A Term Paper on Google
Business strategy defined by SMBTN.com is a term used in business planning that implies a careful selection and application of resources to obtain a competitive advantage in anticipation of future events or trends. In more general terms business strategy is positioning a company so that it has the greatest competitive advantage over others in the markets and industries that they participate in. This process involves making corporate decisions regarding which markets to provide goods and services, pricing, acceptable quality levels, and how to interact with others in the marketplace. The primary objective of business strategy is to create and increase value for all of its shareholders and stakeholders through the creation of customer value.
According to InformationWeek.com, Google has a distinctive technology advantage over its competitors like Microsoft, eBay, Amazon, Yahoo. Google utilizes custom high-performance systems which are cost efficient because they can scale to extreme workloads. This hardware allows for a huge cost advantage over its competitors. In addition, InformationWeek.com interviewed Stephen Arnold who stated that Google’s programmers are 50%-100% more productive compared to programmers working for their competitors. He based this theory on Google’s competitors having to spend up to four times as much just to keep up.
The business Operations and Corporate Development of google teams work on global, cross-functional projects that are at the heart of what we do at Google. These teams deliver insights to our leaders that drive decision-making, execution and investments for some of Google’s most critical initiatives. This requires an analytical savvy, a problem-solving sophistication and a drive to make the highest possible impact. You thrive in a fast-paced environment that calls for you to be resourceful and think on your feet. You can look at a situation, deconstruct and have the foresight to anticipate what could be. The Business Operations and Strategy team at Google plays a critical role in defining and driving strategic, operational and organizational improvements across the company. Founded in 2003, BizOps is a high-profile, high-impact team working with Google’s businesses across the globe. BizOps works on a range of critical projects and issues–from growth strategies for exciting products like YouTube, Chrome and Mobile; to engineering prioritization and global sales force alignment; to partner development and strategy work in emerging markets such as Africa and India. As a member of the BizOps team, you are at the forefront in helping Google clarify fast-moving strategic priorities, tackle operational challenges and enable innovation. The Corporate Development team guarantees Google’s worldwide growth by identifying the appropriate acquisitions and investments–and then working to make them happen. Consisting of experienced merger-and-acquisition leaders and integration experts, we’re dedicated to identifying the business opportunities of tomorrow. We find and evaluate acquisition opportunities across existing and future markets, drive management team decisions, lead deal negotiations and help manage post-acquisition integration and performance evaluation.
1.1 Access Strategy:
The Access Strategy Team drives the access strategy for Google, seeking the creation of more and faster broadband pipes, preserving the openness of the wired Internet and bringing the open ethos of the wired Internet to the wireless world. In partnership with teams across the company, the team develops products, makes strategic investments and influences public policy to achieve these goals.
1.2 Google Ideas:
Google Ideas is a technology-oriented think/do tank. We seed innovative initiatives to tackle the toughest human challenges, and reframe global political and social issues to account for the changing role of technology. Our methods include original research, technology projects and convening unorthodox stakeholders to catalyze lasting change.
The Energy and Sustainability Team strives to make Google a global leader in sustainability and clean energy. The team ensures that Google’s operations are as sustainable as possible through innovative technologies and business practices. In addition, the team seeks ways to have a broader impact beyond our operations by catalyzing change externally.
2. Most Strategic Management Model
Strategic management model is also known as strategic planning model. A strategic planning model is selected for the purpose of formulating and implementing the strategic management plan of a particular organization.
3. Company profile:
Google was founded by Larry Page and Sergey Brin while they were students at Stanford University. The company was officially launched in September, 1998 in a friend’s garage. In one of the most anticipated Initial Public Offerings (IPO) Google raised $1.67 billion in August of 2004. Today, Google has over 12,000 employees in offices throughout the world.
Google’s mission statement and corporate culture reflect a philosophy that you can “make money without doing evil” and that “work should be challenging and the challenge should be fun”. These beliefs dominate life at Google. The official mission statement of the company is to “organize the world’s information and make it universally accessible and useful.”
In 2006, Google was selected by MBA students as the ideal place to work. In 2007 and 2008 Fortune Magazine named Google the Number 1 employer in their annual 100 Best Companies to Work For.
Google is a high-energy, fast paced work environment. While the dress code might be “casual” the company attracts and retains some of the brightest minds in the technology industry. There is a work hard, play hard atmosphere. The Google Mountain View, CA headquarters (aka “the Googleplex”) is a campus-like environment. There are workout facilities, a café, well stocked snack rooms, and a dorm like environment.
In my opinion, one of the coolest programs at Google is the 20% time program. All Engineers at Google are encouraged to spend 20% of their work time on projects that interest them. Not only does this keep Engineers happy and challenged, its also good business: some estimates put half of all new product launches can be directly attributed to projects that came from the 20% time program.
3.1 Jobs at Google:
In the United States, Google has offices in several states, including California, Illinois, Massachusetts, Arizona, Michigan, New York, Texas, North Carolina, Oklahoma, South Carolina, Pennsylvania, Oregon, Washington (Seattle) and Washington, DC. They currently have hundreds of openings in Engineering, IT, Operations and Support functions. Some of the current openings at Google:
- Current job postings in Engineering include openings for Software Engineers with extensive experience in C++ programming and in java programming. There are also a lot of openings for Testing Engineers and a few for Web Designers.
- The current postings for Operations and IT include openings you would find in many Information Technology departments, including System Administrators and Help Desk Technicians. There were dozens of openings in their Data Center as of this writing.
- Google actively recruits college graduates, with a special website section specifically for students. Google offers both internship and full time employment opportunities on their student recruitment pages.
- Google also has offices internationally. While much of the information presented here refers to Google’s US offices, they currently have hundreds of Google Openings Worldwide in areas such as Asia-Pacific, Europe, the Middle East, Africa, and the Americas. I counted openings in 57 worldwide locations, not including those in the United States.
3.2 Google Compensation and Benefits:
Most workers at Google have base salaries that are on the lower end of normal for the markets they operate in. The base salaries are supplemented by stock options, challenging work and extensive benefits. In addition to the normal health and welfare benefits that most larger companies offer, Google provides its employees with the following cutting-edge benefits:
- Health care for you and your family, plus on-site physician and dental care at our headquarters in Mountain View, California and our engineering center in Seattle, Washington
- Vacation days and holidays, and flexible work hours
- Maternity and parental leave, plus new moms and dads are able to expense up to $500 for take-out meals during the first four weeks that they are home with their new baby
- Adoption assistance
- Google Child Care Center, just five minutes from Google headquarters in Mountain View
- Back-up child care helps California parents when their regularly scheduled child care falls through
- Free shuttle service to several San Francisco, East Bay, and South Bay locations
- Fuel Efficiency Vehicle Incentive Program
- Employee discounts
- Onsite dry cleaning, plus a coin-free laundry room in the Mountain View office.
Google’s mission is to organize the world’s information and make it universally accessible and useful. As a first step to fulfilling that mission, Google’s founders Larry Page and Sergey Brin developed a new approach to online search that took root in a Stanford University dorm room and quickly spread to information seekers around the globe. Google is now widely recognized as the world’s largest search engine — an easy-to-use free service that usually returns relevant results in a fraction of a second. We also provide ways to access all this information without making a special trip to the Google homepage. The Google Toolbar enables you to conduct a Google search from anywhere on the web, while the Google Deskbar (beta) puts a Google search box in the Windows taskbar so you can search from any application you’re using, without opening a browser. And for those times when you’re away from your PC altogether, Google can be used from a number of wireless platforms including WAP and i-mode phones. Google’s utility and ease of use have made it one of the world’s best known brands almost entirely through word of mouth from satisfied users. As a business, Google generates revenue by providing advertisers with the opportunity to deliver measurable, cost-effective online advertising that is relevant to the information displayed on any given page. This makes the advertising useful to you as well as to the advertiser placing it. We believe you should know when someone has paid to put a message in front of you, so we always distinguish ads from the search results or other content on a page. We don’t sell placement in the search results themselves, or allow people to pay for a higher ranking there.
Google believes that an open web benefits all users and publishers. However, “open” need not mean free. We believe that content on the Internet can thrive supported by multiple business models — including content available only via subscription. While we believe that advertising will likely remain the main source of revenue for most news content, a paid model can serve as an important source of additional revenue. In addition, a successful paid content model can enhance advertising opportunities, rather than replace them.
When it comes to a paid content model, there are two main challenges. First, the content must offer value to users. Only content creators can address this. The second is to create a simple payment model that is painless for users. Google has experience not only with our e-commerce products; we have successfully built consumer products used by millions around the world. We can use this expertise to help create a successful e-commerce platform for publishers. Beyond the mechanics of any payment system, users must know the product exists. Discovery and distribution are just as, if not more, important to premium content as they are to free content given the smaller audience of potential subscribers. Google is uniquely positioned to help publishers create a scalable e-commerce system via our Checkout product and also enable users to find this content via search — even if it’s behind a paywall. Our vision of a premium content ecosystem includes the following features:
Single sign-on capability for users to access content and manage subscriptions
Ability for publishers to combine subscriptions from different titles together for one price
Ability for publishers to create multiple payment options and easily include/exclude content behind a paywall
Multiple tiers of access to search including 1) snippets only with “subscription” label, 2) access to preview pages and 3) “first click free” access
Advertising systems that offer highly relevant ads for users, such as interest-based advertising Google already works with a number of premium content providers in a manner similar to the vision above. Combining our e-commerce system with our search capability and advertising platform will allow for even more flexibility for publishers and users alike.
6. Organ gram of Google:
7. PESTEL analysis:
The political environment:
Google is worldwide companies so it has to face the constraints impose by different countries. Indeed, although Google is present in more than most countries around the world, it has to cope with internal rules. The most famous case is that of China. Google has accepted to put a filter on its
search engine in order to “respect” the censorship that prevails in China. So, Google has to adapt itself to local habits in order to impose its search engine in a market. On top of that there are sometimes difficulties between Google and antitrust authorities. One can say that this is normal because Google has become such a big company that it is difficult for it to let the market as competitive as before. We can take the example of the repurchase of the company “Double click”. This company is specialized in the market of web advertising and European and US authorities are investigating because Google could be too important in the field of web advertising.
The economical environment:
Google has emerged at the end of the nineties when people were very enthusiastic in front of internet. The level of disposal incomes was high and allows them to have an important growth. They began with 100 000 dollars in 1996, then reach to obtain 1 million and then 25 million dollars from business angels in 1999. So, we can say that if the idea was good, the context was also favorable to develop new businesses. Internet was the center of a formidable enthusiastic move and the market became bigger and bigger each day. The particularity of Google was that it had already found its business model. Contrary to a lot of web companies, Google has, from the very beginning, found a solution to make money on the internet. Most of its competitors might have good ideas but no possibility to gain money and have a sustainable development. Google have seen that by using an advertising adapted to requests, it would be profitable very rapidly. Profitability is a key word here. Because of this relevant business model, Google has faced the storm that has destroyed a lot of start up at the beginning on the 21st century. Now, Google evolutes in a very competitive environment and has to compete with the historical companies of the sector that are Microsoft or Yahoo!.
The societal environment:
Google is the leader of a society that is more and more global. Knowledge will become the key factor of human development over the next decades. The attitudes toward this business are very enthusiastic and we are only at the beginning. The goal of the founders is to organize worldwide information and make it accessible and useful for everybody. But, Google is more and more criticizes because it has started to scan books in order to create a universal library. This project is called “Google Print”. It has begun in January 2005 in partnership with the greatest American universities. The goal is to scan more than 14 million books for a cost of 200 million dollars. To illustrate the societal environment in that case, we can explain the view of the “Bibliothèque National de France” that think that it is an American project, so, it supposes a choice. Now, a choice is not neuter, and a worldwide biography must be neutral. On top of that, the European project “Gallica” (whose aim is also to scan books) is in competition with the giant Google. So the societal environment is a key success and Google has succeeded to cope with that kind of obstacles, sometimes with difficulties. For example, a research for Tiananmen pictures in China conducts to pictures of monuments or happy families whereas in France for example, we can see a student in front of a tank.
The technological environment:
The leadership of Google is based on its efficiency. In fact, Google has developed a very efficient search engine which is the most powerful of the market. 500 000 requests per day at the beginning of 1999, 3 million at the end of the same year and 300 million in 2006, that represent more than the half of world requests on the internet. Google offers more than 8 billion pages to people. In order to remain the best in the field of technology, Google has bought a great number of start-up that allows it to benefit from the dynamism and creativity of such kind of little business: security, advertising, video…
The environmental framework:
Google do not have to cope directly from ecological problems but, faithful to its spirit, Google has decided to be involved in ecological actions. For example, the company has made a donation of 10 million dollars in order support the development of non polluting technologies. Recently, Google has launched a campaign baptized “International cleanup weekend” that proposes to people to clean a place which is located near the town they live by using Google Earth. To sum up, one can say that Google wants to be integrated in an ecological move in order to be considered as a citizen company, which is very important for its brand image.
The legacy environment:
Legacy is probably the biggest challenge that Google will have to face in the next ten years. Why? Because Google is based on a “knowledge economy” which means that it will have to develop a new business model that take into account the respect of intellectual property. Indeed, Google benefits nowadays from the work of a large number of people who produces reports, data, videos, pictures… And the majority of them are not pay for this information… The most famous case is that of “Youtube” that Google repurchase this year. Many companies have lodged a complaint against this website because some videos have been placed on YouTube without their authors’ agreement.
8. Google SWOT Analysis:
1. It has established a brand name for itself and is considered to be the number one search engine on the web.
2. The speed and simplicity of its search engine is quite reliable and user friendly.
3. It has a „market cap? of $185.61 billion according to „Yahoo Finance?, Dec 5, 2009.
4. It has a „war chest? of $22 billion according to Adam Ostrow, Oct 15, 2009.
5. It is considered to be among the top 10 brands in the U.S.
6. It gets reputation by its popularity which proceeds by its word of mouth publicity, so it doesn?t need to put much effort in marketing its search engine.
7. It offers many products and services i.e.; Desktop products, Mobile products, Web products, Hardware products.
8. It has a low operation cost regarding its products and services.
9. It has hired PhDs specially to work for enhancing the search engine algorithms which will render the search faster, relevant and more efficient.
10. It provides its search engine interface to 88 languages which is quite helpful for the locals of the countries.
11. It uses state-of-the-art technology to catalog the pages to give the most updated outcomes to its users.
12. It ranks the WebPages with its Page-Rank technology that gives the users access to the important pages first.
13. It specializes in marking the results in differential scale i.e. it separates the sponsored links from the regular links that are provided.
14. The search engine also provides localized searching where the users get results according to their regions such as http://www.google.ps, www.google.my, etc.
15. It provides innovative services such as Tashkeel for Arabic characters and websites (http://tashkeel.googlelabs.com)
16. It provides services such as Groups, Email, News, Directory, Citation, etc.
17. It has come-up with ideas regarding solutions to wireless hand-held (Android) devices, personalized toolbars, and indexes.
18. It directly routes its users to the webpage without lingering on another site for ad. Revenue.
19. It has also acquired YouTube which provides video services to users across the web, and which is regarded to be the number-one online video portal users.
20. It has Ad Words and Ad Sense programs working as the main mechanism.
21. It has a strong professional networking space present.
1. It is dependent mostly on its search based advertising.
2. There is the risk of facing dead ends for the users, who find the citation but not the whole text.
3. It has lack of focus regarding the service of search engine.
4. Spammers usually take advantage of Google’s ranking technology by creating sites that contain a lot of links by which they end up getting higher ranks.
5. Its link-based ranking tech. mostly didn’t work on actual traffic analysis.
6. Its cost-per-click advertising charge & ranking policy makes it difficult for the clients to predict the positioning of their ads and their costing as per se.
7. Its contextual advertising is considered less effective regarding sales generation, and the algorithms behind the search are erroneous.
8. Its localized search also results in errors at times.
9. It is the top player regarding the search engines yet it answers search queries with 50% to 60% accuracy.
10. Its inability regarding YouTube to be monetized.
11. It has weak presence regarding the social-networking space.
12. The products and services integration is quite heterogeneous.
13. It does not hold any strategy for contraction.
14. The cost for the data-center getting higher and higher.
1. It has vast opportunities for reaching new groups/segments and reaching for new contents.
2. Easy expert search, which can be integrated using open-url.
3. Using higher value content on the web.
4. It can relive the trend like Yahoo! and MSN and become a mass market portal for users that will increase switching costs for its potential users.
5. It can add localized vendors paid advertisements on the localized search.
6. It can merge with an already existing mass market portal to cover more ground regarding its users.
7. It can provide more services to the hand-held devices to capture more market that goes past the conventional internet.
8. It can increase its overall ads. spending online.
9. Its can enhance by having new acquisitions.
10. It can increase the internet usage which will render the usage of google.com to be increased as well.
1. It can lose control over the indexing policy.
2. The censorship will be imposed which will render many services to be less effective.
3. Library services becoming less visible.
4. Users ending up not getting to the institutional subscription.
5. The disappearance of informational skills.
6. Competition from firms like Yahoo, MSN.
7. Legal trials.
8. Federal lawsuit regarding the collection of search habits of the consumers, which erodes public perception.
9. It will lose a considerable amount of revenue if its contacts with portals like AOL.
10. There is no time constraint regarding the business, competitors can emerge with better interface and new ideas regarding the search mechanism that will make Google lose its market share.
11. Confusing cost-per-click policy can disappoint the clients and the firm may start losing them.
12. It can lose its simple and user-friendly interface if it decides to become a portal, for which it is favorite among its users.
13. It can get stuck in issues if it decides to acquire information regarding its users? personal information.
14. Merging with another already establish mass market portal will be a good step, but Google will start losing its well-earned brand-name.
9. Porter’s Five Forces Analysis:
Both Internet and Computer Software are attractive industries that involve many companies. However, to become a viable force in either industry, it takes both innovation and resources. This reduces the threat of new entrants, but could allow for existing companies in either industry to easily branch into the other.
9.1 Supplier Power – LOW
Supplier bargaining power is currently low and should remain low as long as Google maintains strong market dominance. Because of the ad system they use to generate income, both the advertiser and the receiver are Google clients. The Android phone system has been selling with great success for all mobile phone companies, so suppliers of these items want to maintain a good relationship with Google as well, putting them in a somewhat powerless position.
9.2 Buyer Power – STRONG
Buyer power is strong in both the Internet and Computer Software industries. There are many competitors that host alternatives to Google’s offerings. While many of Google’s services are free, they rely on advertising to generate a moderate percentage of their revenue. If people choose not to use their services, this could cause a drop in advertising clients, affecting Google’s bottom line. There are also many companies that create mobile phone operating systems, allowing consumers the choice not to buy Google based phones. Because of this, buyers could potentially control pricing if there is a general consensus that prices are too high.
9.3 Competitive Rivalry – MODERATE
While Google does have current competitors in the search engine game (the two largest being Yahoo and MSN) it still commands a large majority of internet services. Its search engine is by far the most used year after year, and innovations like Google Earth and Street View leave competitors playing catch up. Yahoo and MSN both constantly update their services but they have yet to capture the success Google has. When introducing the Android operating system, Google put themselves in competition with Apple’s iPhone. While it may be true that Android phones make up a larger share of the market than iOS phones, Apple only has a few versions of a phone that uses their OS. Many different companies have released Android power phones, making the market much more saturated. However, there is no one Android phone that would come close to the market share of the iPhone on its own.
9.4Threat of Substitution – LOW
The internet has become the primary source for information gathering and queries, and the backbone of this is built off search engines and other services that return the results needed. With such a commanding presence, Google Inc. has itself positioned for long term success on the internet. As of now, there is no foreseeable substitution for the internet. The closest would be a theoretical step backwards by depending on physically locating information through publications, which would have a large negative impact on both time and money of all involved.
9.5 Threat of New Entry – MODERATE
Google Inc. has a low risk of new entry threat because of the high level of entry barriers. It would take a massive starting capital to build a startup network infrastructure to compete with all Google’s online services and products, and would be a considerable feat to maintain and upgrade services and products at a rate that would usurp their current control of the industry. What could pose a threat of new entry for Google is a company focusing specifically on one of the services offered by Google. BY focusing all of their attention on one product, they could potentially develop a single better product than one of Google’s if they have the talent and information necessary.
10. Value Chain Analysis:
Google’s primary activities in its value chain vary slightly from a traditional model where raw materials are processed into finished goods for sale to a customer, gaining value in each step of the process. Since Google doesn’t produce physical products, its value chain is a bit more nuanced. Google gathers all the web users it can by enticing them to use its stellar search product with highly relevant results delivered promptly. Then, through assorted “signs” it directs these same web users in the form of traffic to its advertising partners who transform the traffic into “conversions” or sales on their sites. Google adds value not only by directing a quantity of web users to specific sites, but also by sorting the pre-qualified visitors using keyword association and search history to recognize users’ interests. In this manner, Google ensures that the users who are directed to a partner site are more likely to purchase a product there.
Google’s Value Chain
Google’s primary activities in its value chain are heavily dependent on the support activities of administration and human resources (Figure 4). Google has always tried to hire the most qualified and competent individuals to ensure that it excels at the research and development of its technology and systems. In fact the company often gives aptitude challenges and tests to help recruiters sift through the massive amounts of resumes they receive.
Next to the employees, a large percentage of the cost structure is the infrastructure and systems. Google’s servers and internal software allow it to conduct operations, distribution, sales, and service. Each activity contributes to the value chain by increasing the profit of the firm. Google has locations all over the world to localize distribution, marketing, and service which in turn ensures maximum profit on a global scale. Profit is maximized by the company’s cultural awareness and social competence to tailor products to the regional needs of its users. By shifting activities geographically, Google uses advanced analytics to measure the efficiency of its supply chain . This data about the history of its users is important because it helps Google improve its search algorithms and advertising interface.
11. The BCG chart:
Placing products in the BCG matrix results in 4 categories in a portfolio of Google Company:
BCG STARS (high growth, high market share)
– Stars are defined by having high market share in a growing market.
– Stars are the leaders in the business but still need a lot of support for promotion a placement.
– If market share is kept, Stars are likely to grow into cash cows.
BCG QUESTION MARKS (high growth, low market share)
– These products are in growing markets but have low market share.
– Question marks are essentially new products where buyers have yet to discover them.
– The marketing strategy is to get markets to adopt these products.
– Question marks have high demands and low returns due to low market share.
– These products need to increase their market share quickly or they become dogs.
– The best way to handle Question marks is to either invest heavily in them to gain market share or to sell them
BCG CASH COWS (low growth, high market share)
– Cash cows are in a position of high market share in a mature market.
– If competitive advantage has been achieved, cash cows have high profit margins and generate a lot of cash flow.
– Because of the low growth, promotion and placement investments are low.
– Investments into supporting infrastructure can improve efficiency and increase cash flow more.
– Cash cows are the products that businesses strive for.
BCG DOGS (low growth, low market share)
– Dogs are in low growth markets and have low market share.
– Dogs should be avoided and minimized.
– Expensive turn-around plans usually do not help.
limitations of the BCG matrix:
- The first problem can be how we define market and how we get data about market share
- A high market share does not necessarily lead to profitability at all times
- The model employs only two dimensions – market share and product or service growth rate
- Low share or niche businesses can be profitable too (some Dogs can be more profitable than cash Cows)
- The model does not reflect growth rates of the overall market
- The model neglects the effects of synergy between business units
- Market growth is not the only indicator for attractiveness of a market
There are probably even more aspects that need to be considered in a particular use of the BCG model.
12. Market Analysis including Market Segmentation:
Basis on market analysis includes Market Segmentation:
Google has own market analysis including market segmentation like, Gender: they target both female and mail gender. All use it for their needed.
Age Group: They have lots of young age group and also all levels.
Income: There are no boundaries for any income groups.
Occupation: It is important for students, jobholder or less, software engineer, doctors, teachers to collect their data.
Competitive Analysis – Your competitive analysis should identify your competition by product line or service and market segment. Assess the following characteristics of the competitive landscape:
- Market share
- Strengths and weaknesses
- How important is your target market to your competitors?
- Are there any barriers that may hinder you as you enter the market?
- What is your window of opportunity to enter the market?
- Are there any indirect or secondary competitors who may impact your success?
- What barriers to market are there (e.g., changing technology, high investment cost, lack of quality personnel)?
Consumer Market Segmentation
A basis for segmentation is a factor that varies among groups within a market, but that is consistent within groups. One can identify four primary bases on which to segment a consumer market:
· Geographic segmentation is based on regional variables such as region, climate, population density, and population growth rate.
· Demographic segmentation is based on variables such as age, gender, ethnicity, education, occupation, income, and family status.
· Psychographic segmentation is based on variables such as values, attitudes, and lifestyle.
· Behavioral segmentation is based on variables such as usage rate and patterns, price sensitivity, brand loyalty, and benefits sought.
Business Market Segmentation
While many of the consumer market segmentation bases can be applied to businesses and organizations, the different nature of business markets often leads to segmentation on the following bases:
· Geographic segmentation – based on regional variables such as customer concentration, regional industrial growth rate, and international macroeconomic factors.
· Customer type – based on factors such as the size of the organization, its industry, position in the value chain, etc.
· Buyer behavior – based on factors such as loyalty to suppliers, usage patterns, and order size.
- Market segmentation is a marketing concept which divides the complete market set up into smaller subsets comprising of consumers with a similar taste, demand and preference.
- A market segment is a small unit within a large market comprising of likeminded individuals.
- One market segment is totally distinct from the other segment.
- A market segment comprises of individuals who think on the same lines and have similar interests.
- The individuals from the same segment respond in a similar way to the fluctuations in the market.
The basis of such segmentation is the lifestyle of the individuals. The individual’s attitude, interest, value help the marketers to classify them into small groups.
- Behaviouralistic Segmentation
The loyalties of the customers towards a particular brand help the marketers to classify them into smaller groups, each group comprising of individuals loyal towards a particular brand.
- Geographic Segmentation
Geographic segmentation refers to the classification of market into various geographical areas. A marketer can’t have similar strategies for individuals living at different places.
Nestle promotes Nescafe all through the year in cold states of the country as compared to places which have well defined summer and winter season.
McDonald’s in India does not sell beef products as it is strictly against the religious beliefs of the countrymen, whereas McDonald’s in US freely sells and promotes beef products.
13. EFE Matrix:
External Factor Evaluation (EFE) matrix method is a strategic-management tool often used for assessment of current business conditions. The EFE matrix is a good tool to visualize and prioritize the opportunities and threats that a business is facing.
The EFE matrix is very similar to the IFE matrix. The major difference between the EFE matrix and the IFE matrix is the type of factors that are included in the model. While the IFE matrix deals with internal factors, the EFE matrix is concerned solely with external factors.
The EFE matrix process uses the five steps as the IFE matrix.
List factors: The first step is to gather a list of external factors. Divide factors into two groups: opportunities and threats.
Assign weights: Assign a weight to each factor. The value of each weight should be between 0 and 1 (or alternatively between 10 and 100 if you use the 10 to 100 scale). Zero means the factor is not important. One or hundred means that the factor is the most influential and critical one. The total value of all weights together should equal 1 or 100.
Rate factors: Assign a rating to each factor. Rating should be between 1 and 4. Rating indicates how effective the firm’s current strategies respond to the factor. 1 = the response is poor. 2 = the response is below average. 3 = above average. 4 = superior. Weights are industry-specific. Ratings are company-specific.
Multiply weights by ratings: Multiply each factor weight with its rating. This will calculate the weighted score for each factor.
Total all weighted scores: Add all weighted scores for each factor. This will calculate the total weighted score for the company.
EFE matrix example
Total weighted score of 2.46 indicates that the business has slightly less than average ability to respond to external factors.
14. CPM Matrix:
|Competitive Profile Matrix|
|Critical Success Factors||Weight||Rating||Score||Rating||Score||Rating||Score|
|Strong Brand Recognition||0.15||4||0.60||4||0.60||4||0.60|
|Talented Employee Base||0.10||3||0.30||4||0.40||3||0.30|
|Culture of Innovation/Accountability||0.10||2||0.20||4||0.40||4||0.40|
|Powerful Business Relationships||0.05||3||0.15||3||0.15||4||0.20|
Yahoo!’s competitive profile matrix (CPM) weighs international markets, .20, as the most important item on the list of critical success factors. Yahoo!’s score on this factor is the highest in comparison to their two chief competitors, Google and MSN, reflecting a distinctive competitive advantage in the Internet market. Strong brand recognition has a weight, .15, assigned which replicates a high level of importance on the CPM. Maintaining strong brand recognition to retain market share is rated and scored highly in the industry by all three companies on the matrix. The customer loyalty factor weight, .15, discloses Yahoo’s ranking and score as second to Google; yet remaining ahead of MSN. The advertising factor weight, .015, rates Yahoo! and MSN equal; yet behind Google, the industry leader for this factor. Talented employee base weight, .10, rates and scores equal to MSN; yet lags behind Google. Yahoo! lags behind considerably in comparison to Google and MSN on the culture and innovation and accountability factor. The factor weight, .10, on Yahoo’s CPM does not reflect a high level in ranking the critical success factors, but does release valuable information in comparison to their competitors on the CPM. Yahoo! rates and scores the lowest on this factor. Market share weight, .10, shows Yahoo! is second to Google; yet leads MSN. Weighing the powerful business relationships factor the least, .05, Yahoo! ranks and scores evenly with Google; yet MSN holds the top score and rating on this factor.
15. Financial Analysis;
Google 2012 1Q results are good. 2012 1Q revenue is up to 10,6 bn.$. or +24% compared to 2011 1Q 8,6 bn.$. but almost the same as previous 4Q. As can be seen from graph below revenue is always at the same level in Q1 compared to Q4 then stably increases at the rest quarters. This is due to economic swing-back at Q1 after holiday sales at end of Q4. Net Income before depreciation has increased to 3,4 bn.$ which is more then +55% increase compared to 2011 Q1, but that quarter was unusually low. Compared to Q4 it has increased by 6% from 3,2 bn.$. Accumulated last 4 quarters Net Income before Depreciation has increased up to 12,8 bn.$ and should increase in the future.
According to http://www.netmarketshare.com Google share in search engine market stays stable around 80% so Google continues to be #1 without any notable competition. And in Mobile devices Google share is even larger ~90%
Income from www.google.com website generates ~70% of companies income same as it was in 2011 Q1, so companies dependence on one product remain high, but company is investing into new mobile technologies. Company is competing in its competitors. Google+ competing with Facebook; 2) Chrome with Microsoft Explorer and 3) Android mobile + Motorola acquisition competing with Apple IPhone/IPad. And have to say that both 3 has improved their positions and moving at positive directions. In browser Chrome has gained from 12% to 19%. While Microsoft Explorer is losing its market share.
Financially Google is in much better shape than its main competitor, Yahoo. Google has about 2.4 times the revenue of Yahoo ,but common size ratios allow comparison of the two. Google has a much higher Income from Continuing Operations/Sales ratio indicates that Google is more profitable than Yahoo. The two companies have a roughly equivalent Cost of Goods Sold/Revenue ratio at 40%, but Google’s Liabilities /Total Assets ratio is half of Yahoo’s indicating that Google is managing their debt better. Google’s Return on Assets shines as well at 23.2% versus Yahoo!’s 5.9%.
|Current Year||Prior Year|
|Fixed Asset Turnover||4.1||4.4|
|Return on Assets||23.2%||24.7%|
Keeping in mind the facts mentioned in the previous paragraph, Google slowed down by the end of the 2007 fiscal year. The growth ratios such as Sales Growth, Income Growth, Asset Growth were all down from 2006 In addition the Activity ratios of Receivable Turnover and Fixed Asset Turnover were also down slightly Profit margin and Return on Assets were also down, but still at healthy levels. These numbers do not mean that Google is in trouble; after all, they are still much higher than Yahoo!’s ratios. What they mean is that Google is moving out of its explosive, exponential growth and it will eventually settle at a more steady growth rate if their business model remains successful. No company can sustain a greater than 50% growth rate for too many years in a row.
Google’s 5-year Revenue Growth
Google’s spectacular growth is shown in the charts in Appendix C. In the past 5 years revenue has grown from $1.47 billion to $16.59 billion. In the Net Income Trend Graph, the revenue growth is pleasantly tracked by the net income.
Quarterly Data (in millions of USD)
|1st Q||2nd Q||3rd Q||4th Q||Annual|
|Current Year Revenue||3,664||3,872||4,231||4,827||16,594|
|Last Year Revenue||2,254||2,456||2,690||3,206||10,605|
Google is not a seasonal or a cyclical company, because its services are constantly desired. Table 3 shows that Google has not yet had a quarter where income or revenue was below the previous quarter’s reported numbers.
Quarterly Stock Prices
Since the fourth quarter has not yet been reported for 2008, the Current Year Quarterly Stock Prices table in Appendix D shows fiscal year 2007 numbers. As stated earlier, Google’s stock performed remarkably through the end of 2007 and the Quarterly Stock Highs and Lows graph showcases that continued growth.
16. Competitor Analysis:
– Google has superior strength over competitors
– Yahoo falls in second place due to name brand recognition
– Ask.com is increasing product innovation
– Microsoft came in last due to lack of product innovation
Weighted Competitor Analysis Matrix:
|Key Success Factor/Strength Measure||ImportanceWeights||Yahoo||Microsoft||Ask.com|
|Expertise in a Particular Technology||.3||8/2.7||7/2.5||6/1.5||5/2.0|
|Well-Known and Respected Brand||.2||8/1.8||7/1.4||6/1.4||5/1.0|
|Global Distribution Capabilities||.2||9/1.7||8/1.7||6/1.5||6/1.6|
|Sum of Weights||1.00|
|Weighted overall Strength Rating||8.7||7.6||5.2||6.1|
17. Breakeven Analysis:
Break even point analysis is very important topic of cost accounting. You add more in it by writing your worthy comments below this content. Break even point analyzes which quantity or amount of sale of products will be most profitable to the business. First of all, we find break even point on graph of total sale and total cost on the different level of unit of sale and then study the cause and effect deeply if we increase sale or decrease the sale from this point and try to find important facts and information which can be used in business.
It can also solve following problems
Q: – 1. Why are company increasing the price of product or decreasing its cost?
Ans. After find the break even point on the graph paper and calculating the quantity of sale under break even point. It is very easy for company to know the quantity of sale where total cost of company is equal to total revenue of company. But some time, company has no power to get that level of sale. At that time, company can take the decision to increase the price or decrease its fixed and variable cost for protecting business from loss. That is the reason, we are doing analysis of break even point.
Q: – 2. How will Company get new ideas relating to maximize the profit?
Ans. Break even provides clear picture of cost, sales, profit and their relationship. Sometime a simple person does not understand the formula of units sold at break even point but this formula shows the clear relationship among total fixed cost, sale per unit and variable cost per unit.
we show here the formula of sale unit at BEP = TFC / sale price per unit – variable cost per unit
Now, accounts manager thinks like me :
a) how can my sale unit will more than break even point sale unit without any loss because there is no benefit to increase sale unit at higher cost?
b) This formula also provides me to reach its originality.
sales unit at BEP = Total fixed cost/ sale price per unit – variable cost per unit
X = TFC / P – V
X ( P- V ) = TFC
P X X – V x X = TFC
P X X = TFC + V X X
Total Sale = TFC + TVC
Total Sale = Total Cost
Q:- 3. How can manager achieve target income sales?
Ans. With break even point analysis, manager can achieve target income sales because, if we subtract variable cost out of sale value, we can find contribution and break even point will be
BEP = Total fixed cost / Contribution per unit
and target income in unit will be = total fixed cost + target income / contribution per unit
Q:- How to find Margin of Safety ?
Ans. One of major benefit of analysis of break even point, with this, we can calculate exact amount of profit of business whether they are over or below the sale than break even point. Without finding break even point, we can not find margin of safety.
margin of safety = (current output – break even output)