional Copyright: All rights reserved

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05/28/2014

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Onur Saka8/16/11
On Google’s Expansion Strategy: The Acquisition of Motorola
Today, Google is again in the headlines; the internet and technology giant acquired American Telecommunication pioneer Motorola for $12.5 Billion, to strengthen its mobilebusiness
1
. The offer is Google’s largest ever in their acquisition portfolio, and it is 63% abovethe closing price of Motorola Mobility shares on Friday. Shares in Motorola have already raisedmore than 50% in one day, and the ripple effects of the acquisition enjoyed by some othertechnology companies. Research In Motion and Nokia enjoyed their climbing stock marketswhich is mainly a result of greater appreciation of patents. Further than that, it will cause muchdeeper effects in whole technology world.With this acquisition Google simply buying a lot of stuff; an amazing number of 24000patents, 20000 employees, and world recognized wireless brand, and a handset manufacturingbase
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. This is going to change the wireless battle between major players such as Apple,Microsoft, Ericsson, RIM and Google. Since its foundation, Google has always been aresearching, innovating and investing company. This aggressive expansion strategy is essentialfor technology industry; the new technological developments and competition easily puts you inthe dusty pages of history, and thus, you became a study for unsuccessful strategy. In contrast,despite some critics, Google is doing well with its overall global business strategy. Twenty yearsmay considered a short period of time for a company to establish its business, and executeoperations and implement strategy, but it was enough for Google to became world’s mostpopular brand with generating almost $30 billion dollars revenue in 2010.To understand the business strategy of Google, their ‘short’ history must be examined.The company is founded in 1996; the story is famous, two Stanford doctorial studentsdeveloped a search algorithm to be used in Internet search. They developed their searchengine, www.google.com,and it has become a game changer. Searching is a human behavior, in internet world it is essential. It is a basic tool that we use every day since its foundation, thissimple tool, according to Alexa, is in the top three of most visited sites in almost every country.There is no other business than internet business in the world that can reach billions of people. And there was no other website than Google that can reach all other website and internetcommunity; this gave Google an amazing opportunity, and they used it for advertising. Therevolution in advertising and the dominance of Google has given such power; they became aninternet giant in a very short time. And Google has never lost popularity; the website always hada simple, clean design, which is probably the best style for millions of unique visitors.
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The unmatched success in web search and advertising, the core competences of Google,provided every opportunity and power to expand their business. From one aspect, expansion isnecessary; everyday new ideas create new technologies and bring new dimensions to theinternet world, and the companies have to develop long-them plans and future objectives totake a better place in the competition. From another aspect, Google had everything, technology,popularity, world’s biggest user base and billions of dollars. They used these funds to improvetheir distinctive competences and comparative advantages; in addition they made severalinvestments into new fields. Diversification has become their new strategy.Google always kept up investing in the core business; they improved the search engine,continued to index every possible contents including articles, books and even photos. They alsodeveloped new advertising features such as sponsored links, Adwords Adsence, Ad Innovations.To be in the top search results of Google became an important goal for websites. (Even this hasbecome a separate business field) In addition to investing in core businesses, they successfullycompleted several mergers and acquisitions in different fields. In the beginning they focused oninternet based businesses to gain more data; because data means more people, markets,options and future. In 2001, Google acquired a Usenet archive; an archive which has containedmore than 500 million discussion group posts. They, clearly, acquired a community. In 2003,Google acquired Pyra Labs, the developer of Blogger. This time, they acquired a more successfuland populated blogging platform which enabled reaching more users and a better competitiveadvantage, and blogging became a new trend. In 2006, Google acquired YouTube. This one wassurprising; people criticized Google for wasting money since they have a similar platform,Google Video. This investment was to acquire an already available platform with millions of userand videos. They chose to have a well settled and successful business in a snap rather thanfocusing to enhance their own platform. Besides, they acquired a portfolio of millions of onlinevideos, and then, they indexed these videos and combined this platform with their searchengine business. They also acquired some websites, projects and platforms such as Kaltix,Picasa, Keyhole, Dodgeballs, Nevenvision and Writely. These acquisitions aimed to bring newtechnology and developers to the company. Data, users, technology and intelligence are themost precious values in 21
st
century, and Google’s acquisition strategy is based on expandingthese values. After having an indispensable power in the internet world, their strategy shifted todiversification. They used their assets to invest in new technologies other than internet, but thesame time, related with internet; the theory is sound, the fastest, easiest and variedcommunication channel and network between all humanity, internet, is inevitably the futureitself; and you can build everything that humankind ever created since the beginning of historyon internet. It is a new dimension; shopping, trading, manufacturing, marketing, mailing,talking, watching, reading, simply everything can be reshaped and implemented to thisdimension. And if you hold a significant part in this traffic, your options are limitless. Googledeveloped and still developing new ways of talking, chatting, watching TV, making research,publishing and making payment. The limit is truly their imagination.
 
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One of the recent investments of Google was Android. Android is an operating systemfor smartphones. Since the phones have become smart, several operating systems aredeveloped by the phone makers for their on handsets. The latest and the most successful onewas the IOS, the operating system developed by Apple, for its handsets, IPhone. With theirgigantic base of R&D and numerous of intelligent developers, creating a smartphone OS was nothard for Google. So, they entered this business with the Android platform. The platform was avery stable one compared to the others in the market; soon, it has started being used by severalphone makers such as Samsung, LG, Motorola and HTC and became the most powerfulcompetitor to Apple’s IOS. Later, Google gave a stronger signal to call for entry to thesmartphone business; they contracted HTC, Taiwan’s biggest phone maker, to produce Googlesmartphones. Months ago, Google bid against an alliance of Apple, Microsoft, RIM, Sony andEricsson for Canadian defunct telecommunication company, Nortel Networks’ patent rights, andlost. The telecommunication battle has officially started.Google’s latest acquisition of Motorola Mobility was its response to thetelecommunication battle. Google wanted to be in this market; and now, more than just havingan operating system, they have a whole company which is a pioneer in telecommunicationindustry. They finally became a real player in this field having both an operating system and itsown handset. Besides the large manufacturing base, infrastructure and human power, the mostimportant reason for this acquisition was the patent rights that Motorola have. The patents areseen as a huge asset to mobile industry players as a key in coming out on top in the mobilerealm. It’s those patent portfolios that are used as defensive mechanisms against each other.The more patents a company has, the more it prevents other companies from going after it inlitigation. Google, who has quickly risen to the upper ranks in mobile technology, is alreadyseeing lawsuits come its way. Acquiring the Nortel properties would help them combat suchlitigation. They lost them, but now they have Motorola’s patents. Clearly, competition hasbecome a level of war between giants and patents are the essential shields.There are both positive and negative critics on Google’s strategy. Some people believethat Google does not innovate any more, rather than creating new technologies, they arefocused on competing in several areas. It may be considered true, but from the managementview, Google has to utilize its sources to become more efficient, generate more revenue andcreate value. Google also has to diversify with new technologies, new markets and newchallenges. Losing focus on core competences is a critic error for management, but Google’s alldiversification strategies are related with internet. They are building a greater network combining Internet with mobile phones, computer operating systems, TV’s, TV channels,payment instruments, in short, every aspect of life. Now, they are face to face with accusationsof creating a monopoly.The future of the Motorola acquisition will be clearer soon, today, it is also criticized forthe amount of payment. $12.5 billion is a remarkable acquisition especially in this post-crisis era.The news is depressing all the time, people tend to search for havens for safety; they choose toinvest in secure assets like gold and bonds. Truly, the financial crisis has a negative influence on

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