ALPHABET’S GOOGLE Case study analysis and solution
The case is
written from the perspectives of Larry Page, CEO of Alphabet and Sundar Pichai,
CEO of Google. The case focuses on opportunities and challenges faced by
Alphabet’s largest business unit, Google. The case discusses Google’s history,
its business model, and its role in Alphabet as it diversifies into other
businesses. As Alphabet continues to implement an M-form structure to
administer unrelated diversification, the adjacent business units will have a
significant impact on Google. It needs to continue to innovate, even as it
tries to retain the top talent that can create and commercialize new products.
The road ahead comes with challenges in its core business in advertising, as
well as the new corporate structure and accompanying moonshots of Alphabet.
1. Is the industry Google Alphabet in, an attractive industry? What does it take to remain competitive in this industry?
2. Identify and critically evaluate Google Alphabet’s resources and capabilities using relevant frameworks and concepts. In your answer you should use your evaluation of resources and capabilities to assess how Google Alphabet achieves competitive advantage in its industry.
3. What type of diversification strategy is Alphabet pursuing? Explain the organizational structure of Alphabet using its strategic business units? What is the rationale behind this structure and diversification strategy?
1. Is the industry Google Alphabet in, an attractive industry? What does it take to remain competitive in this industry?
With the advent of technology and increase in
internet users, the industry in which Google Alphabet operates is not only
attractive but also have potential to revolutionize the technology and internet
world.
Porter’s five force model and TOWS matrix analysis
will help to understand factors that will help Google to remain competitive in
the industry.
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Low |
Moderate |
High |
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High |
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Intense
competition in the industry |
|
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High |
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Diverse
range of products with diverse applications |
|
|
High |
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Cost of switching of customers is low |
|
|
High |
|
Low |
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Huge
number of suppliers |
Low |
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|
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Switching
cost is very low. |
Low |
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|
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Diverse
set of suppliers for diverse products make supplier weak. |
Low |
|
|
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Size
of Google is larger than its suppliers and in many cases only buyer from its
suppliers. |
Low |
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|
Low |
|
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|
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Huge
and increasing demand of technological products |
Low |
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Over
dependence of Google services |
Low |
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Dominance
of Google through its search engine platform on internet. |
Low |
|
|
|
Low |
|
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|
Cost
of switching from advertisement on Google to substitute products such as TV,
radio is moderate |
|
Moderate |
|
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Excessive
use of Google as search engine due to its customer friendly features |
Low |
|
|
|
Substitutes
of Google do not offer same level of convenience, information and speed. |
Low |
|
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|
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Low |
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|
|
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Very
difficult to build brand by new entrants. |
Low |
|
|
|
Huge
fund required to develop infrastructure to render services to customers. |
Low |
|
|
|
Very
difficult to enter into search engine service as Google has more than 85 % of
online advertisement revenue. |
Low |
|
|
|
Strict
licensing and regulatory requirements to enter in the industry. |
Low |
|
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Strength
|
Weakness ·
Excessive advertisement on its products such as
you tube, browser, Gmail. ·
Huge reliance on advertisement revenue. ·
Failure in retaining talented personnels. |
|
Opportunity ·
Huge demand and increase in internet users and mobile
phone users. ·
Google Fiber, Cloud computing, Artificial
intelligence, Android OS ·
Focus on Non ad business such as Market
penetration in consumer electronics. ·
R & D in Google Glasses and Google Play and
other innovative technologies. |
·
Investment in cloud computing, Google fiber
expansion and Android OS to increase its non advertisement revenue. ·
Continuous technological upgradation in Android OS
to capture mobile industry and compete with rivals such as APPLE IOS. ·
Developing and designing user friendly products in
consumer electronics segment. |
·
Avoidance of unrelated ads on its platform and
display user need based ads. ·
Offering better job positions, opportunities and
pay to its talented employees to make them loyal. ·
Development of innovative non ad based revenue
generating products and penetrating new markets through diversification. |
|
Threat ·
Intense competition ·
Antitrust controversies with European Union and US
law makers. ·
Investment in moon shot projects and other bets
whose success is uncertain. ·
Downgrading of market share in online
advertisement. |
·
Use of its strong brand reputation and patent
rights to dominate over competition in market. ·
Acquisition and Investment in promising business
opportunities where success is viable in short interval of time and reduction
in businesses which is non value generating to the organisation. |
·
Reduction in advertisement and banning of bad
content ads to keep customers satisfied while using Google services. ·
Focus on other products more intensively to
increase revenue rather than to focus on advertisement revenue. |
2. Identify and critically evaluate Google Alphabet’s
resources and capabilities using relevant frameworks and concepts.
In your answer you should use your evaluation of
resources and capabilities to assess how Google Alphabet achieves competitive
advantage in its industry.
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Sustained
Competitive advantage |
|
|
|
Content that Google shows to its users
on search results come from private and organisational internet users free of
cost. |
No inbound logistics cost for its
search engine business. |
Yes |
yes |
yes |
yes |
Sustained Competitive advantage |
|
|
Extensive range of hardware,
equipments and tools to conduct its operations. |
Capacity to meet unlimited search on
its search engine. |
Yes |
yes |
yes |
yes |
Sustained Competitive advantage |
|
|
Use of dedicated supplier site to
maintain strong relationship with its suppliers. |
Protection of new products and
services’ ideas to its competitors. |
Yes |
yes |
yes |
yes |
Sustained Competitive advantage |
|
|
Employees of Google are major inputs
who develop profitable ideas and convert them into Google services. In the software application android, inbound logistic
begins with cell phone apps created by developers. |
More free apps than competitors. |
Yes |
yes |
yes |
yes |
Sustained Competitive advantage |
|
|
|
|
|
|
|
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|
|
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Temporary
competitive advantage |
|
|
|
Its offices
are designed creatively with various features such as sharing cubes, video
games, pool tables, pianos, cafes and others. |
Promotion of innovation and innovative
thinking within the organisation. |
Yes |
Yes |
No |
yes |
Temporary competitive advantage |
|
|
Operations
are based on thinking out of the box and doing things in unconventional way. |
Innovative products to remain
competitive in market. |
yes |
yes |
No |
Yes |
Temporary competitive advantage |
|
|
Design and
development of technological capabilities and advanced search algorithm. |
Display more appropriate and relevant
search. |
yes |
yes |
yes |
yes |
Sustained Competitive advantage |
|
|
Development
of innovative application for internet users to suit customer needs. |
Unique algorithm tools to dominate in
search industry. |
yes |
yes |
yes |
yes |
Sustained Competitive advantage |
|
|
Multiple
projects are performed at same time in teams to complete it in stipulated
time to meet the urgency of the project. |
Enhance ability to access to online
information. |
yes |
no |
no |
yes |
Temporary competitive advantage |
|
|
Continuous development and maintenance
of mobile apps. |
Provide user friendly interface on
mobile app. |
yes |
no |
no |
yes |
Temporary competitive advantage |
|
|
|
|
|
|
|
Temporary
competitive advantage |
|
|
|
Core business of Google is search
through its browser and display of advertisement into search results. There
is no outbound logistics associated to it. |
Directing high quantity of web
users to specific sites and sorting pre-qualified visitors for these sites
using search history and keywords. |
yes |
yes |
yes |
yes |
Sustained Competitive advantage |
|
|
Online sale channels and business
partners to generate sales throughout the globe. |
Delivering information and application
based products at lower cost to its users. |
yes |
no |
no |
yes |
Temporary competitive advantage |
|
|
Very few physical stores for Google
merchandise showcasing Chromebooks, Chromecasts, Android phones etc. |
Cost reduction due to less physical outbound
logistics. |
yes |
no |
no |
yes |
Temporary competitive advantage |
|
|
Revenue generation through
advertising products such as Google Pay per click, Ad Sense etc. |
Increase in profitability |
yes |
no |
no |
yes |
Temporary competitive advantage |
|
|
Updating of Android OS on regular
basis. |
Adapt changes in Mobile operating
system to its competitors and remain competitive. |
yes |
no |
no |
yes |
Temporary competitive advantage |
|
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Temporary competitive advantage |
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|
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Integration of online and offline
marketing channels to promote its online ads business. |
Strong brand positioning and reach to
mass consumers with low cost of promotion. |
yes |
no |
no |
yes |
Temporary competitive advantage |
|
|
Most of the sales are done through
online sales channel. |
Worldwide presence on internet due to
its search engine. |
yes |
no |
no |
yes |
Temporary competitive advantage |
|
|
Use of its own platform to promote its
products and services. |
Reduction in promotion cost |
yes |
yes |
yes |
yes |
Sustained competitive advantage |
|
|
|
yes |
No |
no |
yes |
Temporary competitive advantage |
|
|
|
Google forum, Customer helpdesk and
customer helpline number to assist and resolve queries of customers. |
Brand association and loyalty. |
yes |
No |
no |
yes |
Temporary competitive advantage |
|
|
Customer focused and need based
products and services. |
High satisfaction and Less lost
customers. |
yes |
No |
no |
yes |
Temporary competitive advantage |
|
. |
|
yes |
yes |
yes |
yes |
Sustained competitive advantage |
|
|
|
Procurement of hardware, servers,
fiber optic cable and other equipments are done using verified suppliers. |
Best technological and innovative
products delivered to customers. |
yes |
yes |
yes |
yes |
Sustained competitive advantage |
|
|
Google deals in rendering information
services to its clients. Major procurement for Google is to hire talented
people to render best information services to its users. |
Easy to use and customer focused
applications being designed and developed for its clients. |
yes |
yes |
yes |
yes |
Sustained competitive advantage |
|
|
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|
|
Sustained
competitive advantage |
|
|
|
Development of new search applications
such as Google Map, Google earth, Google incognito, development of new and
innovative apps for android OS. |
Multiple apps to keep users engaged
& Recognition as innovative brand. |
yes |
yes |
yes |
yes |
Sustained competitive advantage |
|
|
Google’s advanced analytics in measuring
the efficiency of its users on search platform. |
Creates efficiency, speed and
innovativeness in search. |
yes |
yes |
yes |
yes |
Sustained competitive advantage |
|
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|
|
|
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Centered
on “Googleyness,” an intangible trait in terms of ability to work in teams,
handle ambiguity and think out of the box. |
Promotes
Innovation and improves employee performance. |
yes |
yes |
yes |
yes |
Sustained competitive advantage |
|
|
Multiple
training programs |
Increases
employee morale and job satisfaction. |
yes |
no |
yes |
yes |
Temporary competitive advantage |
|
|
Culture
of hiring best in the industry and offering best salary in the industry along
with huge incentives. |
Team
of best employees in the industry. |
yes |
yes |
yes |
yes |
Sustained competitive advantage |
|
|
|
|
|
|
|
Sustained competitive advantage |
|
|
|
Huge
financial resources with market capitalization of 798.45 Billion with more
than 118000 employees. |
Acquisition
and strong borrowing capacity |
yes |
yes |
yes |
yes |
Sustained competitive advantage |
|
|
Huge investment in data centers, switches, storage centers/ devices and fiber
networks. |
Increase profitability and brand
image. |
yes |
yes |
yes |
yes |
Sustained competitive advantage |
|
|
More than 6,00,000 servers racked
in thousands of data centers in different countries mostly in USA and Europe. |
Strong global supply chain management. |
yes |
yes |
yes |
yes |
Sustained competitive advantage |
|
|
Huge investment in R & D on
regular basis to develop new products and services. |
Large range of product offerings to
its users. |
yes |
yes |
yes |
yes |
Sustained competitive advantage |
|
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3.
What type of diversification strategy is Alphabet
pursuing? Explain the organizational structure of Alphabet using its strategic
business units? What is the rationale behind this structure and diversification
strategy?
Alphabet INC is a giant
conglomerate and holding company for Google LLC and more than 200 companies
which are subsidiaries to it. It has online, digital and moon shoot companies
under its verticals which are independent from one another. From 2001 to 2020,
the company has done more than 200 acquisitions. If we consider companies
acquired, it appear to be unrelated diversification, however, when these
companies are evaluated on the basis of their activities, most of them are
generally to support Google search advertising which is the main activity of
Alphabet Inc. Acquisition of Alphabet Inc proves to facilitate diversification
strategy. These acquisitions are very specialized in social networking,
intelligent home systems, robotics, communication, e-commerce, navigation,
office software, and their core capabilities such as search engine, mobile OS,
advertising or information technology (voice and image recognition). Diversification
strategy of Alphabet Inc is twofold:
Related diversification through product and service innovation and acquisition
Related diversification
in terms of acquiring and developing internet and technology based products and
services to capture the global internet market such as cloud computing, Android
OS, R &D in Artificial intelligence and so on.
The main service of
Alphabet Inc is Google online search and major revenue is generated through
online advertisement. It has diversified into various internet related products
and services such as Gmail, Google drive, Google my business, Google map,
Google photos, YouTube; enterprise products such as Ad sense, Ad Word, Pay per
click and other utility services such as Google translate, Google news, Google
drive, Google map, Google language. It enabled the company to reach to a large
number of internet users and make them dependent on its products and services.
It helps the company to create consumer base of Google dependent internet
users. It also enables the company to position itself as one stop solution
venue for all internet related services. Chrome had 60 % market share in web
browsing in 2017. Google map allows retailers
to advertise their address and products through promoted place application.
Unrelated diversification through company and product acquisitions for expansion
From
search engine business in 1998, Alphabet Inc. offers the widest ranges of
products and services termed as other bets. Other Bets includes businesses like
Access (Google Fiber), Calico, CapitalG, GV, Nest, Verily, Waymo, and X.
Continuous
investment in development and acquisition of products such as artificial
intelligence, machine learning and robotic technology, health care, venture
capital funding, energy, self driving car, drone delivery and R& D in many
moon shot projects, consumer hardware, airborne wind turbine, learning
thermostats, smoke alarms and many other business segments have led to
diversification of Alphabet’s business into other technological segments and
industries. First mover advantage is the main
Alphabet competitive advantage in relation to the majority of these products
and services.
Acquisition
of HTC Google will allow engineers to more tightly integrate hardware and
software and differentiate its high end pixel phone from Apple I phone X. Acquisition
of Android for smartphone OS held 85 % market share in 2017.
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Alphabet INC organisation structure
|
Ø YouTube Ø Google
Map Ø Ad
sense, Ad Word, Pay per Click Ø Android Ø Nest
Labs Hardware from Google such as Pixel, Ø Chrome Ø Google
Cloud Ø Chronicle Ø Gmail Ø Google
Play Ø ATAP
Advance technology and projects ·
Jacquard ·
SOLI ·
Spotlight series Ø Google
Business Ø Google
Play Ø Google
Translation Ø Google
Analytics Ø Ad
Mob
|
Ø Access
Google Fiber Ø Verily
Healthcare Ø Sidewalk
Labs Ø Calico Ø GV
venture arm for early age startups Ø Google
Capital equity investment in later stage start ups Ø Jigsaw
technology incubator Ø Deep
Mind AI research Ø X
Secretive R&D Labsfor moon shot technologies Ø Titan
Aerospace solar power drone to spread internet access Ø Makani Airborne wind Turbine Ø Loon
internet access through hot air balloons Ø WayMo
Autonomous driving Ø Wing
Drone delivery of Freight
|
Rationale behind Alphabet INC structure and diversification strategy
·
It will help company to become process
driven and focus on core capabilities and business operations of Alphabet Inc
from where it generates most of its revenue.
·
It aims to increase competitive features
and innovation potential and competitive power of the company.
·
Related diversification enables Alphabet
to extend its resources and capabilities to create value. It will also help to
develop and exploit economies of scope between its businesses.
·
Unrelated diversification enables
Alphabet in attaining financial economies in terms of cost saving through
improved allocations of financial resources based on investments and
restructuring of assets.
·
It will help in maximizing profit through
creation of closed eco system. With inter
connected products and services in its product portfolio, users are prompted to
use additional services thus allowing company to generate profit from different
products and services.
·
It will help the
company to run lesser risk of anti-trust violations and is also better able to
account for income streams from various subsidiaries easily.
·
It enables company to
enter new markets and improve existing market shares.
·
It allows internet
giant to empower its current products and services through exploration of other
valuable tech ventures to flourish its technological capacities and penetrate
new market and users for its services.
·
It enables
interdependency across different industries and sectors by promoting importance
of internet, digital communication and other technologies in the diverse
business organisations.
·
It will help to focus
first on developing the user experience before monetizing a product.
·
With the diversification created through
acquisitions and division of organisational structure into core revenue
generating business and other bets, Alphabet will be able to manage strict
financing on the ongoing projects and create profitability for it.
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References
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·
Annual revenue
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·
Nathaniel Smithson ( 2019) Google Five Forces Analysis (Porter’s Model)
& Recommendations retrieved from http://panmore.com/google-five-forces-analysis-porters-model
·
Prudence K Magezi (2019). Porters Five
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·
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·
Kiesha Frue
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·
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·
Value chain Analysis retrieved from https://writepass.com/journal/2016/11/internal-analysis-ofgoogle%EF%BB%BF
·
Abhijeet Pratap (2018). Alphabet
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·
Abhijeet Pratap (2018). Alphabet
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·
Kofi Nayantakyi (2019). List of
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Mathew Emmanuel Pineda (2018) The
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·
Afyon Kocatepe Üniversitesi Sosyal Bilimler Dergisi
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Case of Google Inc.
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