Larry Page and Sergey Bring in their room at Stanford University built Google, a search engine. Finally, in 1998 it became the Google Inc. This company was started with philosophy to create the perfect search engine for internet, which could benefit the seekers as their requirement. This company then moved forward with increasing its area from search engine to various other products like, Gmail, blogger, Google map, Picasa, Google earth and many more. In 2004 Google was gone to public listing the name in New York stock exchange i.e NASDAQ. Today Google is known as one of the best technology oriented company.
Evaluation of Google's Strategy Formulation
Strategy is planning for the direction of an scope of an organisation over the long term, that helps in achieving the advantages in varying environment through its allocation of resources and competences with the intend to fulfilling stakeholders expectations (Johnson, Scholes and Whittington, 2008). Strategy formulation is a process in which the organisation chooses the most appropriate course of action to accomplish its defined goals. This is a very important process in organisation's success in order to provide the framework for the action, which will bring out the anticipated result (Simerson, 2011). Mainly strategy formulation within organisation is carried out by two ways. The first is traditional linear planning process and second is emerging strategy process. Both of these processes are used in different organisation according to their structure, areas, production, company's vision and goals.
In the case of Google Inc., the company, which is known as highly, develop technology-based company, which is moving with continuous innovation and establishing new elements within itself. In such circumstance the strategies formulated by Google seems to be following more emerging strategy formulation (Ireland, Hoskisson and Hitt,2010).
Emergent strategy is about method that is more ongoing or process, which is in contrast to prescriptive strategy. This strategies are seems to have progressive objectives which develop and become clear over time as the strategic situation develops as in Google (Capon,2008). Today's technology market is highly dynamic hence company like Google always can't go through planned strategy because there might be catastrophic or sudden change in technology market, as there are number of technology oriented companies like Microsoft, Yahoo, apple etc. which could penetrate the market (Herzog,2010). Similarly, Google entering in the mobile market in 2010 with its own mobile operating system, android is good example of emerging strategy in dynamic market of mobile industries (Gunasekera, 2012).
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Traditional planned structure of formulating the strategy is good in some extent in different organisation but with change in time, technologies, environment it might not be beneficial for those organisation which are changing every seconds like Google. Hence, Google being the leader in the search engine industries it do have certain responsibility in relation to lead entire dynamic industries, this can be more effective when it is moving with emergent strategies. there are various advantages of emergent strategies to Google like, emergent strategies lies in its reflection of reality and flexibility by corresponding with actual practices in organisation. Emergent strategies mainly consider the organisational culture, due to the flexibility allowed, emergent strategy will adjusts the organisation's strategic situation and environment which is changing over time (Capon,2008). For instance, Google launching android, investing on YouTube, introducing Gmail, etc are time demanded which are fulfilled by emergent strategy. For instance, the main reason of Nokia to lose the current market in comparison to apple and Samsung, is that Nokia did not moved with time demand and changing technological environment (Snyder, and Elliott, 2008). Because of the emergent strategy formulation in Google there is huge development of Google incorporation through variety of product with time demand and dominating the entire search engines industries beating yahoo a great rivalry. Hence to be in the market leader position Google need to follow the emergent strategy which will fulfil the stakeholders expectations.
In other hand, emergent strategy may have various disadvantages like, sometime managers might be biased in their interpretation when making decision. As emergent strategy is a quick process, hence managers might seek only satisfactory solution rather than maximizing the objectives of the organisation. During emergent strategy formulation planning may not take place which may lead to the lack of strategic control and direction and might lead to organisation failure (Capon,2008). For instance failure of Blackberry playbook in comparison to ipad (Kossovsky, 2012).
Impacts of PESTLE factors on emerging strategy for Google
Political and legal- different government issues about Google privacy in different countries like in UK, France etc (yahoo news, 2013). change in government in different countries may lead to difficulty to operate.
Socio-Economic factors- increasing leisure interests in internet, different demographics, class structure for instance younger people are more likely to surf internet than old age, high class society uses the web technology more than economic class. Increasing in education level will increase the uses of Google's products. exchange rates and stability of US dollar will have positive impacts on Google.
Technological- recent technological developments, continuous innovation on technology is basic need for Google to lead the market. Increase in telecommunication technology can be good opportunity for Google.
Emergent strategy for Google- SWOT Analysis
Strength- being a market leader with 79% of share market in search engine and world popular search engine company, changing organisational culture, Google brand is one of top brand in the world (Lamb, Hair and McDaniel, 2009).
Weakness- compromising privacy of user in different source like Gmail (Swartz,2004).
Opportunity - high market growth in web sectors like eBooks, increasing Smartphone's market example growing android market.
Threats - increasing competitors like bing (Swartz,2004). Political and legal factors of different countries affecting Google to operate. e.g. Google privacy related cases in different countries. Economic crisis in different part of world.
Analysis of Financial metrics and analytical tools for decision making in Google
Prior to making any strategic decision in organisation there are certain metrics and tools, which should be, considered before moving to that approach. Mainly financial matrices like investment appraisal techniques, financial ratios, financial statements etc. are used as quantitative tools for decision making on ideas to be commercialised and for qualitative decision making analytical tools like BCG matrix, GE matrix are used. These tools will tells the organisation whether they are making right decision or not.
As Google is moving with various emerging strategies and projects to develop new products, these projects should consider the investments appraisal techniques like payback, internal rate if return(IRR), accounting rate of return(ARR), net present value(NPV) which gives ideas whether project will go in right direction (Pogue, 2010).
Payback period will tell the period that the initial investment will be return back. The main strength of the payback is that, shorter the period the strategy will be more fruitful i.e. success. Some weakness of the payback period is that, it does not consider time value of money and difficulty in using when cash flows changes. The project will be meaningless when payback period is longer (Pogue, 2010). for instance payback from android market to Google is more shorter which is a example of success (Jackson,2012). ARR is another tool, which is a measure of how efficient, is the company at generating return from investments or operation. ARR too helps to compare the new investment opportunities for company with return expectation on capital employed. ARR with highest rate is more acceptable of the organisation like Google, which believes in emergent strategy, though this tool have have drawbacks like it ignores the timing of profits. Another weakness of this tool is that it doesn't have universally accepted rule (Pouge, 2010).
NPV will helps the organisation like Google in forecasting the present value of upcoming projects and strategies through which company will get ideas weather the strategy will work or not. Generally higher NPV is better for the organisation. in many case discounted cash flow is applied which might affect the NPV of the project like higher discount rate, NPV goes down and which is not acceptable for the organisation. IRR is another investment tool which can be used by Google in order to make decision on upcoming strategies. Every day Google is investing in new projects hence IRR will be good tool to find out how risky is to invest in different projects. Higher IRR lowers the level of risk in investing. Though the weakness of irr is that it does not take consideration of initial investment where projects with different amount of investment may gain same return (Vose, 2008).
Profitability model which includes different financial statements like profit and loss account, balance statement and different ratios are other tools which will gives clear ideas in making the decision for the new strategy. The table in the case study shows that there is good increase in the profitable growth but in 2005 the rate has been decreased this might happen because of increase in the different cost like operation cost. To overcome such cost Google can outsource its certain parts of operation outside USA where it can find the cheap variable and fixed costs. Cost of operation is generally measured by profit and loss account. Decrease in the operation costs increase the profit of the organisation. Measurement of assets and liabilities to capital ratios will guide in investing on new projects, which is very important for emerging strategy formulation process in Google. Though such measurement financial tools will give good direction for the future business but due to sudden change in market environment and technology the predicted future market may not be always true.
Ratio analysis is another important tool to analyse the financial statements and hence helps to measure the performance of the company. Ratio analysis helps to measure the profitability of the company, its efficiency and other performance of business in terms of liquidity, gearing, market test and so on (Siddiqui,2006). Profitability ratio actually measures the performance of the business, ratio analysis helps in the accessing the efficiency of the business and helps to find out whether the business is solvent or not analysis of solvency ratio. Measurement of short-term and long-term financial position of the company, which helps in setting up the strategies for the organisation. Ratio analysis helps investors to know the earning potential of the company and helps shareholders about the profit of the business (Siddiqui,2006). Ratio analysis will let the investors of Google to know the performance of the company. These all strength and advantages of ratio analysis, it will be easy in strategy formulation for Google. Still there are some weakness in ratio analysis which might resist in strategy formulation like false result might be meaningless, sometime there is limited comparison, changes on price level affects the ratios, ignorance of qualitative factors in ratio analysis may not give actual performance of the company like Google.
Google is adopting different model where consumers pays nothing except the time they spend but Google will be paid by customers who buys their products and different advertisement agencies who uses the Google apps for their advertisements. For instance mobile consumer doesn't pay for android but the mobile company will pay for Google (Jackson, 2012). Hence during strategy formulation Google should be careful in making chain relationship with consumers and other customers companies e.g. Samsung and Sony using android in their products.
Google's search industry is a major cash generating industry for entire Google, which have relatively high market share hence, strategy like maintaining its status in sustaining its competitive advantages will be helpful. Mobile search and cloud computing are the star product of Google with high market share and market growth, so strategy to promote these industries will be beneficial for Google because these industries are foreseeable so Google should give proper emphasis on them. Android, which is highly innovative product of Google can be placed in question mark in BCG matrix. this product have got good potential to be a star product in future hence Google can invest more on this product to gain competitive advantages in future. in other hand Google plus which is a social network website which is not performing good as there are other top competitors like Facebook, twitter. Hence it would be better for Google to stop investing on it.