5 Force Porter Google

Assignment # 1 Case study questions:

1. Use the information provided in the case study and analyse the search industry using Porter’s five forces. Conclude with a brief statement regarding the industry growth potential. (5* 2 marks = 10 marks)

a. Rivalry Among Existing Firm

Google has major market share in US, Latin and Europe countries. The market share in Asia is rather low. Google is facing strong competition from his local country rivalry such as Yahoo, Microsoft and eBay as well as other country popular search engines such as Baidu (China) and Yandex (Russia). However, Google is still the leader of current most popular search engine with share market of over 65%. Therefore, the completion rating among the existing firm is medium.

b. Threat of New Entrance

Google services are wide variety and are linked to each other. It offers more than just a search engines. They incorporated different useful tools, applications, customization views which are very user friendly. The company is continuous enhancing the way of managing the innovation with instilling different working culture and environment. This has made the new entrance a challenge to compete as Google has been widely accepted. Some of the new entrances are such as Baidu and Yandex. The rating for the threat of new entrance is at medium level.

c. Threat of Substitute products

Google is continuously acquiring any potential business idea and have been providing many different web-based businesses than just a search engine. The company expanded the business into different products such as hosting (YouTube, Google Book, Google Scholar), communications (Gmail, Gchat), browsing applications (Google Chrome) and cloud based productivity application (Google Docs).From the financial statement, Google has been significantly investing huge amount of money in research and development as to develop new innovative products and services. In view of this, the substituting level is low for others to replace Google with different products.

d. Bargain power of Buyer

Google has been partnering with different companies to provide their search engine as default choice when a new product is installed. This has been very successful from the case of Google and Android. In other hand, Goggle do encountered privacy issues raised by users as they retained user’s full search logs for 18 months as well as other advertisement link matters. However, Google was able to defend these cases. In overall, the level of bargain power of buyer is low.

e. Bargain power of supplier

Google is able to control the bargain power of their suppliers as they have huge customer base. Google do faced some complaints on used their source of content impermissibly, improper charges on advertiser’s advertisement viewing by user, dispute on sales and marketing for trademarks. However these issues were able to be resolved easily their suppliers. Therefore, the bargain power level of supplier is low.

In overall, the search industry is still a profitable market and able to growth steadily in near future for Google.

2. Identify two key factors behind Google’s early success and provide explanation as to why you believe these factors are Google’s strategic advantages. (2*5 marks = 10 marks)

The two key factors behind Google’s early success are the differentiation and diversification. From the financial statement, it has clearly indicated that Google has been investing thousand millions of dollar in research and development in the recent years. They are continuously seeking creative idea and innovation products for different user experiences. Besides own development, they acquired some potential company which has well developed product. Google has instilled strong and distinctive corporate values into their company culture. They do not compromised integrity of the search result, invested heavily in building strong technology infrastructures with low cost and custom designed server architecture, and encouraging innovation and team work culture in Google work place.

3. By May 2003, Google was by far the most popular search engine, handling over 55% of all Internet searches through its own website and exceeding 80% of all searches through both Google and client websites. Its annual revenues grew from $86 million in 2001 to $1,466 million in 2003 ($1,352 million in the first six months of 2004 alone), net income of $106 million in 2003 ($326 million and $143 million respectively for the first six months of 2004). Founders’ Page and Brin attributed much of Google’s success to the long-term planning possible in the context of a privately held corporation, unaffected by the pressures and demands of a volatile stock market focused on short-term results. However, on August 19, 2004 Google’s initial public offering (IPO) took place.