Natural environment + Social environment + Task environment

5 pages
1227 words
George Washington University
Type of paper: 
Case study
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Natural environmentGoogle depend on data centers and other internet infrastructure, which is exposed to natural crisis.

Societal Environment (STEEP analysis)Socio-CulturalIncreased necessity on the internet for information. (O)

googling is a term for searching information. The name was taken from the known engine search website Google, and this could cause Google to lose their trademark on their name. (T)

Increased number of smart phones companies and consumer change of behavior. (O)TechnologyChange of both the hardware and software at all times. (T/O)

New technologies frequently being introduced. (T)

Internet security threat is harmful to Google. (T)

Google reputation can be damaged if there is any interruption or failure of information technology and communication systems that can have an effect in its products and services.(T)

EconomyGoogle relies on advertising where they get 97% of their revenues, thus they are very dependent on maintaining their relationships with advertisers. (O)

Foreign competition is minimal. (O)

Their international revenues grow annually. (O)

Rates of exchange risk were prevailing with international dealing. (T)

Great benefits from international transactions generally outweighed the costs.(T)

Political-LegalThe industry grew and consolidated because of its potential monopoly. (T)

Google remains at risk because of liability issues that remain uncertain. (T)

The Digital Millennium Copyright Act contained provisions that limited Googles liability for listing other websites that infringed on copyrighted material. (T)

Many US and International laws restricted the distribution of materials deemed harmful to children and collection of personal data from minors. (T)

Californias Information Practices Act required companies to notify users in case of security breach. (T)

Google was forced not to display certain information on their websites by foreign governments. (T)

Google will have a great access to end users through the increased loosening of restrictions by some governments. (O)

Coining Google as a term to search for information, can cause Google to lose their trademark name. (T)

IP infringement settlements could lead to higher costs, and ultimately limit Googles ability to produce certain services and products, leading to lost profits. (T)

Task Environment (Industry)Threat of new entrants LOWDominated by other two industries that has massive financial and operational resources.

It is easy to create a website, but algorithms used to search for information are complex.

Users of Google, Yahoo! and Microsoft are loyal and recognize their brands.Bargaining power of buyers/users HIGHThere is no single cost for users to switch to an alternative search engine. (T)

Threat of substitutes HIGHMany websites are free to use and can provide relevant information. (T)

Social networks used for gathering data. (T)

Provision of specific types of information from other search engines such as WebMD,, and provides competition. (T)

Companies are advertising their revenue both online and offline. (T)Bargaining power of suppliers - MODERATEGoogle derives 97% of its revenue from advertisements.

Most of the companies wants to be among top 10 in search results to increase their exposure. Rivalry among competing firms - HIGHThe advertising dollar is high

Users are not charged.

Their stakeholders have powers.

Summary of External Forces (EFAS Exhibit 1)Table 1 External Factor Analysis Summary (EFAS)

External Strategic Factors Weight Rating Weighted Score Comments

Opportunities International Expansion 0.15 5 0.75 Google is trying to expands to new international markets

Increased Dependence on Internet Information 0.1 4 0.4 Researchers are now depending on internet for information

Growth of Smart Phones 0.1 3.5 0.35 There is need for immediate information that allows the company to expand to new markets.

Rapid Changes in Technology Industry 0.1 4 0.4 New technology can be used as an advantage to emphasis on innovation.

Acquisitions 0.05 3 0.15 To continue with their growth Google is looking for other companies for acquisitions.

Threats Competitors 0.15 4.5 0,68 Google should be careful with its competitors due to their low switching costs.

Political-Legal Issues 0.2 5 1.0 Google can face issues related to its potential monopolistic power as well as law related to liability of online services and international laws

Growth in Internet Security Breaches and Identity Thefts 0.05 3 0.15 Peoples information having a possibility of being stolen is very harmful to Google.

Financial Risks Dealing with Foreign Subsidiaries 0.05 3 0.15 It is easy for Google to lose revenue if exchange rates become unfavorable and hedging strategies become costly

Possibility of Losing Trademark 0.05 2 0.1 Becoming part of a public domain could make Google lose its trademark name.

Total Scores 1.00 4.13 Having such a score shows that Google is doing well and almost reaching the outstanding level.

The total weighted score is 4.13 which imply how well Google is responding to the factors in its external environment.

Internal Environment of GoogleGoogle structureGoogle has a history of working hard in maintaining a corporate culture of innovation and performance that aligns with the interests of the corporation and those of employees.

Google has a management that is expanded beyond boarders

Google cultureEmployees of the company were rewarded for their performance in the perspective of working to gain global diverse workforce. (S)

Google has an environment that drives their employees to invent, create new ideas and thoughts. (S)

Google develops its new products and application through an open and collaborative culture where employees exchange ideas. (S)

Googles management is very transparent in their workings in the sense that, their employees know about company announcements such as new product or application development before the public. (S)

For productivity, Google relies on highly skilled workers. (S)

Employee satisfaction made Google to experience rapid and strong growth. (S)

Google Spent $15M on a corporate jet in 2006, this indicates a shift in the corporate culture from entrepreneurial to big time corporate. (W)

Google resourceCalculate finance ratios:Ratios 2008 2009 2010

Current ratio 8.76 10.62 4.16

Cash ratio 3.76 3.71 1.36

Net profit 19.4 27.6 29

Gross profit 60.44 62.6% 65.18%

ROE 14.96% 18.11% 19.47%

EPS 13.31 20.41 26.31

Revenues consistently increased from 2009 to 2010 where the net income has increased by $1.985 billion. A net income as a percentage of total revenue increased from 27.6% to 29.0%. This increases is due partly to a slight decrease in total costs and expenses from 64.9% to 64.6%. (Google Inc. Financial Analysis for 2010)

Large cash balance in 2009 (> $10B) for use in acquisitions and growth

$0 debt.

Marketing7,338 employees

They rely on quality user experience who use word-of-mouth to market.

In 2010, 51% of corporate revenues were international revenues.

It comprises of 8-9% of revenues each year at an average.

Research & Development7,443 employees

Artificial intelligence is one of the new technology.

Their revenues comprises between 11-12% each year, on average.

The company has continued to institute their culture of innovative thinking and collaboration.

Human ResourcesResponsibility to recruit, hire and maintain a skilled, talented employee within Google

Note employees who are talented and create a competitive compensation package that can help alleviate high attrition rates

General & Administrative2,941 employees

Operations2,113 employees

Internal Factor Analysis Summary (IFAS)Table 2 Internal Factor Analysis Summary (IFAS)


Strengths Collaborative work environment 0.2 5 1 Provide an environment that drives the employees towards inventing and creating new ideas and thoughts.

Attract and retain top industry talent 0.1 4 0.4 Has the capability to maintain and grow strong talent pool.

Management strived to be transparent in their workings 0.2 5 1 The employees are aware of all the company announcements before the public.

Growth with strong employee satisfaction 0.2 4 0.8 Retaining and low turnover.

Weaknesses Maintain a strong corporate culture. 0.1 4 0.4 Management has a challenge to find new and innovative ways.

Too much expenses 0.1 3 0.3 Spending $15M on a corporate jet in 2006, this indicates a shift in the corporate culture.

Depending on international markets 0.1 2 0.2 More risk and complexity to their dealing.

Total 1 4.1 This score shows that Google is in the right track because of such a performance.

The total weighted score is 4.1 which indicated how well Google responding to the factors in its internal environment.

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