Outline
This paper examines Google’s case, since it’s inception to its present status as a leader in web search service:
- Google has lost partners, but also made other strategic partners.
- Its strategies of expanding its product range has threatened Yahoo!, its one time partner and now a competitor
- Its governance structure, corporate culture, and organizational process present both strength and limitations for the organization.
- Negative criticism of its dual-class equity structure is damaging.
- The management views this arrangement as beneficial in ensuring stability.
Google has the potential to succeed in other areas beyond its web search solutions.
- The success of some of its products is a testimony to that.
- Google Base, for instance, has successfully competed with the market leader, eBay in that area.
- Orkut, Gmail, Google Desktop, and Google Talk have also been successful.
Google’s competitors have had the advantage in that they have remained within the realm of their mission:
- Google’s venture into many products lines might dilute its competency in its web search offering.
Google’s initiatives have the potential to succeed in the coming years.
Google Inc., which started from a humble beginning by licensing its search technology to other companies, has grown to become a leader in web search business. The company developed a search technology that has became superior and preferred by many users. Emerging in an area that was once the domain of Yahoo!, AltaVista, and Inktomi, Google commands a large market share in web search services. In 2005, the company had gross income of $6.1 billion (Eisenmann and Herman 2006). The same year, Google.com commanded a market share of 37% in the U.S. against Yahoo! share of 30%. Moreover, its revenue generated from searches in U.S. was 60%, while its share of web searches outside the U.S. was 68%.
Google has also expanded its realm beyond its web search service to offer a range of other products. These include Google Desktop, Gmail, Google Maps, Google Earth, Book search, Google Base, Google Talk that define its solutions in desktop search, free email service, geospatial navigation and location mapping, online auction, and instant messaging and voice-over internet services respectively. This action of expansion together with its structure of a dual-class ownership has elicited criticism from investors, partners and competitors. In spite of all this, Google has continued to make strategic partnership, with the recent deal with AOL indicating that the success of Google is not about to dwindle soon. Nonetheless, there are several critical questions that arise out of Google’s actions. This document analysis Google’s case by examining whether its distinctive governance structure, corporate culture, and organizational processes are strengths or potential limitations; if the company can succeed in other areas against its competitors, noting that it has created a niche for itself in web search. It also highlights five Google product lines, comparing them to those of its competitors, while commenting on those that have succeeded in the market. It also looks at the advantages of Google’s competitors that act as impediment to Google’s attempts into fresh markets, and explains why Google’s competency in its web search service would be diluted by developing numerous product lines. The analysis concludes by mentioning the new initiatives that have the potential of succeeding in the coming years.
Google’s unique corporate culture, governance structure and organizational processes
The Google’s unique corporate culture, governance structure and organizational processes present both strengths and potential limitations. Google’s governance structure is characterised by a dual-class equity ownership and control of the organization. While the founders and other inside investors belong to Class B that allows a shareholder 10 votes per share, outsiders belong to Class A that allows only one vote per share. This, as Eisenmann and Herman (2006) notes, promotes “strategic risk taking”, but at the same time weakens the investors in terms of providing direction to the company. The dual-class equity structure promotes management entrenchment, which averts hostile take-over attempts (Kim, et. al 2007). While this strategy is sometimes vital and beneficial to an organization in retaining management and leadership aspects that contribute to its success, it has its limitations. Management entrenchment protects even managers who are performing poorly (Jensen and Ruback 1983). Furthermore, a dual-class structure of company ownership weakens the monitoring instruments of the capital markets as well as the shareholders rights to take meaningful recourse (Eisenmann and Herman 2006). The characteristic triumvirate structure of management at Google where decision making is solely the prerogative of the three top managers may results in delay when it comes to making decisions. Eisenmann and Herman (2006) concurs with this citing lack of a clear hierarchy in the management structure. On the other hand, Page and Brin clarifies in their manual that such an arrangement would allow the organization to focus on core and long-term interests of its business as opposed to short-term expectations. Basing on the fact that the same management and leadership has steered Google into profitability and success (Eisenmann and Herman 2006), this claim justifies the arrangement. In fact, Google has for a long time encouraged a corporate culture that minds both their customer and staff, an aspect that may not go well with investors who are interested in maximizing profits. It may be argued that the dual-class arrangement gives the company’s leadership the authority to protect a culture that has propelled it to growth and success.
The corporate culture emphasised by Google has been a big part of its success, while at the same time poses some risks to the organization. Eisenmann and Herman (2006) indicates that this culture revolves around three values of “don’t be evil”, “technology matters”, and “we make our own rules.” The don’t be evil tenet seeks to promote integrity in the organization and service provision to its customers. This has the advantage of boosting customer confidence and trust, which are important aspects since customers are the epitome of a business. The company strives to provide objective and unbiased search results in its search engine, even when such bias might provide monetary gain to the company (Page and Brin,). Additionally, Google puts emphasis on enhancing its technology to serve its customer the best way possible. Encouraging innovations allows creation of superiors products that adds to customer satisfaction. These two principles are strengths for the company, while management insistence on making their own rules might be detrimental to the company.
The “we make our own rules” tenet is demonstrated through the unconventional style of management that can lead to both beneficial and harmful results. The secretive nature of the management may be strategic in making sure that information on the company’s intentions, strategies and strengths are not easily accessible by competitors. However, this is frustrating to investors who might develop a negative perception to the company and its management. Moreover, the dual-class equity arrangement locks out many shareholders in providing direction to the company. These have given the company negative publicity (Eisenmann 2004), which can have negative impact on its user base.
Google’s distinctive organizational processes have also contributed to its success, but also pose various risks. The decision to list the company in the stock market provided the opportunity to increase its investment capital, and subsequently enhance and expand its product range since that provided financial resources needed to support innovation and product development. Enhancing its products allows the company to position itself well in the market against its competitors. The initiatives to improve its web-search engine so that users get relevant information as quickly as possible would attract a sizeable number of users, especially since people want to have information that is useful while saving time. The company has also added to its product range a number of innovative offerings that have contributed to its growth, but which have the potential to weaken its core business of providing search solutions and monetizing them. In other words, this deviation out of its mission to compete with companies like Yahoo, MSN and Microsoft has the potential for both enormous returns and great risks. These undertakings would require huge capital investments and would have to face stiff competition of the already established businesses in that field. Furthermore, there has been characterization of Google as having poor customer service, unresponsive management and being self-centred (Battelle 2005, p. 213; Eisenmann and Herman 2006, p. 9). These are damaging attributes that can contribute to loss of its strategic partners and customers as well. These issues raises the question whether Google would succeed in other areas other than its web search service against its competitors.
Whether Google can succeed in other areas against its competitors
As much as opportunities beyond those of its core mission have the potential to generate revenues, there are various challenges that Google must tackle to succeed. There are dangers associated with its strategy of expanding its scope of business. This aggressiveness by Google has attracted suspicion and negative attitude towards its products (Eisenmann & Herman 2006; Heilemann 2005). For instance, President Jacques Chirac of France viewed Google as “a tool of U.S. cultural imperialism” (qtd. in Eisenmann & Herman 2006, p. 9). Moreover, this strategy has also placed the company on a “collision course” with other firms in the information technology business (qtd. in Eisenmann & Herman 2006), prompting them to take counter action measures. For instance, Yahoo partnered with MSN (La Monica 2007; UniqueDigital 2009) to improve the competitive edge of their search engines against Google.
Google has also lost some of its revenue base and strategic partners as a result of its aggressive expansion moves, while it faces competition in its new endeavours. Yahoo! is an examples of a company that was dependent on Google’s Algorithms on its search engines, but withdrew from that arrangement citing threat from Google to its new products. Therefore, besides loosing a source for more revenues, Google faced the danger of competing with a fully-fledged web portal in areas that it had less experience (Eisenmann & Herman 2006). Yahoo! had long before learnt the intricate art of providing various products with “seamless integration and customer-centric ease-of-use” (Eisenmann & Herman 2006). It is worth to note that Yahoo! success is supported by a model that contrasts Google’s philosophy. Thus, while Yahoo! allows human intervention on its search results or rather it emphasizes on editorially-based search, Google is opposed to that and insists on technology driven search results. Its objectivity approach to its search results may not always be an advantage in provision of other web portal services such as those offered by Yahoo!. However, Google has had an advantage over Microsoft and MSN.
Google’s mastery in providing ad-supported products poses a great challenge to Microsoft, which is a leader in licensed software. The ability of Google to provide inexpensive and reliable tools for communication, web and desktop search, and software applications might gradually drive people away from relying on Microsoft products that require users to pay license fees. As a result, Google would gradually be capturing a market that has been the domain of Microsoft. The success of these products, however, would largely depend on the ability of Google to generates ad-revenues out of the products.
Google’s expansion initiatives were also viewed as threat to the online auctions or marketplaces. Google Base is a competition to both eBay and Craigslist marketplaces. Although the product was received well in the market during its initial stages of operation, the initiative has drawn counter-responses from eBay and faces more competition.
While many of Google’s competitors have focused and remained within their mission, Google has veered off its mission. The numerous products means that Google has to divide its focus on the their development, which might compromise the quality of its search products. However, the company has had an impressive level of success in other areas other than in its monetized search solutions. This has promoted the company as a successful venture. Shulman (2007, p.24 ) points out that the long-term success of a product largely depends on its initial success. In this regard and noting that Google’s products are increasingly capturing greater market, it substantial to conclude that Google has the potential to succeed in other areas outside its initial offer. A look at some of these other products and their performance against those of competitors is essential in highlighting their potential for success.
Google’s other products lines and their comparison to those of its competitors
Google has developed a range of products other than its monetized search solutions; but his discussion will focus on five of them. The five product lines include its software products, portal services, a social networking platform, payment solutions, and a market place. The software product line include Google Talk that allows instant messaging and voice over Internet protocol phone calls, Google Earth that enables viewing of satellite images of the Earth, Google Maps that supports navigation and location of places through display of conventional maps and satellite view, Picasa for management of photo, and Web Accelerator that speeds up loading of web pages. Other products include Gmail and Google News – which are web portals services, Orkut – a social networking platform, Google Base – which is an online auction platform, and Google Checkout, – which is an online payment solution. These products are also offered by Google’s competitors.
Many of Google’s products – besides the search and monetizing tools – have achieved a level of success against its competitors. Google’s Base, for instance, made a successful entrance in the online auction business. Pitted against the market leader, eBay, Google’s Base is well positioned and poses threats to both eBay and Craigslist. Eisenmann and Herman (2006) reveals that listings at Google’s Base stood at 10 million against eBay’s 15 million in November 2005, and continued to grow impressively. Note that Amazon and Yahoo! – other Google’s competitors – had previously failed in their attempt to capture a sizeable share in the online auction marketplace, even after investing hugely (Peck, Anthony & Madhukar 2005). Google’s success in online auction necessitated development of an online payment service, Google Checkout, that challenged eBay’s PayPal.
Google’s software product line has also received a satisfactory level of success as pitted against Microsoft’s products. The Desktop Search for Windows system, for instance, was a success in terms of users acceptance, although the product is provided free of charge. This, in fact, formed the basis of the search tool in the new Microsoft operating system, Vista. Other software products such as Google Talk, Picasa, and Web Accelerator have also had a satisfactory level of command in their respective marketplace against those of Google’s competitors, while Google Earth and Google Maps have not only been a success, but have sparked interest in geospatial applications and technologies within the public domain. However, as much has Google software products have challenged Microsoft products because users acquire them freely, they are far from replacing those of Microsoft in the software industry.
The social networking platform, Orkut, competes with companies such as Yahoo!, MySpace and Facebook. Although Orkut has faired well against the social networking platform of its competitors such as Yahoo!, and it is one of the most popular website in Brazil and India (Alexa.com). However, it is generally less popular than MySpace, Facebook and Tweeter. These companies have an advantage over Google.
Advantages of Google’s competitors against Google and dilution of its web search competency
There are various advantages that Google’s competitor have that are making it more difficult for Google to venture into fresh markets. To start with, Google’s governance structure is a cause of concern to its investors and partners who have been disgruntled by its dual-class ownership arrangement. This has elicited negative publicity which may have played a role in Google’s difficulties to venture into certain markets. On the other hand, many of Google’s competitors have remained within their mission and core business allowing them to develop superior products. For instance, Facebook, which is one of the most popular social networking platform has focused on enhancing its products within the scope of social networking. eBay has also centred its efforts in improving its online auction platform. Similarly, Yahoo! has adhered to its broad mission while developing new products. Besides that, Yahoo! has had more experience as a web portal, providing a wide range of products that it has developed and fine tuned with time, and has acquired a great deal of masterly in providing integrated and customer-centric products. Google’s success and initiatives have also placed its competitors within the information Technology at an advantaged position as far as partnership is concerned. Thus, Google’s competitors have been compelled to partner among each other to counter Google’s aggressiveness.
While its venture into many other product lines has the potential to generate profits for Google, there is the risk of diluting its competency in web search. The fact that it has to develop a wide range of products means that Google has to divide its efforts and resources among these initiatives. This might compromise on the quality of its web search, which is the product that defines the company. In other words, the success of Google is built upon the success of its web search product and the monetizing strategy. Therefore, it matters if its competency in search solution was diluted.
In spite of these risks, there is the likelihood of success for various Google initiatives in the coming year. These include an online payment service that would provide more opportunities for Google to make revenues. For instance, Google could be able to charge e-books and videos through the system, while also acting as a middleman in various e-commerce activities. There is also the potential for success in Google’s software products that compete with Microsoft’s office. Although this has not been substantiated by Google’s management, the company has offered support for the development of an open-source product known as OpenOffice.org. This has the potential to succeed since it would offer office solutions to users at no cost. Google’s proposed plan to provide Wi-Fi services in San Francisco would also serve as a testing ground for its venture in this arena.
Conclusion
This paper has examined Google’s case, since it’s inception when it started by licensing its search technology to third party companies to its current position as market leader in web search service. Google has lost partners, but also made other partners due to its various strategies and expansion actions. Its expansion strategy threatened Yahoo! within its domain of business forcing the company to seek alternative partners for its search service. Google’s corporate culture, governance structure and organizational processes present both strengths and limitations for the organization. The company has received negative criticisms from investors, especially due to its dual-class equity structure that denies outside investors the authority to steer the company in the direction they prefer. The management views the dual-class arrangement as essential in ensuring stability.
Google has the potential to succeed in other areas beyond its web search solutions. The success of some of its products is a testimony to that. Google Base, for instance, has successfully competed with the market leader, eBay in that area. Orkut, Gmail, Google Desktop, and Google Talk have also been successful. Google’s competitors have had the advantage in that they have remained within the realm of their mission, while Google’s venture into many product lines might dilute its competency in its web search offering. However, Google’s initiatives have the potential to succeed.
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