The Bargaining Power Of Suppliers Marketing Essay

Published Date: 23 Mar 2015

1.0 Introduction

This report analyze on Google Inc. corporate strategy regarding its rational business approaches, core business value, and its market position in relation to various strategic analysis identified by frameworks and theories compiled by professional authors that lay the foundation for businesses to gain strategic advantage over their opponents. The analysis also covers the achievement Google's thrived from the mission, visions, plans, and programs they had designed to achieve success using certain frameworks as guidance. In addition, the report covers Google's as the dominant in software services and web-based services on how the company transforms the world we know today. Moreover, the moment these frameworks and strategies applied on Google's business management will be observed as the importance of strategies application involves the correct timing. In addition, strategies Google had selected and used before as well as for future forecasting purpose brought forth the success of Google's businesses are to be examined in conjunction with the reasons.

2.0 About Google

"Don't be Evil", it has become the official motto and code of conduct for Google Inc. on how the employees who work in the company must comply to serve the customer. Though, "Don't be Evil" is more than just the compliance of employee practice. Google committed to provide internet users all around the world with unlimited access to information; listen to the user's needs, and giving the best-in-class products and services. Generally, it is more on doing the right thing and; be ethical in what we do, in terms of abide to the law, act or treat other with respect. Founded in 1996 by Larry Page and Sergey Brin, both Stanford University graduates built a search engine called "BackRub" in web link determination. Since then, the company had grown and currently houses some 180 other Google domains that offers many viewing options of languages, check stocks updates, up-to-date news, pictures and movie browsers or even having to locate one desired shops on map. Now, the search engine can be personalized in accordance with users' preference and interest, helping one obtain even more search results than ever. In the recent years, Google also attempts to digitize things that are not online-compatible, books. Google ads are the source of company's revenue, but they also as useful to advertisers as well as internet users where information can be reached by users hassle-free. Google Apps are web applications that are tailored specifically for users to share information and get things done in orderly fashion. Apps example like Gmail, Calendar, Books, Documents and many more are available for users to utilize. From web-based software and now onto applications that required hardware installation such as internet browser Google Chrome, or an open-source mobile operating system Android, Google has diversify its service operation beyond its original borders and it is ever broadening now. (Google Inc. http://investor.google.com/corporate/code-of-conduct.html )

3.0 Google Business Strategies

3.1 SWOT Analysis

SWOT analysis is an integrated analysis that investigates a company's strength, weakness, opportunity and threats in order to identify its current position on the market. This integrated analysis will focus on a specific area to classify its situation strengths and weaknesses with potential analysis and competitor analysis; opportunity and threats with market analysis and environment analysis to gain more information and support when plotting initial strategy (Anja Böhm, 2008).

Examine of internal and external environment of a company is important in the strategic planning process. On the basis of SWOT analysis, the marketing strategy of company can be build up by using the company strengths and avoiding the company weaknesses in order to help the company to get advantage from opportunities in the future with consideration of future risk (Anja Böhm, 2008).

When applying SWOT analysis (Appendix 1), Google will be able to make comparison with itself and its competitors. In order to indentify strengths and weaknesses, Google team would have to use of accessible data and information to accurately measure each of the SWOT elements. In this way, Google would be able to identify strengths and weaknesses of its rivals. Besides that, identify of rival strengths and weaknesses would help not only to facilitate the decision making in terms of strategy use, SWOT also helps to minimize its own weaknesses that could benefit the competitors.

http://books.google.com/books?id=FJ3oyDYxVCAC&pg=PA137&dq=google+swot+strategy&hl=en&ei=PZ7BTfWfGMzirAfV95HeAw&sa=X&oi=book_result&ct=result&resnum=1&ved=0CDQQ6AEwAA#v=onepage&q=google%20swot%20strategy&f=false

3.2 PESTEL Analysis

PEST analysis can be separated out in elements as political, economical, social, and technology. This analysis would help Google on examine the impact of these elements in their business. With this, Google would be able to develop strategies when opportunities and threats are identified. According to Kotler (1998), he argued that this analysis would be able to help a company to understand the growth and decline in market, business position and the direction of the operation. This analysis is used to review a situation and can be addition to the SWOT analysis as well as Porter's Five Forces framework for company to review the strategic direction. PEST analysis is effective when company is constructing strategic planning, business development, product development, and marketing planning.

3.3 Porter's Five Forces

Porter's five forces help Google to analyze the competitive forces within the industry environment in order to identify the threats and opportunities. This framework consist of five forces that form competition within the industry which they are: the risk of entry by potential rivals, the power of rivalry among the potential companies, the bargaining power of buyers, the bargaining power of suppliers, and the threat of substitute. It is the strength of these forces that could affect the profitability of Google. According to Porter, the stronger of these forces, the less benefit that a company could get in terms price rising and profit gain.

http://books.google.com/books?id=CzIK9ELsyYwC&pg=PA42&dq=porter%27s+five+forces&hl=en&ei=GavBTeyiJ8PqrQfllrzrAw&sa=X&oi=book_result&ct=result&resnum=1&ved=0CCkQ6AEwAA#v=onepage&q=porter%27s%20five%20forces&f=false

Porter's Five Forces is a tool that helps to predict behaviour of the consumers and suppliers in the marketplace. This tool is close to so called "crystal ball" because it allowing company to do future prediction as well as leading stakeholders to understand the conditions of current supply market.

3.3.1 Competition among Existing Firms

By referring to Porter's Five Forces framework (Appendix 2), the element of competition among the existing firm, for example, Google with Microsoft, and Yahoo would actually create more options for supplier and buyers. This is because of the industry's growth speed, range of competitors, as well as product differences. As for Google and its rivals, the competitive of this industry is strong as huge amount of advertising cost flow to the website that has captured largest amount of searches. Google has high market share compared to other enabled Google to improve their search result quality and targeted advertisements faster than competitors.

http://www.benmorrow.info/research/external-analysis-of-google-inc/

3.3.2 Threat of New Entrants

Threat of new entrants is one of the main factors that forces competition in market place within an industry. It functions as the barrier to entry and reaction from the existing rivals. There are few types of entry barrier such as economic scale that is already fully enjoyed by the existing business and gain cost advantage over the new entrants, requirement of capital to start a new business, brand loyalty where new entrants have to spend more money in order to attract customers from the existent competitors, cost advantages independent of scale, and switching cost where the new entrant would have to offer better service to customers. http://www.strategy-formulation.24xls.com/en110

As for Google, the difficulty for new entrants in the internet search market are high as the new entrants would need to provide better search service in terms of providing higher search speed than Google which they already have huge amount of servers deployed all over the world and already have deep understanding about the users habit.

3.3.3 The Bargaining Power of Suppliers

The bargaining power of supplier would have impact on the company's effectiveness. If the bargaining power of supplier is high, therefore it shows less attractiveness of company industry. There are few factors that could cause to high bargaining power of supplier such as there are few suppliers with many buyers, the products are can hardly be imitate, and the industry is not the key customer for the supplier.

For Google, advertisement is the main source of income as the advertisement providers and users are the customers of Google. Therefore if Google maintaining market dominance well with the search products, it will keep the bargaining power of suppliers low. For example, the cost of revenue for Google and Yahoo was 40% in year 2007 and this shows that both of the company are equally efficient in maintaining the supplier-seller cooperation.

3.3.4 The Bargaining Power of Customers

Customers are the people that create demand towards the company. Customers would have more power of bargaining when there are only few dominant buyers with a lot of sellers. Besides that, standardize products would also lead to high bargaining power. Next, the bargaining power also increases if the industry group is not the key supplying group for the customers. In brief, customers' powers are great when they are the main customer of the product.

http://books.google.com/books?id=tA1bYJ8FIzIC&pg=PA118&dq=porter%27s+five+forces&hl=en&ei=GavBTeyiJ8PqrQfllrzrAw&sa=X&oi=book_result&ct=result&resnum=8&ved=0CE8Q6AEwBw#v=onepage&q=porter%27s%20five%20forces&f=false

In Google case, its main revenue is gain from advertising. Though there are no single account that generate more than 3% of net profits and only 5% of net income are gain from network partner site. Many of the advertisers are bid on keywords on Google's system; some of the popular keywords are sold higher than the unclear topic. This approach enables Google to attract both large companies as well as small companies to keep the power of customers low. http://www.benmorrow.info/research/external-analysis-of-google-inc/

3.3.5 Threat of Substitute

The substitute products can lead to low attractiveness of the current product and can lead a company to less profitability as they offer the same product, service or information. The threat of substitute products are mainly depends on the customer wills to substitute and the performance of the substitute products.

For example, internet has become popular for people to search for information. But in the internet world, there is actually no appropriate substitute as information search can be organized in many different ways whether can be sort by date or by categories. Google has invented tools that could perform these tasks as well as can conduct search. Although there are no proper substitute in search, Google could take this opportunity to invent new tools to prevent of other substitutes. http://www.benmorrow.info/research/external-analysis-of-google-inc/ http://tutor2u.net/business/strategy/porter_five_forces.htm

http://expertscolumn.com/content/google%E2%80%99s-corporate-prodcut-marketing-strategy

3.4 Differentiation Strategy

According to Jeffrey S. Harrison and Caron H. St. John (2020), "in differentiation strategy, it stress on creating value through sustainable uniqueness." The uniqueness can be gain through creating innovative product, superior quality or service, brand-building, and strong supply chain relationships. Besides that, in order to make successful of differentiation strategy, customer of one company must be willing to pay extra for the uniqueness of products or services. Although in differentiation strategy, firms are not actually focus on their cost, but if the cost are too high compared to their competitors they might not be able to recover through charging higher price. As an example for this criterion, Google had used Intel microprocessor-based commodity server rather than using the more expensive server such as IBM and Sun Microsystems. Therefore, Google is able to deliver to the users at lower cost. Google also team up with network affiliate and also provide them with search engine service with the return of profit sharing from advertising. Besides that, AdWords paid listing is also introduce by Google to finance its search engine. Moreover, Google also stress on innovative management where it encourage its engineers to use 20% of their time in working of their own choose project. These differentiation help Google to vis-à-vis position coopetitors as the customer think that switching to competitor would not give them any benefit. Furthermore, differentiation also helps to prevent any threat of new entrants and made it difficult for any new potential new entrants from go into the market (Allan Afuah, 2009).

http://books.google.com/books?id=ybfj2F0oO9EC&pg=PA89&dq=differentiation+strategy&hl=en&ei=Ko_CTbDRJYH3rQeVvYDXAw&sa=X&oi=book_result&ct=result&resnum=3&ved=0CDMQ6AEwAjgK#v=onepage&q=differentiation%20strategy&f=false

http://books.google.com/books?id=7KYLKBg8WzsC&pg=PA132&dq=Google+search+engine+differentiation&hl=en&ei=Zm7CTYqoEcLsrQf868z3Aw&sa=X&oi=book_result&ct=result&resnum=1&ved=0CEAQ6AEwAA#v=onepage&q=Google%20search%20engine%20differentiation&f=false

3.5 Concentric Diversification

According to Rasoava Rijamampianina, Russell Abratt and Yumiko February (2003), sustaining business growth is one of the main challenge of a business and diversification is one of the resolve of this issue. Zook (2001a) argued that company that diversify the business out of their core business which is known as concentric diversification strategy are mostly face failure while company that diversify around their core business have higher chance of success. It is difficult for a company to sustain business growth and keep business profitable is the company don not have a strong core business. When a company achieve competitive advantage and make it inimitable thus it achieves sustainable competitive advantage. In the concentric diversification, new opportunities have been developed by Google in terms of providing new search features such as blog search, image, news and many more. Google use of concentric diversification would help it to increase sales not only depends to their advertising. Besides that, people would change to value Google's commerce instead of appraising their search engine.

http://reviewessays.com/Business/Google-Strategic-Move/51973.html?page=5 ]

3.6 Culture

Besides the many strategies implemented by Google, the organization culture is also important

3.7 Corporate Structure