Web Search Engine and Google

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GOOGLE INC. HARVARD BUSINESS CASE #9-806-105

INTRODUCTION/BACKGROUND
In December of 2005, six years after its founding and twenty-one months after the company went public, search engine giant Google, Inc. had grown into not just probably the world’s biggest and most successful Internet companies, but also one of America’s biggest business success stories. Founded by two Stanford graduate students, Google was in many ways the quintessential American business success story. Sergey Brin and Larry Page (Google’s founders) infused their start-up with an innovative, entrepreneurial culture and established an organizational structure that supported innovation and risk taking. While Brin, Page and their fellow “Googlers” pursued the company mission '' “to organize the world’s information and make it universally accessible and useful” passionately, they also took care to imbue Google’s culture with a strong sense of values and a distinct philosophy, as characterized by the company slogan, “Don’t be evil” (Eisenmann & Herman, 2006, p. 24).

By December of 2005, Google, Inc. was by virtually every measure a whopping success. Google absolutely dominated the search engine market, with a 37% of all US searches, a 68% share of international searches, and a 60% share of US search-related advertising revenue in 2005 (Eisenmann & Herman, 2006, p. 1). In fiscal year 2005, Google earned net income of $1.46 billion on revenues in excess of $6.1 billion (Eisenmann & Herman, 2006, p. 13). Google’s share price had climbed from $85 at the time of its August 2004 IPO to $414 in December of 2005. As Business Week observed, Given its market cap of $120 billion, double that of its nearest competitor, Yahoo!, Google now has the gravitational pull to draw in a host of institutions and company matchmakers unable to resist the potential profit opportunities. Google stock, with a price-earnings ration of 70, represents one of the richest deal-making currencies anywhere (Farzad & Elgin, 2005, p. 60).

Moreover, Google was branching out in both existing and new markets with a broad range of new products including new search domains (e.g., Desktop search, Base, books, video), advertising enhancements, and software tools and services (e.g., gmail, user-designed RSS, Google talk, Earth, Maps, Picasa, etc.), as well as making plans for possible future offerings including a web-based payment system, office applications, and wi-fi offerings (Kirkpatrick, 2006; Solheim, 2005; Elgin & Beucke,2005; Mears & Fontana, 2005).

Google’s rapid expansion was taking it into new competitive territory, bringing it face to face with other Internet giants such as eBay and Amazon.com as well as a host of established brick-and-mortar competitors including telecommunications companies, publishers and media giants, and '' probably most critically '' software behemoth Microsoft. Google’s expansive growth was also beginning to place pressure on some of the company’s basic values. Moreover, Google had become so big and so dominate that it was losing its status as an entrepreneurial upstart and beginning to provoke a certain amount of backlash among its customers and its partners (Heilemann, 2005; Whiting, 2005; Trumull, 2005).

STATEMENT OF PROBLEM
Google, Inc. must craft a strategy which will create a sustainable competitive advantage in each market in which it operates and which will be consistent with the company’s core values and objectives. Otherwise, Google must change its culture and transform its organizational structure to conform to its new strategy.

ANALYSIS
P.E.S.T. Analysis
Political.For most of its existence, Google has enjoyed a relatively politically open operating environment as an Internet company. As Yang & Crockett (2005) observe, “the Internet has always been a model of freedom” (p. 38). Despite a few government attempts at Internet censorship, Internet companies '' at least in the U.S. '' have for the most part enjoyed a...
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