Google Strategic Plan Brent Hummer, Greg Jones, Audre Wilde, Steve Ellison MGT 578 Strategy Formulation

and Implementation Ray Sherwood January 25, 2006 Executive Summary ----------------Company Background "Google is now the most dominant search tool on the web, setting the standards that others try to follow and better, as yet unsuccessfully" (Websearch, 2005). Founded just eight short years ago, Google was developed by Larry Page and Sergey Brin. From the walls of a garage the Google business was born. The Google search engine has continued to grow at a rapid rate since the initial launch in 1998. "The search engine and the company grew quickly through word of mouth, initially with regular web users coming across the tool and finding the results to their liking" (Websearch, 2005). The augmenting popularity of Google has continued with strong user acceptance worldwide. "Google took a major step forward in 2000 when it replaced Inktomi as the provider of supplementary search results on Yahoo 3/32 this gives Google exceptional coverage of web searches and it now has more than 50% share of the total search market, making it the clear market leader" (Websearch, 2005). Google serves three primary market segments: end users, advertisers, and partner web sites (Google, 2005a). Google does not charge users for searches. Google displays advertisements with the results of each search requested by a user. Whenever a user clicks on an advertisement, Google collects a fee from the advertiser. Long Term Objectives Google's long-term objectives are to deliver new advertising technology, develop tracking mechanisms, and enable users to search a larger base of information. Strategic Analysis and Choice Google's search engine business is the dominant business of the company. Google has built a competitive advantage based on search engine differentiation. Google's strategies are innovation and concentric diversification. Plan Goals and Implementation Google's short-term objectives are to expand the workforce for anticipated growth, expand further into international markets, and continue developing new products. Expanding the workforce will help achieve the long-term objective of delivering new advertising technology. Google's organization structure is primarily functional but also includes a few geographical organizations. Google has a unique culture and policies to promote innovation. Google Mission

11/32 You don't need to be at your desk to need an answer. really well. in order to promote good performance and facilitate hiring and retention. 11/32 Democracy on the web works. some are listed below: 11/32 Focus on the user and all else will follow. 2005c). p. They do state a philosophy on the Google website.e. 2005b) Vision/Values Google does not document a Vision or Values on the Google website. The following internal traits portray a resource-based view of Google's core strengths: 11/32 Strong brand name. Google strives to employ the most qualified applicants and reward the greatest contributors. industry. 11/32 Fast is better than slow. 11/32 It's best to do one thing really. 2005a. finding new key employees and infrastructure) 11/32 Dependence on advertising 3/898% source of revenue (Google. and .Organize the world's information and make it universally accessible and useful (Google. Google's 70-20-10 rule for employees is: 11/32 70% of employee time is spent on core business 11/32 20% for adjacent areas such as a Gmail and Google desktop search 11/32 10% for creativity and freedom to innovate Environmental Analysis ---------------------Internal Environment This section of the strategic environment is a realistic analysis of Google's internal resources. 11/32 You can make money without doing evil. 2005a) 11/32 Google Member Network's lack of popularity 11/32 Weak position in China 11/32 Nearly all revenue from one product line (search) 11/32 Lack of experience External Environment The external environment involves three areas: remote. 22) Google's weaknesses are: 11/32 Growing pains (i. 11/32 Broad web site appeal 11/32 Innovative search technology 11/32 "The advertisers' return on investment (ad cost per sale or cost per conversion) from advertising campaigns on our web sites or our Google Network members' web sites compared to other forms of advertising" (Google. 11/32 The need for information crosses all borders 11/32 You can be serious without a suit 11/32 Great just isn't good enough 11/32 No pop-ups (Google. 11/32 There's always more information available.

bundled services. In the case of Google. 2005a) and new unknown competitors that may be international. The creation of patents and intellectual property will hold the keys to gaining competitive advantages in the market. Industry concerns for Google are competitive threats from Yahoo and Microsoft (Google. Hence. increasing intellectual property claims. design of the ads. The strategies of Google have been focused on becoming a search engine that in the words of the firm's co-founder. and enabling users to search a larger base of information. To keep up with the market Google plans to focus on delivering new advertising technology.operating. 2005d). Google's opportunities are: 11/32 Unmapped countries 23/64 expanding services 11/32 New advertisement format and tracking mechanisms 11/32 Size of current customer base and market share 23/64 leverage advertising agreements Google's threats are: 11/32 Competition from Microsoft and Yahoo 23/64 greater resources. by applying concentric diversification 3/8a focus on the core product of search services 3/8the company has also been able to benefit from a competitive advantage in "faster response times. and access to more information. Long-term Objectives -------------------Based on the SWOT analysis of internal and external factors. Operating issues are the current ad base. "understands exactly what you mean and gives you back exactly what you want" (Google. the next 10 years will define the longevity and sustainability of Google as a company. developing tracking mechanisms. Google has sought to employ the power of differentiation to create a competitive advantage. Agreements with advertisers could potentially become competitive as well. greater scalability and lower costs" (Google. not only . is a single-product-line business 3/8search engine technology. Remote concerns for Google are new laws and regulations. Quick and dramatic changes characterize the technological environment. The quality of service provided by the Google organization and retaining qualified help is also an operating issue. The retention and recruitment of the best human resources are also a critical factor for Google in order to reach the changing needs of consumers and advertising clients. In order to compete with other media titans such as Microsoft and Yahoo!. Larry Page. Strategic Analysis and Choice ----------------------------Google Inc. and shrinking advertising budgets of customers. and ability to attract and retain users through portals 11/32 Increasing intellectual property claims 23/64 resources needed for legal claims 11/32 Increasing competition reducing operating margins 11/32 Shrinking advertising budgets by companies 11/32 Increasing international competition 11/32 New laws and regulations 23/64 domestic and international. 2005d).

focused project teams that may remain together only a few weeks before team members are reassigned to other projects (Hardy. Google employees are the best of the best and treated as such. Job candidates take difficult tests and go through an intensive interview process. Every employee posts a weekly review of his or her activities to the company website. stock options and profit sharing. Google's organization structure is primarily functional but also includes a few geographical organizations. Employees are encouraged to post ideas on an electronic mailing list software application that delivers the ideas to every employee in the company (Hardy. and Mobile Search initiative with Motorola. Time Warner's AOL strategic alliance. The company regularly sponsors employee outings such as picnics and skiing trips. 2005). expand further into international markets. The portfolio of products is beginning to diversify with the Google Video Store that markets programming from CBS. Google has two unique policies to promote idea generation and feedback. Finally. The stakes are high for the . Google provides free lunches every day for employees and encourages participation in the weekly roller hockey games. The average manager has 20 direct reports. and continue developing new products. Google offers generous stock options to retain the best talent and align employee interests with shareholder interests. page 1. para 6). Expanding the workforce will help achieve the long-term objective of delivering new advertising technology. Google must retain and attract the best and the brightest skill sets to remain at the top of the food chain. fun and laid back which fosters creativity. but a cost and speed advantage as well.does Google have a high advantage in the differentiation arena. The atmosphere is relaxed. Plan Goals and Implementation ----------------------------Google's short-term objectives are to expand the workforce for anticipated growth. 2005). The human resources function strives to hire only the most brilliant people. the Time Warner's AOL alliance was an investment of a billion dollars in cash. Each opportunity is a significant investment of time and money as Google broadens the product portfolio and raises the bar for competitors. Critical Success Factors -----------------------Critical success factors leading into the 2006 fiscal year are strongly aligned with employee development and retention along with major agreements and recent investments. Google is generous in its rewards to employees by offering bonuses. One key to the success of Google is the culture of the organization. Google operates primarily through small. For example. According to Allen Weiner one key element in the media strategy of Google's future will be making searches "more relevant and useful to end users and maintain its competitive edge over other search providers by retaining and growing its user base" (2004.

para. This seems in line with Google's historical compounded growth rate of revenue being 94% and of net income being 59% (Mergent(a). 2. para. and international expansion" (2006). 2005). p. 2005a). 2005a.success of these initiatives (Google. Consider the negative consequences of a significant power outage. 2005e). Google systems are vulnerable to any electrical service disruptions resulting in service being impacted. "For example. p.432 billion in advertising revenues generated by online media companies in 2003" (Mergent. 1). Furthermore. [Google] failed to provide search results for approximately 20% of traffic for a period of about 30 minutes" (Google. new offerings. given the phenomenal results of the fairly recent and unique IPO of the company's dual-class shares. in November. 45). p. 2005). any disruptions in service will tax the entire Google system and result in lost revenue (Google. the efficiency and appeal of keyword search advertising. Citigroup estimates that Google's volume of searches will increase from 72 billion in 2005 to 91 billion in 2006 and 124 billion in 2007.6 billion in advertising revenues" according to PricewaterhouseCoopers and the Interactive Advertising Bureau (Mergent(b). 40). there should be a gradual shift of advertising revenues and budgets to new media from conventional media" (Mergent(b).com scene much later than Yahoo and Microsoft but the financial world as well. p. 2005a. Strategic controls -----------------Strategic controls can be largely affected by environmental factors. Another environmental concern is new technologies that do not compliment Google's current operating systems. Actually. For example. 2005). Nevertheless. Additionally. Citigroup estimates that 2006 and 2007 will see 88% growth in Google's gross margin (Mahaney. from around $100 in late 2004 to over $400 today. 2005). "the number of people who access the internet through devices other than personal computers. Financial Projections and Analysis ---------------------------------Google not only entered the . Implementation controls . Standard and Poor's believes "revenues will benefit from increased spending on Internet advertising. one can gather that this company is projected to be successful. 2005). "As online media continues to increase in popularity. In fact. Citigroup estimates that the average (advertising) price per click will be 56 cents in 2006 and 60 cents in 2007 and the click-through rate will be 23% in 2006 and 24% in 2007. 2003. media advertising accounted for 99% of 2004 revenues at Google (2006. "this was a record figure and an increase of 33% from the $6.1. 2) "2004 saw online media companies generate $9. including mobile phones. and television set-top devices. market share gains in certain segments. Standard and Poor's expects Google's 2005 revenues to increase 91% in 2005 (2006. has increased dramatically in the past few years" (Google. hand-held calendaring and email assistance. Expanding Google's product offering to meet all user needs will limit the threat of alternative internet devices.

Identifying the correct monitoring systems will be essential to the continued success of Google. . This can be done by continuous monitoring of competition and expanding current product offerings. Establishing realistic time frames and goals for milestone reviews will be significant since Google is growing at such a rapid pace and lacks experience in areas such as the Time Warner/AOL alliance. Gathering of data detailing consumer needs and search preferences will ensure that Google continues to be an industry leader among search engines.Monitoring strategic projects must involve contingency planning in the event that Google's present product offerings become obsolete with the invention of new internet devices and in case of a competitive threat.