Google Is the Global Leader

Google is the global leader in terms of innovation and creativity on the IT market and has been so for the past couple of years. With important financial and human resources, Google has managed to develop a search engine that ensures its leadership on this market. However, with the economic downturn in 2008, Google could face potential threats and challenges, both coming from the market and other competitors, as well as from the inside. The aim of this paper is to analyze some of the main characteristics of Google as a commercial and business entity, both from an internal perspective and through a discussion of the external environment. Subsequently, the aim is to propose alternative solutions for its future development and discuss the best solution in this case for Google.

Internal resources vs. external environment

Google has significantly increased its internal resources over the last couple of years and this trend continued in 2008 as well. Following the IPO in 2004, the company counted on important financial resources. At the same time, the other internal strength of the company is given by the people: Google has managed to hire innovative, creative individuals that were able to carry on Google inventions rather than allow the company to stagnate in its search engine program. On the same line, Google has hired Eric Schmidt to manage day-to-day operations, an excellent idea which allows founders Larry Page and Serghei Brin to concentrate on the development of the company rather than on daily management.

There have been several voices pointing out that one of the weakness at Google is that the salaries are low for the industry, pointing out that the system administrators, for example, only make around $35,000 a year

. However, there are several things worth pointing out. First, compensation is not necessarily tied only to the net salary that an employee receives -- at Google, many of the employees received shares or options for Google shares. Given the trajectory that the price for these shares had after the IPO, one can point out that compensation was significantly increased in the case of many of the employees. Second, Google offers different other incentives as well, such as training programs, a great working environment etc.

2008 did see some of the executives at Google leave for new challenges. Many of these went over to Facebook and several to other competitors in the IT industry. This remains a problem for Google and a threat for the future as well. However, the problem is not necessarily internal. These executives did not necessarily leave because they were underpaid or because they were not satisfied with the working conditions at Google: they left because they were at a point in their career where they were willing to try something new. It will be difficult in the future for Google to fight against this brain drain and some of the solutions proposed in this paper will need to address exactly that problem.

In terms of financial internal considerations, the price of shares in 2008 followed the general trend of the market, with significant decreases. Now, however, the price of shares is closer to the historically high levels and the trend will probably continue as the economy moves out of the recession. The financial figures in the Annual Report for 2008

show sustainable growth trends in most of the categories, included the company's total revenues and total assets.

In terms of the external environment, Google is an unchallenged leader on the search engine market. However, there are significant threats that arise from other segments of the IT market, notably on the online interaction segment (with companies such as Facebook or MySpace). The problem with these competitors is that they drain some of Google's resources, including human resources and also, potentially, financial resources as investors decide to use other websites for advertisements. At the same time, as Google will try to diversify its presence on the market, it will run into Microsoft, an important adversary.

However, the IT market offers numerous opportunities as well, starting with the diversification and amplification of the portfolio of instruments that Google is offering to entering some of the related segments, such as some of those that have been described previously.

Alternative solutions

There are several alternative solutions to some of the problems that have been previously identified.

1. Develop new technologies

This type of solution would allow Google to enter new markets, but will also address one of the problems that has been identified as the brain drain: important executives migrating to other companies because of the need for new challenges. This type of solution is a feasible one: the company has enough financial resources to pour them into developing new technologies and into research and development in general. The problem with this type of solution may be that Google would enter some market segments where other players have been competing for a longer period of time and have greater experience.

2. Improve the search mechanism

This type of solution would again involve a significant amount of resources being put into research and development. The problem is that this solution does not address the problem with people leaving the company: developing the search engine is what the company has been doing from the very beginning, it needs to focus on new areas as well. At the same time, one can also wonder how much the search engine can be improved technologically and whether this type of development would still bring additional revenues for it to be profitable.

3. Develop through acquisitions

Again, Google has significant financial resources that it can put into acquisitions and new development. The example of Google purchasing You Tube is significant in this sense: with $1 billion invested, the company both entered a new market segment and increased its chances and possibilities of developing in new segments. This is very important and Google could take into consideration similar actions in other market segments as well, including the social connection market.