Running head: GOOGLE CASE STUDY ANALYSIS 1

Google Strategy Case Study Analysis

Tara Looie

MBA 8800 Business Strategy

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Google Strategy Case Study Analysis

Google Inc. was founded in 1998 by Page and Sergey Brin. The company is a

headquartered in Mountain View, California. It is a technology company in internet content and

information industry which builds products and provides services to organize information. This

industry has an aggressive growth of stock market. The company offers a wide variety of products

such as Google search engine, AdWords, AdSense, Double Click Ad Exchange, and AdMob.

Google Inc. also offers YouTube for video, Android; a mobile software platform, hardware

products such as Chromebook, Chrome OS device, Chrome Cast, Google Drive and Nexus

Devices. In addition, the company provides Google Maps, Google Apps for Gmail, Docs, Google

+ for sharing things online with people. The company recently expands its production to Google

Cloud Storage and Drives, Google Big Query for real time analytics, Google Glass and Google

fiber (Yahoo Finance, 2015).

SOWT Analysis

Google’s business strategy is simpler that we think. It’s “Get people to use the internet

more.” This means that the more time people spend on the internet, the more time they will

engage in revenue generating activities such as viewing and clicking display ads and performing

searches (Dickey, 2013). This is the main reason Google is focused on improving internet access

and speed and make its goal to shortening the distance between any activity and the internet.

To illustrate primary issue of Google Inc., we will briefly highlight company’s SWOT

analysis in Table 1.

Table 1: SWOT Analysis, Google Inc. (Cruz, 2015).

Strengths Weaknesses
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 Own 70% of market share profit in  90% of Google’s profit comes from
the industry from internet searches. search and ad alone, making them heavily
 Android has 80% of global market dependent.
share  Labor compensation is too high for short
 AdSense is the #1 money makers, term result; employees can manipulate
which drives a lot of traffic to Google earnings higher by cutting back.
& their ad partners.  Mozilla replaced Google and made its
 Loyal employees who want the default search engine for its Firefox to
company to succeed, with the best Yahoo which affects Google market share
engineers on the world to develop and its share price.
work incredibly.  Lowest probability and revenue among
 Pipeline of products coming out competitors like Microsoft , Yahoo &
within R&D investment. Apple,
Opportunities Threats
 Google driverless car has opportunity  Facebook; 1st threat to Google, people
to transform the world. spend on this website tremendously.
 Nest is developing “the internet of  Apple; is considering replacing Google as
things” to connect devices. Google & the default search engine in iPhone which
Nest can get the smart home market can affect on Google’s short term price.
share.  Amazon; people directly use Amazon
 Google Glass instead of searching through Google for
 Google fiber; providing broadband product to buy.
internet and cable television and  Security breach liability and criminal
increasing number of location. liabilities were always a threat.
Primary Issue

Google business model relies heavily on advertising through Google website and Google

network members’ website. The financial analysis in figure 1 reveals that 85 to 90% of company

revenue drives from ads alone in 2014. The advertisers can easily terminate their contracts if

their investments in advertising do not generate sales leads or brand awareness to their customers

or if not deliver their advertisements efficiently. Google revenues and business adversely affect if

advertisers stop placing. Although advertising revenues of company is growing recently, the data

in Figure 2 for probability ratios indicates that Google is suffering from declining of net profit

margin, return on asset and return on equity. Therefore, Google operating margin is experiencing

downward pressure as a result of increasing competition and increased expenditures for many

aspects of its business.

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Figure 1_ Advertising Revenues, Google 10-K Financial Report 2014.  Members’ websites are AdSense for
search, AdSense for content, AdExchange, AdMob, and DoubleClick Bid Manager- Other Revenues are digital
content products such as apps, music, and movies.

Figure 2_ Google Profitability, Data from Morningstar .com

Alternative Solutions

Google Inc. can increase its revenue by continuing earning revenue from advertising of

Google website aggressively but adjusting business strategy pricing model, generate revenue

from developing non-advertising products, and reduce the cost of revenues.

Advertising Revenue, Continue Improvement

Google Inc. can continue earning revenue through Google websites; however, company

has to adjust business model to earning revenue aggressively. The biggest threat for Google is its

rivals such as facebook with high traffic which is more attractive for advertisers. Advertising

revenue growth is driven primarily by an increase in the number of aggregate paid clicks through

Google advertising program. The increase in the number of clicks is due to some factors such as

new and richer ad formats, an increase in aggregate traffic across all platforms, the continued
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global expansion of products, advertisers, and user base, and an increase in the number of

Google Network Members which partially offset by certain advertising policy changes. Google

revenue growth has generally declined overtime due to increasing competition, query growth

rates, challenges in maintaining growth rate as their revenues increase to higher levels, the

evolution of the online advertising market, investments in new business strategies, changes in its

product mix, and shifts in the geographic mix of their revenues (Google, 2014).

Google has to consider the rate of change in revenue as well as the rate of change in paid

clicks and average cost per click (CPC) which is the current model of pricing on Google websites

and Google Members’ websites correlatively. Google has to work with different pricing models

such as cost per thousand (CMP) and cost per acquisition (CPA), and click through rate (CTR)

depend on company type of campaign (World Press 2008). For example Pepsi would just like to

enforce their brand and be seen across many websites, without any need for the user to click on

their banners and CMP model is the best deal to be preferred. Google also can make changes in

advertising quality or formats in expand ad sizes or contextual and display to adjust rate in paid

of adverting. In addition, in Google Networking Members’ website, Google AdSense is not

advertised to public attention properly and there is a lack of awareness of how to use AdSense

which is one the first money makers of advertising revenue. Improvement in AdSense for search,

AdSense for content, AdExchange, AdMob, and Double Click Bid Manager can increase Google

revenue remarkably.

Non- advertising Revenue_ Development

Portion of Google revenues is derived from non-advertising revenue which are digital

content products such as apps, music, movies, Google fiber and technology products such as

Google smart watch, Google Glass. Google has to focus on expanding offers to their users
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through products like Google Play, Google for Work, and Nexus devices to boost up its revenue

in this segment. Google has to focus on advertising and marketing new products and introduce

them to public efficiently. For example, Google fiber can be a threat of substitute for Net Flex if

it’s present properly with an effective business strategy model. Moreover, Google smart watch is

one of the products that were predicted for massive revenues when it’s launched to market,

however Google has a slow start, and its sales were lower than expectations. Even Google Glass

failed compare to Apple watch. Google Glass didn’t fail because of the technology, rather

because it wasn’t clear to the customer what problem it’s solved or why they needed it.

Reducing Cost of Revenue

There are many ways to reduce expenditures to get to lower cost of revenue and higher

profit. Although cost of R&D is not capitalized, company has to spend cash to invest in this

segment. Google is currently invested heavily in R&D and capital expenditures in areas of

strategic focus, such as search and advertising, as well as in new products and services. Google

can save value and profit via joint venture or starts up fund financing options especially in

Google driverless car. There are many automobile manufacturers such as BMW, Mercedes Benz

which are willing to invest in vehicle innovation and technologies. For example BMW launched

new series of BMWi3 as vehicle efficiency which definitely is open to add more specifications to

its new products and invest in R&D with Google Inc. As a result of that Google not only will

save profit in R&D segment, but also will obtain significant saving in compensation wages and

operating expenses of using BMW high-tech engineers.

Decision Criteria and Analysis

Table 2 illustrates six factors that are assigned to the alternative solutions. Google’s

organization structure is primarily functional key with weighted 21%. Google structure is not
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particularly unusual and is overseen by a board of directors, which passes instructions down

through an executive management group; however, what makes it different is that Google’s

management helps their employees meet the objectives that the employees set for themselves.

The company sees its managers as leaders who facilitate inspiration and empower employees.

Google leadership structure is based on a rule called the 70/20/10 which employees are accepted

to devote 70% of every work day to assigned projects, 20% to projects and ideas related to core

projects, and 10% to any new ideas that pursue them to creativity (Thompson, 2015).

The second factor is to compete with other media such as Microsoft and Yahoo. Google

requires employing the power of differentiation to create a competitive advantage. Google has

been focused on becoming a search engine and has to have a high advantage in cost and speed as

well. Moreover, Google has to compete with Apple products in non-advertising segment to gain

revenue. The weighed is allocated in this factor is high with 21%.

Another critical success factor with weighted 18% is employee development and

retention. Google’s goal is always attract the best and brightest skill sets.

Internal and external environmental factor can also affect in strategic control and is

weighted 14%. Google systems are vulnerable to any electrical service disruptions and failing to

provide search results for approximately 20% of traffic which is only about 30 minutes will

affect the entire Google system and result in lost revenue. Another environmental concern is new

technologies that do not compliment Google’s current operating systems. For example, the

number of people who access the internet through devices other than personal computers,

including mobile phones, tablets, handheld calendaring and email assistance, and television set-

top devices (Google, 2005).

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One of the other keys to success of Google is the culture of the organization which is

weighted 11%. Google’s atmosphere is relaxed, fun and laid back to foster creativity. Google

provides free lunch and encourages employees in weekly roller hockey games, skiing trips,

picnics, and is generous in its rewards to employees by offering bonuses, stock options and profit

sharing (Google, 2014).

Cost is designated with weighed of 14% because every segments of company from traffic

acquisitions to operating expenses are allocated in cost fluctuation.

Table 2_ Weighted decision matrix _5-6= High = Great; 3-4 = Medium; 1-2 = low = Poor.

Weighted 21% 21% 18% 14% 11% 14% 100%

Internal & Culture of

Employee
Organization Rivals & External the Financial
Factors Development Score
Structure Competitions environmental Organizatio Cost
& Retention
Impacts n

Alternatives Solutions
Advertising
Revenue, 4 6 5 6 2 4
Continue 4 x 0.21= 6 x .21= 5 x .18= 6 x 0.14= 2 x .11= 4 x .14= 4.62
Improvemen 0.84 1.26 0.90 0.84 0.22 0.56
t
Medium High High High Poor Medium
Non-
advertising 6 6 6 5 2 4
Revenue- 6x .21= 6 x .21= 6 x .18= 5 x .14= 2 x .11= 4 x 0.14= 5.08
Developmen 1.26 1.26 1.08 0.70 0.22 0.56
t
High High High High Poor Medium
Reducing 3 2 5 2 6 2
Cost of 3 x .21= 2 x .21= 5 x .18= 2 x 0.14= 6 x .11= 2x .14= 3.17
Revenue 0.63 0.42 0.90 0.28 0.66 0.28
Medium Poor High Poor High Poor
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Implementation Plan

The timeline and implementation process and schedule of advertising and marketing for

Google’s non-advertising products is indicated in table 3 as follows;

Table 3_ Implementation Plan for Non Advertising products such as Google Watch, Google
Glass, digital content products such as apps, music, movies, and Google fiber.

Start & End date Responsible Task – Milestone

05/1/15-06/30/15 Pricing Principal and Projection costs of products, values,
Pricing Associates: positioning, and success of products in
Sarvajna and Karen, Yooki market, identifying competitors price and
threats
7/01/15- 09/30/15 Pricing Principal & Survey, Quantitative analysis,
Associates, Director of Identify current issues and report.
Product management; Scott Communicate with Product management and
technical managements to shape the strategy,
communicate with financial management.
10/01/15-10/31/15 Plan & Marketing Leaders Identify targets groups (ages, gender, and
Psychographic profiles) of each product.
10/01/15-11/30/15 Plan & Marketing Leaders Develop scheme for marketing and training
segment
Develop scheme for customers’ awareness
(QUICK WIN).
10/01/15-11/30/15 Marketing & Branding Develop scheme for image and brand of
leaders, Marketing graphic products, communicate with designers and
design marketing graphic design team members.
12/01/15-12/31/15 Project leaders & CEO; Meet to communicate all concerns and listen
Page to recommendations, modifying pricing
models.
01/01/16-03/31/16 Marketing teams Identify current customers & new customers.
and ad & commerce team Customize support contacts information.
Create informational flyers and posters.
Develop scheme for mail architecture &
delivery.
Modify customer awareness models
(QUICK WIN) such as social media; TV,
Journals, tablet apps, mobiles apps, banners,
flyers.
Identify location where people congregate,
like checkout line.
01/01/16-03/31/16 Legal; Communications & Evaluate license rights to third Party
Policy management intellectual properties, and auditing.
04/01/16-06/30/16 Marketing teams Distribution and launch the plan – First
and ad & commerce team Round.
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07/01/16-07/31/16 Monitoring team, financial Departmental workflow meetings.

team & Develop Screen casts/Help sheets.
Product managements Monitoring revenue and communicate with
product management.
07/01/16-09/30/16 Monitoring team & Identifying 1st round issues, report and
Marketing team resolve
Monitoring of competition and expanding
current product offerings.
Continue advertising and monitoring
revenue_ Second Round advertising plan for
products.
10/01/16-12/31/16 Marketing teams Third Round advertising plan for products.
and ad & commerce team/
Pricing Associates& Survey for customers’ awareness, Brand
Branding team loyalty.
Ending 2016 HR management Congratulate employees and managers.
Employee rewards and bounces.
Ending 2016 Financial leader & Pricing Results presentation to the Board.
Principals

Conclusion

Although culture of creatively and hiring best skills at Google has resulted in many new

products, however most of these products have not produced substantial new revenues and the

advertising on search engine is resulted much of Google’s revenues. Many of Google products

are offered for free to customers to encourage them to use the Google engine, but Google is still

undergoes lower sales in its products because of a lack of customer awareness. Users usually are

not clear about new products function and what problems can be solved and why they need these

new products. Google should seriously identify issues related to lower sales and find reasons of

unattractiveness of products to customers and launch a marketing model for its products. Google

requires establishing realistic time frames and goals for milestones review and identify the

correct monitoring systems to continue to be successful.

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References

Cruz, M. (Jan. 8, 2015). SWOT Analysis for Google for 2015, Retrieve from

http://obvious-stock-picks.blogspot.com/2015/01/swot-analysis-for-google-for-2015.html

Dickey, M. (Jan. 29, 2013). Google's Entire Strategy Can Be Boiled Down To 7 Words,

Retrieve from http://www.businessinsider.com/googles-strategy-2013-1#ixzz3YjmHcOIR

Google (Dec. 12, 2005). Form 10-K. Retrieved December 12, 2005, from

http://www.sec.gov/Archives/edgar/data/1288776/000119312505065298/d10k.htm

Google (Dec. 31, 2014). Form 10-K. Retrieved December 31, 2014, from

http://www.sec.gov/Archives/edgar/data/1288776/000128877615000008/goog2014123110-

k.htm#sE515092573B60BBFB7CFA63594C1B537

Morningstar (Apr. 2, 2015). Google Inc Class A, Retrieve from

http://www.morningstar.com/stocks/XNAS/GOOGL/quote.html
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Thompson, S. (2015). Google's Business Leadership and Organizational Culture,

Demand Media, Retrieve from http://www.ehow.com/about_6692920_google_s-organizational-

structure.html

World Press (Jun. 18, 2008). What is CPM, CPC, CPA and CTR, Basics of Mobile

Publishing, Retrieve from https://mobileadvertisingworks.wordpress.com/2008/06/18/what-is-

cpm-cpc-cpa-and-ctr-basics-of-mobile-publishing/?

Yahoo Finance (Apr. 15, 2015). Google Inc., Financial Profile, Retrieve from

http://finance.yahoo.com/q/pr?s=GOOG+Profile