Running head: GOOGLE CASE STUDY ANALYSIS 1

Google Strategy Case Study Analysis

Tara Looie

MBA 8800 Business Strategy

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

Strengths Weaknesses

 Own 70% of market share profit in the  90% of Google’s profit comes from search

industry from internet searches. and ad alone, making them heavily dependent.

 Android has 80% of global market share  Labor compensation is too high for short

 AdSense is the #1 money makers, which term result; employees can manipulate

drives a lot of traffic to Google & their earnings higher by cutting back.

ad partners.  Mozilla replaced Google and made its default

 Loyal employees who want the company search engine for its Firefox to Yahoo which

to succeed, with the best engineers on the affects Google market share and its share

world to develop work incredibly. price.

 Pipeline of products coming out within  Lowest probability and revenue among

R&D investment. competitors like Microsoft , Yahoo & Apple,

Opportunities Threats

 Google driverless car has opportunity to  Facebook; 1st threat to Google, people spend

transform the world. on this website tremendously.

 Nest is developing “the internet of  Apple; is considering replacing Google as the

things” to connect devices. Google & default search engine in iPhone which can

Nest can get the smart home market affect on Google’s short term price.

share.  Amazon; people directly use Amazon instead

 Google Glass of searching through Google for product to

 Google fiber; providing broadband 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.

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

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
GOOGLE CASE STUDY ANALYSIS 6

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

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
GOOGLE CASE STUDY ANALYSIS 7

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

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).

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 &
Employee Culture of
Organization Rivals & External Financial
Factors Development the Score
Structure Competitions environmental Cost
& Retention Organization
Impacts
GOOGLE CASE STUDY ANALYSIS 9

Alternatives Solutions

Advertising
4 6 5 6 2 4
Revenue,
4 x 0.21= 6 x .21= 5 x .18= 6 x 0.14= 2 x .11= 4 x .14= 4.62
Continue
0.84 1.26 0.90 0.84 0.22 0.56
Improvement

Medium High High High Poor Medium

Non-
6 6 6 5 2 4
advertising
6x .21= 6 x .21= 6 x .18= 5 x .14= 2 x .11= 4 x 0.14= 5.08
Revenue-
1.26 1.26 1.08 0.70 0.22 0.56
Development

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

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 Pricing Projection costs of products, values, positioning,

Associates: Sarvajna and and success of products in market, identifying

Karen, Yooki 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; Page Meet to communicate all concerns and listen 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.
GOOGLE CASE STUDY ANALYSIS 11

01/01/16-03/31/16 Legal; Communications & Evaluate license rights to third Party intellectual

Policy management properties, and auditing.

04/01/16-06/30/16 Marketing teams Distribution and launch the plan – First Round.

and ad & commerce team

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 resolve

Marketing team 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& Branding Survey for customers’ awareness, Brand loyalty.

team

Ending 2016 HR management Congratulate employees and managers.

Employee rewards and bounces.

Ending 2016 Financial leader & Pricing Results presentation to the Board.

Principals
GOOGLE CASE STUDY ANALYSIS 12

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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