Google Inc.’s Product Innovation and Performance

Summary of the Case and a Discussion of Relevant Issues

As discussed by Edenlman and Eisenmann (2011), the Google Inc. case study analyzes the process of growth of the company in terms of product innovation and policy frameworks. It also offers the organizational economic performance. The company launched its phone product line through the development of Nexus in 2010. The phone is unique compared to others, which are made by the company’s competitors due to its low dependence on keyboard input system. It relies more on voice recognition. The only lingering question is whether the organization will market its products successfully. Was it an injudicious idea for the organization to venture into the phone manufacturing industry? Should it have concentrated on its product line by facilitating the provision of information and ensuring its collective availability and usefulness?

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Edenlman and Eisenmann (2011) discuss the evolution of Google products and services. The organization started by offering web-search services. After its IPO, it then focused on the development of Gmail, Google Maps, Docs, Check Out, Google Books, finance, and calendar among others. This finding shows that the company not only endeavored to compete with web-service organizations such as Yahoo.com and MSN, but also online sales organizations such as Amazon and eBay among others. Products, including paid listings and advertisements, also supported the growth of the organization. Corporate values and governance have also been pivotal in supporting its business success. Indeed, Edenlman and Eisenmann (2011) confirm the company’s 2008 high economic performance in comparison with its competitors.

Discussion of Important Issues

Google’s dominance in the ‘search’ market raises important issues on whether the organization should now focus on pushing its other products or maintaining its focus on web search. Products undergo four different stages in their development. The stages include introduction, growth, maturity, and decline phase. Low sales volumes and higher costs that are related to sales and promotion accompany the introductory phase (Bergsjö, 2009). Google search underwent this stage during its inception in 1999. During the growth phase, an organization undergoes continuous growth due to the increasing sales and profits (Bergsjö, 2009). During this time, Google ate into its competitor market share. When its market share rose, the competitor market share was declining. Google search product is in the maturity phase in both the US market and other markets where the organization reports market shares of 90% or more. Any further concentration on marketing the product may not yield success. Thus, the organization needs to reengineer its web search or pursue its current strategy of marketing diversified products such as phones, notebooks, and online sales.

While operating in an environment where there is competition of substitutes, Google needs to consider two other important issues. Do its corporate values give it an added operational advantage compared to its competitors? Can the dual-class equity governance approach favor more risk-taking or lead to dilution of some shareholder influence on organizational decision-making process? Edenlman and Eisenmann (2011) respond to this interrogative accurately by claiming that under this governance approach “Google’s top management trio will own roughly one-third of the shares, but control over 80% of the votes” (p.5). Governance in organization is about protection of the interests of the majority owners (Caldwell & Karri, 2005). Therefore, Google’s governance is inappropriate to the extent that it increases risky behaviors, which can lead to loss of competitive advantage. However, the governance plan is appropriate to the extent that risk-taking will increase the organization’s revenues. The risks of introducing more product categories are yielding a potential mechanism of generating an alternative growth potential. Thirdly, can Google’s corporate values increase its competitive advantage?

Important Characteristics of the Industry

External Analysis

Porter’s five-force model reveals well Google’s external environment. These elements include the company’s consumer and contractor bargaining capacity, substitutes, potential of new market candidates, and competitors (Hill & Ettenson, 2005). Google’s buyers have a high bargaining authority due to the availability of low-cost products and substitutes. For example, while Google provides online storage for photos at the rate of $5 annually for every 20GB, Facebook offers the same at no cost.

Supplier bargaining supremacy is high. Sometimes, hardware supply prices are high such that the company has little control due to the few organizations such as Apple and Microsoft, which supply hardware that is compatible with the company’s software application. Indeed, windows developed the ‘Bing’ search engine to compete with Google’s search engine, yet the company (Google) sources hardware from it. This situation raises the supplier bargaining power even higher. Threat of new entrants is also high. Microsoft and Yahoo are making their search engines better. Any search engine that is likely to out power Google’s search in terms of performance will most probably herald a decline of Google’s search capacity. Rivalry among competitors is higher due to lack of a patent for the search engine. Consequently, the environment remains prone to manipulation and abuse. For example, Apple and Microsoft have embedded a search tool onto explorer browsers.

Micro-environmental aspects that influence the business of Google Company include political, cultural, social, economic, and technological factors. These factors present both opportunities and threats to the company. As discussed before, competition is the major threat to Google. However, the company also faces the threat of low uptake of its products, especially where other organizations offer the same products at lower prices. For example, Google’s advertisement plan faces high threats from substitutes such as radio, television, and search hotlines. Its opportunities include the possession of the capability to develop better products than those of its competitors akin to its technological knowhow, a good public image, and excellent status of its products. This case makes it easier to bring new products in the market.

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Internal Analysis

Google Company has both weaknesses and strengths. It has a weakness in maintaining a good international appeal. For instance, in Russia and China, it is not a preferred search engine. Issues such as the birth and rise of Facebook present a major weakness. Both organizations host ads that are related to ‘search’ keywords. Indeed, State University of New York (2014) confirms that Facebook has managed to steal many ads from Google. Losing ads means affect the amount of revenue. However, the strength of possessing innovative services, high-market share, and technological infrastructure overcomes the weakness. Google depends on its diverse employees to innovate and create new products. Since the company is sure of continued access to highly innovative people, its human resources form a reliable and sustainable source of competitive advantage. Google’s financial statements indicate a healthy organization.

The company reported a working income of US5.5billion dollars and gross revenue amounting to US21billion dollars in 2008. It has floating cash that amounts to US 8.7billion dollars with an employee base of more than 20,000 people. Its economic success is also showcased by the increased share value from US85dollars during the initial public offer to US600 dollars at the close of 2009. These increments give the organization a market value of US189 dollars. Its market share rose to 65.6% in 2009 in the US market compared to its closest competitor, Yahoo.com, which had a market share of 17.5% in the same market (Edenlman & Eisenmann, 2011). In other markets, Google Company has reported over 90 percent web search market penetration.

List of Alternatives that the Organizations might Consider Taking

Business-level Strategy

Effective business positioning strategy helps in creating a strong brand identity. It may also help in increasing both sales and profitability (Hitt, Duane & Hoskisson, 2010; D’Aveni, Ravenscraft & Anderson, 2004). Google’s main business strategy focuses on enriching its users’ experience by providing clear and simple-to-use home pages. Another strategy is continuous improvement. The company works constantly on making its Google search product and other products better compared to those that are offered by its competitors. Its business is organized around making the ‘searching’ experience speedy. Another strategy is ensuring that physical presence near a desktop is not necessary to access its products. For example, Google’s search plan is available on cell phones. It offers android applications on mobile platforms.

The above business strategies ensure the overall good positioning of the organization in a competitive technological environment. For example, the Adsense program ensures that customers deliver their advertisements while at the same time earning money. The strategies align well with the mission of increasing customer experience through availing Google in different languages. The company has a democratic functional structure to support its positioning strategies. The structure encourages innovation and creativity so that the organization remains assured of its ability to develop new products that meet customer needs well ahead of its competitors. For instance, apart from the alternative products to web search as discussed by Edenlman and Eisenmann (2011), through the business strategy of enriching customer experience, Google has now ventured into making and developing applications for Smartphones, Google branded notebooks, and tablets. This move implies a capacity not only to supply information and provide platforms for placing ads, but also to provide gadgets for accessing the information and ads. Figure 1 evidences quantitatively the capacity of Google’s branded products (chrome books) to support its business strategy.

Lin, 2013
Source: (Lin, 2013)

Corporate Level Strategy

Apart from web browsing, the company is also in the business of online sales through Google books and Froogle. It is in the business of advertisement and paid listings. It also offers products such as Gmail, Google maps, Docs, Check Out, Google Books, and calendar among others. In combination, these products add value to the organization. Indeed, when products, which an organization has built its success around, reach their maturity, economist Bergsjö (2009) recommends the consideration of product diversification. Google takes this approach by focusing on the corporate level strategy of increasing its product range on offer to its customers.

In case web-browsing starts to decline as the main source of Google’s revenue, the availability of alternative products to replace it makes the organization anticipate an easier task of creating product awareness through marketing. However, close competitors such as Yahoo have similar products. Google undertakes its businesses by introducing new products. It proceeds to monitor and evaluate their success. For instance, to increase consumer spending on the preferred products, the company provides its clients with an opportunity to evaluate the success of their spending on Google products to pursue their own business interests. For instance, using Google analytics, advertisers have the capacity to track advertising keywords to win higher sales (Edenlman & Eisenmann, 2011). This strategy permits them to increase their spending on the keywords, thus allowing Google to have a better penetration capacity. In 2005, advertiser optimization software enabled Google to earn 38% extra income per search in comparison with its closest competitor, Yahoo (Edenlman & Eisenmann, 2011, p.4). This figure rose to twice as much as that of Yahoo by December 2005.

Recommendations

Google has a variety of corporate-level and business strategies at its table. The first strategy is to concentrate on one business (web browsing). This claim implies that Google needs to stay in a single activity of industry with the intention of creating a competitive position in relationship to its competitors. By focusing specifically on web browsing, the organization has managed to establish a very strong global brand image and loyalty. The main long-term challenge is how to maintain a sustainable dominance in the market upon considering that its web browsing market is at the maturity phase.

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To overcome the above challenge, it is recommended for the organization to continue investing in the development of new products such as applications and gadgets, for instance Smartphones, tablets, and notebooks). Offering such products at cheaper prices in comparison with competitors can increase the number of people who have appropriate gadgets to access the company’s web search and communication products such as Gmail. This outcome can accelerate income on ads and other postings that are paid per click. This strategic direction is recommended because increasing the number of customers means escalating the rate of use of its products and hence revenues. Increasing income aligns with the organization’s corporate value of increasing returns on shareholders. The effectiveness of the recommendation can be measured from the expected change in revenue generation.

Reference List

Bergsjö, D. (2009). Product Lifecycle Management–Architectural and Organizational Perspectives. Chalmers: Chalmers University of Technology.

Caldwell, C., & Karri, R. (2005). Organizational Governance and Ethical Systems: A Covenantal Approach to Building Trust. Journal of Business Ethics, 58(1), 249-259.

D’Aveni, R., Ravenscraft, D., & Anderson, P. (2004). From corporate strategy to business –level advantage: relatedness as resource congruence. Managerial & Decision Economics, 25(7), 365-381.

Edenlman, B., & Eisenmann, T. (2011). Google Inc. Cambridge, MA: Harvard Business School.

Hill, S., & Ettenson, T. (2005). Achieving the Ideal Brand Portfolio. Sloan Management Review, 2(1), 85-90.

Hitt, M., Duane, I., & Hoskisson, R. (2010). Strategic management: competiveness and globalizations concepts. New York, NY: Cengage Learning.

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Lin, L. (2013). Analysis of Google’s platform strategy, positioning and supply chain management for Google-branded devices. Web.

State University of New York. (2014). Calvin’s Google. Web.

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