What are Google's Competitive Advantages?
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Google's Big Three Competitive Advantages
Google, because of its size, innovation, and market position, has a number of competitive advantages. While Google has many competitive advantages, it possible to narrow Google’s competitive advantages into three main categories consisting of infrastructure, innovative services, and market share. First, Google has an incredibly powerful infrastructure is not easily replicated. Just like Wal-Mart is known for having highly efficient supply chain infrastructure with a massive investment in plant assets and equipment including transport vehicles, enormous warehouse facilities, and high tech inventory systems, Google has a vast technology infrastructure.
Google does not disclose the number of data centers or servers they operate, but based on energy usage, the dollar amount of Google’s capital expenditures, and other factors, estimates can be made on the size and efficiency of Google’s infrastructure. Royal Pingdom, a technology company whose clients include Microsoft, Amazon.com, IBM, and McAfee, among many others, has complied information to locate the 36 data centers they believe Google was using as of 2008 (Pingdom AB, 2008). According to information provided by Google on their data centers page, most of their locations cost between $300-600 million to build and equip (Google). A 2011 article from Data Center Knowledge reported that Google was probably using somewhere around 900,000 servers. If went on further to note that, despite Google’s massive operations which use .01% of the entire world’s electricity, Google’s data center’s are incredibly efficient as they use less than 1% of the power used by data centers worldwide (Miller, 2011).
Google’s services would not be possible without their infrastructure which makes it very hard for competitors to copy or even try to rival Google. Even if they had the computing know-how, they would have to spend billions building from the ground up to establish the backbone of their operations. This makes Google’s infrastructure a sustainable competitive advantage.
The next competitive advantage that Google boasts is all of its innovative services. While the case lists 40 different Google services, a Wikipedia article lists well of 100 Google services including the renown “Google Search,” Gmail, Blogger, Google Finance, Google Docs, Google Apps, Adsense, and Google Chrome, just to mention a few. While many of these services were developed in-house, Google has also greatly expanded its services through acquisitions, with YouTube, being a classic example.
The incredible value of Google’s services lies in the fact that Google can offer nearly all of their services at zero cost to web users. Because of the number of services and users, Google is able to offer an attractive advertising model and make billions of dollars every year. Because of its infrastructure, Google is able to offer an incredible range of services. While similar services may be used by competitors, Google gives its users the chance to enjoy a “one-stop-shop” for all their Internet and computing needs. This is a hard advantage for competitors to overcome, however, Google must continue to innovate in order to make this advantage sustainable.
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Google’s last major competitive advantage is market share. Comscore, a well known leader in technology monitoring, issues monthly reports on market share for a number of digital services. The results from Comscore’s search engine rankings and market share reports are almost always published through major media outlets such as Reuters or Bloomberg. According to Comscore’s March 2012 report, Google Search currently holds 66.4% of the market share in Internet searching (2012). Google’s closest competitor is Microsoft with 15.3%. Google has held this strong majority of search market share for quite some time. The January 2010 report from Comscore listed Google at 65.4%, with Yahoo!, the next closest competitor, at 17.0% (2010). Clearly, Google has a significant foothold in the search industry, but that is not the only service in which Google leads the way in market share.
Comscore’s February report for US mobile subscriber market share revealed Google has having 50.1% of market, nearly 20 percentage points above Apple who had 30.2% of the market (comScore, 2012). Unlike Google Search, which has historically dominated the market, just two years ago in January 2010 Google only had 7.1% market share in mobile phones while Research in Motion lead the industry with 43.0% (comScore, 2010). This proves that Google can preserve market share in one industry while having the ability to gain a huge market share in a completely different market.
Google’s market share in various industries is not only a sign that the company’s strategies are paying off, but also creates a strong competitive advantage. Because so many people use Google, it has become more than a household name. In fact, the word “Google” has even become noun as people often say “I’ll just Google it,” as a reference to searching the Internet. This is not only good for Google’s brand, but it also gives Google an edge for any new products or services they wish to launch. Customer loyalty also plays a role because individuals using Google’s services are less likely to try other competitors since they may feel comfortable using and understanding Google’s products such as their search engine or Android operating system.
These three competitive advantages place Google in a very strong position for the future. A recent article featured on Seeking Alpha, an investment website, argued that Google stock is likely to increase $140 in the next year (ValueMax, 2012). The evidence presented by these strategic advantages certainly lends creditability to the previously stated conclusion.