Thomson, Strickland & Gamble. Mcgraw-Hill. (P. C 136): Case – Google’s Strategy in 2010
Creating Sustainable ValuePre-Course AssignmentGoogle’s Strategy Case | | |
Question 1
In the early days of Google there was one major player called Yahoo in the search industry, but since then Google has managed to grow and to overcome by far any competitor in the search industry.
Please find a summary of the relevant competitive Five Forces below:
Threat of new entrants
The search industry is attractive as the net profit margins are higher than 20% in average, nevertheless to offer this kind of service requires a huge investment in IT infrastructure and R&D. plus Google’s dominance can be another blocking factor. Nonetheless, there is a medium risk of entrants as more effective algorithms could be found, e.g. semantic based instead of content based search.
Bargaining power of buyers
Buyer power is low. There are many players available on the Search Industry market, but almost none of them are comparable to Google as they offer dissimilar products. There are only a few global providers like Google and Microsoft (Bing) offering similar level of search services.
Bargaining power of suppliers
As search engines have nearly zero necessity for suppliers. Companies like Google or Bing, have their own programmers and infrastructure, and even though they depend on IT parts suppliers, there are far too many of those available out there in the market to have any relevant bargaining power what so ever.
Threat of substitute products
There is a high risk of substitutes as it all depends on the relevance of results and how effectively the search engine works to get those results shown to the end user. In this market it is essential to stay ahead of competition all times.
Intensity of rivalry among competitors
Rivalry is very high amongst the 2 main competitors Google and Microsoft (Bing), who also sell their services to Yahoo
The graph below reflects what has been said previously. Rivalry and Substitute products are the strongest forces
Question 1
In the early days of Google there was one major player called Yahoo in the search industry, but since then Google has managed to grow and to overcome by far any competitor in the search industry.
Please find a summary of the relevant competitive Five Forces below:
Threat of new entrants
The search industry is attractive as the net profit margins are higher than 20% in average, nevertheless to offer this kind of service requires a huge investment in IT infrastructure and R&D. plus Google’s dominance can be another blocking factor. Nonetheless, there is a medium risk of entrants as more effective algorithms could be found, e.g. semantic based instead of content based search.
Bargaining power of buyers
Buyer power is low. There are many players available on the Search Industry market, but almost none of them are comparable to Google as they offer dissimilar products. There are only a few global providers like Google and Microsoft (Bing) offering similar level of search services.
Bargaining power of suppliers
As search engines have nearly zero necessity for suppliers. Companies like Google or Bing, have their own programmers and infrastructure, and even though they depend on IT parts suppliers, there are far too many of those available out there in the market to have any relevant bargaining power what so ever.
Threat of substitute products
There is a high risk of substitutes as it all depends on the relevance of results and how effectively the search engine works to get those results shown to the end user. In this market it is essential to stay ahead of competition all times.
Intensity of rivalry among competitors
Rivalry is very high amongst the 2 main competitors Google and Microsoft (Bing), who also sell their services to Yahoo
The graph below reflects what has been said previously. Rivalry and Substitute products are the strongest forces