Google Inc.’s Diversification Strategy: A Synergistic Approach

QUESTION

Read the following case on Google Inc .pdf and answer the following questions:

1. Evaluate Google’s diversification into new products and businesses. With particular reference to (a) video sharing (You Tube), (b) browsers (Chrome), and (c) mobile phone operating systems (Android).

2. Do you think Google is creating synergy by diversifying into all this products/services? If so, where do you see the synergy?

3. When does diversification becomes less productive, in your opinion? Use lecture materials and examples in your discussion.

ANSWER

Google Inc.’s Diversification Strategy: A Synergistic Approach

Introduction

Google Inc., now a subsidiary of Alphabet Inc., has been a dominant force in the tech industry, primarily known for its search engine. However, the company’s diversification into various new products and businesses has been a key strategy to maintain its competitive edge and expand its footprint. This essay will evaluate Google’s diversification into new products and businesses with particular reference to video sharing (YouTube), browsers (Chrome), and mobile phone operating systems (Android), assess whether they are creating synergy, and discuss when diversification becomes less productive.

Google’s Diversification

Video Sharing (YouTube): Google’s acquisition of YouTube in 2006 was a significant diversification move. YouTube has become the dominant platform for video sharing globally. This diversification leveraged Google’s advertising prowess, allowing it to monetize video content effectively. The synergy between Google’s advertising capabilities and YouTube’s vast user base has driven substantial revenue growth.

Browsers (Chrome): The introduction of the Chrome browser in 2008 was another diversification step. Chrome’s rapid adoption brought synergy through integration with Google’s search engine, driving more users to Google’s core business. Chrome also served as a platform for Google to promote its other products and services, creating a synergistic ecosystem.

Mobile Phone Operating Systems (Android): Google’s development of the Android operating system, starting in 2005, aimed at the mobile market. This diversification has been incredibly successful, as Android is the most widely used mobile OS globally. The synergy here lies in integrating Google services (search, maps, YouTube) into Android, providing data and ad revenue opportunities.

Synergy in Google’s Diversification

Google’s diversification strategy has been successful in creating synergy in several ways:

Cross-Promotion: Google integrates its services seamlessly into products like Chrome and Android, promoting its search engine, YouTube, and other services.

Data Synergy: The data collected from various products and services enable Google to refine its advertising targeting, enhancing ad revenue.

Advertising: Google’s advertising expertise complements various diversifications, such as YouTube, as it monetizes user engagement effectively.

Ecosystem: The interconnected ecosystem of Google’s products, from search to email to cloud services, strengthens user retention and loyalty.

Diversification and Productivity

Diversification can become less productive when it exceeds a company’s core competencies, stretches resources too thin, or lacks synergy. Google’s diversification has been largely productive due to its ability to leverage existing strengths into new markets. However, diversification becomes less productive when it dilutes a company’s brand or results in significant resource allocation without clear benefits.

In conclusion, Google’s diversification into new products and businesses has generally been successful, creating synergy through cross-promotion, data, and an interconnected ecosystem. This diversification has allowed Google to maintain its position as a tech giant. However, it’s important for any company to carefully manage diversification to avoid spreading resources too thin or diluting the core brand, which can hinder productivity.