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Assignment on

Google: An Internet Search Service Company

Submitted to:
M NAZMUL AHSAN KHAN

Faculty of Business American International University Bangladesh Course: Strategic Management

American International University Bangladesh


Date: 28 November, 2010

Google Inc.: The Company Google was founded in 1998 by Larry Page and Sergey Brin, PhD students at Stanford University who were fed up with the existing Internet search technology companies and their inability to return accurate search results. Google was basically an online company that specialized in developing a reliable Internet search engine. Google Inc. became a global technology leader focused on improving the ways people connect with information. Their innovations in web search and advertising have made their web site a top internet property and the brand one of the most recognized in the world. Google maintains a large index of web sites and other online content, which is freely available via their search engine to anyone with an internet connection. Googles automated search technology helps people obtain nearly instant access to relevant information from their vast online index. The main revenue generation of Google is by delivering relevant, cost-effective online advertising. Different companies use the Adwords program to promote their products and services with targeted advertising. In addition, the third-party websites that comprise the Google network use Adsense program to deliver relevant ads that generate revenue and enhance their user experience. Googles Strategic Position: Googles Chairman of Board and CEO, Eric Schimdt, is committed to the continuous growth of Google as a premium Internet-search company while at the same time striving to further expand beyond just the Internet search-based services the company offered. The company needs to introduce new internet-related services in order to develop a more enduring company not reliant solely on internet search technology but diversified enough to remain an enduring entity. It also is further developing its international popularity by giving options for the users to choose their languages for the search engine. In Googles website www.google.com or one of more than 150 other Google domains, information can be found in many different languages, check stock quotes and sports scores, find news headlines and also find images, videos, maps, patents and much more. Google regularly explores all three manners of diversification with new start-ups, with acquisition, and with strategic alliances.

Start-ups: Google has a rule that employees can spend 20% of the time working on pet projects that are not part of their job description. Such motivation helps Google innovate and diversify into previously untapped businesses but usually still makes use of their core competencies and capabilities. Both Gmail and Google News started off as 20% projects. Acquisition: Several of Googles products are derived from acquisitions including Docs, Earth, and YouTube. These products have expanded Googles brand and brought the previous users of these services to Google. Alliances: It is interesting to note the Google and Yahoo recently explored an alliance for advertising but federal judges threatened an antitrust investigation so Google backed out. This move did not cause a financial setback being prompt and respectful of other partners. Yahoo and Google in fact have a history together. Back in the early 2000s Google provided all of Yahoos search results. Google understands the wealth in diversification. Exploring new opportunities constantly over a solid base of research could prove profitable with the use of products that can reduce cost cost of production, advertisements, etc. These new products are crucial in gaining leverage in the constantly changing market and providing an alternative industry if need be. Google understands that valuable profits and minimized risk can be garnered with international operations. Googles Vision & Mission: Googles mission is to organize the worlds information and make it universally accessible and useful. They believe that the most effective, and ultimately the most profitable, way to accomplish the mission is to put the needs of the users first. Offering high-quality user experience leads to increased traffic and strong word-of-mouth promotion. Googles dedication to putting users first is reflected in three key commitments: Doing the best to provide the most relevant and useful search results possible, independent of financial incentives. The search results will be objective, and we do not accept payment for search result ranking or inclusion.

Doing the best to provide the most relevant and useful advertising. Advertisements should not be an annoying interruption. If any element on a search result page is influenced by payment, it will be made clear to the users. Will never stop working to improve user experience, search technology, and other important areas of information organization. Believe that user focus is the foundation of success to date and this focus is critical for the creation of long-term value and not intend to compromise user focus for short-term economic gain. Googles Objectives: Googles objective is to provide the users the perfect search engine that would understand exactly what they mean and give back exactly what they want. Now a days Google became successful precisely because of better and faster at finding the right answer than other search engines at the time. But technology has come a long way since then, and the face of the web has changed. Recognizing search is a problem that will never be solved, continuously pushing the limits of existing technology provides a fast, accurate and easytouse service that anyone seeking information can access, whether theyre at a desk in Boston or on a phone in Bangkok. As Google keeps looking towards the future, these core principles guide its actions. 1. Focus on the user and all else will follow. 2. Its best to do one thing really, really well. 3. Fast is better than slow. 4. Democracy on the web works. 5. You dont need to be at your desk to need an answer. 6. You can make money without doing evil. 7. Theres always more information out there. 8. The need for information crosses all borders. 9. You can be serious without a suit. 10. Great just isnt good enough.

These principles were written several years ago, still now it is revisited to see if the principles are well maintained through Googles journey or not. Corporate Governance Co-founders Larry Page, president of products, and Sergey Brin, president of technology, brought Google to life in September 1998. Since then, the company has grown to more than 20,000 employees worldwide, with a management team that represents some of the most experienced technical professionals in the industry. Eric Schmidt joined Google as chairman and chief executive officer in 2001. Corporate Culture: Google maintains a small company feel. Its commitment to innovation depends on everyone being comfortable sharing ideas and opinions. Its emphasis on innovation and commitment to cost containment meant that each employee was a hands-on contributor. Googles hiring policy is aggressively non-discriminatory and favored ability over experience. Google has offices around the globe and Google engineering centers recruit local talents in locations from Zurich to Bangalore, dozens of languages are spoken by Google staffers. As Google expands its development team, it continues to look for those who share an obsessive commitment to creating search perfection and has a great time doing it. Google allows employees to spend 70 percent of their time on the core business, 20 percent on related projects, and 10 percent on unrelated new businesses. This rule is so important that Google has people on staff to manage the 70/20/10 rule. The engineering and design staffs make use of the free time to pursue new products and technologies, but even the top-level managers adhere to the rule. Board of Directors: Eric Schmidt, Google Inc. Sergey Brin, Google Inc. Larry Page, Google Inc. L. John Doerr, Kleiner Perkins Caufield & Byers
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John L. Hennessy, Stanford University Ann Mather Paul S. Otellini, Intel K. Ram Shriram, Sherpalo Shirley M. Tilghman, Princeton University

Executive Officers: Eric Schmidt, Chairman of the Board and Chief Executive Officer Sergey Brin, Co-Founder and President, Technology Larry Page, Co-Founder and President, Products Nikesh Arora, President, Global Sales Operations and Business Development Shona L. Brown, Senior Vice President, Business Operations David C. Drummond, Senior Vice President, Corporate Development and Chief Legal Officer Alan Eustace, Senior Vice President, Engineering and Research Patrick Pichette, Senior Vice President and Chief Financial Officer Jonathan Rosenberg, Senior Vice President, Product Management

Societal Environment Internet search is applicable to most cultures all over the world this gives Google geographic independence. In fact, the company now has 20 offices in the U.S. and international locations in over 30 countries working on research, sales and marketing. Google offers a personalized search engine for more than 115 countries, and as language support improves, the company is likely to gain market share. As now computers are more affordable, many people in developing countries
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are gaining access to the internet for the first time and Google is steering them through its search and productivity products, like Gmail, Docs, and Sites. Google is well positioned in demographics because it has a relatively young user base. This is a good side as the use of internet increases the use of search engines also increase. Internet search doesnt depend on factors like gender, religion etc. therefore Google has an advantage over other businesses. a. Economy IT related companies like Google are relatively isolated because search and consequently internet-based advertisements has become a staple to the world society and economy. Googles focus on highly targeted, measurable advertising makes it more recession-proof than many other businesses in the technical sector. The crucial need to stay informed and constantly connected keeps such services vibrant despite the parched surroundings. b. Technology Technology is obviously always improving and Google has taken specific measures to make sure it does not fall behind. Google can use commodity computer parts (cheap components) knowing they will fail by ensuring that every component always has a duplicate. The components are attached to the computer with Velcro rather than screws which allows for quick swapping and upgrading. c. Socio-Cultural Formal institutions have not significantly affected Googles operations, although Google has faced pressure from the Department of Justice to relinquish archived search terms and from the Chinese government to censor search results. Googles Dont be evil mantra has been put to the test as users ask whether cooperation with governments undermines their privacy and freedoms. In 2008, Google responded to customer concerns when it added a privacy link to its home page. This link took users to a Privacy Center where they could learn about Googles policies in regard to political and legal issues.

The world is increasingly becoming more connected due to the means of communication available through the internet. And, for many people, the search giants like Google make the internet navigable. As internet use increases among all age groups and across all cultures, we will become increasingly more dependent on internet search. In addition, most new cell phones are internet capable devices. People will use these devices for driving directions, to locate restaurants, check sports scores, download music, and even quick research. Google stands to benefit from this with an increased number of search queries. To enable more people to access Googles services from their 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. d. Political Legal Google has also 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 criticism by releasing a copyright information page. The page provides the relevant information regarding digital information and provides links to notify both Google and the U.S. Copyright Office of suspected infringement.

Task Environment: Porters 6 forces (Forces Driving Industry Competition) Porters 6 Forces analysis is a framework for industry analysis and business strategy development relative to the competitors of a firm. Potential New Entrants Googles business is rapidly evolving and intensely competitive, and is subject to changing technology, shifting user needs and frequent introductions of new products and services. The barriers to entry in the internet search market are high. There are many competitors in different industries, including traditional search engines, vertical search engines and e-commerce sites, social networking sites, traditional media companies, and providers of online products and services. Googles current and potential competitors range from large and established companies to emerging start-ups. The current competitors have thousands of servers deployed in locations
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all over the world and have accumulated many years worth of data about user habits. A new entrant would need to provide better search results at very fast speeds to compete in this highly competitive market. When Google was founded in 1998, Yahoo, Excite, and Altavista dominated the search market and now Google is number one search engine by overcoming all of them. The market now, however, is more mature with a necessary path dependency to gather data on both the content of web pages and the search history of users. Therefore, the threat of new entrants in the internet search market is relatively low.

Suppliers Googles ad system is a reliable source of income because both the ad-making partner and adreceiving individual are both customers of Googles. So as long as Google maintains its market dominance with the search product, supplier bargaining power will remain low. Googles cost of revenue as a percentage of sales in 2007 was 40%. This number is the same for Yahoo suggesting that both companies are equally efficient at maintaining supplier-seller collaboration. Current Competitors Googles goal is to organize the worlds information and to addition they created many complimentary products to their main internet search service. Targeted advertisements based on the information they collect with their products are Googles primary source of revenue. With regard to internet search technology Google is the winning search engine. Googles main competitors are Yahoo, AOL and MSN. Presently, Google has nearly 60% of US market against their search engine. This large market share helps them to improve the quality of their search results and get ads more quickly than their competitors. Yahoo and Microsoft lag behind Google in market shares. The competitive rivalry is strong and ongoing in this industry because large amounts of advertising dollars flow to the website that has captured the largest volume of searches. Customers

The customers of Google are mainly the ad providers. Ad providers are continuously looking for the search engines which the people use the most to attract the target customers. In this case Google is number one as the usage of this search engine is the most depending on its fast and reliable search results and simplicity of the website. Brand value is also a reason for Google current success. The ongoing value creation is helping Google to capture new markets in the world. Therefore the ad providers can capture developing countries through Google as the use of internet user and search increases correspondingly. The users play a vital role for Googles revenue as the popularity of search engine depends on it.

Potential Substitutes In 2008, the internet has become the mode chosen by millions of people all over the world to request and retrieve information. So, there really is no suitable substitute for search. Information can be organized in different ways including categories and sorted by date, but Google provides tools to complete these tasks as well as conduct searches. A substitute product may be invented in the future, but there are no obvious substitutes to organizing information on the internet. Google has positioned itself well to weather each of Porters Five Forces of Competition as well as stay afloat in a turbulent external environment. Googles ability to please its stakeholders will continue to define the success of the venture and the future of the company. Relative-power of Stake-holders In Googles case the main power is on the hand of the investors and other partners. As Google is a public company its financial stability is very important for the investors. The increase in stock price proves that the company has a very good reputation and the financial condition is sound. The companys expenses are minimal because it had no inventory. But any kind of rules and regulations in the search industry might affect the company as it may affect the world.

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Internal Environment Analysis: The internal environment analysis mainly involves the strength and weaknesses of an organization. Here the strength and weaknesses are found according to Google Inc.s current situation. Strength: Google has a lot of strengths, below is given the main key points for Googles success.

Profitable business model (S1):

Google has a very profitable business model. Its diversification in business helps to expand in different areas of search and also increase the popularity to the users. Googles search engine has a huge database which helps to generate the accurate search results. Because of the huge database Googles business model is very hard to follow but still there are a few competitors like Yahoo, AOL and MSN who has similar products and services. Business Model: Google, Inc.

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IFAS Table (S1): Weight- 0.12 in the scale of 0.00-1 Rating- 4 in the scale of 1-5

User friendliness, reliable and fast search (S2):

Googles user friendliness, reliability and fast search helps to gain more users day by day. The simplicity of the search engine helps the users to be more dependable. Most of the time if a topic is searched the results also are related in a higher rate than Yahoo, AOL or MSN. This is mainly because of the data relativity and usage rate of the users. IFAS Table (S2): Weight- 0.20, in the scale of 0.00-1 Rating- 3.2, in the scale of 1-5 Brand equity

Googles brand equity is very high comparing other the search engines. Because of its brand value and quality search the users word to mouth promotion is helping Google to keep all the internet users known to its existence and use it for the source of information. Therefore the brand equity helps the company to gain more market share now and onwards. The brand identity that Google has developed has significantly contributed to the success of the business. The importance of brand
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recognition will increase due to the relatively low barriers to entry in the internet market. IFAS Table (S3): Weight- 0.18, in the scale of 0.00-1 Rating- 4, in the scale of 1-5 Innovative initiatives

Google has taken a lot of risks in the field of information technology. Its innovativeness helps people realize some product that they didnt know they were missing. For example, Google Search Personalization, Google in different languages, Google News, Google Earth etc. Who knew we could find a global website like Google asking us in mother tongue-Bangla what we are looking for. Therefore Googles innovativeness is its unique strength.

IFAS Table (S4): Weight- 0.12, in the scale of 0.00-1 Rating- 3.5, in the scale of 1-5 Work-force & corporate culture The workforce of Google is an important factor for its organization. All innovativeness comes from this work-force and every employee helps the organization to grow in a unique way. The 70/20/10 rule for work for the employees helps the employees to work on task that are not even in their job description. This culture helps everyone to think out of the box once a while so the creativeness increases giving them brilliant ideas that might be the next revenue earning project for Google. IFAS Table (S5): Weight- 0.08, in the scale of 0.00-1 Rating- 3, in the scale of 1-5 Weakness:
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Dependency of advertising business:

Googles main earning is depended on advertising. Advertising completely depends on the popularity of the search engine and its related products. The ad providers motive is always to get the peoples attention for selling their products or services. In this case if Googles popularity decreases the ad providers might switch to others search engines to make their organization visible to the people. Therefore, the dependency on ad providers may cause Google large revenue if the popularity level decreases.

IFAS Table (W1): Weight- 0.2, in the scale of 0.00-1 Rating- 3, in the scale of 1-5

Has products customers dont know that it even exists:

Google has a wide variety of products and services. Some of these products are still unknown to the people. This is a weakness as Google in unable to make the users know about products such as Google catalogue, Google translate, Google wireless etc. IFAS Table (W2): Weight- 0.1, in the scale of 0.00-1 Rating- 2, in the scale of 1-5

IFAS TABLE:
Internal Strategic Factors 1 Strengths S1 S2 S3 S4 Profitable business model User friendliness, reliable and fast search. Brand equity Innovative initiatives 0.12 0.2 0.18 0.12 4 3.2 4 3.5 0.48 0.64 0.72 0.42 Search engine, advertising, business solutions, third party websites etc. Related search results Large number of users. Google earth, Google news etc. Weight 2 Rating 3 Weighted Score 4 Comments 5

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S5

Work-force & corporate culture

0.08

0.24

Helps create innovation business ideas.

Weaknesses W1 W2 Dependency on advertising business Has products customers dont know that it even exists 0.2 0.1 3 2 0.6 0.2 Most revenue comes from Google AdWords. Google catalogue, Google translate, Google wireless etc.

Total Scores

3.3

The most important internal factors for Google are identified in the IFAS table are highlighted.

External Environment Analysis The external environment analysis involves the opportunity and threats of an organization. Here the opportunities and threats are chosen according to Google Inc.s current situation and future possibilities. Opportunity: Increasing internet users The usage of internet is increasing day by day. Since the use of internet is spreading to developing countries Google is taking the chance of increasing its market share as well. This opportunity is a plus point for internet search engine providers because the industry is still in a growth stage in these countries. Google is trying to capture the market of China but due to their local search engine it is becoming hard to compete. Apart from the increase market Google enjoy the users from a very young age. Technological change is helping Google to expand its users group day by day. Therefore increasing number of internet users is helping Google to attract more ad providers also as the user range increases. EFAS Table (O1): Weight- 0.15, in the scale of 0.00-1 Rating- 5, in the scale of 1-5
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Technological change

Technology is changing rapidly as well as Googles products and services. Google is the leader of such an industry that most of the advancement creates a new level for Google to make things more users friendly and simpler. The increase in usage of mobile phones helped Google introduce Google applications in the mobile phones. Technological advancement creates new areas for Google to expand its tools. For example, Nexus Googles creation for competing with Apple in the mobile phone industry. EFAS Table (O2): Weight- 0.05, in the scale of 0.00-1 Rating- 2, in the scale of 1-5 Expanding to profit making opportunities Google always seek new arenas for profit making opportunities. Different and innovative internet devices and advertising platforms may create the opportunity for Google to increase its revenue. EFAS Table (O3): Weight- 0.15, in the scale of 0.00-1 Rating- 3.5, in the scale of 1-5

Threats: Increased competition in the search engine market

The search engine industry full of competition. It is rapidly evolving and intensely competitive, and is subject to changing technology, shifting user needs and frequent introductions of new products and services. There are many competitors in different industries, including traditional search engines, vertical search engines and e-commerce sites, social networking sites, traditional media companies, and providers of online products and services. The current and potential competitors range from large and established companies to emerging start-ups. Established companies have longer operating histories and more established relationships with customers and end users, and they can use their experience and resources against Google in a variety of competitive ways, including by making
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acquisitions, investing aggressively in research and development, and competing aggressively for advertisers and web sites. Emerging start-ups may be able to innovate and provide products and services faster than Google can. If the competitors are more successful than developing compelling products or in attracting and retaining users, advertisers, and content providers, Googles revenues and growth rates could decline. EFAS Table (T1): Weight- 0.2, in the scale of 0.00-1 Rating- 5, in the scale of 1-5

Business model imitators

Google has a very profitable business model and there are companies who follow it. Google can face threat if the followers create a huge data relevancy and create a faster and more reliable search engine, but here Google is ahead of startup companies as its tough enough to create such search engine to match with Googles rate of relevant information. EFAS Table (T2): Weight- 0.05, in the scale of 0.00-1 Rating- 1.2, in the scale of 1-5 New media of advertising

Google Inc. generated 97% of their revenues in both 2008 and 2009 from their advertisers. The advertisers can generally terminate their contracts with at any time. Advertisers will not continue to do business with us if their investment in advertising with does not generate sales leads, and ultimately customers, or if Google do not deliver their advertisements in an appropriate and effective manner. In addition, expenditures by advertisers tend to be cyclical, reflecting overall economic conditions and budgeting and buying patterns. If Google is unable to remain competitive and provide value to the advertisers, they may stop placing ads, which would negatively harm overall revenues and business. EFAS Table (T3):
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Weight- 0.15, in the scale of 0.00-1 Rating- 2, in the scale of 1-5 Concerns from investors

For a public company this is a very crucial issue. A companys overall performance reflects on its investors. Therefore the investors play a very vital role. EFAS Table (T4): Weight- 0.15, in the scale of 0.00-1 Rating- 4, in the scale of 1-5 Data privacy The Google brand may be negatively impacted by a number of factors like data privacy and security issues. Government might create rules and regulations if Google cannot secure data and provide services to the users. This issue may raise if Google doesnt maintain the data privacy along with their services. EFAS Table (T5): Weight- 0.1, in the scale of 0.00-1 Rating- 1.5, in the scale of 1-5

EFAS TABLE:
External Strategic Factors 1 Opportunities O1 Increasing internet users O2 O3 Threats T1 T2 T3 T4 Increased competition in the search engine market Business model imitators New media of advertising Concerns from investors 0.2 0.05 0.15 0.15 5 1.2 2 4 1 0.06 0.3 0.6 Local search engines are more popular in markets like China Doesnt impact much Might create threat initially if its not internet related positive now, but as its a public company investors are important Technological change Expanding to profit making opportunities 0.15 0.05 0.15 Weight 2 5 2 3.5 Rating 3 0.75 0.1 0.525 Weighted Score 4 Comments 5 Internet dependency increase in use of mobile- Google Launches Nexus New internet devices and advertising platforms

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T5

Data privacy

0.1 1

1.5

0.15 3.485

Government regulations

Total Scores

The most important external factors for Google are identified in the EFAS table are highlighted.

SFAS (Strategic Factor Analysis Summary) Matrix:


Strategic Factors Weigh t Rate Weighted Score Sh or t In te r m ed iat e Lo ng Comments

S1 S2 S3 S4 W1 O1

Profitable business model User friendliness, reliable and fast search. Brand equity Innovative initiatives Dependency on advertising business Increasing internet users

0.1 0.12 0.12 0.08 0.2 0.08

4 3.2 4 3.5 3 5

0.4 0.384 0.48 0.28 0.6 0.4

Will keep Google successful in the long run Quality search for users to rely Helpful for intermediate and long run. Helpful for long run. Only focus for revenue

Ongoing process as technology is becoming more popular New internet devices and advertising platforms Local search engines are more popular in markets like China Might effect in the long run Will affect the future of the company

O3 T1

Expanding to profit making opportunities Increased competition in the search engine market New media of advertising Concerns from investors

0.1 0.1

3.5 5

0.35 0.5

T3 T5

0.05 0.05

2 4

0.1 0.2

Total Scores

3.694

Notes:

1. List each of the most important factors developed in the IFAS and EFAS tables in Column1.

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2. Weight each factor from 1.0 (Most Important) to 0.0 (Not Important) in Column 2 based on that factors
probable impact on the companys strategic position. The total weights must sum to 1.00. 3. Each factor rates from 5.0 (Outstanding) to 1.0 (Poor) in Column 3 based on the companys response to that factor.

4. Column 4 is the factors weighted score obtained by each factors weight times its rating.
5. 6. For duration in Column 5, short term- less than 1 year; intermediate- 1 to 3 years, long term- over 3 years. Column 6 is the rationale used for each factor.

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Recommendation: The company should take upon strategies to maintain its strengths, overcome the weaknesses and threats and create opportunities to be competitive in the search industry. Google can take the following strategies to overcome its weaknesses and threats by using its strengths and opportunities.

Google's Should Profitable business model User friendliness, reliable and fast search. Brand equity Innovative initiatives Strength Maintain the strengths so that Google will remain the market leader.

Implementation

Evaluation

Control Long Term control on company's strategic position.

Strategy: >Maintaining the quality of the search engine and create new ways to satisfy the users and relate to them. Strategy: >Google has opportunity to explore the world of graphics make games, design websites. >It can also create products like anti-virus softwares etc. >Create car tracking softwares by the help of Google Earth. Strategy: >Compete with local search engines in large markets like China. >Create social networking website to compete with most popular website Face book. Strategy: >R & D for new ways of advertising. >Improve quality of search

Continuous process- Feasible

Feasible

Dependency on advertising business

Weakness

Take immediate action to diversify business in different sectors for gain more revenue.

Feasible Might require permission /hamper regulations/peoples privacy May or may not be feasible

Short Term control on company's strategic position.

Increasing internet users Opportunities Expanding to profit making opportunities Increased competition in the search engine market New media of advertising Concerns from investors Threats Take the opportunities and making them the strength for the company.

Feasible

Overcome threats by new startups, acquisitions and alliances, keep a sound financial performance to attract investors.

External factors cannot be controlled

Feasible Feasible

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Conclusion: Now a days Google is the most popular global search engine. Its reliability and user friendliness attract users from all over the world. The brand value of Google is higher than its competitors, but it doesnt mean that this will remain always. Google needs to take strategies to be the market leader as there are always new competitors in the search industry. These strategies need to be updated due to frequent technological change.

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