Google Case Study
Value Chain Analysis
This is an analytical framework that is used to identify the activities that can create value to and give the business a competitive advantage over other key players in the market. It majors on the analysis of the international environment, the Strengths and Weaknesses, and how they affect the overall operations of the business. To remain a principal player in the market, Google engages in a series of activities and processes that are aimed at value addition in order to provide a unique platform for customer satisfaction. The objectives of such activities are to gain a differentiation advantage and/or create cost advantage, both of which will make them unique (Stratton, 2009).
According to Magretta (2013), Potter described primary and support activities which are directly related to creation of goods and services to support the achievement of the above objectives. The primary activities that Google Inc., uses to achieve this unique trait are;
- Marketing and sales
Google is dedicated to high level of customer satisfaction which can be seen through the large amount of money dedicated solely for research and development. Once the products are ready, the company engages in a comprehensive product launch to capture the attention of the market which is followed by extensive marketing to reach as large population as possible. It uses a combination of different marketing mix and takes advantage of its online dominance to further propel their course. Google used a minimum of 8.4% of their sales returns for three consecutive years running from 2007 to 2009. Such a level of commitment is a direct implication of the seriousness that the company is committed to ensuring its market shares remains dominant in the market.
- Wide presence and operations
Google offers its services in more than eighty countries across the globe and commands about 70% of the market share in web search engine as of 2012. The figure could have dropped slightly in the preceding years but it still remains to be a dominant player in the market. There are numerous regional and even country based offices in places where there are no restrictions and the company seeks to venture in markets where is bound such as China. In China, for example, it has a market share of 20% with the state sponsored Baidu commanding more than 70% (Ireland et al, 2012). This shows that if there was an open market for search engines in the country, it would be quite competitive.
Logistics can fall into two categories which included outbound and inbound. Being a service industry, Google is able to deal directly with the consumers eliminating the intermediaries which reduce the prices of their products. It has an online store that sells more of their technological goods and services to the customers. For the mobile alternative, customers are able to access their goods from Google Play Store from the comfort of their devices. Inbound logistics are rarely revealed with the anonymity playing a key role in keeping their competitors in the dark.
Google has an online customer care service which deals with concerns, enquiries, complains and other issues from the customers around the clock. It is quite convenient to the customers since the lack of physical movement or being kept in waiting after making calls is eliminated.
The above primary activities are supported by;
- Human resource management
Since 2001, Google has enjoyed stable development at the hands of determined leadership which saw it surpass the companies such as Yahoo which had entered the market earlier. The co-founders took executive position as the presidents of technology and products and have since then managed to steer the company a head (Ireland et al, 2012). It offers lucrative incentives and benefits which attracts high competition from highly qualified personnel. It has conducive work environment hence able to retain is highly skilled employees.
Google has fully functional management, finance, legal and other departments that keep its operations. They all hold the building motto of ‘Don’t Be Evil’ and pull together to ensure that information is available to all the customers in every region that they have access to. This dedicated team of employees is behind the excellent services that Google offers and good customer service relations.
- Technological developments
Though this data is not disclosed, it is estimated that Google has more forty data centers and almost a million servers around the globe. They are quite efficient in terms of power usage which gives the firm some competitive advantage when compared to the other key players (Bhatia et al, 2012).
Like the information about logistics, the procurement process at Google is not disclosed. However, since it accounts for support since there are no raw materials, it is expected to be very minimal. Also, it is entirely done on the internet to save time and reduce costs involved as results of physical movement.
Linkages between Value Chain activities
The fact that there are no outbound logistics as the products and services are sold directly to the customer means that there is no additional cost. There low power consumptions as a result of technological developments which ensure that the data servers and centers operate at minimum cost. It products and services are, therefore, able to reach the market at a relatively low cost and in a form appealing to the customers.
The expanse presence of Google in many countries has played the central role in ensuring that the firm commands a larger market share. The search engine has about 65% of the market share while in the mobile device segments it has about half of the subscribers in the United States. This has also been made possible due to the recruitment and retaining of the right human resources teams and intensive marketing and sales activities.
The human resources department plays a vital role in ensuring the best personnel are hired for research and development hence bring innovative services to the market which satisfy the customer needs and satisfaction. This makes it a leader in hardware and software infrastructure.
Sales and marketing has ensured that the presence of the firm is felt in as many countries as possible. Their operations in more than eighty countries have played a central role in ensuring that the firm has large market share.
A majority of the above VC linkages are not unique to Google since the other players still have a similar approach. New entrant could still tap into the market with similar strategies since they are quite open and only need bringing together the different resources.
Google has ensured that a user in its search page can find virtually anything that they key in the search page. Both hardware and software segments have set the company aside. This is kept trade secret which is costly to imitate in the first place. The other players are trying to come up with different approaches and algorithms but still give Google the added advantage of dominance. The founders intended to make sure that the internet is more organized in terms of such skills and since their entry they have managed to remain be the first choice for majority of the surfers.
This has been made possible through an ever evolving research and development team which ensure that the new software and even support hardware matches closely to consumer expectations and preferences. It is quite valuable since it offers alternative to other options which are filled with annoying ads. How Google organizes its search results and all their products is quite unique and the cost to imitate is quite high with only a single aim of bringing down a player who is already a household name in the market. Finally, the fact that the service and products are specific hence non-substitutable makes this a Core Competency that provides competitive advantage.
Bhatia, A., Deep, G. and Sachdeva, A. (2012). Strategic Analysis of Search Engine Giant, International Journal of Computing and Business Research, 2229 (6166)
Ireland, D., Hoskisson, and Hitt, M. (2012). Google, The Management of Strategy: Concepts and Cases, pp 161-177, South-Western Cengage Publishers
Magretta, J. (2013). Understanding Michael Potter, The Essential Guide to Competition and Strategy, Harvard Business Review Press, Boston
Stratton, B. (2009). Can Value Chain Analysis lead to Business Transformation? Journal of management Excellence: Business Transformation, 7 pp 15-18