Attached is the case study and question paper. Please all all the questions with relevant information derived through the case study.
Assignment 2(b) Individual Case Analysis Please read the case study “Alphabet’s Google” and answer ALL four questions below. Make sure to support your answers by systematic analysis and demonstrate your understanding of the unit’s concepts, frameworks, and their application. Your answers should refer, explicitly, to the frameworks, models, tools, and theories covered. Please type your responses into a single Word document and ensure to number each question clearly and accurately. Please use ‘standard’ formatting settings: 11-point font, Times New Roman, single or 1.5 spacing, standard margins. No referencing is required. QUESTION 1 Is the advertising industry attractive? Analyse the advertising industry in which Google operates using any tools or frameworks that might be appropriate. QUESITON 2 1. How is Google using platform strategy? Please evaluate and explain strengths and weaknesses of platform strategy? (10 marks) 1. Which generic competitive strategy do you think Google follows? Please provide justification for your answer. (15 marks) QUESITON 3 1. What do you consider as Google’s sources of competitive advantage? (15 marks) 1. Is Google’s competitive advantage sustainable over the long run? Please provide justification for your answer. (10 marks) QUESTION 4 1. Which type of diversification (growth) strategy is Alphabet pursuing? What are the strengths and weaknesses of this strategy? Please provide justification for your answer. (15 marks) 1. Is Alphabet’s Google an example of a Blue Ocean Strategy? Please elaborate to explain why or why not. (10 marks) We have only scratched the surface of truly being there for our users, anytime, anywhere, across all devices. –Google CEO Sundar Pichai1 In March 2017, Alphabet’s CEO Larry Page, leaned on a dusty wooden railing and gazed across the vastness of Moffett Airfield’s Hangar Two. A half-dozen illuminated balloons, each fifteen meters in diameter, were floating before him in the cavern-like space. Three years earlier, he had signed a $1.2 billion, sixty-year lease for the airfield’s largest hangars, which were only a few miles from Alphabet’s Mountain View, California headquarters.2 Originally built in the 1940s to house the US Navy’s blimp fleet, the hangars were now being used to house Alphabet’s fleet of private jets and some of its more ambitious projects. The balloons were part of Project Loon, a plan to use high-altitude balloons to bring Internet access to the most remote corners of the world. The project’s name was chosen both for its connection to flight and its lunacy.3 Page’s thoughts were interrupted by the buzzing of his Pixel smartphone. It was a reminder that he had scheduled a meeting with Sundar Pichai, the CEO of Alphabet’s Google subsidiary. In August 2015, Google’s cofounders Larry Page and Sergey Brin announced that they would be restructuring the com- pany as a diversified conglomerate under the name Alphabet. The Google cofounders indicated that they were inspired by Berkshire Hathaway’s conglomerate structure through which the famed inves- tor, Warren Buffet, successfully led an ensemble of widely different businesses over several decades.4 Alphabet’s largest subsidiary would retain the Google name and focus on Internet-related services and products with Pichai as CEO. A former McKinsey consultant, Pichai had quickly risen through the Google ranks after joining the technology firm in 2004. Page walked across the tarmac to his Tesla Model X parked in front of the hangar. As he let the car’s autopilot drive him to Google’s offices, Page’s thoughts switched from Project Loon to more ter- restrial concerns. Although perceived as a technology company, Google was in many ways more of an advertising company. In fact, advertising accounted for almost 90 percent of Google’s 2016 revenue. Although the portion of revenue from advertising had decreased in 2016, it still funded the clear majority of Google’s user services and Alphabet’s “Other Bets,” including Project Loon (Exhibit 1). Professor Frank T. Rothaermel prepared this case from public sources. The author gratefully acknowledges the contributrions of David R. King and Christopher Zahrt on an earlier version, and Austin Guenther for research assistance. This case is developed for the purpose of class discus- sion. This case is not intended to be used for any kind of endorsement, source of data, or depiction of efficient or inefficient management. All opinions expressed, and all errors and omissions, are entirely the author’s. © Rothaermel, 2017. FRANK T. ROTHAERMEL MH0055 1259927628 REVISED: SEPTEMBER 27, 2017 Alphabet’s Google This document is authorized for use only in Miles Yang's MMBA8050 - Strategic Frameworks - Term 4 2020 - Miles Yang (Readings and Cases) at Macquarie University from Sep 2020 to Mar 2021. 2 Alphabet’s Google Google’s 2016 results had been a mix of good and bad news. Google’s ad revenues had grown to $79 billion, an increase of 18 percent over the previous year. However, the cost-per-click paid by advertis- ers had decreased 11 percent from 2015 to 2016 (Exhibit 2). Although Google was the market leader in online advertising, its market share was decreasing as rivals like Facebook increased their take of the advertising pie. Further complicating matters was growing scrutiny of Google by regulators, who were concerned about Google’s near monopoly on search services and its profiling of users. Finally, the online advertising industry itself was under threat. Bad ads from fraudsters and spammers reduced public trust in Google’s legitimate advertisers. Increasingly, users were installing ad-blocking software and avoiding advertising entirely. A self-driving Lexus drove past as Page neared Google’s campus. Formerly one of Google’s “moon- shot ventures,” the self-driving cars were now being developed by Alphabet’s Waymo subsidiary. Page watched the Lexus in his rear-view mirror as it disappeared around a corner. He found it was a bit ironic. While the car knew where it was going, he was still trying to figure out what direction to take Alphabet’s many disparate ventures. What could he do to address the challenges facing Google and Alphabet? A Brief History of Alphabet Cofounders Larry Page and Sergey Brin met in 1995 at Stanford University during a tour for stu- dents accepted into the doctoral program. “We both found each other obnoxious,” recalls Brin only half-jokingly, “but we spent a lot of time talking to each other, so there was something there.”5 Despite this rocky start, the pair quickly became inseparable friends. While working on a dissertation topic, Page realized that the number and quality of links to a website could be used as a proxy for the credibility of that website. However, at that time, there was no good way to determine what sites were linking to a web page. Page began working on a program called BackRub that would index links on the web. Creating this index took a mammoth amount of bandwidth and computing power. By the fall of 1996, Page and Brin succeeded in creating an algo- rithm within BackRub that used the index to sort web pages by relevance. He dubbed the algorithm PageRank (named after himself, not web pages).6, 7 The first test of the PageRank system occurred in March of 1996. It became apparent to Page that his system would make an excellent search engine. Page and Brin, assisted by several classmates, began refining this search engine. In September of 1997, they decided to name their engine “Google,” which was a misspelling of the mathematical term googol: 1 followed by 100 zeros. On September 4, 1998, Google filed for incorporation and moved its rapidly growing collection of servers into a garage in nearby Menlo Park, CA. Internet use in the U.S. and in other developed coun- tries was growing exponentially during this time. By 1999, 100 million web searches occurred every day, and Google needed capital to continue purchasing servers and hiring computer scientists.8,9 On June 7, 1999, Google announced that legendary Silicon Valley venture capital firms, Kleiner Perkins Caufield & Byers (KPCB) and Sequoia Capital, made a joint equity investment of $25 million in the startup, contingent upon finding Larry and Sergey some “adult supervision.” As KPCB principal, John Doerr, observed, “It’s not saying anything negative about them, but I thought we would do a much bet- ter job of building a world-class management team if they had a world-class CEO. They agreed, and we closed the financing.”10 What would become a lengthy search for a new Google CEO had begun. This document is authorized for use only in Miles Yang's MMBA8050 - Strategic Frameworks - Term 4 2020 - Miles Yang (Readings and Cases) at Macquarie University from Sep 2020 to Mar 2021. Alphabet’s Google 3 On June 26, 2000, Yahoo announced that it had licensed Google’s search engine. Jeff Mallett, presi- dent and CEO of Yahoo stated, “Our web directory and navigational guide is critical to the essential set of services that we provide.”11 Despite this acknowledgement from Mallet, Google was allowed to insert a message below the search box stating that Google was providing the search results. This agreement introduced Google to Yahoo’s 180 million worldwide users who generated 900M average daily page views.12 More importantly, this vast increase in traffic allowed Google to fine tune its search engine.13 By performing statistical analyses on logs of hundreds of millions of user interactions, Google’s engineers could make its search engine understand contextual clues in search queries. Simply put, the more users searched, the better search results became. After more than two years, the search for the right Google CEO came to an end when Eric Schmidt accepted the position in August of 2001. Schmidt held a PhD in computer science from the University of California-Berkeley, and had previously served as an executive at Sun Microsystems and Novell. “Most importantly for anyone taking on the CEO role at Google,” observed Page, “Eric is a natural fit with our corporate culture.”14 On December 31, 2001, Google reached another important milestone. It had its first profitable year, reporting net income of $6.9 million.15 “When we were still in the dot-com boom days, I felt like a schmuck,” recalled Sergey Brin, “I had an Internet startup, so did everybody else. It was unprofitable, like everybody else’s, and how hard is that? But when we became profitable, I felt like we had built a real business.”16 With a lucrative licensing agreement, a large capital infusion, a proven method of generating profits, and experienced management in place, Google had indeed become a “real business.” For his first coup as CEO, Schmidt made an agreement with AOL to provide the online portal with