Case Analysis - Strategic Management Alphabet eyes new frontier Presented by Group 09Q1: Reasons for owning. ‘porate Structure 2D Alignment ith Googles vison: Google aimed at creating bigger impact in people’s lives by doing multiple things had aims been open totaling umearvertional ris on WD Lone in Eos: Google's founders were deeply inspired by Herlahire Hathaway. The focus was on lng term vale creation rather than shor tarm profit ang promising new opportunities Benefits 73 195% of Google's revenues (in 2012) was earned from its eee eet lversiication to reduce the dependency on one business a ‘Owning unrelated subsidiaries created a potential for ‘Alphabet to make a breakthrough in anew industry n tong Oe ear cy} Since the subsidiaries were working in very unrelated fiolds, there was negligible chances of sharing activities or peur a ‘The losses from its unrelated subsidiaries were eating out ee ee eo eres Pests The excessive risktaking Involved in _ unrelated: diversification concerned investors. They were worried Pe eee ree er See cesQ2. Rationale Behind De-Centralised Structur When is this structure sui r_a_diversifi Alphabet chose decentralized structure to address spmpany? investor's concer of lack of transparency in evaluating, De-centralized structure is suitable fora diversified company in scenarios performance of individual business units due to Consolidated reporting. Dercentralization aimed to inculcate more financial discipline and bring greater ‘Also there is a need for establishing greater transparency in performance ‘transparency ‘where the topmost priority of company is innovation. i Benefits 3 [Wm Subsicaties Uke Nest and Very had igh tumaver due to sues Sth management sie and employess lung. coidtice in leiderps A decanted corporate stroclre wood ensure Frecterconttol of Aphabet over tach sbeilary QW Since bet companies had greater accountability in reporting their costs, it created a sense of caution in spending practices. This can stifle innovation, Brought in greater transparency due to independent performance ‘evaluation of each subsidiary WD Since the subsidiaries were very unrelated in thelr product tne, there was less chance of sharing activities or transferring skls to optimize thelr restructuring Reduced competition for talent and funds between individual subsidiaries [WD The de-contraization created a cultural sift as there was a possibility that the management could become more bureaucratic slowing the WD Provided greater autonomy to individual companies as they had eee ies ‘reater control over thelr business functions like hiring and marketingQ3: Is ‘Dual Class Share’ stock structure appropriate for Alphabet? Dual-class share stock structure was appropriate for Google as it gave its founders control over 80% of the votes. This ensured that they had complete control over the decision-making and functioning of the organization. This was important as innovation was important to Google and hence they had to focus on long-term value creation rater than short-term profit making. Benefits fi Drawbacks iC? 2D roster control to founders over the decision-making and Sa ec rereredla Cy reese i caren eR functioning ofthe organization concentration of power in the hands of founders leaving ‘them with less control over decision making. This can lead to Alphabet losing out on many investors which can make it difficult for it to raise capital QD This ensures that they can take decisions aligned with their long-term vision as compared to just focusing on short term profit making to gain the confidence of investors, [MD Dual class share stock structure can seem unfair to many Investors as they can feel that they are holding inferior WD Allows founders the flexibility to take high-risk high- area] rewards initiativesThank You!