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External Analysis of Google Inc.
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External Analysis of Google Inc.
By Ben Morrow on October 15, 2008
Google Inc. is analyzed using Porter’s Five Forces: rivalry, the threat of substitutes, buyer power, supplier power, and barriers to entry.
Internet search is applicable to most cultures all over the world freeing Google from geographic dependence. 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, 2008). 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 computers become more affordable, many people in economically disadvantaged countries are gaining access to the internet for the first time and Google would like to route them through its search and productivity products, like Gmail, Docs, and Sites. Google’s web applications are now bundled into the operating system on low-cost Linux-based computers (Blankenhorn, 2008).
Google is well positioned in demographics because it has a relatively young userbase. This means that it will be less affected as the Baby Boomers age in comparison to other companies that depend on the 50 to 60 year-old demographic group. Internet search is also not a gender-specific issue, and would not be hurt by changes in the ratio of female to males. The company will however benefit when some traditional and paternalistic societies begin using the internet more frequently.
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 (May, 2007).
The United States is currently in a period of recession and stocks are trading at 52-week lows. However, technology companies like Google are relatively isolated because search and consequently internet-based advertisements have become a staple to the world society and economy. In fact, a recent Wired magazine article says that Google “looks particularly well-positioned to weather the downturn. Google’s focus on highly targeted, measurable advertising makes it more recession-proof than many other businesses in tech.”
we will become increasingly more dependent on internet search. Google’s “Don’t be evil” mantra has been put to the test as users ask whether cooperation with governments undermines their privacy and freedoms. To enable more people to access Google’s services from their mobile devices. Google stands to benefit from this with an increased number of search queries. for many people.S.19/03/2011 External Analysis of Google Inc. 2008). In addition. to locate restaurants. Socio-Cultural The world is increasingly becoming more connected due to the means of communication available through the internet. 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. 2008) The crucial need to stay informed and constantly connected keeps such services vibrant despite the parched surroundings. Politcal and Legal Formal institutions have not significantly affected Google’s operations. This link took users to a Privacy Center where they could learn about Google’s policies in regard to political and legal issues (Google. 2005). Stakeholders benmorrow. 2008). although Google has faced pressure from the Department of Justice to relinquish archived search terms (Buncombe. check sports scores. Google responded to customer concerns when it added a privacy link to its home page.info/…/external-analysis-of… 2/7 . People will use these devices for driving directions. As internet use increases among all age groups and across all cultures. most new cell phones are internet capable devices. And. The page provides the relevant information regarding digital information and provides links to notify both Google and the U. 2006) and from the Chinese government to censor search results (Liedtke. download music. In 2008. Copyright Office of suspected infringement (Google. Google has also faced concern on copyright issues because the company stores copies of third party web pages and images on their servers. the search giants like Google make the internet navigable. (Schiffman. and even quick research. They have responded to this criticism by releasing a copyright information page.
It is Google’s management’s job to ensure the survival of the firm and the long-term benefits of the stakeholders. Google’s distributed business model ensures that no stakeholder has a level of importance that could singly change the direction of the company. Each stakeholder has a relationship with Google and this relationship is the source of the stakeholder’s power to affect Google’s decisions.info/…/external-analysis-of… 3/7 . Potential New Entrants The barriers to entry in the internet search market are high. the user’s right to privacy and the government’s right to access records. but the way that the mass of web users. media. customers. Management is tasked to weigh the seriousness of each claim and decide which outcome will best benefit the majority of their stakeholders. Google decisions may be influenced by the government. Figure 1. Stakeholders include not only the shareholders of the company’s stock. trade associations. activist groups. and community. and governments interpret their activity could influence the company’s objectives. Some stakeholders have conflicting claims. suppliers. all who have their own agendas and responsibilities to the people they serve. Stakeholder Importance Google has a responsibility to manage its operations for the benefit of its stakeholders. Litigation and politics often have an effect on both the short-term and long-term results and that is why it is important to be vigilant of the external environment. such as the user’s right to information and the government’s responsibility to protect information – or consequently. Porter’s 5 Forces Analysis Porter’s 5 Forces analysis is a framework for industry analysis and business strategy development relative to the competitors of the firm (QuickMBA. The current competitors have thousands of servers benmorrow.19/03/2011 External Analysis of Google Inc. 2007). and the media. but also the employees.
Suppliers Google’s ad system is a reliable source of income because both the ad-making partner and ad-receiving individual are both customers of Google’s.6 billion which grew an average of 115% annually in the preceding five years (Google. Google commands 57% of internet searches in the United States (Agence France-Presse. the threat of new entrants in the internet search market is relatively low. So as long as Google maintains its market dominance with the search product. (Google.info/…/external-analysis-of… 4/7 .1 billion respectively (Google. There is a dizzying amount of money made in this industry. 2007). Yahoo. 2008). A new entrant would need to provide better search results at very fast speeds to compete in this highly competitive market. 2007). 2007). benmorrow. This creates a sort of self-perpetuating draw for customers as the search results constantly improve. is more mature with a necessary path dependency to gather data on both the content of webpages and the search history of users. Excite. posted revenues of $7.0 billion and $51. This number is the same for Yahoo (Google.19/03/2011 External Analysis of Google Inc. Targeted advertisements based on the information they collect with their products are Google’s primary source of revenue. With that in mind. and Microsoft (operating under their respective brands – MSN and Live Search). 2008) Google’s main competitors. it must be recognized that when Google was founded in 1998. The market now. Google had revenues of $16. This large market share enables them to improve the quality of their search results and targeted ads more quickly than their competitors. and to merit they have created many complimentary products to their main internet search service. 2008). Yahoo. and Altavista dominated the search market and Google has since eclipsed them all (Viney. Yahoo and Microsoft lag behind with 23% and 11% respective market shares (Figure 3) (Agence France-Presse. however. Presently. Current Competitors Google’s stated goal is to “organize the world’s information” (Google. Google’s cost of revenue as a percentage of sales in 2007 was 40% (Google. 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. supplier bargaining power will remain low. Therefore. deployed in locations all over the world and have accumulated many years worth of data about user habits. 2007) suggesting that both companies are equally efficient at maintaining supplier-seller collaboration. 2008). In 2007. 2008). Figure 2.
“Company Overview. 99% of Google’s revenues are derived from advertising (Google. In light of this fact. AFP. 2008) Customers As of 2007.. Andrew. The Independent. Google’s ability to please its stakeholders will continue to define the success of the venture and the future of the company. Works Cited 1 Agence France-Presse. This means that no single buyer has a controlling interest. 3 Google. However. there really is no suitable substitute for search. benmorrow. 2008). In Google’s system many advertisers bid on keywords. Popular keywords like “Dallas Texas” are sold for much higher value-perclickthrough than obscure topics (Google. Corporate Information.” 2008.info/…/external-analysis-of… 5/7 . (Agence France-Presse. This distributed approach allows Google to attract both large companies and small “mom-and-pop shops” keeping buyer power low. 2008). and less than 5% of the revenue is generated by any given network partner site (Google Inc. 6 October 2008. but Google provides tools to complete these tasks as well as conduct searches. but there are no obvious substitutes to organizing information on the internet. 2 Buncombe. Information can be organized in different ways including categories and sorted by date. the internet has become the mode chosen by millions of people all over the world to request and retrieve information.19/03/2011 External Analysis of Google Inc.com searching for more market share”. 2007). “Revamped Ask. no single account contributes more than 3% to net revenue. A substitute product may be invented in the future.” 15 March 2006. Google has positioned itself well to weather each of Porter’s Five Forces of Competition as well as stay afloat in a turbulent external environment. Potential Substitutes In 2008. Figure 3. “Google resists demand to hand over search records.
5 Google Finance. Your name here. 31 December 2007. 12:00:46 – Like – Reply benmorrow. February 08. Corporate Filing. This Page Add images Follow Cancel Post Echo 2 Items Guest Admin Tuesday. External Analysis of Google Inc..” 31 December 2007. November 2007. Washington D. David. Read more about Ben's bio and motivations. “Google Agrees to Censor Results in China. Posted in Research | Tagged Advertising. Reuters Business & Finance. 8 Reuters.C. 9 Viney. Google.” 14 September 2007. Google's Strategic Direction Login Share What's on your mind. Search Ben Morrow An entrepreneur from Texas who loves to build things. 2011. “Search Engine History – Web Search Before Google. 4 Google.” 30 June 2008.: Securities and Exhange Commission. 6 Google Inc. “Annual Income Statement. “Financial Tables.19/03/2011 External Analysis of Google Inc.. 10-Q.” 24 January 2005. Internal Analysis of Google Inc. a company that will revolutionize the way you think about your personal finances. Articles in this series History of Google Inc. Investor Relations. SEO Expert Services. Business. Breitbart. Leadership & Culture at Google Inc.info/…/external-analysis-of… 6/7 . Ben is currently starting up myMoney360. Michael. 7 Liedtke...
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