The Case Analy sis of Google Inc.
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The Case Analysis of Google Inc.
Attractiveness of Internet Search Industry
The introduction of Google Inc., in 2009 has led to a new development of Internet Search Industry. Through paid-advertising and invention of new products, Google Inc., has reached a level where it is becoming difficult for other companies to compete. To further analyze this case, it is important to use Michael Porter’s Five Forces tool that will determine whether this is an attractive industry.
Threat of New Entrants
According to Michael Porter, Threat of New Entrants refers to level of threat that new competitors poses to current competitors in the industry. For the Internet Search Industry, the barriers to entry is low. These are factors that makes it difficult for new competitors to enter in the market. The barriers to entry are low in the Internet Search Industry because high capital are not required to start and run a business like Google Inc. Most of the times, companies are depended on the advertisements for revenue. “Ordering paid listings according to “cost-per-click” (CPC) auctions yielded substantial revenues, while meeting users’ needs” (p. 2). Also switching to a different search engines is very costly for the Advertisers making it difficult to switch. Since, the threat of new entrants is high, it can be said that the industry is unattractive.
Bargaining Power of Suppliers
There are very few suppliers in the industry. As a result, the bargaining power of suppliers is high. Since there are few suppliers in the industry, the switching cost to a different supplier is extremely high. However, there are also many substitutes available in the market, which would cause the bargaining power of suppliers to be low.
Bargaining Power of Buyers
Like Suppliers, there are very few buyers in this industry. Therefore, the bargaining power of buyers is low. The buyers in this industries are advertisers, or even individual consumers. There is also very less price sensitivity which would result in the buyer to have less power over the products.
Threat of Substitutes
In the Internet Search Industry, the threat of substitutes is also high. This means that the chances of consumers switching to a different product/technology is high. Some of the substitutes to this industry are: “books, magazines, newspapers, and social networking sites such as Facebook and twitter)” (p. 9). The availability of so many substitutes’ products indicates that risk of consumers switching to a different industry (other than Internet Search Industry) are extremely high. This increases the competition and resulting in decrease in the profitability of the firms in this industry. For Advertisers, it makes more sense to advertise on the social networking sites rather than through paid advertisements on the search engines as the cost would be comparatively low and chances that more people will follow the ads on Facebook are higher. As the threat of substitutes are high, it can be said that the Internet Search Industry is not very attractive and the potential for firms to earn profits are very low.
Rivalry among existing competitors
Some of the competing firms in the Internet Search Industry are: Microsoft and Yahoo. According to the case, in this industry, companies are competing to generate high revenues through paid-advertising and through different contents that attracts individual buyers. As the Internet Search Industry is growing at a slower speed, since many new competitors are entering in the market and are competing against similar technology and innovations. For example “Yahoo competed head-to-head with Google in search and paid listings and offered direct rivals to Google’s local search, Home Page, Froogle, Gmail, Maps, and Picasa applications” (p.8).
In conclusion, because threat of entrant is high, and threat of substitutes products are high, this industry is unattractive.
Generic Competitive Strategy – Broad Differentiation
The competitive strategy that Google pursues is Broad differentiation. This is a strategy that requires to be unique in ways that are valuable to wide range of customers. Google differentiates creating a competitive position amongst other companies such as Microsoft and Yahoo. The launch of Google products such as “Google Checkout that allowed users to pay participating merchants through a system similar to PayPal” (p.7). Every product or content Google introduces, not only attracts young teenagers but also influences older generation and working adults. Google has been trying to be unique to attract customers. From
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Alphabet Inc., Google, Gmail, Porters five forces analysis, Yahoo!, Android, Microsoft, Google China, Criticism of Google
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