Company Strategy Formulation and Financial AnalysisAugustina Wilfred
Google is a worldwide company that provides different services and products such as search engine, cloud computing, online advertising technologies, software, and hardware. The company started out as its primary purpose to a search engine where is everyone could easily access documents, images and other sourced data; since then, the company has moved on to other technology services and devices. Google was created by Larry Page and Sergey Brin in 1998. A few threats that the company can be faced with or are already facing are Anti-Piracy Legislation Franchise Risk, Security Breach Liabilities, Copyright Lawsuit Liability: Google Books & Viacom vs. Google-YouTube, Android Franchise Risk from Patent/Copyright Liabilities and Criminal Liability, to name a few, (Cleland, 2011). This research paper will be based on Google’s business-level strategy, its corporate strategy, and International Strategies formulations. It will also give a bit of information on Google’s TOWS Matrix and an insight into the company’s Balance Sheet and Income Statement.
Throughout the years, Google has managed to preserve their Differentiation business level strategy by maintaining their unique products and services to a variety of consumers. A few of Google’s aim competitors are Amazon, Microsoft, and Apple. Google Inc. as three major advantages of its rivals, its market shares, innovation services and technology infrastructure.
Google’s has an incredible technology infrastructure that is quite impossible to duplicate, and it intimidates competitors to try to match the company. The search engine throughout the years has been very impressed with its relevancy of results, the speed of search, and the cost of executing a search query. Some of the results from Google, may not always be precise and ideal, but it has proven to be more beneficial and reliable. In 2007, Hitwise confirmed that Google has 65% of the total search market, because of its lightning speed fast access to information. Over the years, for more networks to keep up with Google’s speedy service the company started creating their own internet switches, storage systems, and servers system. To produce this type of system, there is a sharp and steep cost for the company to keep this main section of its infrastructure alive. Many have criticized the amount spent on maintaining its technology infrastructure, however, this has continued to be a huge barricade to entry for its rivals, (Malik, 2007). This makes Google’s infrastructure a sustainable competitive advantage.
Google has driven on innovation and creativity. The company has generated its own Google Finance, Google Apps, Google Search, Google Docs, Google Search, Blogger, AdSense and its widely known Gmail. Google is also proficient in offering a variety of services at a low to nothing cost for consumers, these same services may possibly be offered by other rivals of Google. But still can’t match their prices. Just by using the company’s search engine, you are able to access your finances, news, shopping, entertainment, reviews and many more. Google has kept is creativity internally by, encouraging employee from line staff to management to be creative and innovative, invest in research, dividing teams into self-sufficient startups and encouraging collaborations with others.
Google has over 90% of all internet searches are taking place through Google and the company subsidiary YouTube, (Desjardins, 2018). Google market share in several industries such as marketing, education, tourism, finance, and technology, to name a few. Because of the services it provides, the company is able to delegate through these industries and that gives it a competitive advantage over its rivals. Customer loyalty has played a big role in the market shares of Google. Since Google has a variety of services and products, customers feel more comfortable to go with a Google product because of their past experience. Google processes 3.5 billion searches per day, (Desjardins, 2018).
Google has a diversification and growth corporate strategy combination. As mentioned in the business level strategy earlier in this paper, the company has created a variety of different products and services for everyone with different interests and abilities. Google’s Growth corporate strategy comes from them plenty of additional products and services that the company is creating, and the improvements the company makes for their previous products and services. All this made possible by the company’s pressed importance on creativity and being innovative internally and externally. The company keeps their products constant by making upgrades and introduces new products and services every year.
Developing a TOWS MATRIX.
Internal Factors; Strengths (S) Weaknesses (W)
External Factors S1. Pushes employee innovation S2. Diversified businessS3. Large organization W1. Too much spammersW2. Dependable on the internetW3. Minimal physical presence
O1. Gain more mobile users
O2. Expand Google Fiber
O3. Penetrate markets with consumer electronics SO Strategies
-Allow employees to generate creative way to attach my mobile phone users.-Use the company’s diverse team to come into find ways to enter different markets. WO Strategies
-By expanding Google’s Fiber, this can fine means of Lessing the dependability of internet and find way to decrease on spammers.
Threats (T) T1. Imitation of some productsT2. More competition ST Strategies
-The company’s creativity time can fine innovative ways to prevent an imitation of the products, making it more unique. WT Strategies
-Keeping a minimal physical appearance can make it difficult for other to imitate the company and keep the competition at a low.
Google business level strategy is based on differentiation, by remaining and providing unique services and products, Google can maintain a stable internal and external environment. One of the best TOWS Matrix strategies which can help maintain a differentiation business level for Google is, by allowing the employees to be creative and innovative to find new ways to keep Google as the number one search engine, and maintain a low competition level and to continue to be unique. Google can continue to remain on the top spot with more unique innovations from the company.
Google is used in over 144 countries and is the most used search engine that holds 60% of the market shares. Google uses a multi-domestic international corporate level strategy. The company adapts to the local standards and requirements within each of the user countries. This means the company had to modify their products and services to suits the countries, the languages, the news outlets and abide by the laws. The company has proven their respect to various countries by adding the necessary changes to the products and services for different markets, as mentioned above. This method is used to prevent the company from forcing its American culture on other countries, (Ketchen & Short). I do support the company using the multi-domestic strategy, because, it shows that the company holds respect for these countries and gives their users some sense of appreciation for their loyalty towards them.
Using Financial Analysis
Please refer to Table 1 on page 11
The key point of Google’s Balance Sheet is the amount spent on Short Term Investments. Under total current assets of the balance sheet, Short Term Investments increased by over $10,000 between 2014 to 2015, then increased again by $16, 000 from 2015 to 2016 and again by almost by $17,000 from 2016 to2017. Short-term investments are the highest spending amount of 2017 on the balance sheet. These numbers show how Google has allowed their employees and other external persons with freedom of expression and creativity and invested in what they believed was worth it. Google has continuously grown and remains number one because the company is not afraid to be creative and innovative. Jarno Poskela sat down with a spokesperson from Google, as they reviled their secret recipe to innovative success is, something old, something new, something borrowed, Relax constraints, Create attractive stories- Storytelling, and Celebrate failures.
Please refer to Table 2 on page 13The key points from Google’s Income Statement are, the operation expense and the gross profit. In 2017, Google operations expense were at $84709 million dollars. This figure shows the amount it takes for the fast, reliable and smooth operations of the search engine. The operations expense includes salaries, benefits, advertising, rent, utilities, depreciation and other operating costs. Some of these fees may be fixed prices and some may fluctuate throughout the year. The operations of Google, especially the technology infrastructure and the labor usually takes up over 30% of the companies spending and is usually the most costly expense. The employees of the company play a big part in the company’s smooth sailing and this is why the company has such amazing benefits for its staff.
The Gross profit on Google Income statement shows a growth of at least $10,000 over the years. Gross profit is given when the sales of goods or services are minus from the cost of how much was spent to produce the goods or to provide the service. This gives an insight as to how much is being spent, and if the pricing of the services or products match the costing price, and/ or if the company is giving to many discounts. The income statement allows you to compare the revenue and the expenses to assist with cost control of products and services.
Financial ratios are considered to be associations determined by the company’s financial data and are typically used for assessments reasons of previous years to present and its performance, (Inc.com, n.d). This can include return on investment, return on assets and debt-to-equity. Three financial ratios that can explain the financial conditions of Google are operation margin, revenue growth, and price-to-sales ratio.
The operations margin of Google is how much of a profit is the company making from the actual operations. This examines the company’s fundamental business revenue, as to money that is made outside the company’s normal operations. This could be conserved as cashing off a profitable investment or selling business segments, (DePersio, 2016). The operations margin is generally stated in percentage of net sales, Google’s operations margin in the fiscal year of 2016 was 25.6%.
The purpose of the revenue growth is to allow the company to examine the comparison of the company’s revenue from the previous or most fiscal year or quarter to its present. It can also be used to correct errors and to take precaution on certain decisions. In 2015, Google’s third-quarter revenue was a 13% increase from its previous third quarter which was in 2014. Since 10% growth is a positive value of growth, this signifies a propitious result of merchants being able to pay for ad placement in Google’s search results rate, (DePersio, 2016).
Price-to-sales ratio allows the company to divide its market capitalization in the last 12 months of revenue. Market capitalization is the overall value of all outstanding common stock, determined by multiplying the share price by the number of shares outstanding, (DePersio, 2016). Google’s price-to-sales ratio for 2014 was 6.7 from a scale of 10. Price-to-sales ratio specifies the value that investors set per dollar on the revenue, this allows the investors to identify their investment on the stock is too much based on the company’s earnings from its operations.
Since it’s coming out in 1998, Google has remained the number one search engine in the world, defeating new and old rivals. The company has kept its title for over the 2 decades by using a differentiation business-level strategy, a diversification and growth corporate strategy combination and a multi-domestic international corporate level strategy. All while basing its company on creativity and innovation. After doing research for this paper, in my opinion, Google has the potential to make it to 5 more decades as the top search engine if they continue to be innovative.
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