Google′s Strategy in 2012


Review Case 13, Google’s Strategy in 2012
Google was the leading Internet search firm in 2012, with nearly 67 percent market share in search from home and work computers and 95 percent of searches performed from mobile devices. Google’s
business model allowed advertisers to bid on search terms that would describe their product or service on a cost-per-impression (CPI) or cost-per-click (CPC) basis. Google’s search-based ads were
displayed near Google’s search results and generated advertising revenues of more than $36.5 billion in 2011. The company also generated revenues of about $1.4 billion in 2010 from licensing fees
charged to businesses that wished to install Google’s search appliance on company intranets and from a variety of new ventures. New ventures were becoming a growing priority with Google management
since the company dominated the market for search based ads and sought additional opportunities to sustain its extraordinary growth in revenues, earnings, and net cash provided by operations.
In 2012, Google was pursuing a cloud computing initiative that was intended to change the market for commonly used business productivity applications such as word processing, spreadsheets, and
presentation software from the desktop to the Internet. Information technology analysts believed that the market for such applications—collectively called cloud computing—could grow to $95 billion
by 2013 Google had also entered into alliances with Intel, Sony, DISH Network, Logitech, and other firms to develop the technology and products required to launch Google TV. Google TV was launched
in the U.S. in 2011 and would allow users to search live network and cable programming; streaming videos from providers such as Netflix, Amazon Video On Demand, and YouTube; and recorded programs
on a DVR. The company also launched its Google+ social networking site in 2011 to capture additional advertising opportunities.
Perhaps the company’s most ambitious strategic initiative in 2012 was its acquisition of Motorola Mobility for $12.5 billion, which put it in the hardware segment of the smartphone and tablet
computer industries. Analysts following the transaction saw the move to acquire Motorola Mobility as a direct attempt to mimic Apple’s strategy used for the iPhone and iPad that tightly integrated
hardware and software for its most profitable and fastest growing products. Google had launched its Android operating system for mobile phones in 2008 and allowed wireless phone manufacturers such
as LG, HTC, and Nokia to produce Internet-enabled phones boasting features similar to those available on Apple’s iPhone. By 2012, Android was the leading smartphone platform with a 50.9 percent
market share.
Google’s top managers have heard of your budding skills of analysis as a new project manager with the company. You have been assigned to a strategic planning committee where your charge is to
analyze the search industry and Google’s competitive position. Your report should include a 3-4 page executive summary of recommendations necessary to allow Google to strengthen its lead in the
search industry and to make a success of its recent acquisition of Motorola Mobility and other recent ventures. You should also provide a recommendation concerning how to best address concerns over
possible ethical lapses at the company. Your recommendations should be specific and supported with facts from your industry analysis, company situation analysis, and financial analysis. Please
attach whatever tables, figures, or other exhibits you believe necessary to support your conclusions. (You should utilize the financial ratios presented in the Appendix of the text as a guide in
doing your financial analysis of the company.) Your supporting exhibits and executive summary of recommendations will be given equal weighting in your grade for the written assignment.