Let us assume you are working on a Porter’s Five Forces Analysis of Google. Whic

Question

Let us assume you are working on a Porter’s Five Forces Analysis of Google. Which of the following details from a Porter’s Five Forces analysis would be MORE ADVANTAGEOUS TO GOOGLE (We are assuming this detail is correct):

a. MEDIUM STRENGTH FORCE: "Of course the competition is fierce among the industry leaders, but my personal opinion is that IBIS World and others overstate the level of competition. Microsoft for years was considered the evil empire, accused of anti-trust practices. The fact that the alliance between Bing and Yahoo! largely goes unnoticed is a testament to two things. First, competition is not as cut throat as some imagined. Secondly, Google has become so powerful that not even a merger between Yahoo! and Bing has people thinking monopoly."

b. MEDIUM STRENGTH FORCE: "Advertising costs are determined in a real-time auction format, thus from the search engine’s perspective, there is no price setting. Both ‘cost-per-click’ and paid inclusion 14 Google 10 methods of advertising involve bidding, so there is no way search providers can differentiate between customers. Nonetheless, suppliers like Google, Bing, and Yahoo! can offer different types of search placement. For example, one engine may allow you to bid on placement for searches including ‘sports’ while another engine may allow you to bid on a more specialized keyword like ‘world cup.’ For the most part, the industry has homogenized tools and platforms for advertising. Ultimately the power of the supplier depends on users. But given that there roughly four billion people in the world with access to the web, it does not feel like the user has much power."

c. LOW STRENGTH OF FORCE: "As mentioned before, acquisitions are extremely high in this industry. For most startup tech companies the goal is to someday become acquired. Few companies manage to keep their autonomy while being relevant on a broad scale. The primary reason it is difficult to enter into the search engine industry is that searches require an enormous amount of capital develop, and also a variety of other offerings to secure web traffic. To compete on the same level as Google and Microsoft involves at minimum a distinct web browser, and more likely also an operating system and other software and hardware. Therefore, only one company seems to have the potential to enter the market in the foreseeable future—Apple. Thanks to their success in the computer hardware and mobile industries, Apple has the platform to attract users for whatever search engines they might produce. However, as demonstrated by Apple’s recent disaster involving mobile maps, creating good tools to support good web searching is clearly difficult. One other potential entrant is Facebook. Their social platform has the necessary base of supporters and advertisers, but a strong search engine is still in the distant future. Also, their success presupposes that Facebook endures in social media, which is quite uncertain."

d. None of the forces discussed above is advantageous to Google.

Explanation / Answer

In this case presented and for Google’s line of business the ,most crucial porter’s 5 factor is Threat of Substitute. A substitute product is one that may offer the same or similar benefits to a company as a product from another industry. The threat of a substitute is the level of risk that a company faces from replacement by its substitutes. For more generic, undifferentiated products the threat is always higher that from more unique products. A company that has several possible substitutes that can easily be switched to has little control over the prices it sets or how it chooses to sell the product.

Threat of Substitution: Some of Google’s products and services could potentially be substituted, such as users choosing GPS instead of Google Maps, but Google’s primary business is their online search engine, which is difficult to substitute. Everyday, an average of 8.9 billion Google searches are made (Statistic 2017). Although there are alternative sources of information such as newspapers, books, television, or radio, the internet is the preferred source for people to retrieve information as it provides information on demand. As of now, the threat of substitution is low as there are no foreseeable substitutions for online search.

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