Google Case Analysis

Ⅰ. Introduction

Google, which is the market leader in the search engine business, is the largest and fastest search engine in the world. It had become the first company ever to have a 25% share in all US online ad spending. This case illustrates the various diversifications and partnerships of Google and highlights how these have helped Google to grow. At first, Google used a single business strategy, focusing on their algorithmic search and their revenue came solely from one business unit. However, Google had acquired 26 companies from 2001 till 2006, most of which were small startups with innovative products or technologies. Although most of these businesses were not in line with its core area of search, Google had successfully integrated its acquisitions. This allowed Google to enter in new and unrelated areas. However, While Google has drawn a lot of interest with the launch of new services such as Froogle, Google News, Picassa and Gmail, none of them have shown themselves to be a new engine for revenue growth. As a result, some analysts and investors are skeptical about these unrelated diversification. In this report, we are going to analyze whether Google was making the right move by moving away from its search business and entering new areas.

Ⅱ. External Environment Analysis (Refer to Appendix 1)

We have focused on the search engine industry and conducted Porter’s five forces analysis.

As referred in Appendix1, the search engine industry has a low threat of new entrants, low threat of substitutes and relatively moderate intensity of rivalry. However, this industry has a high bargaining power of buyers. Due to the fact that this industry is changing and growing so rapidly, Google should innovate and develop new technology in order to keep their position as a leader whose market share in search engine is 49% (Refer to Appendix 2). In addition, we assumed that the supplier in this industry is the supplier who offers server.

Ⅲ. Internal Analysis

Google has 3 main core competencies, which is Search engine algorithm, Google Advertising inventories, Google’s distinctive corporate culture and people. The first one, the Google’s search engine algorithm called PageRank is the related to their main business. It assigns a numerical weighting to each element of a hyperlinked set of documents, with the purpose of "measuring" its relative importance within the set. Second, Google Adwords is Google's main advertising product and main source of revenue. Google's total advertising revenues were USD$28 billion in 2010. When a user searches on Google, ads for relevant words are shown as "sponsored links" on the side of the screen. Google’s first and second core competencies are related to the operation level and these are based on Google’s