A CASE ANALYSIS ON GOOGLE’S STRATEGY IN 2010

 A CASE ANALYSIS ON GOOGLE’S STRATEGY IN 2010
In a bid to gain sustainable competitive advantage over their rivals, companies have over the years found it necessary to formulate both short-term and long-term strategies to enhance their internal and external capabilities in order to sustain and improve their market position. Michael E. Porter (1980) postulated three general strategies that can be adopted to this end. These include, cost leadership, differentiation and focus strategies. Cost leadership strategies can further be divided into low-cost provider and best cost provider strategies. Focus strategies on the other hand can either be based on differentiation or cost leadership. There are therefore five different generic strategies that can be adopted by companies to enhance their competitive advantage against other firms in the industry. This report is an analysis of the generic strategies that were adopted by Google Inc. to gain a competitive edge over its rivals.

The strategy adopted by a company depends on its internal capabilities, which stipulate its primary source of competitive advantage and the nature of the market within which it competes. Companies that enjoy considerable internal economies of scale are usually in a position to significantly reduce their production costs and as such, they will more often than not adopt cost leadership strategies for broad markets and cost focus strategies for narrow and niche markets. On the other hand, those that primarily depend on differentiation as a source of competitive advantage normally adopt broad differentiation and differentiation focus strategies. The success of most internet based businesses relies heavily on innovation and creativity that are usually manifested in diversified product portfolios comprised of unique products that are tailor-made to meet the needs of their customers. For this reason, differentiation is the major source of competitive advantage for these businesses. This was also the case for Google Inc. However, because of its diversified product portfolio, it targeted both broad and niche markets. Consequently, it adopted two major strategies, a broad differentiation strategy and a market niche strategy based on differentiation.

The success of the Google search engine was mainly attributed to the company’s broad differentiation strategy, which was achieved through a series of acquisitions and strategic alliances that were aimed at improving customer experience. This contributed significantly to customer satisfaction that ultimately translated to brand loyalty. Some of the notable acquisitions that contributed to significant additions to the search engine include Key-hole, YouTube and Double Click. The acquisition of Key-hole enabled the company to launch Google Earth and its companion software Google Maps, which allowed users to conveniently search for locations all over the world, while YouTube and Double Click provided more avenues to generate advertising revenue. Other additions to the google search engine include Custom Search, Book Search, Finance, Image Search, News, Scholar and Translate. While the Google search Engine targeted the entire population, several applications and additions targeted specific niche markets. For instance, Google Books and Google Scholar were specifically designed for students and academic professionals. Therefore, for these applications and additions the company adopted a focus differentiation strategy as opposed to a broad differentiation strategy.

Google’s high level of innovation and dedication to customer satisfaction ensured a constant growth in the company’s stock price from its inception in 2004 to mid-2007 when it dropped drastically due to the impacts of the global financial crisis. The stock price, however increased sharply between 2009 and 2010 when it was characterized by relatively better performance compared to most firms across all industries at the time. In fact, despite having been established long after its major competitors, Yahoo and Microsoft, the company had already acquired a majority market share, which escalated from 43.7% in 2006 to 63.7% in 2010. Yahoo and Microsoft on the other hand only managed to gain 18.3% and 12.1% of the total market share respectively in 2010.

Apart from advertising, which constituted the bulk of Google’s total revenue, the company also availed the Google Search Appliance to third parties ranging from small and medium sized enterprises to multinational corporations. Additionally, to further increase the total advertising revenue the company introduced AdWords to facilitate text-based ads that appeared alongside Google search results. AdWords also enabled advertisers to monitor the performance of their advertisements and simplified payment transactions. Other than that, the company launched AdSense, a program that allowed web publishers to retain part of the revenue that was generated by text ads.

In line with its differentiation stra