Google Strategic Plan
Brent Hummer, Greg Jones, Audre Wilde, Steve Ellison
MGT 578 Strategy Formulation and Implementation
Ray Sherwood
January 25, 2006
Executive Summary
-----------------

Company Background

"Google is now the most dominant search tool on the web, setting the
standards that others try to follow and better, as yet unsuccessfully"
(Websearch, 2005).  Founded just eight short years ago, Google was
developed by Larry Page and Sergey Brin.  From the walls of a garage
the Google business was born.

The Google search engine has continued to grow at a rapid rate since
the initial launch in 1998.  "The search engine and the company grew
quickly through word of mouth, initially with regular web users coming
across the tool and finding the results to their liking" (Websearch,
2005).  The augmenting popularity of Google has continued with strong
user acceptance worldwide.  "Google took a major step forward in 2000
when it replaced Inktomi as the provider of supplementary search
results on Yahoo 3/32 this gives Google exceptional coverage of web
searches and it now has more than 50% share of the total search
market, making it the clear market leader" (Websearch, 2005).

Google serves three primary market segments: end users, advertisers,
and partner web sites (Google, 2005a). Google does not charge users
for searches. Google displays advertisements with the results of each
search requested by a user. Whenever a user clicks on an
advertisement, Google collects a fee from the advertiser.

Long Term Objectives

Google's long-term objectives are to deliver new advertising
technology, develop tracking mechanisms, and enable users to search a
larger base of information.

Strategic Analysis and Choice

Google's search engine business is the dominant business of the
company. Google has built a competitive advantage based on search
engine differentiation. Google's strategies are innovation and
concentric diversification.

Plan Goals and Implementation

Google's short-term objectives are to expand the workforce for
anticipated growth, expand further into international markets, and
continue developing new products. Expanding the workforce will help
achieve the long-term objective of delivering new advertising
technology. Google's organization structure is primarily functional
but also includes a few geographical organizations. Google has a
unique culture and policies to promote innovation.

Google Mission

Organize the world's information and make it universally accessible
and useful (Google, 2005b)

Vision/Values

Google does not document a Vision or Values on the Google website.
They do state a philosophy on the Google website, some are listed
below:
 11/32    Focus on the user and all else will follow.
 11/32    It's best to do one thing really, really well.
 11/32    Fast is better than slow.
 11/32    Democracy on the web works.
 11/32    You don't need to be at your desk to need an answer.
 11/32    You can make money without doing evil.
 11/32    There's always more information available.
 11/32    The need for information crosses all borders
 11/32    You can be serious without a suit
 11/32    Great just isn't good enough
 11/32    No pop-ups (Google, 2005c).

Google strives to employ the most qualified applicants and reward the
greatest contributors, in order to promote good performance and
facilitate hiring and retention. Google's 70-20-10 rule for employees
is:
 11/32    70% of employee time is spent on core business
 11/32    20% for adjacent areas such as a Gmail and Google desktop search
 11/32    10% for creativity and freedom to innovate

Environmental Analysis
----------------------

Internal Environment

This section of the strategic environment is a realistic analysis of
Google's internal resources. The following internal traits portray a
resource-based view of Google's core strengths:
 11/32    Strong brand name.
 11/32    Broad web site appeal
 11/32    Innovative search technology
 11/32    "The advertisers' return on investment (ad cost per sale or cost per
conversion) from advertising campaigns on our web sites or our Google
Network members' web sites compared to other forms of advertising"
(Google, 2005a, p. 22)

Google's weaknesses are:
 11/32    Growing pains (i.e. finding new key employees and infrastructure)
 11/32    Dependence on advertising 3/898% source of revenue (Google, 2005a)
 11/32    Google Member Network's lack of popularity
 11/32    Weak position in China
 11/32    Nearly all revenue from one product line (search)
 11/32    Lack of experience

External Environment

The external environment involves three areas: remote, industry, and
operating. Remote concerns for Google are new laws and regulations,
increasing intellectual property claims, and access to more
information. Industry concerns for Google are competitive threats from
Yahoo and Microsoft (Google, 2005a) and new unknown competitors that
may be international. Agreements with advertisers could potentially
become competitive as well. Operating issues are the current ad base,
design of the ads, and shrinking advertising budgets of customers. The
quality of service provided by the Google organization and retaining
qualified help is also an operating issue.

Google's opportunities are:
 11/32    Unmapped countries  23/64 expanding services
 11/32    New advertisement format and tracking mechanisms
 11/32    Size of current customer base and market share  23/64 leverage
advertising agreements

Google's threats are:
 11/32    Competition from Microsoft and Yahoo  23/64 greater resources, bundled
services, and ability to attract and retain users through portals
 11/32    Increasing intellectual property claims  23/64 resources needed for legal
claims
 11/32    Increasing competition reducing operating margins
 11/32    Shrinking advertising budgets by companies
 11/32    Increasing international competition
 11/32    New laws and regulations  23/64 domestic and international.

Long-term Objectives
--------------------

Based on the SWOT analysis of internal and external factors, the next
10 years will define the longevity and sustainability of Google as a
company. Quick and dramatic changes characterize the technological
environment. To keep up with the market Google plans to focus on
delivering new advertising technology, developing tracking mechanisms,
and enabling users to search a larger base of information. The
creation of patents and intellectual property will hold the keys to
gaining competitive advantages in the market. The retention and
recruitment of the best human resources are also a critical factor for
Google in order to reach the changing needs of consumers and
advertising clients.

Strategic Analysis and Choice
-----------------------------

Google Inc. is a single-product-line business 3/8search engine
technology. In order to compete with other media titans such as
Microsoft and Yahoo!, Google has sought to employ the power of
differentiation to create a competitive advantage. The strategies of
Google have been focused on becoming a search engine that in the words
of the firm's co-founder, Larry Page, "understands exactly what you
mean and gives you back exactly what you want" (Google, 2005d). In the
case of Google, by applying concentric diversification 3/8a focus on the
core product of search services 3/8the company has also been able to
benefit from a competitive advantage in "faster response times,
greater scalability and lower costs" (Google, 2005d). Hence, not only
does Google have a high advantage in the differentiation arena, but a
cost and speed advantage as well. According to Allen Weiner one key
element in the media strategy of Google's future will be making
searches "more relevant and useful to end users and maintain its
competitive edge over other search providers by retaining and growing
its user base" (2004, page 1, para 6).

Plan Goals and Implementation
-----------------------------

Google's short-term objectives are to expand the workforce for
anticipated growth, expand further into international markets, and
continue developing new products. Expanding the workforce will help
achieve the long-term objective of delivering new advertising
technology.

Google's organization structure is primarily functional but also
includes a few geographical organizations. The average manager has 20
direct reports. The human resources function strives to hire only the
most brilliant people. Job candidates take difficult tests and go
through an intensive interview process. Google offers generous stock
options to retain the best talent and align employee interests with
shareholder interests. Google operates primarily through small,
focused project teams that may remain together only a few weeks before
team members are reassigned to other projects (Hardy, 2005).

Google has two unique policies to promote idea generation and
feedback. Every employee posts a weekly review of his or her
activities to the company website. Employees are encouraged to post
ideas on an electronic mailing list software application that delivers
the ideas to every employee in the company (Hardy, 2005).

One key to the success of Google is the culture of the organization.
Google employees are the best of the best and treated as such. The
atmosphere is relaxed, fun and laid back which fosters creativity.
Google provides free lunches every day for employees and encourages
participation in the weekly roller hockey games. The company regularly
sponsors employee outings such as picnics and skiing trips. Finally,
Google is generous in its rewards to employees by offering bonuses,
stock options and profit sharing.

Critical Success Factors
------------------------

Critical success factors leading into the 2006 fiscal year are
strongly aligned with employee development and retention along with
major agreements and recent investments. Google must retain and
attract the best and the brightest skill sets to remain at the top of
the food chain.  The portfolio of products is beginning to diversify
with the Google Video Store that markets programming from CBS, Time
Warner's AOL strategic alliance, and Mobile Search initiative with
Motorola.

Each opportunity is a significant investment of time and money as
Google broadens the product portfolio and raises the bar for
competitors.  For example, the Time Warner's AOL alliance was an
investment of a billion dollars in cash. The stakes are high for the
success of these initiatives (Google, 2005e).

Financial Projections and Analysis
----------------------------------
Google not only entered the .com scene much later than Yahoo and
Microsoft but the financial world as well. Nevertheless, given the
phenomenal results of the fairly recent and unique IPO of the
company's dual-class shares, from around $100 in late 2004 to over
$400 today, one can gather that this company is projected to be
successful. In fact, Standard and Poor's expects Google's 2005
revenues to increase 91% in 2005 (2006, p.1, para. 1). Citigroup
estimates that 2006 and 2007 will see 88% growth in Google's gross
margin (Mahaney, 2005). This seems in line with Google's historical
compounded growth rate of revenue being 94% and of net income being
59% (Mergent(a), 2005).

Standard and Poor's believes "revenues will benefit from increased
spending on Internet advertising, the efficiency and appeal of keyword
search advertising, market share gains in certain segments, new
offerings, and international expansion" (2006). Actually, media
advertising accounted for 99% of 2004 revenues at Google (2006, p. 2,
para. 2) "2004 saw online media companies generate $9.6 billion in
advertising revenues" according to PricewaterhouseCoopers and the
Interactive Advertising Bureau (Mergent(b), 2005). Furthermore, "this
was a record figure and an increase of 33% from the $6.432 billion in
advertising revenues generated by online media companies in 2003"
(Mergent, 2005). Citigroup estimates that the average (advertising)
price per click will be 56 cents in 2006 and 60 cents in 2007 and the
click-through rate will be 23% in 2006 and 24% in 2007. Citigroup
estimates that Google's volume of searches will increase from 72
billion in 2005 to 91 billion in 2006 and 124 billion in 2007. "As
online media continues to increase in popularity, there should be a
gradual shift of advertising revenues and budgets to new media from
conventional media" (Mergent(b), 2005).

Strategic controls
------------------

Strategic controls can be largely affected by environmental factors.
Consider the negative consequences of a significant power outage.
Google systems are vulnerable to any electrical service disruptions
resulting in service being impacted. "For example, in November, 2003,
[Google] failed to provide search results for approximately 20% of
traffic for a period of about 30 minutes" (Google, 2005a, p. 40).
Additionally, any disruptions in service will tax the entire Google
system and result in lost revenue (Google, 2005a).

Another environmental concern is new technologies that do not
compliment Google's current operating systems. For example, "the
number of people who access the internet through devices other than
personal computers, including mobile phones, hand-held calendaring and
email assistance, and television set-top devices, has increased
dramatically in the past few years" (Google, 2005a, p. 45). Expanding
Google's product offering to meet all user needs will limit the threat
of alternative internet devices.

Implementation controls

Monitoring strategic projects must involve contingency planning in the
event that Google's present product offerings become obsolete with the
invention of new internet devices and in case of a competitive threat.
This can be done by continuous monitoring of competition and expanding
current product offerings. Gathering of data detailing consumer needs
and search preferences will ensure that Google continues to be an
industry leader among search engines.

Establishing realistic time frames and goals for milestone reviews
will be significant since Google is growing at such a rapid pace and
lacks experience in areas such as the Time Warner/AOL alliance.
Identifying the correct monitoring systems will be essential to the
continued success of Google.


References
----------
Google (2005a). Form 10-K. Retrieved December 12, 2005, from
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Google, (2005b). Google corporate information: Company overview.
Retrieved December 13, 2005, from
http://www.google.com/intl/en/corporate/index.html
Google, (2005c). Google corporate information: Our philosophy.
Retrieved December 13, 2005, from
http://www.google.com/intl/en/corporate/tenthings.html
Google (2005d). Google corporate information: Technology. Retrieved
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http://www.datamonitor.com.