Company Analysis- google Executive Summary=



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Company Analysis- Google



Executive Summary=

Google Inc. is one of the fastest growing multinational corporations who went public in 2004. Ever since going public, they have gained success every year by increasing market share up to almost 900% at one point. Even during the financial crisis of recession in 2007-2009 when thousands of corporations were going under, Google still hit profit margin and stood strong recession-free. There is absolutely nothing stopping this company from expanding and no threats going forward. Being the perfectionist they are, there is not much room for improvement. However, if there are any aspects to improve on, it is to expand market share globally including China, expanding android phones innovation, and keeping market share in the search results. As a business consultant or an investor, Google is without a doubt the best corporation to work for and the most secure company to invest your money in.



Introduction=

Founded in 1998 by Larry Page and Sergey Brin, Google has significantly changed the world wide web and has caused a major peak in the technological revolution society currently resides in. Originally called BackRub, Page and Brin met and began collaborating on a search engine project at Stanford University. Brainstorming to create a new name for their innovation, the creators came up with Google, a pun from the word “googol,” a mathematical term for the number one followed by a hundred zeros. Its purpose was to illustrate the search engine’s infinite amount of information available on the web. By 2000, Adwords was created which is a self-service program used to create advertisements and campaigns. Along with Adwords, it instituted Google Toolbar. The Google revolution evolved as it received awards for Technical Achievement by People’s Voice, Webby, and Yahoo. Four years later, Gmail is launched with new features such as immense amount of storage and threaded messages. Shortly after, by obtaining digital mapping company Keyhole, introduction of Google Maps and Google Earth was released, now featuring live traffic, street images, and directions. Lastly by 2006, Google announced YouTube, an online video sharing site allowing users to upload videos ranging from music videos to video blogs. Along with achievements on the web, came along the innovation of the little green robot, Android, in 2007. The Android is designed for handheld devices, touch screen mobile phones, and tablets with over 500,000 apps to install. Rapid growth of Google has triggered a chain of new innovation, acquisitions, and partnerships beyond just the search engine. Google Inc. has been estimated to run over one million data server across the world and process over a billion search requests. Making themselves available in 2004, Google has come a long way to become the biggest search engine in the world.



External Analysis=

-General Assessment of Environment

Demographic- regarding the aging population, Google fits well in the demographics due to its youth. Founded in 1998 it still has room for growth and maintains its appeals to all age groups. Ethnicity and gender issue won’t be a problem since internet search is not a gender issue as both men and women surf the web without discrimination. A change in ratio of women to men or men to women will not affect Google’s outputs. Ethnicity will also not make an impact as Google can be translated in 51 different languages. It eliminates any language barriers for foreigners who can’t type in English.

Technological- As technology keeps advancing Google has yet to fail in keeping up with the latest technology. They use what’s called a PigeonRank system for their accuracy on Google search. The CEO’s, Page and Brin thought the low cost pigeon clusters (PCs) could be used to compute the relative value of web pages faster than machine based algorithms and human editors. When a search query is submitted, it is forwarded into a database where relevant searches are observed by the pigeons in the clusters. The pages that have the most pecks due to its popularity are returned to the top of the user’s results.

Global- Globally Google is on track to take over the world. Google has a search engine for over 115 countries, offices in over 30 countries working on marketing and research, and they continue to improve their language barrier and grow market share. However Google failed to settle in the biggest internet market, China as they are blocking Google from entering due to censorship. With increased technology, computer prices continue to decrease allowing for the poorer countries to access the web. In 2008, for the first time, international sales accounted for most of the revenue for the search giant.

Economic- During the recession of 2007-2009, Google reported a huge rally in its shares as their first quarter profit was better than expected. They reported a 17% increase in their market share and continued to show no signs of slowing down due to the economy. Google’s focus on popular advertisements continues to be a success and defies the slowing economy. While 73% of Americans were affected by the recession and 25% being laid off, Google was recession-proof as they continued their hiring process during this time and was voted the best place to work by major magazines across the country.

Legal/political- Google has been pressured by the Federal Trade Commission (FTC) for almost a decade now over an antitrust case regarding monopolization. Laws governing monopolies fall under section 2 of the Sherman Act, and are defined as situations in which one firm holds the power to control prices, and/or to exclude the competition in a particular market. Although the ruling came into a settlement, the search giant has been criticized for demoting rivals in its search engine results in order to steer users towards Google’s products. They have also faced problems from the department of justice regarding privacy as Google aggregates users information from all its products and advertise according to consumers preferences. Not only that they have had multiple problems with censorship in its search results. Google answered with a privacy link to their page where surfers can learn about their legal and political issues.

Sociocultural- The average age for when a child gets a cell phone is now 11.6 years, children learn to operate a tablet before they learn to read, and communication is being used more now via the internet. Google has market share in just about every aspect of electronics that is internet capable and continue to improve on every aspect of its queries and products daily. It’s hard for anyone not to access one of these main features such as Gmail, Google Chrome, Google Maps, Google News, Google Adhense, and etc. for just one day. Sociocultural beliefs have almost no effect on Google as Google’s main revenue is through advertisements.

-Stakeholder Analysis

Google has over 318 million outstanding shares of which the two founders own a significant amount and 40% being owned by mutual funds and large corporations. It is their job to ensure the stakeholders are happy and benefit in the long run. In order to do so, they sold more of its shares to the market to increase its cash reserves. Google has become a publicly traded corporation as financial institutions and MNC’s own a vast amount of its market share. Although Google is mainly owned by its shareholders, they have to consider the stakeholders of the company such as their employees, suppliers, and customers who are affected by every day decision making. They can easily be influenced by government actions, media, advertisers, and even politics. For example, if the FTC ruled that Google was trying to monopolize, or if the 97% of advertising revenue ended, or the media criticized them, this could all lead to a downturn of Google. That is why it is Google’s main mission to keep the company in check and keep a healthy standing relationship with all stakeholders and shareholders. Even though outsiders control more than half of Google’s shares, they have created a voting structure to ensure that the insiders have majority of the vote in what the company does next. So how big is Google? In order to build and grow faster, Google bought multiple technology companies which contain the assets they need instead of developing new products from scratch. List includes Blogger, Android, Picasa and etc. The shareholders over the years have all enjoyed Google’s return on their investment, and even the stakeholders have enjoyed a healthy long usage and partnership with Google.

-Porter’s 5 Forces

Google has gained strong reputation from its customers in providing outstanding Internet services as well as wireless telephone software’s. Because the company has obtained great attention, advertisements yearn to be exposed on Google. Such affect has built up strong bargaining power of buyers, low braining power of suppliers, low threat of substitute products or services, moderately low threat of new entrants, and moderate rivals among existing competitors.

One of the main reasons why buyers have strong bargaining power is because there are other free Internet services that they can easily access. The switching cost is very low enabling the buyer to switch back and forth depending on which fits their preference better. Google currently holds dominance in the internet market, which may reduce the bargaining power for the buyers. However, buyers’ preferences may always sway, leaving the company to constantly update and upgrade itself. Due to cell phone software’s, switching costs could be higher but since the buyers have such a strong alternative, the , Google has no option but to abide by its buyer’s power.

On the opposite end, the suppliers have low bargaining power. Google collects most of its revenue through payments that advertisements make, and because Google currently holds a firm dominance in the market, suppliers have very minimum power in bargaining. Suppliers will then have no choice but to sell themselves to Google. Also in the phone industry, almost all the phone companies, excluding iPhone uses the Android software. The phone producers have very little power but to use Android or other Google software’s including Google Maps and YouTube. Circumstances like this have even escalated to an anti-trust investigation (Brussels). In April of 2013, 17 companies led by Microsoft launched an anti-trust investigation on Google Inc. Their main lawyer, Thomas Vinje, stated, “Google is using its Android mobile operating system as a Trojan horse to deceive partners, monopolize the mobile market place and control consumer data.”

The threat of substitute services would be the lowest of all. Two of the sectors of what Google provides Internet services as well as cell phone software’s, are almost impossible to replace in today’s society. Today’s Internet-revolved society is one of the biggest revolutions yet, and the only way to replace it would be to go back to the ages when information was manually looked up, and messages were physically sent from one party to another. The alternative would make the society outrageously inefficient.

The barrier to entry in the Internet business is extremely high. Especially entering the market where big companies like Google, Yahoo, and MSN are dominating would require extremely high costs. Another factor that chases away new entrants is the rate of efficiency that Google and other Internet services are upgrading themselves in. Especially Google has accelerated so fast that it is now over taking the market. The only visible possibility of new entrants would be entering a market where Google holds a segment in. An example would be the Google Map. Although a company may not be able to grow its size up to par like Google, small segments like the Google Map would be easier to imitate.

Google Inc. has relatively moderate rivalry; it stands strong against its internet service rivals, but is threatened by its phone software rival, the iPhone. In the Internet industry, it currently holds two main competitors – Yahoo and MSN of whom both have been constantly updating themselves to catch up. However, Google’s ability to innovate like Google Earth and Street View immediately put the competitors in disadvantageous positions. On the other hand, it has come to a surprise that Apple Inc.’s innovations have shown stronger impact than Android’s. Android may have come up with more upgrades by quantity, but the value of the innovations were not as strong as the iPhone’s. Many phones use Android but no one android phone would come close to the market share of the iPhone on its own.



Internal Analysis=

-Financial Analysis

Yahoo is Google’s number one competitor but as of recent, Google has been dominating Yahoo in financial point of view. According to the competitor analysis chart below, it is evident that Google’s revenue is more than 10x the amount of Yahoo in the 2012-2013 fiscal year. Although Yahoo’s Gross profit/sales ratio is 67.5% compared to Google’s 59% and COGS ratio being lower than that of Google by a margin of 8.5%, Google still dominates in every other category. Google’s income from continuing operations ratio is 25.4% while Yahoo is 11.4%. This is a significant factor to show Google’s growth since the company went public in 2004. From the current ratio stand point Google’s ratio is 4.22 compared to 16.71 by Yahoo. This could mean that Yahoo has a high liquidity, but it also may indicate inefficient use cash and other short term assets. Next since it is the company’s goal to give the highest return to the shareholders, the return on equity calculated out to be 15% for Google d 27.1% for Yahoo. However it all comes down to the earning per share as Google dominates with a $33.41 per share compared to $1 Yahoo’s. Google’s growth from the $85 dollar stocks in 2004 to the $798 dollar stocks now is a 900% return on your investment. Google continues to grow and it continues to innovate. Their revenues have increased significantly over the years mainly due to its 97% of revenues coming from advertisements and its business not being affected by any seasonal or cyclical changes.



Competitor Analysis 2012-2013 yearly

Income statement

Google

Yahoo

Revenue

50,175(millions)

4,986.57(millions)

Cost of Revenue

20,505(millions)

1,620.57(millions)

Gross Profit

29,670(millions)

3,366(millions)

Total operating exenses

37,415(millions)

4,420.20(millions)

Operating income

12,760(millions)

566.37(millions)

EBIT

13,386(millions)

5,214.21(millions)

EAT

10,788(millions)

3,274.16(millions)

Net Income

10,737(millions)

3,945.48(millions)

Weighted Average Shares

$332.21

$1,202.91

Earnings per share

$33.41

$1.00

Balance Sheet

Cash

8,066.00(millions)

2,667.78 (millions)

Receivables

8,585.00(Millions)

1,050.20 (millions)

Inventory

505(millions)

0 (millions)

Current Assets

60,454(millions)

5,652.71(millions)

Total Assets

93,798(millions)

17,103.25(millions)

A/P

2,012(millions)

184.83 (millions)

Depreciation

5,843(millions)

2,265.38(millions)

Accrued Expense

6,968(millions)

767.17(millions)

Current liabilities

14,337(millions)

338.23(millions)

Total Debt

5,537(millions)

0.04(millions)

Total Liabilities

22,083(millions)

2,543.05(millions)

Total Equity

71,715(millions)

14,560.20(millions)

Ttal Liabilities & Shareholders' Equity

93,798(millions)

17,103.25(millions)


Total Common shares outstanding

329.98(millions)

1,115.23(millions)

-Strength and Weakness

It is well known that Google Inc. outstands many of its competitors through its unique strengths. Some of the main strengths include large quantity of customers, exposure to great amount of sources and products, high quality products, successful integrations, and growing financials.

One of the biggest strengths Google Inc. holds is the broad spectrum of customers it has access to. 79% of the world has access to the usage of Google on their desktops while 89% of mobile phone users have access to a Google related services or products. Google has expanded its company from search engine to different tools like the Google Chrome, Google Toolbar, Gmail, Google Plus, Google Map, and YouTube. In relation to phones, many phones are mandated to hold certain Google generated features. Having such control strengthens the company greatly.

The main strategy of how Google Inc. captured the market’s attention was having access to an extreme amount of information for free. It is able to obtain the maximum amount of information available on the web. From to exceeding its ability to capture broad amount of data better than its competitors, it was instantly able to obtain its target’s attention. The impact was so strong that it even earned the household phrase of “Google it.” The company has stated that its mission is to “organize the world’s information and make it universally accessible and useful.”

Customer experience is always thought through before a product or service is provided. This allows Google to provide everything in high quality. It’s competitors like Yahoo, MSN, and Bing have also tried to catch up with Google’s excellence, but they have failed to truly understand what the customers want. Because Google Inc. is constantly in the process of improving, it has added 1,151 patents just from the year 2012. For this reason, Google puts a big importance on their intellectual properties. This had lead Google to be on second place for being one of the most innovative companies by Boston Consulting Group (BCG)

Another area Google Inc. is strong in would be product integration. Almost all of Google’s products are integrated with other products. Google products are able to adopt itself in any software’s. It was even able to do the impossible by incorporating itself with its biggest competitor, apple. Android’s biggest competitor, the iPhone had to surrender itself in using Google quality products to complete theirs.

Google has solid financial proof that it is on the right track. In the previous year, it held earnings of $50 billion, gross profit of $29.5 billion, and $10 of net profit. Their net profit increased 9.3% from the previous year.

Google is usually well known for its strengths, but there are some flaws that it has to face. Some of Google’s weaknesses include having only once source of income, holding unprofitable products, and facing international culture clash.

Google have obtained outstanding revenue of $18.9 billion in 2010, $14.7 billion in 2011, and $29.5 billion in 2012. Surprisingly, 90% of these revenues are generated solely from online advertising. Having one major source of income is risky. Although Google holds most of its power in the search engine sector, it has slowly been losing its portions. It would need to kick itself back up to the prime of the competitions in order to both gain back its market shares and to have hold of its main source of income.

As indicated earlier, Google Inc. came up with 1,151 patents in 2012 alone. Most of the patents produced fall into failure. Google, like any other IT companies, often fall into similar situations; not all of their patents end up being used greatly. Even if they were to be used, the products or services add little value to the company or even create loss for the company.

One of the major strengths that were mentioned above was having exposure to great amount of sources and products. This character has been a pro for Google Inc. in general, but the character was not able to appeal to all parts of the world. Some cultures do not want every individual to be exposed to so much sources and information’s. A great example of this would be China. China’s economy is growing drastically, but many sectors of Google are banned in the country. What is thought to be great in the US is not always thought the same way in certain places.

-Value Chain Analysis
Google’s value chain is not like other companies due to its lack of production of physical raw materials which are transformed into goods and services. Since its value chain does not consist of tangible components, the process is distinct. The primary activities which play a part in the value chain consist of invention, creation, and innovation.

Through invention, a fundamental level of the technology’s core is assessed and Google brings about consumers (web users) to exercise their search engine. Next, creation of the internet-platform strategy is put into effect which is also known as the valuation level. Google directs the web users to advertisements which leads to the advertising partners, thus gaining profit and “goods and services” for the company. To add value to Google’s search engine, they market to advertisers of certain classifications websites that are viewed most of those categories. By viewing ads and advancing to the ad-site, the user is more likely to buy products from the advertising partners. An example of how output is gained is through Google’s Adsense Program. Adsense is a program in which the user allows ads to be placed onto their online blog or content, thus producing cash flow for both the individual and Google. Lastly, innovation for the customer service level is administered through high-tech search service. Google adds value by sorting out searches for users through keywords and search history on their interests. It can be termed as “user-friendly.”

Google’s internal operations consist of human resources and management. Google administers aptitude tests in order to separate resumes for recruiters. By hiring those who certifies excellence, the company strives to look for those who can further cooperate in the development of the technology and system. The servers and internal software generate revenue for Google, conducting sales, services, and distribution. By localizing servers and internal software internationally Google can achieve global status which ensures profit from other countries. Through cultural awareness, Google tailors products to the needs of those overseas, maximizing profits. Compared to competitors such as Yahoo and Microsoft, Google’s search page is uncluttered and almost plain, with no ornate design, which is seen as abnormal. This illustrates how Google wants users to focus on their search and have no interruptions. Because users do not pay for Google, it creates a financial relationship between the customers to vendors. In the end locking down the individuals as users and not buyers. Ultimately, Google’s value chain is one of distinction and shaky foundation but yet successful.
-Strategy Identification=
Google has transformed not only the World Wide Web, but has also created a new level of accessibility for computer users globally. Its main purpose is to aid individuals by providing immense amounts of information located throughout the web.

The current firm level strategy consists of three components: start-ups, acquisitions, and alliances. By a set rule, Google allows employees to invest 20% of their time to work on pet projects. These projects endorse a wide diversification of ideas and innovations which brings about new business strategies. Ranging from Google Docs to Gmail, these acquisitions have augmented Google’s brand and have brought about significant revenue. Through alliances, by providing similar APIs, the partnership is able to draw attention away from the leading social networking website, Facebook.

The current business level strategies for Google are its complementary products. With its broad range of commodities including Google Earth and Maps, Picasa, and Docs along with Spreadsheets, it increases brand awareness. By placing advertisements on sites which are related to the ads, Google generates revenue, exceeding the markets of fellow competitors like Yahoo. Also, by reinforcing its brand name into all its products, Google increases its advertising business.

There are four stages to the product life cycle: introduction, growth, maturity, and decline. Google’s current product life cycle is at its maturity stage due to its entrance into the new market. By creating Android, Google has embarked on new and unfamiliar territory, encountering new competitors, due to its new direction towards internet media.



Recommendations=

Since Google went public in 2004, it has done nothing but excel and spread its wings to various technology companies. Now it holds the title of the search giant and it has become nearly impossible to not rely on Google.

Google’s performance is off the charts, it is voted by Time Magazines as the best place to work, engineers and executives envy and loathe Google, overall they are a marvel of brilliance. They are a brilliant young company who always out performs and contains the top class engineers, marketers, and employees. However there are always ways to improve.

Some Recommendations for Google include entering the biggest internet search market in China, they need to get past the censorship and bypass China’s search machine Baidu and not give up this opportunity of market share in China. They need to focus on improving each android phone to be as innovated as the iPhone and not letting iPhone secure the market share of phones. Finally, they have to maintain customer loyalty and show who is boss and not give hope to Bing, Ask, AOL, or Yahoo thinking they can surpass Google.

Bing, the search engine owned by Microsoft announced that a user who has no knowledge of any historical background of Google, Bing, or Yahoo would prefer to use Bing over Google. They state that they will provide you “relevant information and services related to your search to you right on the main results page including maps, restaurant reservations and reviews so you can take action”(Clay). Unlike the competitor Google who forces queries on top of you. They developed a sidebar which will change the way people search, let’s people share, discover, and interact with friends like in real life. Let’s face it though, nothing Google can’t match. So how does Google eliminate any doubts that they are number one and increase that 70% search engine market share to 80 or even 90%? For Google, it is easy. Surrounded by perfectionists, Google is not satisfied with the 0.2 seconds it takes to pull up a search query, they should work till they hit that .001 second mark. However, their main strategy should be how they can they maintain the two biggest aspect of their company’s future, the trust and attention.

Keeping up with the latest technology is as easy as picking your nose for Google. Google has the smartest engineers in the world and doesn’t know the definition of second place or losing. The only strategy they should worry about is how do they maintain the billions of advertising revenue and still keep loyal users happy without throwing thousands of advertisements in their face. If search queries are terrible, or if they are packed with advertisements, it risks losing users trust. If it lags or doesn’t understand the search input and takes 3 seconds to load the results, they risk losing the users attention. Trust and attention are the sacred sanctions that Google always wants to maintain.

All three recommendations are all strategies important to Google’s everlasting success but keeping customer’s trust and attention seems most vital to Google. One wrong mistake could have the 150 million search results per day distribute across to Yahoo, Bing, or Ask. First, Google should display the amount of advertisements on a page based on demand. The search queries that have the most popularity should have relatively high advertisements and keep the low demanded queries be free from advertisements. This way Google can make maximum advertisement revenues from their highest visited sites without being criticized that all their results are stuffing ads down your throat. The mission statement at Google should be if there is anything you can do to help user’s experience feel more pleasurable, do it. Because everyone in this society currently faces a love for multi-tasking, Google should focus on reducing every second or millisecond it takes to pull up any search results. What better way to multi-task than bring up results you weren’t even thinking of, but are actually helpful to you? Google has been criticized by many people over privacy issues relating to Google knowing pretty much your entire history. Google’s ability to know your preference in taste, music, and your lifestyle comes off as scary to many users as Google can sell your information to advertisers based on Google patterns. However, some find it very helpful when you’re having a migraine and there is an ad for a new Advil with a coupon attached as you are writing a research paper. Google’s intention is to make consumer experience simpler not creating more consumer privacy issues. Google has made the privacy policies clearer for the users so that they may have the option to stop using your information for ads. Google should continue with their advertising techniques and use whatever sources necessary to make users happy.

With these recommendations Google would be unstoppable in their quest for growth, not that they already weren’t. Sooner or later Google will bypass the Chinese block on Google’s entrance and be the primary search engine for every country across the world. The corporation has every comparative and absolute advantage over all competitors and will stop at no cost.


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