Situational Analysis of Google - Case Study Example

YouTube/Google Case Analysis Table of Contents YouTube/Google Case Analysis Table of Contents 2 Introduction 3 Situational analysis 3 SWOT Analysis3 Competitive Analysis 5 External Environment 6 Assumptions for the study 7 Statement of the problems facing the company 8 Developmental alternative and evaluation 9 Implementation of selected alternative 11 Reference 12 Introduction You Tube was acquired by Google in the year 2007. This brand name from Google gave a great advantage for You Tube to flourish in their business and soon the online video portal accomplished to achieve third place in a survey for online brand following Google and Apple as the leaders. But in spite of this success story Google faced several issues after the acquisition of the online video portal. This report is concerned with the analysis of the firm and the assumptions taken during the study. Also it contains the alternative strategies which can make You Tube a profitable business for Google without compromising its leadership position in the market. Situational analysis SWOT Analysis Evaluation of the firm’s external and internal environment and finding the strength, weaknesses, opportunity and threats for the situational analysis of the company the SWOT analysis is conducted. Strength The massive database of the company with huge traffic volume accessing the database from various parts of the world is one of the major strength of the company. The unparallel size of the company with its merger Google made it a huge success for the firm. YouTube comprises about 60 % of the total video watched online world wide and grabs 29 % of the market share of U.S market share for multimedia (Cool, Seitz, Mestrits, 2010, p.2). The advertisers and the owners of different contents on the site can evaluate their performance and feedbacks from their videos thus providing a measurable return for the participants. Weaknesses One of the weaknesses of Google YouTube is its inability to earn money from the user uploaded videos. Another issue is its complex proposition in the market which can be difficult for the company to handle the situation. The unprofitability of the company due to free service to the users is growing and within few days it can be a burden for the company. Opportunities Google You Tube has immense opportunities if the strategies can be implemented in a rightful manner. The company needs to evaluate the processes and understand the potential in the market. Many content producers are constantly looking to enter into the online video platform which is a great prospect for the company to expand their business. Google’s developing strategy for Cloud Media will help in efficient handling of material in the online portal. Feasible alternate business model for Google You Tube can be a great opportunity for the company if implemented effectively in the business process. Threats The online video market is growing at a very fast pace. Many players are entering into the market with huge demand in the market. Thus it acts as a threat for You Tube to maintain their position in this competitive market. The Governmental intervention in the online services can create some problem for the company in future business activities. Another issue of Copyright Infringement can be a threat for the company as the users are free to upload any videos in the portal. This can violate the laws and also copyright issues which the company need to take care of for a smooth business process. Google’s focus towards other business projects can shift its concentration from You Tube which might result in downfall in the Internet video service from Google. Competitive Analysis In order to understand the position in the market the company is needed to understand its competitors in the market. Competitive analysis of the firm gives the ability to the firm to understand the threats from the other player in the market. It can be either from the new entrants in the market and also may be from some existing players of the market. In the internet video marketplace there are mainly three players who in online portals namely AOL video, Yahoo Video and Msn Video. The different features available in the different service providers can attract the users and might decrease the footfall for You Tube videos. The strategies implemented by the different online video portals are targeted to different demographics but on the other hand AOL focuses on mainly increasing the customer base rather than targeting towards the special demographic. Yahoo implemented a different strategy for their video portal service to the users. The company first designed a video search engine though which the user can search the videos uploaded by other users at different sites. Then Yahoo improved their service and allowed the user to upload, share and also comment on their uploaded video through the Web 2.0 platform. Another issue to evaluate for an extra edge in the market place is to understand the new players in the industry. With the growing demand of the online video service many companies are emerging with their online video portals. New players like MySpace, Metacafe and Joost are entering into video service in recent years and growing in popularity with the different features provided by the different websites ranging from online streaming of uploaded videos to direct TV program steam over the internet. Few other competitions are also present from sites like break.com and Veoh. Break.com is a video sharing site which offers monetary rewards to the up loaders based on the popularity of the video while Veoh is also a video portal which gives the up loader the facility to distribute their videos in their normal format with high bandwidth rather than the compressed distribution technique used by most of the online video sharing sites. Other site like Atom Films mainly concentrates on short films and animation movies which can affect You Tube as many people can move towards the focused approach of these sites towards the niche segments. External Environment The online video market is in the state of explosive growth and it is expected to grow even more in recent future. Accessing free video contents over the internet is the major advantage for Google You Tube. Ad-supported business model experimentation of Google may drive the business for the company in future to great extent. The revenue generated from the ads at recent time is not very high and the also the entry of growing competitors are affecting the market potential for the company. Though Google believe that their brand name can add great value to the video service of You Tube but the business model followed by the company is not very clear from the revenue generated from the division. The trend in internet video technology is growing with time and with more advanced technologies the users are more attracted towards online activities than purchasing videos or TV programs. The flexibility to upload users own video and share with others at any part of the world generated great potential for the company to flourish in recent future. The Video on Demand service over the internet is expected to grow at a very fast pace and can be estimated to reach to as much as $12 billion by the year 2010 of which Internet video service is expected to contribute around one third of the total revenue (Cool, Seitz, Mestrits, 2010, p.2). Assumptions for the study The information available for the SWOT analysis and competitive analysis is mainly concentrated towards the services provided by the company and the external environment for You Tube and its competitors in the market. But other information about the organization structure, business processes and HRD needs would have helped in the process for better understanding of the internal environment. It has been thus assumed that the internal human resource issues do not create any problem thus it’s a hindrance in conducting research for the case study on YouTube. All the information studied during the process is publicly available data only and since YouTube don’t publish separate financial statement of the company after it was acquired by Google, separate data on revenue of the company is not available thus financial analysis of YouTube was not possible during the study. The company’s financial state can only be assumed from the parent company Google and no individual assessment is possible during the analysis stage. All the revenue data available were estimated by analyst from Google data and the number of views of video with the ad contents on the page. Again the cost structure of the company is not well recognized. It is assumed from mainly two sources, the computer infrastructure and the salary of the employees. Statement of the problems facing the company YouTube Google faces several issues which range from the demand in the online video marketplace to the challenges it faces for generating profit from the business model. During the year 2007 the online video service has a booming market and the percentage was expected to grow even higher in coming years. The customers are willing to avail video services free of cost and are not eager to pay for their entertainment from movies and TV shows. In coming years it is expected that ad supported business model will have better prospect in future but on the other hand YouTube ad support strategy was very low revenue generation program and along with that the competitive scenario is also threatening the service. Though Google claims that their association with YouTube will increase the value of the company to great extent but the business model of the company is not very clear from the strategy of the firm. The success score of YouTube is not very high as compared to the success of the search engine of Google. On the other hand Google is investing a huge amount for the development of new products thus without earning from the service will affect the financial condition of the company. Problem Statement: How will Google be able to implement its advertising expertise for YouTube? What Google YouTube should do to maintain a competitive position in the market and gain profit from their video service? Developmental alternative and evaluation To ensure profitability and sustainable growth of YouTube the alternative strategy can be evaluated from the Ansoff Matrix shown below. Figure 1: Ansoff’s Strategic Matrix (Source: Luck, 2008, p.346) The continued free service provider for online video will penetrate the existing market and get an extra edge over the subscription based services from the competitors. U.S market is the major segment YouTube should concentrate in. About 99 percent of the total video viewed in the year 2010 was done on YouTube.com. Competitors like Hulu and Microsoft are ranked next to it. To maintain this competitive advantage the company needs to provide the service efficiently to the users. Figure 2: U.S Online video sites (Source: International Television Expert Group, 2010) Market development strategy can be another alternative for YouTube to concentrate on specific regional based search options for the country based contents. It will give the users a feel of association with the company for customer centric approach. Searching the videos matching the cultural and legal aspects of the country will give the company opportunity to concentrate on particular market and can understand the trend in particular region. New product development is another option for YouTube. The company can introduce new concepts like online training and tutorials for students and use for educational purposes. YouTube can also be used for advertisements of different products through online video streaming. Implementation of selected alternative YouTube is the leader of online video service provider already offering free access for the users to upload and view videos online. To maintain their position in the competitive environment the company need to constantly evaluate the market activities of the competitors and keep the service always free for users. To generate revenue from the video department Google need to include advertisements in the YouTube platform from which the company will be able to generate revenue to continue their free service to the users. Country specific domain name for YouTube can help the country to concentrate on specific regions and avoid the problems from cultural and legal aspects of the country. Specific domains will give the opportunity to access the market in a more focused manner. New videos on different topics like tutorials from different institutes and advertisement from commercial purposes can also be included into the database. Uploading Commercial advertisements can be kept as a paid service of the company which can be another source of revenue for Google YouTube. Reference Cool, K., Seitz, M. & Mestrits, J. (2010). YouTube, Google, and the Rise of Internet Video. Kellogg School of Management. International Television Expert Group, (2010). Top 10 Video Content Properties by Videos Viewed. Retrieved on July 12th 2011 from http://www.international-television.org/tv_market_data/online-video-usage-usa-2010-01.html. Luck, D. (2008). CIM Coursebook Assessing the Marketing Environment. Butterworth-Heinemann. Read More