Google in China (B) Harvard Case Solution & Analysis

Industry Analysis

Porter Five Forces

  • Buyer’s Bargaining Power: - Buyers had a very low switching cost in the internet search engine industry because of the presence of a number of other players, which were easily accessible. Therefore, they had a high bargaining power.
  • Suppliers Bargaining Power: - Power of suppliers in the internet search engine industry was moderate to low because mostly all companies had their own product development facilities but firms were also dependent upon some suppliers i.e. different software developers, media technologies, computer software and operating system, development tools, etc.… Therefore rendering the overall power of suppliers moderate to low.
  • Threats of Substitutes: - As there were a number of players present in the industry, therefore threat of substitutes to the Google Inc. was high because one can easily substitute their products and services with that of other players.
  • Threats of New entrants: - Threat of new entrants was low because entry into the internet search engine market required huge investments in the development of infrastructure. Therefore a new entrant had to make huge investments in the development of their products and services; it was also difficult to compete against the other existing well-known brands in the industry.
  • Industry Rivalry: - There was a high industry rivalry in the market because of the presence of a number of well-known and well-established brands i.e. Google, Baidu, Sohu, Yahoo and Sina.

Financial Analysis

Google Inc. was clearly the leader of the internet search engine industry and was listed on a number of stock exchanges with four standard industrial classifications i.e. Internet Search Engine, Federal Government Contractor, Web-hosting and Marketing Programs. From the financial analysis of the company, it has been evaluated that it had an impressive profitability and superior efficiency as compared to its three major competitors i.e. MSN, AOL and Yahoo Inc. If we compare the financial performance of the company with its financial figures of 2008, we will conclude that the company had almost doubled its figures in 2009, which shows the company’s potential and commitment towards growth. The net profit margin of Google was 27.57%, which was much above than the industry average of 6.20% and its return on assets and return on equity was 18.05% and 20.3%, respectively, which was also four times of the industry average. Days of outstanding sales in 2009 were measured as 44.92, which mean that the company had tighter credit regulations. The liquidity and financial leverage ratios of the company indicate that it was capable of meeting all its short term liabilities very effectively and also had an impressive return on asset ratio of 4.69. Google’s increasing R&D expenses had assured that the company was capable of meeting the changing demands of its customers and increasing innovation in the technology.

Corporate Level Strategy

The corporate level strategy of the company was to strengthen its brand loyalty and accelerate innovation in the market. Its main objective was to be called such a place where everyone could get any sort of information through a distance of a single click. The company had integrated a culture of competition among all the major industry players on innovation rather than the development of existing products or enhancing revenues. With the help of the company’s corporate level strategy, it had launched a number of new applications in 2006 including Picasa Web Album, Google Calendar, Google Docs, Google Checkout and Google Talk. In 2008, the company had released its mobile operating system, Android, which was aimed to compete the Apple’s iPhone OS in the mobile phone industry. The company had also released an open source web browser, Google Chrome and Google Translate by the end of the same year.

Business Level Strategy

The company had a generic business level strategy of product differentiation strategy because it was offering a number of unique products in the market that could meet the demands of a broad customer base. With the help of this strategy, the company had achieved a competitive advantage over the rest of the industry and developed a number of innovative products to meet their corporate level demands as well. The company’s differentiation strategy was highly supported by its internet driven search engine advertising facility, which had enhanced the company’s brand recognition and also generated huge numbers in the revenues of the company. The biggest advantage of this strategy to the organization was building a strong customer base and gaining high customer loyalty, as the company’s search engine holds approximately 69% of the US search engine industry share and 69% of the global industry share.................................

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The case describes the circumstances in reviewing Google's strategy in China. Google officially announced in January 2010 that its Chinese site, Google.cn, experienced cyber attacks from China. Google also announced that, as a result, she decided to rethink its approach to China, including the ability to completely exit the Chinese market. The case is the performance of Google in China, details of cyber-attacks and heated public debate after the announcement Google. Students are asked to consider actions that Google has and adequate, the main reason. "Hide
by Deborah Compeau, Yulin Fang, Majela Yin Source: Richard Ivey School of Business Foundation 11 pages. Publication Date: June 18, 2010. Prod. #: 910E11-PDF-ENG

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