TITLE:

INTERNAL ANALYSIS OF GOOGLE

STUDENT NAME:
AZIM MOHAMMED

UNIT CODE:
BSS058-6

UNIT NAME:
STRATEGY AND THE GLOBAL COMPETIVE ENVIRONMENT

STUDENT ID
1722448
 EXECUTIVE SUMMARY

Businesses need to thrive and understand what is happening in their external environment. The
business environment is constantly changing because of many factors. Understanding external
environment changes are important to creating business strategies which will ensure a business'
survival. The changes within the external environment affect the firm’s internal environment
because new strategies will have to be formulated to align with existing changes. Strategy is
about deciding which direction to take and how to get there.

Google, one of the biggest brands to date in the information technology industry, deals with
constant change in its industry. Investing in technology is risky because products and services
become obsolete in the absence of technological innovation and advancements.

The purpose of this paper is to evaluate corporate and business strategies of Google and justify
given approaches. Firstly, the paper analyses the Value Chain Analysis and V.R.I.N of Google.
Secondly, both internal and external environment analyses are described in brief then the
Ansoff Matrix is presented analysing the corporate strategy diversification. Thirdly, the
marketing plan presents a proposed plan for diversification Google’s portfolio.

The paper illustrates that Google’s employees are critical to the success of its value chain. They
are the company’s most important assets. Google’s V.R.I.N analysis highlights four keys areas
in which Google’s resources are valuable. Google has captured the largest market share in its
industry and is making strides in its technological advancements and is increasing its
environmental efficiency.
 TABLE OF CONTENTS

Contents
EXECUTIVE SUMMARY ............................................................................................................................ 1
TABLE OF CONTENTS........................................................................................................................... 2
INTRODUCTION ....................................................................................................................................... 1
VALUE CHAIN ANALYSIS .......................................................................................................................... 2
V.R.I.N ..................................................................................................................................................... 4
VALUE .................................................................................................................................................. 4
RARITY ................................................................................................................................................. 5
IMITABILITY ......................................................................................................................................... 5
SUBSTITUTABILITY............................................................................................................................... 5
CORPORATE STRATEGY ........................................................................................................................... 6
DIVERSIFICATION ................................................................................................................................ 8
Marketing Plan ...................................................................................................................................... 11
DIFFERENTIATION ............................................................................................................................. 11
7 P’s ................................................................................................................................................... 11
CONCLUSION..................................................................................................................................... 13
RECOMMENDATIONS ....................................................................................................................... 13
REFERENCES .......................................................................................................................................... 16
BIBLIOGRAPHY ...................................................................................................................................... 17
 1

INTRODUCTION

Google was formed in 1998 by Larry Page and Sergey Brin. The company began in the men’s
dorm rooms and soon moved to a garage after an investment from a venture capitalist. The
company has grown exponentially with a staff of over 80,000 around the world. They have
dominated the online advertising industry for several years despite their constant legal issues
of unethical business practices.
The company has diversified and expanded into many different markets such as Space
exploration,3d mapping, driverless cars and has made breakthroughs where artificial
intelligence is concerned.
In this paper the value chain analysis is explained and shown, which is slightly different from
the Value chain regularly used. The reason for this is because the nature of the business of
Google and the structure of their company which is explained in detail in that section.
Following the Value chain analysis is the VRIN analysis.
 2

VALUE CHAIN ANALYSIS

The value chain of Google, an information technology company differs from a manufacturing
company where raw materials are transformed into physical products to be sold to costumers
in turn creating value at each stage of the value chain. Considering Google does not produce
finished goods, its main service is its online search engine platform.

Google’s web users (who are essentially the raw materials) use the search engine to access
information of which the most relevant results are generated. These web users (traffic) are
directed to advertisers who convert traffics to their sites into sales finished goods. (Morrow,
2008). Google’s advertising business creates value by guiding internet users to certain websites
and categorizing users based on relevant searches.

Value Chain Analysis Diagram

Firm Infrastructure
Support
Activities
Human Resource Management

Technology

Supply Operations Distribution Sales Service

Primary Profit Margins
Chain and
Activities
Management Marketing

<Created for this report>

Over the years Google has gradually incorporated hardware and technological innovation for
its operations. Since the company is not a mass producer of goods, it works along with over
400 suppliers globally to manufacture devices, hardware and products such as Google Home,
Chrome Cast, Google Pixel and Nexus Phones, and Nest Learning Thermostat. Furthermore,
Google’s large supplier base supports its data centres and many of its services.
 3

In 2016, Google reported about creating a responsible supply chain1. Google wants customers
to not only enjoy but achieve satisfaction with using its products and consider the utility of its
products as well as its social and environmental impact. Creating a responsible supply chain
outlines achieving three main goals which are 1) 'the ethical and fair treatment of workers, 2)
providing safe and healthy workplaces and 3) maintaining an established supplier code of
conduct (Google, 2016) .

Google considers the value of its workforce as well as that of its suppliers and intends on
improving employee relations with management and reducing employee turnover by
identifying and addressing risks and concerns.

Google’s supply chain management enhances its value as well as the other primary activities
(operations, distribution, sales and marketing and service). These primary activities depend on
support activities such as human resources and its organizations infrastructure.

Human resources is the most fundamental success factor of any organization. As of December
31, 2017, Google reported having 80, 110 full time employees of which its U.S employees do
not receive labour union representation however all employees are provided with benefits.
(Google Inc, 2017)

Google is aware that competition for the most qualified workers in its industry is extremely
high, so the company gives aptitude test to hire the most competent persons. These personnel
are crucial to ensuring that Google surpasses expectations within its Research and
Development. Besides having the most efficient workforce, Google is desirous of improving
employee representation and inclusion for everyone. (Google, 2016)

Google’s employees are responsible for carrying out all its business operations. With more than
80,000 employees Google operates in over 70 offices in 40 countries located in the Americas,
Europe, Asia, Africa and the Middle East with its headquarters based in Mountain View,
California. The company’s operations are mainly technological alluding that advanced
software conducts not only its operations but distribution, sales and marketing and services.

Its global locations allow it to centralize its primary activities within each region to maximize
worldwide profit margin. More importantly Google profits from a human resources standpoint
because the company can take advantage of foreign currency differences against the U.S dollar.

1
It is important to note that Google does not disclose information about its supply chain management to the
public.
 4

In this regard, Google can opt to pay lower salaries to employees based outside the United
States.

Technology is another major success factor for the company because of the nature of its
business. Alphabet Inc.’s annual report highlights that 27, 169 full time employees were
working in Research and Development (Google inc, 2016). Technology is constantly
revamping and changing so Google needs to secure its dominant position by adapting,
inventing and renovating technologies.

By emphasizing the importance of human capital, Google has demonstrated that employees are
their most valuable assets, and without a work environment promoting transparency, equity
and inclusion Google cannot successfully carry out both its primary and support activities of
its value chain.

V.R.I.N

VALUE

Currently, Google holds more than 80% of the market share in the search industry. It’s search
engine platform is valuable to customers because it generates the most relevant websites based
on user searches. For instance, when searching, Google provides the most popular links in the
top search results e.g. currently trending FIFA World Cup 2018.

Furthermore, as highlighted in the value chain analysis, Google directs traffic to certain
websites. This is done through its AdSense program which generates income to advertising
partners. The more traffic to an advertiser’s website, the greater the sales.
 5

RARITY

Google’s technological infrastructure is unparalleled against its competitors. Google operates

and owns data centres globally which are responsible for its products continuous operations.
These data centres are not only efficient but reduce the environmental impact of product usage.
This is due to Google’s data centres consuming 50% less energy than others (Google , 2018).

Ten years ago, Google set out to reduce its carbon footprint by going carbon neutral, and this
has been accomplished using machine learning which creates a virtual replica of the earth. The
company is aware of its corporate social responsibility regarding the environment and has taken
into consideration the negative effects of the rapid consumption, depletion and emission of the
world’s natural resources and harmful gases respectively.

IMITABILITY

Google has data centres throughout the world, so it is more apt to serving user efficiently and
quickly. Google’s search engine (artificial intelligence) learns from each search request. It
constantly acquires more intelligence from collecting and storing user preferences. Because
Google holds the largest market share for a search engine, it can learn more from its users as
compared to its rivals. The company has been collecting, analysing and refining data for a
considerable number of years so therefore it would take years before a competitor could imitate
its search results.

SUBSTITUTABILITY

The easiest form of accessing information is via the internet. Although, Google has the most
popular search engine, it offers other search applications such as Google Scholar, Google
News, Google Books, Google Music, Google Images and Google Shopping etc. The company
has a knack for delivering the most relevant results. In addition, its competitive advantages
 6

differentiate it from its competition. Google has the competitive advantage in its industry, so it
should not depend solely on its AdSense program to generate revenue. During the growing
social media era, Google needs to expand and diversify from its advertising operations.

CORPORATE STRATEGY

Organizations operate in constantly changing and evolving business environments. To adjust

to the changing environment, businesses analyse the implications of these changes and
formulate new business strategies. Hankansson and Snehota (2006) state that strategy has been
described as opportunism to a certain extent however it emphasizes activities' patterns which
affect the attainment of organizational goals.

The Ansoff Matrix is a strategic analysis framework for identifying growth opportunities of
products and services in new and or existing markets. The growth opportunities are drawn from
both internal and external environment factors.

The external analysis of Google in assignment 1 was conducted using the P.E.S.T.E.L analysis.
Google has expanded its operations due to globalization however the company faces intense
scrutiny from international regulatory bodies and countries. The company has been accused of
both interfering in international politics and breaching Antitrust and Consumer Protection laws.
The latter has caused the tech giant to incur a hefty fine of €2.4 billion from the European
Union and this has negatively affected Google’s brand image and reputation. Despite political
and legal issues, the U.S government’s recent tax reform will provide incentives for Google
through increased business investments.

Google continuously makes great strides in technological advancements through its Research
and development. The company has improved its environmental efficiency by going carbon
neutral and has provided internet to rural areas where there is no access for instance through
'Project Loon.'
 7

In addition to the external analysis, the S.W.O.T analysis identifies the strengths, weaknesses,
opportunities and threats of an organization. Below Table 1 presents the S.W.O.T analysis of
Google.

S.W.O.T ANALYSIS TABLE

S
Presence is diversified on the world wide web
Globally recognized and trusted brand
Adwords program generates significantly large amounts of revenue
Rated worlds #1 search engine

W
More than 85% of Google’s annual revenue is acquired from advertising
Sharing user information could deter a lot of users from utilizing services2
Charged Large fines by multiple countries and organizations for unethical
business practices.
Many services and products offered are not profitable.
No social media presence

O
Development of Google plus to enter social media market
Business diversification and expansion of markets into multiple industries
Opportunity to acquire multiple companies
Since more businesses are utilizing the world wide web, more customers for
Google advertising

T
Competition from Facebook as well as Bing
Privacy issues
Expenses of fines from lawsuits
Fluctuations in exchange rates

2
All information searched by users, as well as locations of users and pictures are stored by Google -see
appendices for more details
 8

DIVERSIFICATION

Diversification is a fundamental action undertaken by most businesses wishing to expand into

new territory. Zook,( 2004) states that a company that diversified away from their primary
business was highly unlikey to succeed and was at a high risk for failure.In contrast to this
Baird & Thomas, (1990) highlights that any and all strategic decisions involve a significant
deal of risk taking.

An analysis of both the external and internal environment of Google highlights key risk factors
to its business. These risks are: -

1. Heavy dependence on advertising as the main revenue earner: - advertising

accounting for more than 80% of revenue
2. Encountering tremendous competition in every aspect of its business operations e.g.
advertising, cloud services, search engine, and video services
3. Increasing regulatory scrutiny: - new and existing laws could harm business
4. The changing online advertising market
5. Its lackluster social media presence

Although, Alphabet Inc.'s largest revenue earner is advertising, the company needs to move
into new areas to mitigate its current risks. Google needs to adapt a diversification3 marketing
strategy to a changing characteristic of its company’s product portfolio or market as compared
to market penetration4, market development5 and product development.6 This is achieved by 1)
expanding its current product portfolio into new markets and 2. introducing new products and
services to new markets. (Ansoff, 1957)

Each strategy defines a different path that a business can adopt however, businesses follow a
combined approach to thriving during formidable competition.

3
This move requires substantial investment in marketing and operational skills and is achieved through
acquisitions and joint ventures. Acquisitions will account for major revenue cost to the company however it is
fundamental to Google’s corporate strategy. It broadens the product offerings and improves expertise for
instance in engineering and other areas unrelated to its business.

4
Increasing business sales by increasing sales volumes to customers or targeting new customers for current
products.
5
Adapting product line by updating its features to new missions.
6
Develops products with distinct features in keeping with businesses' current mission.
 9

Figure 1 <https://newproductblueprinting.theaiminstitute.com/risk-and-the-ansoff-matrix/>

Diversification is distinct from the above-mentioned strategies because even though it utilizes
the same resources used in the standard product line, it requires new capabilities, facilities and
methods which results in physical and organizational changes to the business. This is the
riskiest strategy that an organization can adopt because the organization is going into a new
market in which it has no experience. There are three types of diversification approaches in
which a company can apply. They are horizontal, vertical, and lateral.

1. Horizontal diversification: - acquiring or developing new products or services unrelated to

existing products however remaining within the scope of the company’s financial,
technological and marketing experiences. To date, two of Google’s greatest acquisitions are
Android and YouTube. Android is an operating software while YouTube is a video and music
application. Google has been able to tap into the mobile phone as well as video industry which
is unrelated to its search and advertising business yet within the scope of the above-mentioned
expertise. Most mobile devices on the market use Google's Android software except for Apple's
iPhone and phones operating with the Windows operating system, so the investment was
profitable.

Currently, the company has the application Google + within its portfolio and its format is like
Facebook’s timeline however users are not able to 'chat', 'instantly' message or video call
 10

another user. Whereas, Facebook users have the option of communicating via Facebook
messenger or WhatsApp.7

Google has tapped into the mobile services industry by targeting all users of Android devices.
Mobile devices are pre-installed with YouTube, Gmail, Google +, Drive, Maps, Play Music,
Play Movies, Duo, Photos, Newsstand and Games. Therefore, Google should consider
developing a preinstalled social media app that competes with Facebook. The company needs
to analyse its competitor’s strengths and weaknesses to create a product that is much unique
and meets the expectation of users.

2. Vertical diversification: - expanding into production of components and materials. In this

instance Google should branch out into manufacturing. Currently, it has a supply chain
relationship with over 400 suppliers and the company can acquire or go into joint ventures with
business partners which carry complementary portfolio to absorb their intangible assets such
as its personnel (scientists, and or engineers etc.), patents, licensing of (new) technologies and
software etc. Google has developed products such as Google Home, Pixel and Nexus Phones
so it should investigate possibilities of acquiring one of its suppliers to enter into the
manufacturing sector.

3. Lateral diversification: - expanding product or service portfolio beyond the current industry
to access different possibilities. Google has the capital to invest into different markets. The
company core competencies lie within the technology industry. With its technological
background, the company should go into areas such as construction and engineering, health
care, transport, agriculture and national security.

Google has a digital replica of the earth, and it is promoting environmental efficiency, so the
company could explore opportunities within the heath care and food industry by targeting users
who use organic products or users who can’t drive or are unable to physically drive but linking
their mobile devices to the vehicles.

7
In 2014, Facebook acquired WhatsApp for US $19 billion from Jan Koum.
 11

Marketing Plan

According to the Chartered Institute of Marketing (2015), marketing is defined as the procedure
for establishing and fulfilling customer requirements.Similarly, Kotler et al(1999 cited in
Drummond & Ensor, 2005) defines marketing as the executive operation or procedure by
which individuals, groups and businesses attain what they desire through generating and
exchanging products/services and value with others.

DIFFERENTIATION

The most crucial component of a business plan is strategy. Implementing an effective strategy,
allows a company to find a market or industry segment and learn about the product users. There
are three business strategies; - differentiation, focus and cost leadership and a company can
either use one of the above-mentioned strategies or a combination to achieve the desired
outcome. The strategy that a business chooses must align with the company’s goals and
objectives.

Google is a leader in its search and advertising operations securing most of the market share
within its sector. Through diversification the company should innovate or invent unique
products and services. Differentiation will allow Google to attract customer loyalty by
customizing their products and services to satisfy customer needs. Once the product is unique
and demands a high degree of customer loyalty Google can set premium prices based on
quality, features and a favourable user experience.

7 P’s

Place: - Diversification means that the company could sell more products and offer services in
new markets so there are no limits to Google’s areas of interest. The company operates globally
over the world wide web and its physical geographic locations with a handful of ‘Google stores’
and plans to expand more. Google has business relations with over 400 suppliers, so the
company could acquire or establish joint ventures with companies offering related products
and services.
 12

Product: - Google offers a host of services and products ranging from its search engine to
laptops, and even driverless cars soon. By diversifying, google can benefit as the host of
products they offer will increase and the amount of their users will increase drastically.

People: - Successful businesses have the most competent persons. Employees carry out
responsibilities and tasks essential to the operation of the business. Google has a workforce of
80, 110 employees and considers them to be one of its most valuable assets. Google should act
to become more ethnically diverse since they claim that their employees work and succeed in
an environment encouraging fairness, equity and inclusion. According to the Google Diversity
Annual report (2018) 53.1 % of their workforce are white males and 2.5 % are of African
descent with 0.3% Native Americans.8

Price: Most of Google’s product’s services are offered to users free but a consumer can
purchase additional features that are not offered to non-paying user. In diversification, Google

Promotion: Google uses a multitude of marketing strategies and tools in their operations and
maintains a very powerful presence online. They also host a yearly event called Google I/O
keynote where they invite developers and associates from around the world to unveil their latest
technological findings. By this strategy the company keeps the customer interested and the
customer then spreads the information and findings of the company thus advertising on their
behalf.

Process: The scope of operations integral to Google’s success should entail research and
development, recruitment of top executives and marketing. Since the vast majority of their
products and services are online, they have ensured that the experience is user friendly as
possible and constantly engage users to be informed of how they can improve the experience.

Physical evidence:
Since google regularly engages customers, non-users are able to witness their professionalism
and their flaws and make suggestions. Since most of Google’s products and services are free,
the customer who has internet access can experience and utilize these services and only pay to
receive additional features, for example; Google Drive, the cloud service, is free but should
you require an enormous amount of space then you can purchase it after you have used the
drive.

8
See Appendices for Further information and Chart
 13

Segmentation, Targeting, Positioning

The company targets multiple customer segments with their wide range of products and
services. Some of their products may not have a clear target customer at this time.9

The launch of their Google plus app to imitate Facebook and the creation and launch of google
chrome browser to imitate internet explorer can be termed ‘imitative positioning.’

CONCLUSION

Google has changed the way we think and has made changes that will affect mankind for
decades to come by introducing artificial intelligences that greatly increases the quality of life.

The Value chain analysis is slightly different and was explained in detail. The VRIN analysis
was very informative and indicated to us the resources/capabilities of Google. Ansoff matrix
was examined to identify the most effective strategy to be utilized. Diversification was
discussed in detail and elaborated upon which indicated the benefits of diversification and
justified as why Google should utilize this strategy. The SWOT matrix was exploited as well.
The 7ps were explored and scrutinized to identify any marketing strategies that may require
changing by the company.

RECOMMENDATIONS

Google should diversify their product line and expand into areas such as the social media
industry, health care, engineering, and construction and transport. They should also remove
from their subsidiaries those companies that do not produce revenue and should become more
ethnically diverse.

9
Products such as Self driving car and Space exploration programs
 14

APPENDICES

All information accessed at google or stored within Google are saved by Google.

Google can see where users have been and this information can be accessed by logging
onto ; https://www.google.com/maps/timeline?pb

Google also knows everything you have ever searched for and deleted,see this link for
more; https://myactivity.google.com/myactivity

Google also has all of your youtube history and have created a profile based upon your
searches and moods.

To download all your information from Google go to;

https://takeout.google.com/settings/takeout
 15

Figure 2;Chart showing Ethnically Diversity of Google

Adapted from Google annual diversity report 2018

 16

REFERENCES

Ansoff, H. I., 1957. Strategies for Diversification. Harvard Business Review, pp. 113-124.

Baird, I. S. & Thomas, H., 1990. What is risk anyway?. In: What is risk anyway:the meaning of risk in
strategic management. Greenwich: JAI press, pp. 21-52.

Chartered Institute of Marketing, 2015. Marketing and the 7ps;A brief summary of marketing. 1st ed.
s.l.:Chartered Institute of Marketing.

Chartered Institute of marketing, 2018. Chartered institute of Marketing. [Online]

Available at: www.cim.co.uk
[Accessed 18th July 2018].

Drummond, G. & Ensor, J., 2005. Introduction to marketing concepts. Oxford: Elsevier Butterworth-
Heineman.

Fodness, D., 2005. Rethinking strategic marketing;achieving breakthrough results. Journal Of

Business Strategy, 26(3), pp. 20-34.

Google inc, 2016. Alphabet Inc 10 k 2016, s.l.: Securities and Exchange Commission.

Google Inc, 2017. Alphabet Inc 10k 2017, s.l.: Securities and Exchange Commission.

Google, 2016. Creating a responsible supply chain, s.l.: Google.

Hakansson, H. & Snehota, I., 2006. No business is an island;the network concept of business
strategy. Scandinavian Journal of Management, pp. 256-270.

Johnson, G. et al., 2014. Exploring Strategy;Text and cases. Harlow: Pearson.

Kim, W. C. & Mauborgne, R., 2005. Blue ocean strategy;how to create uncontested market space and
make the competition irrevelant. 1st ed. s.l.:Harvard business school press.

Kirby, D. A., 2004. Entrepreneurship education;can business schools meet the challenge?. Education
and Training, 46(8/9), pp. 510-519.

Magretta, J., 2012. Understanding Michael Porter;the essential guide to competition and strategy.
1st ed. Boston: Harvard business review press.

Morrow, B., 2008. Google's Success, Dallas: University of Texas.

Porter, M. E., 1990. New Global Strategies for Competitve Advantage. Planning Review, May/June, p.
4.

Porter, M. E., 1998. Competitve Strategy;Techniques for analyzing industries and competitors. 1st ed.
New York: The Free Press.

Zook, C., 2004. Beyond the Core;Expand your market without abandoning your roots. 1st ed. Boston:
Harvard Business school press.
 17

BIBLIOGRAPHY

Ansoff, H. I., 1957. Strategies for Diversification. Harvard Business Review, pp. 113-124.

Baird, I. S. & Thomas, H., 1990. What is risk anyway?. In: What is risk anyway:the meaning of risk in
strategic management. Greenwich: JAI press, pp. 21-52.

Chartered Institute of Marketing, 2015. Marketing and the 7ps;A brief summary of marketing. 1st ed.
s.l.:Chartered Institute of Marketing.

Chartered Institute of marketing, 2018. Chartered institute of Marketing. [Online]

Available at: www.cim.co.uk
[Accessed 18th July 2018].

Drummond, G. & Ensor, J., 2005. Introduction to marketing concepts. Oxford: Elsevier Butterworth-
Heineman.

Fodness, D., 2005. Rethinking strategic marketing;achieving breakthrough results. Journal Of

Business Strategy, 26(3), pp. 20-34.

Google inc, 2016. Alphabet Inc 10 k 2016, s.l.: Securities and Exchange Commission.

Google Inc, 2017. Alphabet Inc 10k 2017, s.l.: Securities and Exchange Commission.

Google, 2016. Creating a responsible supply chain, s.l.: Google.

Hakansson, H. & Snehota, I., 2006. No business is an island;the network concept of business
strategy. Scandinavian Journal of Management, pp. 256-270.

Johnson, G. et al., 2014. Exploring Strategy;Text and cases. Harlow: Pearson.

Kim, W. C. & Mauborgne, R., 2005. Blue ocean strategy;how to create uncontested market space and
make the competition irrevelant. 1st ed. s.l.:Harvard business school press.

Kirby, D. A., 2004. Entrepreneurship education;can business schools meet the challenge?. Education
and Training, 46(8/9), pp. 510-519.

Magretta, J., 2012. Understanding Michael Porter;the essential guide to competition and strategy.
1st ed. Boston: Harvard business review press.

Morrow, B., 2008. Google's Success, Dallas: University of Texas.

Porter, M. E., 1990. New Global Strategies for Competitve Advantage. Planning Review, May/June, p.
4.

Porter, M. E., 1998. Competitve Strategy;Techniques for analyzing industries and competitors. 1st ed.
New York: The Free Press.

Zook, C., 2004. Beyond the Core;Expand your market without abandoning your roots. 1st ed. Boston:
Harvard Business school press.