IT for Business Value
September 18, 2012
Google is simply one of the most successful companies—in terms of profits, technological innovation, and cultural impact—that the world has ever seen. Google’s success, challenges, and future are all subjects worthy of thick books. Here, we’ll briefly discuss a few questions. We first look at the online search industry through the lens of Porter’s five forces model, and see a few reasons why Google has been successful. Second, we recommend Google continue expanding in ways that support its core philosophy of providing information. Third, we predict continued success for Google’s Android operating system. Fourth, we discuss why Google’s culture and governance structure have been beneficial. Fifth, we look at Google’s struggles in China and Korea and make a few suggestions. Finally, we examine Google’s future with regulatory agencies and make recommendations to deal with regulation.
Evaluate the sponsored search engine industry based on Porter’s five forces model. An analysis of Porter’s five forces reveals how Google became the most used search engine today. The first force to be analyzed is the threat of new entrants to the market. Currently, the threat of new entrants is low. The technology and marketing needed to enter the market are prohibitive for most firms. What’s more, people are comfortable with the search engine choices presently available and, while switching costs are low, Google itself has demonstrated that it has a strong foothold on the search engine market. In November 2009, Google “enjoyed a 65.6% share of all U.S. searches…[and outside] the United States Google’s lead was even larger, exceeding a 90% share of search queries in numerous countries.” The second force that needs to be analyzed is the threat of substitutes. Industry substitutes would be other ways to collect information and/or browse the web. For the vast majority of cases, search engines and Google in particular have been shown to be a faster and better way to collect information (compared to say a library or research firm). We might consider social sites like Facebook or Reddit to be threats. Rather than pure searches, people get information based on recommendations of peers. In Google’s case, it has incorporated social into its own algorithms in response to this threat. For most searches, though, people go to a search engine like Google rather than waiting for a friend or a Facebook algorithm to suggest it. The threat is low-to-medium. The third force, the bargaining power of suppliers, is also low. The suppliers are just those who put information on the web. Those suppliers can’t switch to another web without Google or other search engines and won’t stop creating content even if one search engine disappeared. The threat is not just low, it doesn’t exist. The fourth and fifth forces are the bargaining power of buyers and the competition. For both the industry and Google in particular, both are low. Buyers are those who purchase ads. And Google’s ads easily reach more people and cost less than any competitor. (Though those are also relatively cheap). Google AdSense give buyers the best tools to track and improve their advertising. Excepting some huge companies, such as Yahoo, no one has enough heft to negotiate with Google to any degree. They must simply except the price. Google knows they outshine the competition.
In addition to enhancing its core search businesses, should Google also branch out into new arenas? Which of the following would you recommend: 1) building a full-fledged portal like Yahoo!’s; 2) targeting Microsoft’s desktop software hegemony; and/or 3) becoming an e- commerce intermediary like eBay? Why? Reflecting upon Google’s recent strategies since Larry Page’s return as CEO, it is quite interesting to note that Google has shifted its...