A Strategic Analysis of a Search Engine Industry

Question:-

Prepare report that analyzes the search engine industry and Google’s competitive position in the industry. Your report should include a Five Forces analysis, list of industry driving forces and key success factors, a SWOT analysis and financial analysis for Google’s performance.

Answer:-

Google is an American multinational technology organization that specialises in internet related products and services, which incorporates a search engine, online advertising technologies, software, cloud computing and hardware. It is considered as one of the big four technology organisations in the United States information technology industry along with Apple, Amazon and Microsoft. This report will include a deep strategic analysis of Google using different strategic tools such as Porter’s five forces analysis, SWOT analysis, Financial analysis etc (Moreno-Izquierdo, Ramón-Rodríguez & Perles-Ribes, 2016).
Porter’s five forces analysis
A five forces analysis of Google needs consideration for the situations of different but related markets as well as industries. For instance, the external analysis accounts for the online search market, along with the digital advertising industry and cloud services market (Phadermrod, Crowder & Wills, 2019). The five forces in Google’s industry or external environment can be summarised as follows –

• Competition or Competitive rivalry – Strong force
• Bargaining power of buyers- Weak force
• Bargaining power of suppliers – Weak force
• Threat of substitutes – Moderate Force
• Threat of new entrants – Moderate Force.

Competitive rivalry – Google faces the strong faces of competitive rivalry, it is due to large number of organizations in the online services industry and Information technology. There is high diversity of technology organisations that also has a strong force. Low switching costs for customers, is another factor that makes competition more stronger force that affects the company (Kim & Choi, 2019).

Bargaining power of buyers or customers – The bargaining power of customers or buyers affects Google’s business, there are many external factors such as small size of individual buyers or customers of the company, high and increasing demand from buyers, moderate quality of information for customers etc. With only a small contribution to revenues of the company, each and every buyer exerts only weak force on the organization (Yun, 2018).
Bargaining power of suppliers – Suppliers power is also weak against Google, this is due to the reason that there are many suppliers to choose from. There is high availability of supply, large population of suppliers and small to moderate size of Google’s individual suppliers, that contributes in the weak force of bargaining power of suppliers. The high availability of supply along with the large population of suppliers weakens the bargaining power of any single supplier against business of Google.

Threats of substitutes – Google is facing the moderate threat of substitution or substitute, in this case the substitutes of Google include other advertising channels for instance, radio, television, print media and other technologies that are alternatives to the products of the company. It is essential for Google to consider certain external factors that contribute to the moderate threat of substitution such as moderate switching costs between Google and Substitutes, Moderate to high availability of substitutes (Miklosik, 2019).

Threats of new entrants – The threat of new entrants, moderately impacts business of Google. These new entrants consist new investments or ventures of large technology organisations, and startups offering similar products as Google does. There are many external factors that contribute to the moderate threat of new entrants against the technology business and it’s industry environment. Thee factors includes moderate costs of doing business, high cost of brand development and general capability of the firm to fulfil regulatory requirements.
SWOT analysis

In order identify the internal strategic factors such as strengths, weaknesses, opportunities and threats, SWOT analysis tool can be used.

Strength of Google – The strength identified in this organisational analysis relate to communication and information technologies and their impacts upon competitiveness of the organisation. Strength of Google enable profitable growth and operations despite aggressive competitors in the global marketplace. In context of computing technologies, the online environment, Innovation and market conditions, some internal strength of Google are strong image and high value of the Google brand, Diverse portfolio of patented commercial products, high capability for Novel and rapid technological innovation (Bansal, 2017).

Google’s Weaknesses – Along with the success, Google also has weaknesses that is a challenge for the growth and development of business. There are several weaknesses that influence the long term business success of Google, these weaknesses includes High dependence on online technologies, low control over consumer electronics that utilises Android OS (Luh, Yang & Huang, 2016).

Opportunities for Google – Google has opportunities to improve and grow, opportunities in the SWOT analysis tool are external factors that are providing potential improvement and growth in the technology organizational performance. There are various opportunities for Google such as establishing brick and mortar stores, expanding world wide usage of Chromebooks and other consumer electronics or hardware (Edelman & Geradin, 2016).

Threats facing Google – The presece of many organisations and their rapid technological innovation are threats within the industry. The major threats that affects Google’s profits and strategies are, competition against innovative and large businesses, regulations that restrict operations of Google, product counterfeiting and imitation.
Financial analysis

The higher the fixed and receivable asset turnover ratios the better is the conversion of receivables into cash by Google. In the year 2014, the organization collected it’s receivables almost seven times per year, a little slower as compared to the previous year, but still at a very good pace. A higher fixed asset ratio is also preferable, it is indicating Google is generating $3.27 in sales for every $1 invested in fixed assets. This ratio has also reduced slightly from the year 2013, similarly sales to net working capital also decreased from 2013. In the most recently reported annual financial report revenue of Google amounted is 169.70 billion US dollars. Google’s revenue is largely made up by advertising revenue, which is calculated to 134.81 billion dollars in the year 2018 (Phadermrod, Crowder & Wills, 2019).
Recommended strategies

The strategic challenges in developing Google pertain to the weaknesses and threats examined in the above analysis. The low control of the company over android devices related to inconsistentency of customer experience, which influences customer satisfaction, profits and branding. Google must focus on establishing agreements with manufacturers for creating higher consistency in user experience and design, mainly for Google services and products (Ragin-Skorecka & Nowak, 2019). Another recommendation for Google is that it should develop brick and mortar stores for hardware sales in major locations. In addition to this, Google may also enter new space sharing agreements with big box retailers in order to develop kiosks or store within a store spaces for the consumer electronics of the company. With respect to regulatory restrictions, it is recommended to Google that it should ensure full compliance, along with continuous improvement of products for enriching user experience such as for users’ ease of controlling their data or information. Google is also recommended to employ a two-way strategy, marketing and legal. The organization could utilise legal ways for preventing or removing counterfeit consumer electronics from the marketplace.