STRATEGIC MANAGEMENT – PRE-ISSUED CASE STUDY & GUIDELINES
following provides details on a case study involving GOOGLE. Candidates should read this case study carefully
in preparation for the examination.
Note: A copy of this case study will be available in
the examination. Therefore, you will NOT be allowed to take this case study
into the examination room. Candidates are allowed to take into the examination
a maximum of two pages/four sides A4 of draft working notes which should be
handed in and attached to the answer script. DRAFT
WORKING NOTES GUIDANCE [15 marks] – to
be handed in with answer script.
preparing and understanding the case study and compiling these notes provides
the essential case preparation necessary for all candidates to be successful.
draft working notes (maximum of two pages/four sides A4) should be handed in
and attached to the answer script. They should be word-processed (min. word
size 12 pt) and contain key headings and areas relating to the strategic
analysis of GOOGLE and
should provide the analysis underpinning required to answer the examination questions.
notes will be assessed as follows:
Evidence of a good level of secondary research and understanding of the case [5
Outline of FOUR strategic models relevant to the case analysis [5 marks]
Report structure, readability and legibility [5 marks]
N.B. Whilst it is hoped that all, or most, information required to
analyse and evaluate this case study is contained in the case, it is recognised
that this might not always be the situation as information relating to most
companies is sometimes changing on a daily basis. It is suggested that
secondary information (facts, figures, etc.) contained in this case should be
utilised first. If the student still considers there is an absence of information
in a particular area then it is quite reasonable for material external to the
case to be gathered and utilised. External sources mentioned in the report
should, of course, be referenced.
STUDY – GOOGLE
Inc. is an American multinational technology company specialising in
Internet-related services and products. These include online advertising
technologies, search, cloud computing, and software. Most of its profits are
derived from AdWords, an online advertising service that places advertising
near the list of search results. As a result of its worldwide success in a
number of industries, Google has now become a household name globally.
was founded in 1996 by Larry Page and Sergey Brin while they were PhD students
at Stanford University.
they own about 14 percent of its shares but control 56 percent of the stockholder
voting power through super-voting stock. They incorporated Google as a
privately held company in September 1998. An initial public offering followed
in August 2004. Its mission statement from the outset was “to organise the
world’s information and make it universally accessible and useful”, and its
unofficial slogan was “Don’t be evil”. In 2004, Google moved to its new
headquarters in Mountain View, California, nicknamed the Google-plex. In August
2015, Google announced plans to reorganise its interests as a holding company
called Alphabet Inc. When this restructuring took place in October 2015, Google
became Alphabet’s leading subsidiary, as well as the parent for Google’s Internet
growth since incorporation has triggered a chain of products, acquisitions and
partnerships beyond Google’s core search engine. It offers online productivity
software including email (Gmail), a cloud storage service (Google
an office suite (Google Docs) and a social networking service (Google+).
Desktop products include applications for web browsing (Google Chrome),
organising and editing photos, and instant messaging. The company leads the
development of the Android mobile operating system and the browser-only Chrome
OS for a class of netbooks known as Chromebooks.
corporation was estimated to have run more than one million servers in data
centres around the world by
In 2009 it processed over one billion search requests and about 24 petabytes of
user-generated data each day. In December 2013, Alexa listed google.com as the
most visited website in the world. Numerous Google sites in other languages
figure in the top one hundred, as do several other Google-owned sites such as
YouTube and Blogger. Its market dominance has led to prominent media coverage,
including criticism of the company over issues such as search neutrality,
copyright, censorship, and privacy.
HISTORY OF THE TECHNOLOGY
conventional search engines ranked results by counting how many times the
search terms appeared on the page, the two founders, Page and Brin, theorised
about a better system that analysed the relationships between websites. They
called this new technology PageRank; it determined a website’s relevance by the
number of pages, and the importance of those pages, that linked back to the
and Brin originally nicknamed their new search engine “BackRub”, because the
system checked backlinks to estimate the importance of a site. Eventually, they
changed the name to Google, originating from a misspelling of the word “googol”,
the number one followed by one hundred zeros, which was picked to signify that
the search engine was intended to provide large quantities of information.
Originally, Google ran under Stanford University’s website, with the domains google.stanford.edu and z.stanford.edu.
domain name for Google was registered on September 15, 1997, and the company
was incorporated in
1998. It was based in the garage of a friend (Susan Wojcicki) in Menlo Park,
a fellow PhD student at Stanford, was hired as the first employee.
January 2013, Google announced it had earned US$50 billion in annual revenue for
the year of 2012. This marked the first time the company had reached this feat,
topping their 2011 total of $38 billion.
1999 saw the company move its offices to Palo Alto, California, which has been
home to several prominent Silicon Valley technology start-ups. The next year,
against Page and Brin’s initial opposition toward an advertisingfunded search
engine, Google began selling advertisements associated with search keywords. In
order to maintain an uncluttered page design and increase speed, advertisements
were solely text-based. Keywords were sold based on a combination of price bids
and click-throughs, with bidding starting at five cents per click.
2001, Google received a patent for its PageRank mechanism. The patent was
officially assigned to Stanford
and lists Lawrence Page as the inventor. In 2003, after outgrowing two other
locations, the company leased an office in Mountain View, California. By 2006,
the name “Google” had found its way into everyday language, causing the verb “google”
to be added to the Merriam-Webster Collegiate Dictionary and the Oxford
Dictionary, denoted as “to use the Google search engine to obtain information
on the Internet”.
announced the launch of a new company called Calico in September 2013 and led
by Apple chairman
Levinson. In the official public statement, Page explained that the “health and
wellbeing” company will focus on “the challenge of ageing and associated
now operates 70 offices in more than 40 countries and it celebrated its 15-year
anniversary in September
The Alliance for Affordable Internet (A4AI) was launched in October 2013 and Google
is part of the coalition of public and private organisations that also includes
Facebook, Intel and Microsoft. The corporation’s consolidated revenue for the
third quarter of 2013 was reported in mid-October 2013 as $14.89 billion, a 12%
increase compared to the previous quarter. Google’s Internet business was
responsible for $10.8 billion of this total, with an increase in the number of
users’ clicks on advertisements.
November 2013, Google announced plans for a new 1-million-sq-ft (93,000 sq m)
office in London, which is due to open in 2016. The new premises will be able
to accommodate 4,500 employees and has been identified as one of the biggest
ever commercial property acquisitions in Britain.
2014, according to the Inter-brand ranking, saw Google become the second most
valuable brand in the world (behind Apple) with a valuation of $107.4 billion.
A Millward Brown report from the same year put the Google brand ahead of Apple’s
at number one.
PRODUCTS, SERVICES AND TECHNOLOGY
2011, 96% of Google’s revenue was derived from its advertising programs. In
addition to its own algorithms for understanding search requests, Google uses
technology from the company Double Click, to project user interest and target
advertising to the search context and the user history.
Google Analytics allows website
owners to track where and how people use their website, for example by examining
click rates for all the links on a page. Google advertisements can be placed on
third-party websites in a two-part program. Google’s AdWords allows advertisers to
display their advertisements in the Google content network, through either a
cost-per-click or cost-per-view scheme.
to market research Google Search is currently the dominant search engine in the United States market, with
a market share of about 65%. Google indexes billions of web pages, so that
users can search for the information they desire through the use of keywords
Watch has criticised Google’s PageRank algorithms, saying that they discriminate
against new websites and favour established sites. The site has also alleged
that there are sinister connections between Google and the National Security
Agency (NSA) and the Central Intelligence Agency (CIA).
also hosts Google Books. The company began scanning books and uploading limited
previews, and full books were allowed into its new book search engine. The “Hummingbird”
update to the Google search engine was announced in September 2013. The update
was introduced over the month prior to the announcement and allows users to ask
the search engine a question in natural language rather than entering keywords
into the search box.
a free webmail service provided by Google, was launched as an invitation-only
beta program in April 2004 and became available to the public in February 2007 –
and the service soon had 146 million users monthly. It was the first online
email service with one gigabyte of storage. It was also the first to keep emails
from the same conversation together in one thread, similar to an Internet
Apps allows organisations to bring Google’s web application offerings, such as
Gmail and Google Docs, into their own domains. The service is available in
several editions: a basic free edition (formerly known as Google Apps Standard
edition), Google Apps for Business, Google Apps for Education, and Google Apps
Translate is a server-side machine translation service, which can translate
between 80 different languages.
some languages, handwriting recognition, or speech recognition can be used as
input, and translated text can be pronounced through speech synthesis.
launched its Google News service in 2002, an automated service which summarises
news articles from various websites.
2007, reports surfaced that Google was planning the release of its own mobile phone,
possibly a competitor to Apple’s iPhone. The project, called Android, turned
out not to be a phone but an operating system for mobile devices. However, in
January 2010, Google released an Android phone under its own company name
called the Nexus One. A report in July 2013 stated that Google’s share of the
global smartphone market was about 64% at the time.
projects Google has worked on include a new collaborative communication
service, a web browser, and a mobile operating system. Google pre-announced the
upcoming availability of Google Chrome in September 2008, an open source web
browser, which was then released the next day. At a launch event in July 2013,
a newer version of the Nexus 7 Google tablet device was released to the public,
dongle that allows users to stream
YouTube and Netflix videos via smartphones.
Alerts is a content change detection and notification service, offered by the
search engine company Google. The service sends emails to the user when it
finds new results – such as web pages, newspaper articles, or blogs – that
match the user’s search term.
CULTURE AND CORPORATE AFFAIRS
On Fortune magazine’s list of the
best companies to work for, Google ranked first in 2007, 2008 and 2012 and fourth
in 2009 and 2010. Google was also nominated in 2010 to be the world’s most
attractive employer to graduating students. The company’s corporate philosophy
includes principles such as “you can make money without doing evil”, “you can
be serious without a suit”, and “work should be challenging and the challenge
should be fun”.
2013, Google had 47,756 employees and among them more than 10,000 software
developers based in more than 40 offices.
the company’s Initial Public Offering (IPO) in 2004, founders Sergey Brin and
Larry Page and CEO Eric
requested that their base salary be cut to $1. Subsequent offers by the company
to increase their salaries were turned down, primarily because their main
compensation continues to come from owning stock in Google.
2004, Schmidt made $250,000 per year, and Page and Brin each received an annual
salary of $150,000.
and early 2008, several top executives left Google. In October 2007, former
chief financial officer of
Gideon Yu joined Facebook along with Benjamin Ling, a high-ranking engineer.
March 2008 saw Sheryl
then vice-president of global online sales and operations, begin her position
as chief operating officer of
while April 2011 saw Larry Page become company CEO and Eric Schmidt took on the
role of Executive Chairman of Google. In July 2012, Google’s first female
employee, Marissa Mayer, left Google to become
motivation technique, Google uses a policy often called Innovation Time Off,
where Google engineers are encouraged to spend 20% of their work time on
projects that interest them. Some of Google’s newer services, such as Gmail,
Google News, Orkut, and AdSense originated from these independent endeavours.
In a talk at
University, Marissa Mayer, Google’s Vice President of Search Products and User
Experience until July 2012, showed that half of all new product launches in the
second half of 2005 had originated from the Innovation Time Off.
formed the not-for-profit philanthropic Google.org, with a start-up fund of $1 billion
in 2004. The mission of the organisation is to create awareness about climate
change, global public health, and global poverty. One of its first projects was
to develop a viable plug-in hybrid electric vehicle that can attain 100 miles
per gallon. In 2008,
announced its “project 10100” which
accepted ideas for how to help the community and then allowed Google users to
vote on their favourites. After two years of silence, during which many
wondered what had happened to the programme, Google revealed the winners of the
project, giving a total of ten million dollars to various ideas ranging from
non-profit organisations that promote education to a website that intends to
make all legal documents public and online.
TAX AVOIDANCE AND NEGATIVE PUBLICITY
uses various tax avoidance strategies. Out of the five largest American technology
companies, it pays the lowest taxes to the countries of origin of its revenues.
The company accomplishes this partly by licensing technology through
subsidiaries in Ireland, Bermuda, the Bahamas, and the Netherlands. This has
reportedly sparked a French investigation into Google’s transfer pricing
criticism of the amount of corporate taxes that Google paid in the United
Kingdom, Chairman Eric
said, “It’s called capitalism. We are proudly capitalistic.” During the same
December 2012 interview,
“confirmed that the company had no intention of paying more to the UK
exchequer.” In 2013, Schmidt responded to questions about taxes paid in the UK
by pointing to the advertising fees Google charged UK companies as a source of
Vice President Matt Brittin testified to the Public Accounts Committee of the
UK House of Commons that his UK sales team made no sales and hence owed no
sales taxes to the UK.
2007, Google has aimed for carbon neutrality in regard to its operations.
Google disclosed in September
that it “continuously uses enough electricity to power 200,000 homes”, almost
260 million watts or about a
of the output of a nuclear power plant. Total carbon emissions for 2010 were
just under 1.5 million metric tons, most due to fossil fuels that provide
electricity for the data centres. Google proudly said that 25% of its energy
was supplied by renewable fuels in 2010.
2013, The Washington Post reported that Google had donated $50,000 to the Competitive Enterprise
a libertarian think tank that calls human carbon emissions a positive factor in
the environment and argues that global warming is not a concern.
reported, in July of that year, that Google had hosted a fundraising event for
Oklahoma Senator Jim Inhofe, who has called climate change a “hoax”. In 2014
Google cut ties with the American Legislative Exchange Council
after pressure from the Sierra Club, major unions and Google’s own scientists,
because of ALEC’s stance
climate change and opposition to renewable energy.
ACQUISITIONS AND MERGERS
2001, Google has acquired many companies, primarily small venture
capital-funded firms. In October 2006,
announced that it had acquired the video-sharing site YouTube for $1.65 billion
in Google stock, and the deal was finalised on November 13, 2006. Google does
not provide detailed figures for YouTube’s running costs, and YouTube’s
revenues in 2007 were noted as “not material” in a regulatory filing. A Forbes magazine article projected
the 2008 YouTube revenue at $200 million, noting progress in advertising sales.
bought out its first public company in 2009, purchasing video software maker
On2 Technologies for $106.5 million. They also acquired Aardvark, a social
network search engine, for $50 million, and commented on its internal blog, “We’re
looking forward to collaborating to see where we can take it”.
addition to the many companies Google has purchased, the company has partnered
with other organisations for research, advertising, and other activities. In
2008, Google developed a partnership with GeoEye to launch a satellite
providing Google with high-resolution imagery for Google Earth.
Energy made its first investment in a renewable energy project, putting $38.8
million into two wind farms in North Dakota in 2010. The company announced the
two locations would generate 169.5 megawatts of power, enough to supply 55,000
homes. The farms, which were developed by NextEra Energy Resources, will reduce
fossil fuel use in the region and return profits. Also in 2010, Google
purchased Global IP Solutions, a Norwaybased company that provides web-based
teleconferencing and other related services. This acquisition enabled
to add telephone-style services to its list of products. In April 2011, The Globe and Mail reported that
bid $900 million for six thousand Nortel Networks patents.
made its largest-ever acquisition to-date when it announced, in August 2011,
that it would acquire Motorola Mobility for $12.5 billion subject to approval
from regulators in the United States and Europe. In a post on Google’s blog,
Google Chief Executive and co-founder Larry Page revealed that the acquisition
was a strategic move to strengthen Google’s patent portfolio. This purchase was
made in part to help Google gain Motorola’s considerable patent portfolio on
mobile phones and wireless technologies to help protect it in its ongoing
patent disputes with other companies, mainly Apple and Microsoft, and to allow
it to continue to freely offer Android. After the acquisition closed, Google
began to restructure the Motorola business to fit Google’s strategy.
2013 saw Google announce that it had acquired Channel Intelligence for $125
a technology company that helps customers buy products online, is active
globally in 31 different countries and works with over 850 retailers. Google’s
strategy is to utilise this technology to enhance its e-commerce business.
2014, Google purchased the online music service Songza.
THE FUTURE OF THE COMPANY
future of the technology and media industry and its key players remains very volatile
and uncertain to say the least. As a result the Google boardroom will need to
fully consider all of the major stakeholders involved to continually monitor
the ever-changing external environment whilst building future strategy around
the core competences, experience and skills that the company has built up since
inauguration. It will not be easy but the future survival of the company will
depend on it.
Reference Source: Wikipedia
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