MBA6024_Unit_6_Assignment_1

Running Head: A COMPREHENSIVE STRATEGIC PLAN FOR GOOGLE, INC.
A COMPREHENSIVE STRATEGIC PLAN
Spencer Atton
MBA6024
Capella University

A COMPREHENSIVE STRATEGIC PLAN FOR GOOGLE, INC.
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A Comprehensive Strategic Plan For Google, Inc.
Presented here before the VP of Strategy, Terry Bell, is this student’s Comprehensive
Strategic Plan for Google, Inc., an accumulation of all previous memos and reports submitted
with additional information acquired since his last memo. Google (NASDAQ: GOOG) has been
and continues to be the preeminent choice for people searching for information all around the
globe. Though our search engine is our proudest contribution to the world, this Company seeks
to reach people in new and different ways while offering technological solutions for their
inquiries, dilemmas and opportunities. We seek to remain on the cutting edge of information
technology and we plan do this with the intelligent utilization of our cherished resources (both
human and non-human) and immense capabilities. The Company has an opportunity to
positively change the world as well as a responsibility towards social, environmental and privacy
issues.
Many of our products such as Google Chrome, our search engine, Gmail, Android,
YouTube, Google Glass, Chromebooks, Motorola wireless telecommunications and Chromecast
have had a positive influence on the global community, bringing people together and educating
the masses. The purpose of this strategic plan is to cover several critical areas regarding
Google’s current strategy as well as recommendations for the future. With the aid of several
references, to include Robert Grant’s Contemporary Strategy Analysis and our Company’s own
10-K Annual Report from 2013, this report strives to identify the Company’s values and mission
and determine whether the Company’s current overall strategy aligns with those values and the
mission. This student will describe the Company’s approach to creating a sustainable

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competitive advantage while evaluating the approach’s effectiveness, discuss the Company’s
corporate strategy with respect to vertical integration, globalization and diversification, provide
recommendations on how Google’s resources can be better aligned and leveraged to create
capabilities that facilitate a sustainable competitive advantage and also regarding realignment of
the organizational structure and management systems that supports this student’s proposed
realignment and leveraging of resources and capabilities. Finally, this student will decide
whether Google is overstretched with its diversification strategy, which areas should be scrapped
or divested as well as any new opportunities that should be explored.
When we speak of a mission statement, we must understand the components it
incorporates to unify and align employee, management and shareholders’ objectives. Bozarth &
Handfield (2013) assert a mission statement as a concept that describes why an organization
exists, identifies the organization’s domain (where we will compete) and their core values, or
what is important to the organization. According to Google’s Form 10-K Annual Report, its
mission statement is “…to organize the world’s information and make it universally accessible
and useful” (“Google, Inc.,” 2013, p. 3). Our business model is primarily emphasized around
critical areas such as web search and display advertising, mobile wireless devices and support
products, commerce, enterprise and hardware products, the Android operating system and
consumer content via Google Play (“Google, Inc.,” 2013). Google’s culture holds creativity and
collaboration in high regard and also values the importance of iterative ideas that solve complex
problems (“Google. Inc.,” 2013). Broken down into smaller, autonomous teams that may work
on a facet of a bigger project, the firm’s de-centralized organizational breakdown structure
requires highly capable individuals who are encouraged to think unconventionally in order to
develop new ideas for future development as well as lenient, trusting team leaders (or managers)

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that delegate a high degree of responsibility to their team members (Grant, 2013). Our primary
means of revenue generation originate from cost-effective online advertising initiatives such as
AdSense and AdWords, both based on a pay-per-click approach (“Google, Inc.,” 2013). Even
though our mission is to organize the world’s information and make it universally useful and
accessible, a small percentage of their products and services would not necessarily fall into this
category. However, products such as Google Search, Google Local, Google Earth, Google
Books, Google+, Google Chrome, Android mobile operating system, Google Glass and
Chromebooks do in fact facilitate one’s search for information.
Competitive Advantage
Google earns a great deal of revenue from its online advertising efforts as opposed to
generating it from end-user customers. When we speak of a competitive advantage, the student
is referring to Grant’s definition “when two or more firms compete within the same market, one
firm possesses a competitive advantage over its rivals when it earns (or has the potential to earn)
a persistently higher rate of profit” (Grant, 2013, p. 170-1). He also goes on to state that there
are external sources of change like customer demand, pricing, technology, adaptability,
differential impact or internal sources of change such as a greater creative or innovative
capability (Grant, 2013). In order to understand how a competitive advantage can be achieved,
the reader must consider the enormous amount of resources and exceptional capabilities that the
firm possesses, which permits them to think of innovative ideas and conduct R&D in order to see
these ideas come to fruition.
Since Google understands that competitive advantage eventually erodes with atrophy,
they must continue to strive and innovate at a faster rate than their competitors. Google invests

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these vast sums of working capital in their 70-20-10 rule. The 70-20-10 plan represents 70% of
its engineering resources being dedicated to developing the core business, 20% is allocated to
extending its core into new areas and 10% is reserved for eccentric ideas that could result in
future success (Grant, 2013). It is obvious that Google has planned for the eventuality that they
may lose their competitive advantage and are hedging their bets against this in a calculated
manner. Though 95% of their revenue comes from online advertising, Google understands that
they must reach out to people in different ways other than their search engine.
Corporate Strategy
Before investigating further into Google’s general corporate strategy, this student would
opt to define the terms being used to ensure everyone speaks the same business language. A
corporate strategy encompasses “…the scope of the firm in terms of the industries and markets
in which it competes” (Grant, 2013, p. 19). The term vertical integration is best defined in
Grant’s text as the portions of a value chain that serve as internal functions of the business as
opposed to outsourcing these activities (Grant, 2013). The more activities a business controls
internally, the more vertically integrated it becomes (Grant, 2013). Internationalization is
described as when a company decides to trade with businesses or invests directly in operations
located in foreign countries (Grant, 2013). The final noteworthy definition is for diversification
(in a business context), which means when a company chooses to expand into new types of
markets or industries with the intent of discovering new growth opportunities (Grant, 2013).
However, a firm must realize there is much risk involved in completely new ventures, as they
may not be able to maintain their core competencies and suffer immeasurable losses as a result.
As part of their vertical integration initiatives, Google’s global sales and support structure

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dispatches highly trained, capable and experienced teams across vertical markets (“Google, Inc.,”
2014). Google’s Chromebooks are an additional activity that complements its search engine,
which the latter happens to be complemented by the Google Chrome web browser. As one can
see, for the entire personal computer value chain, Google has made efforts to internalize much of
the activities involved (“Google, Inc.,”2014).
Google prides itself in being a global technology leader that both trades with and directly
invests in other nations while assisting billions of people in their search for information (“Google,
Inc.,” 2014). The Company offers products and services to more than 50 countries, territories
and regions and their US revenue only accounted for 45% of total revenue. In January 2014, the
Company came to contractual terms with Lenovo Group Ltd (based in Hong Kong) in order to
build their Motorola Mobile segment (“Google, Inc.,” 2014). Google obviously is, and has been,
an influential force in search engine platforms all over the world. Our ability to permeate into
different nations, whose own homegrown IT firms cannot hope to replicate Google’s search
algorithms in over 100 languages, is boundless. Some of the numerous risks inherent to
internationalization are foreign exchange rates, for which Google suffered in international
markets because of the marginal strengthening of the US dollar (relative to the Japanese yen and
Brazilian real) from 2012 to 2013 (“Google, Inc.,” 2014). As the US markets begin to plateau,
Google will need to explore investments in foreign markets in order to experience similar rates
of growth.
Google’s diversification strategy involves acquiring businesses in various sectors where
they feel there are attractive growth opportunities, usually in the area of information technology.
The Company has expanded its scope from being a mere search engine firm to one that dabbles
in advertising management services, operating systems, wireless telecommunications,

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information products and applications software (Grant, 2013). Unfortunately, aside from
Google’s Motorola endeavor and Adwords / AdSense advertising avenues, they have no
additional revenue being generated (Grant, 2013). Google feels that the industries it is
expanding into are attractive and feels it can develop a competitive advantage with the resources
and capabilities available to them. Google will need to continue its diversification path, but also
realize that incorporating Motorola along with the Android operating system and the current
trend in smart phones in order to achieve a competitive edge over Apple is imperative.
Resources & Capabilities
This student feels it is important to review the company’s financials to obtain a more
intimate understanding of their resources and capabilities. When speaking in mere qualitative or
non-specific terms, the reader may not fully comprehend the magnitude and influence of a firm’s
resources and capabilities. When we use quantitative values to support a comprehensive
presentation, it can provide the reader with an increased level of insight and understanding. For
the year ending in 2011, Google earned total revenues of $37.9 billion; it increased to $46 billion
in 2012 and a staggering $55.5 billion in 2013 (“Google, Inc.,” 2013). Motorola Mobile earned a
mere $4.1 billion in 2012 (8.1% of total revenue) and $4.3 billion in 2013 (or 7.2% of total
revenue) (“Google, Inc.,” 2013). Google’s resources and growth indicators are astounding when
reviewed: $12.9 billion in net income for 2013 - a 20.3% margin increase from 2012 ($10.7
billion). As is displayed in this plan’s Appendix, Google’s cumulative rate of return is currently
exceeding that of the S&P 500, the NASDAQ Composite Index and the RDG Internet Composite
Index - a remarkable feat (“Google, Inc.,” 2013). Also displayed in the Appendix, it shows our
shareholder price in mid-2009 being $200/share to over $580/share in mid-2014, a 290%

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increase over five years. Google In 2013, they boasted $18.9 billion in cash on hand, or $58.7
billion in total cash, cash equivalents and marketable securities, maintained low inventory levels
of only (relatively speaking) $426 million, $16.5 billion in plant, property and equipment (PPE)
and $61.2 billion in retained earnings for future investments (“Google, Inc.,” 2013). They
display exceptional liquidity with current assets at $72.9 billion and current liabilities of $15.9
billion, a current ratio of 4.584. Our net profit margin sits at an unparalleled 23.2%, unheard of
in other industries (“Google, Inc.,” 2013). The Company’s debt-to-equity ratio was .27 (or 27%)
and return on assets (RoA) was .126, or 12.6% (“Google, Inc.,” 2013). This fully demonstrates
the health and liquidity of Google’s business in financial terms, or a lack of foreseeable
weaknesses. With these resources at their disposal, the Company is capable in meeting
objectives and develop ideas where others are not able to or could never hope to compete.
As far as what Google could be doing differently is re-examining its sources of revenue
and diversifying into markets that are more attractive. Right now, Motorola is our only other
profitable venture coming in at 5% of total sales revenue. It does have numerous products and
services, but identifying the end user as a source of income could also prove to be beneficial.
Pay-per-period services such as its streaming movies and TV shows may prove to be a massive
generator of profits if it can achieve anything comparable to what Netflix has established. The
firm already has a considerable market share of online advertisers, but end-users are the next
market segment Google will need to reach out to. Products that would appeal to end user
customers such as Google Glass and Chromebooks have not captivated the masses as of yet.
Also, with internationalization, they could enter markets that lacks similar, stiff competition.
Google did suffer when they ventured into the Chinese market due to censorship issues with the
host government and competitor Baidu having no reservations about offering easy access to

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pirated media (Crawford & Chau, 2013). With this amount of cash on hand for further
investment, Google should take advantage of this attribute and exploit other opportunities for
growth rather than remain stagnant in the current markets it competes in and see its competitive
advantage naturally erode.
Organizational Structure & Management Systems
When we speak of organizational structure, we must include effective concepts such as
specialization and division of labor. This forces planners to address the need for cooperation or
goal alignment for individuals who may not share the same interests as well as coordination,
which simply refers to complementing their various activities (Grant, 2013). Many firms have
adopted the conventional organizational structure where there is vertical communication
channels, decisions are made at the highest levels and there are divisions between the various
functions or product/service lines (Grant, 2013). This has transitioned from the multi-divisional
firms into multi-national corporations where international expansion has set up regional divisions
(Grant, 2013). At Google, the firm has taken the standard organizational structure and turned it
upside down. Our recruitment and retention of highly qualified, creative, independent
individuals has allowed the organization to organize itself in an unconventional manner. There
are several factors that identify Google as being unique in this respect: our hiring policy, flat
decentralization, small, autonomous teams and rapid, low-cost experimentation (Grant, 2013).
This method has thus far been very effective for Google and as long as they continue to recruit
employees who are creative, innovative and entrepreneurial, this flat, decentralized organization
will encourage management to provide a high level of trust to these teams and enable them to be

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successful. This keeps the organization in line with the overall mission of organizing the world’s
information and making it accessible and useful to everyone.
Conclusion & Recommendations
It is recommended that Google remain in the sub-groups of the information technology
industry as this is their forte. History has shown with the likes of Exxon and Sears that when
expanding into unfamiliar industries un-related to anything they had done in the past, the same
core competencies and competitive advantage that they possessed in their normal industries
failed to translate elsewhere. The Company needs to focus on its key strengths using available
resources and capabilities and continue to increase shareholder value. The technology industries
experience a massive amount of change and volatility and due to this fact, Google must avoid
delayed or inaccurate decision-making or they will fall behind the curve. To reiterate, a business
strategy looks to identify how a firm will compete in a particular area, market or industry and a
corporate strategy focuses on where a firm will compete (Grant, 2013). Google faces the
challenge with its diversification strategy and ensures its ultimate objectives align with
shareholder objectives, as diversification sometimes leads to a divergence (Grant, 2013). If
Google is to continue its diversification strategy, the Company should look for ways to vertically
integrate certain activities within its supply chain and for the complementary portions that are
outsourced, they should ensure they have a large number of vendors to choose from while also
having control of how many competitors there are for those suppliers to vie for (Crawford &
Chau, 2013). Though this student is concerned about Google’s antitrust and privacy issues as
well as its move into the online travel advertising, he would like to see Google test its resources
and capabilities in the PC operating system industry to rival Microsoft’s Windows, Linux and

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Apple’s OS X. There are opportunities to grab market share and with its effectiveness with web
browsers, laptops and search engines, it seems we could continue our vertical integration of the
personal computer experience. Also, by finding dangling value, or bringing end-users to your
services and products while gaining advertiser dollars is a great way to attract public interest and
future revenue streams.

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Appendix

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References
Bozarth, C. C. & Handfield, R. B. (2013). Introduction to Operations and Supply Chain
Management (3rd ed.). Boston, MA: Pearson Education, Inc.
Crawford, A. & Chau, L. (2013, June 25). Why Google’s Business Model Works. US News &
World Report (online). Retrieved from http://www.usnews.com/opinion/blogs/economic-intelligence/
2013/06/25/why-googles-business-model-works
Google, Inc. (2013). Form 10-K 2013. Retrieved from http://investor.google.com/pdf/2013
1231_google_10K.pdf
Grant, R. M. (2013). Contemporary Strategy Analysis: Text and Cases (8th ed.). West Sussex,
UK: John Wiley & Sons, Ltd.
Travlos, D. (2013, May 23). Google Offers Investors More Than Search and Display Ads.
Forbes (online). Retrieved from http://www.forbes.com/sites/darcytravlos/2013/05/23/
what-is-google/

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