Market Share and Smartphone Case Study

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Google Case Study Analysis

Google Inc. is one of the major internet companies worldwide. The multinational firm is predominantly involved in providing online advertising and search engine services. Other products and services provided by the firm include cloud computing services, enterprise services, mobile payment services, as well as consumer services and electronics. The provision of consumer electronics under the Nexus brand represents one of the firm's latest expansions of its product portfolio, largely seen as a move to reduce its reliance on online advertising revenue. With reference to the relevant tools and frameworks, this paper provides a strategic analysis of Google, particularly in relation to its consumer electronics segment. First, an analysis of the internal and external environment is provided. Next, attention is paid to the firm's current strategy diamond. Finally, strategic recommendations based on the analysis are provided.

Internal Environment

The VRINE model provides an ideal framework for examining the firm's internal environment (Carpenter and Sanders, 2009). As a firm, Google has been in operation since 1998. In a little less than two decades, the firm has established itself as one of the most popular and valuable brands across the globe. Indeed, the firm's worldwide popularity makes it not require significant advertising. The firm has experienced rapid growth thanks to effective and competent leadership. One of the major sources of competitive advantage for the firm is its commitment to innovation and creativity. With its innovation-oriented culture, Google has in fact been termed as one of the most innovative technology companies in the world. The firm's proprietary products have taken the internet landscape to a whole new level. This provides a valuable source of competitive advantage in the highly competitive internet marketplace, along with heavy research and development (R&D) spending and impressive financial performance.

The firm's commitment to innovation and creativity has been evident in its recent product line Nexus, which mainly includes smartphones and tablets designed and developed in partnership with original equipment manufacturers (OEMs). The Nexus brand was replaced by Pixel in 2016. Pixel devices come with fairly rare features, notably the Android operating system (OS), which powers approximately four in every five smartphones in the world (International Data Corporation [IDC], 2016a). Some of the major innovative features supported by the OS include Google Maps, YouTube, Play Store, Google Drive, Gmail, Chrome, and Google Docs. Though the Android OS is common in other smartphone brands, Nexus has unique advantages compared to other Android smartphones. For instance, Nexus only supports Google applications, meaning no junk or illegitimate applications. Also, Nexus devices are usually the first to receive Android updates, giving them an upper hand. Other advantages include a simple user interface, developer friendliness, and greater personalisation. From a hardware perspective, Pixel devices boasts amazing features such as fast processing speed, a huge display, as well as an appealing design. Google provides these features at a relatively affordable price. Pixel smartphones are fairly cheap compared to Apple and Samsung smartphones.

In spite of the above rare capabilities, Pixel devices represent an insignificant share of the global smartphone market. The market is still dominated by Samsung, Apple, Huawei, Sony, HTC, and LG (IDC, 2016b); with Google's Pixel accounting for less than 0.02% of the market share as of 2016 (Spence, 2016). Indeed, Google remains predominantly reliant on online advertising, which accounts for over 90% of its revenue (Alphabet Inc., 2015). This is a major weakness for the firm as far as revenue diversification is concerned. There is still a long way to go before Pixel becomes an established brand in the smartphone market. The challenge of market share is further compounded by the threat of imitation and substitution. In the last few decades, numerous smartphone brands have infiltrated the market, in large part due to the ease of imitation of consumer electronics. Whereas Google boasts a strong patent portfolio, the possibility of competitors imitating their products cannot be overlooked. In a market where attaining significant market share is an enormous challenge, imitation can be disadvantageous to the firm (Barney, 1995).

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External Environment

The external environment comprises two elements: the micro environment and the macro environment (Carpenter and Sanders, 2009). The micro environment essentially represents the industry or competitive environment, which is analysed on the basis of Porter's five forces model (Porter, 2008). The smartphone market represents a rigorously competitive landscape. Indeed, the threat of rivalry is strong. The market is dominated by powerful brands such as Apple, Samsung, Huawei, Xiaomi, LG, Sony, HTC, Lenovo, Blackberry, and Nokia. These brands have been in the smartphone business for much longer compared to Google, which is a more recent entrant. A major advantage of these rivals over Google is that smartphones comprise their core business, unlike Google whose core business is the internet. They boast superior engineering capabilities which Google is yet to match.

High competitive rivalry often means a weak threat of new entrants (Hill and Jones, 2012). Most of Google's rivals in the smartphone segment, notably Apple and Samsung, have established robust market share and brand loyalty, making it quite difficult for new entrants to successfully enter the market. The difficulty of entering the market is further compounded by the huge financial, R&D, and supply chain capabilities required to thrive in the industry. A weak threat of new entrants is an advantage for Google. The threat of substitutes in the smartphone industry is also low. Though tablets, laptops, digital cameras, and personal digital assistants (PDAs) may be considered substitutes, they are yet to match the functionalities offered by smartphones, making it difficult for them to replace smartphones.

The bargaining power of buyers is strong. With numerous smartphone brands in the market with almost similar attributes, buyers have several options to choose from. They can readily switch to options that offer the greatest satisfaction in terms of aspects like OS, user friendliness, camera capabilities, size, weight, carrier compatibility, price, and so on. Though the bargaining power of buyers is low, the bargaining power of suppliers is moderate. On one hand, some smartphone manufacturers supply inputs by themselves. Google, for instance, owns the Android OS, a major input in the smartphone market. This dilutes the power of software vendors. On the other hand, however, smartphone manufacturers rely on other entities for the supply of components such as memory chips, processors, cameras, covers, earphones, chargers, and batteries. Though some manufacturers such as Samsung own their inputs, Google depends on suppliers for its components. Component suppliers may have significant bargaining power as they serve a broad clientele.

Business operations are affected by not only the industry environment, but also the larger macro environment as described in the PESTEL model (Carpenter and Sanders, 2009). Political and legal factors are particularly important as far as the smartphone market is concerned. Though the markets in which Google currently markets its Pixel brand are fairly politically stable, it is important to note that political instability may hinder business operations, leading to loss of revenue and profit. Also, laws and regulations relating to aspects such as intellectual property, privacy, telecommunications, and consumer safety may be detrimental to the firm as they may lead to expensive lawsuits, tarnished reputation, and reduced usability of smartphones.

Economic and social factors also have important implications for the smartphone industry. Unfavourable economic events such as recession, for instance, can increase operating costs and weaken consumers' purchasing power, consequently slowing down smartphone purchases. Conversely, favourable economic events such as economic growth can increase consumers' purchasing power. Emerging markets are an ideal example. With impressive economic growth in the last three decades or so, emerging markets present a significant growth opportunity for smartphone vendors due to the growth of the middle class (Dobberstein, Narasimhan and Aggarwal, 2013). Social factors affect smartphone vendors in the sense that local factors have to be considered in the design and development of smartphones. This explains why most smartphones provide options for local languages. The increased popularity of social media presents further opportunities for Google and other smartphone firms as it has increased the demand for.....

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