Google's Value Chain Analysis
Google’s value chain examination and its evaluation is a useful tool of determining the extent of its competitive advantage over other tech firms in the world and how its many activities within the business functionality create value for the firm. The firm from the case study has its support and primary activities that drives its daily operations. The primary value chain activity according to the case study can be summarized as Google Inbound Logistics and Google operations. The two are its main value chain activities. The individual activities that create the highest value chain for the firm are discussed in detail below.
Google Search
Google search is the main activity of the firm with much of its revenue coming from online search activities all over the world. Statistically, google search commands a 67% control of all searches in the U.S. The competitive advantage of this value chain is characterized by the constant update and tweaking of the search engine to provide users with the best experience than previously provided. The move is very advantageous since it has controlled this platform for years than Bing and other search engines in the U.S. It is through this search engine that the firm attracts a large pool of online advertisers who need the firm to advertise their products and services. It is because of this attraction that Google gets the most substantial portion of total its revenues from the search engine through advertising.
Google Maps
Secondly, we have Google Maps that today keeps on creating a significant value chain for the firm. According to statistical data, almost 20% of global searches via the use of desktops is used to search for locations. The introduction of better mobile devices through Android versions has made the growth of this value chain to be extremely high since more and more individuals keep seeking the services offered by Google Maps.
Thirdly, we have e-mail as another primary value chain activity under the inbound logistics that drives the firm’s revenues. The use of G-mail allows for secure communication where the firm generates revenue through advertising after the email has been sent to the recipient.
YouTube
Another primary value chain that remains its highest acquisition in recent years is YouTube. The firm’s acquisition of YouTube has greatly increased its total revenues. The use of this platform has significantly added value in the sense that, we have a new platform for advertising that is more interactive and reaches out to a large pool of people. The video platform is very efficient since one cannot directly play an emerging or current video which is trending without an advert. The constant advertising directly results in substantial revenue streams for the company.
Cloud Storage
The firm also has other activities that create value for the company. The introduction of Cloud storage through its takeover of Upstartle has also added revenue to the firm.
Social Networking
Other value chain activities include social networking although firm like Facebook continues to upstage Google on this field. Facebook also controls WhatsApp and Instagram hence Google has little significance in this field of social networking.
Support Activities
Google has also support value chain activities. The finance, marketing, and human resources departments also create significant value for the firm. The management of the firm is also another department that will always create value to the firm since it’s the top managers that make an investment, innovation and marketing decisions without which Google cannot have the updates and innovations related to its primary value chain activities such as Google search Engine. The above value chain activities determine the profitability and the overall competitiveness of the firm. Particularly, its search engine which acts as its primary revenue sources drive the profitability of the firm. Keeping a competitive advantage over other Tech firms such as Bing will be based on future innovation and developments to make the value chain even more efficient.
Current Value Chain for Google
The current value chain for Google is very effective towards meeting its long-term financial targets. However, to maintain a competitive advantage, a few changes have to be done and also a mix of activities have to be kept. Although we have a common google culture, the firm has to promote and recognize diversity through its search engine. Although the firm gets revenues from the advertising activities, the firm has to streamline them according to specific regions recognizing the cultural backgrounds of different societies of the world. Although the firm tries to accommodate this, implementing this in its entirety will positively affect its revenue streams. Also, the firm has to look for ways of increasing its presence in social networking. Although we have already established firms such as Facebook, Google can increase its innovation and development towards this platform to complement its total revenues. YouTube value chain is effective as it is. The attraction through live interaction advertising is very efficient attracting advisements. However, since the firm spends quite a substantial amount of its fiscal budget towards innovation and development, its bottom-up innovation and Research strategy should be put to task, towards coming up with new ways of increasing revenues from YouTube. Also, less reliance is placed on advertising from the e-mail application. The use of G-mail is free which is effective at an end to end communication. However, despite this efficiency, little advertising is done through email communication. There is a need for the management to tap on this market since many people continue to use the email platform. Google’s top management has to continue promoting diversity through innovation. Clear evidence of this is the increase in robotics activities. The firm has to keep on increasing its reflationary approach towards the development of robotics in the manufacturing sector. Venturing into the robotics sector via its software programs will ensure it directly diversifies its revenue sources. The above recommendations if implemented will ensure the firm continues to have its competitive advantages over other tech companies through increased advertising which is its main sources of revenue.
Findings of Facts from the Functional Areas of Google
Management
One of the best policies adopted by the management to create value for the firm is the bottom-up innovation strategy. Through this strategy, the top management encourages innovations within from the junior employees to spar revenue growth. The move is aimed at making sure that employees come up with new ideas and innovations since they know the working of Google platforms such as the search engine. Through this innovation strategy, the firm spends a substantial amount of money on Research and Development. As of 2014, the amount used on innovation stood at $10 billion which represented an average increase of 38%. The heavy investment is the reason Google continues to update its search engine and YouTube options to spar growth in the firm’s revenue.
Finance
The finance section of the firm reports a majority of revenue from Google coming from the search engine. The only way the firm provides its primary services to the public is through advertising. Although Google has other sources of revenue like the current introduction of driverless cars, the firm’s financial records rely on search engine revenues to generate profits. For example, in 2014, the firm reported a $ 66 billion revenue with 90% of this revenue coming from advertising revenues. It is however imperative to acknowledge that, not all searches will translate to revenues for the firm. Other searches do attract potential advertisers. The revenues coming from the search engine are aided by the firm’s ability to maintain a 90% market control over Europe which other rivals cannot compete with, in the long run. The move has made Google be the dominant search engine for many years.
Marketing
Google’s main marketing strategy is based on the concept of free for all. The company provides its services for free to the public. The platform has no limitation on who accesses its services such as the search engine and the use of E-mail. It is this availability that many people continue to identify with Google. Google products such as social networking, Cloud computing, and G-mail are freely available for use.
Management Information Systems
Google has a full set of MIS that is used for the daily running and functionality of the whole organizational process. The management information system set up by Google ensures the search engine functions efficiently and also provides home internet connections. Some of the set-up systems include Data Centre infrastructure, Internet of Things and the establishment of Google’s Industrial internet.
Justification and Findings of Facts
The success of any firm is pegged on its level of internal development. Google employees know how the daily functionalities of the different features of the search engines work hence only them can give first-hand innovations or come up with changes that can improve how the firm’s systems operate. The justification for this is characterized by the management permitting the employees to spend up 20% of their normal working hours on coming up with new ideas and innovations on how to improve the services the firm offers to its consumers. However, channeling a lot of funds on Research and development results in low overall revenues. The firm spends a lot of funds to come up with new ideas which many see it be reducing marginal returns. It is highly recommended that the firm also attract new fresh ideas from outside. Although the input of employees is highly welcomed, new fresh ideas from innovations outside the firm can change the dynamics of the firm and even translate into high-profit margins. Lastly, the firm has to significantly cut its annual budgetary allocation towards internal research and development; the funds can be used for other investment opportunities like the current introduction of driverless cars. However, the redirection of the innovation funds can only be done for a specified time limit after which the funds have to be channeled back into innovations from the employees.
The primary sources of revenue come from search advertisements because the firm relies on search engine platform, YouTube and other platforms to generate revenues by attracting advertisers. Google is a free platform. The firm being free mean that it can only make income if it uses the open platform to get advertisements from firms and individuals to get paid for the services it renders to its consumers. Currently, Google is facing massive competition from other tech companies that also sell advertising services like Facebook and Apple. These firms have other sources of revenue like Apple which manufactures hardware. It is therefore highly recommended that Google comes up with ways of diversifying its current revenue bases. For example, the introduction of Artificial intelligence, robotics technology, and current driverless cars should be promoted to ensure the firm has other meaningful sources of revenue. Also, the firm has been maintaining a competitive edge for many years. It is highly recommended that new strategies by management be implemented with regards to the use of the search engines to make sure the firm retains and increases its market share. Having the highest market share will definitely increase the level of advertising which will translate into high revenue streams. One of the platforms to tap into is Social networking. Google has to increase its social networking presence since many advertisements are significantly related to the target audience who use the social networks.
Google’s marketing is based on it being free for all. The marketing strategy is very effective in the sense that the firm for all these years has been providing its services to its consumers for free. Since it offers a free platform, no one can do without it. When it comes up with innovations, the new updates will be available for free hence everyone would want to go online and such for them. The move makes it easy for it to maintain its competitive strategy and attract more advertisements. However, the advertisements are not free. To attract new customers and potentially new advertisements, then the firm can offer a free trial for small business start-ups or emerging firms in the world. Such firms will then opt to invest with Google by posting their advertisements in their search engines. The firm can also achieve this by offering discounts on its advertisements to promote customer retention in the long run.
To maintain its systems running, achieve its revenue and growth targets, the firm must have a strong Management Information System. The information systems range from the use of CHROME to make the search engines faster, to the Datacenter infrastructure to manage the search engines. The firm also must have its financial information system that takes account of the daily transactions of the firm. It is highly recommended that the firm keeps on innovating and comes up with new ideas that can translate into the creation of better management information systems. The management system should automatically cover all areas of the business operations. The above justifications are instrumental in explaining why the firm has all these functional areas. The recommendations for significant improvements on this factual finding if implemented will guarantee the continued growth of the company from innovations to high revenue streams.
