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The Dynarnlc Enuironrnent

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PART 1 Integrative Running Case

What's Mew at Google? What's new at the world's leading online search finn?In a word, the answer is everything. Everything about this company is innovative and inventive, from its technology to its organization culture, from its recruiting techniques to its impact on the competitive environment. Google is one of today's most publicized, studied, and acclaimed firms. The company exerts considerable influence on what modern businesses do and how they do it. The story of two twenty-something graduate students creating the hottest company in the world is a familiar one. Larry Page and Sergey Brin met on the Stanford campus in 1995. The two argued about everything but realized they had mutual interests. Both were intrigued by the b a t method of finding a particular piece of information in the vast quantities of data accessible via the Internet. By 1998, the two had developed a new search method that examined links between various websites as a way to rate a site's usefulness. They called on several established firms and venture capitalists for support in marketing their product, only to be rebuffed. One search firm CEO told them, "As long as we're 80 percent as good as our competit~rs, that's good enough. Our users don't really care about search." + The friends decided to go it alone, raising almost $1 million from friends and professors. Page and Brin set up their first office in a fellow student's garage. They named their company Google, after "googol," the number 10 raised to the 100th power (a 1 followed by 100 zeros). The name reflected the company's ability to organize an immense amount of information. The pair's breakthrough technology works like this: Google users enter a search term and then are presented with a list of matchmg websites. The process uses 500 million variables to search and index billions of pages on the World Wide Web. The company's unique search algorithm gives higher priority to the most relevant results. The service is free to users. Google's revenues come from charges to advertisers for sponsored links and display ads. Google makes a small amount each time a user clicks on an advertisement. From 10,000 daily searches in 1998 to 100 million in 2000, Google grew by kaps and bounds. By 2004, Google had held its initial public stock offering (IPO), raising almost $2 billion dollars on shares initially valued at $85 each. Growth continued at a brisk pace, with increases in pqsonnel, , &lidis; users, iidvertiBersi i d 'proti&&. The cornp& Gsq grew through the ?&pisition of more than 50 fimis, in~ludingthe 2006'~urchaseo f ~ o u ~ i for $1.65 billion and the purchase of Doube bleCiick for $33 billion in '2008. Today, Google is at the top ofits game. In March 2007, Google became the most visited global website when 528 millibn unique users-almost 10 percent of Earth's population-accessed Google that month. It has remained the most visited site since that time. Daily searches are in the billions and Google enjoys a market share of 77 percent for Internet search in the United States. In a market where every firm's offerings are similar, Google is differentiated from competitors in three ways. First, the search function is very effective at finding and prioritizing relevant sites. Second, it is always clear to users which results are sponsored, so there are no hidden marketing motives. Third, the results page has a clean design that minimizes distraction. Google has added numerous feanues and capabilities to its basic search function. Over the Features include searches for images, maps, books, and scholarly articles. In addition, Google offers free software that supports email, blogging, photo sharing, instant messaging, and language transla.*
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Introduction to Organizational Behavior

Its varied offerings and reliance on user-based statistics in its search function put Google at the heart of the Web 2.0 trend. "Web 2.0" is a term that describes a maturing phase of Internet-based industries, with a focus on creativity and collaboration, embodied in companies such as craigslist and Wikipedia. Google is a Web 2.0 company for allowing users to tag maps and images, as well as for its blogs and document-sharing capabilities. The Google subsidiary, YouTube, is also a Web 2.0 firm. Technological and marketing successes have led to financial success. Shares are now worth nearly $600, although that amount is down from the peak of over $700 in October 2007. In the first quarter of 2008, revenues from paid clicks and ad sales were $5 billion. T h e company had about $12 billion in cash and that amount was increasing by about $1 billion each quarter. Today, Google is the most powerful global brand with a brand value of $86 billion, beating Microsoft and Apple. Google has tremendous competitive advantage and powerful resources, but it will need all of that to maintain its top position in the complex and dynamic Internet services industry. One element of the rapidly changing environment is the trend toward globalization. Google's site is available in 160 different local counuy domains and 117 languages. In each country, the company faces different opportunities, different consumer expectations, and different restrictions. In Europe, Google's strategy and market share are similar to those in the United States. Advanced features such as Google Maps and Google Mail are widely used. In Africa, however, Google is focused on increasing 1Gernet usage-less than 1 percent of Africans are online. Infrastructure is challenging and high-speed Internet connections are nonexistent, making it difficult for users to view videos online. In Japan, where Google is the second most popular search engine, the company test markets new products with millions of technologically savvy consumers. "People's expectations are very high here compared to other regions," says Google engineer Ken Wakasa. "That's why we get good feedback." Google has had a tough time penetrating the market for online search in China. Local firm Baidu.com controls more than a 50 percent market share. Google has been criticized for cooperating with the censorship of the Chinese government. The company, like all Internet firms, is legally required to filter search results to stop consumers from viewing some types of information, including BBC News. Google also sharply limits email, blogs, and chat in China, following incidents in 2006 in which Yahoo! released personal information that led to the arrest of several Chinese' who Another important aspect of Google's e n ~ o n m e n t workforce diversit);. The is company's website sates, ''The diversiv of our employees and partners serves as the --Google website foundation for us to better serve our diverse customers and stakeholders all over the' world. We continually work to perfect a work environment that is inclusive, collaborative, and innovative." Google personnel include one-third women and one-third racial minorities. Benefits such as healthcare insurance, childcare assistance, telecommuting, and tuition reimbursement support diverse employees. Employee-driven groups for diversity support include Google Women Engineers, Black Googlers Network, Hispanic Googlers Network, and the Gayglers. However, Google has been acdused of age discrimination.JustQ2 percent of its workforce is over 40, although most of its senior managers are at least that. The average age of a Googler is 29. Google is also experiencing rapid changes in its competitive and technological environments.'In its primary market, Google is effectively dominating rivals Yahoo!, AOL, and MSN, owned by

"The divmiy ofour employees and partners s e m as the foundation for US t o better serve O U diverse customers ~ and stakeholders all over the world. '"

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The Dynamic Environment

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NIicrosoft. In addition, the industry is undergoing a convergence of technologies, with the blending of media, communications, entertainment, personal and office software, gaming, and more. Google, for example, has recently introduced a suite of online software products that manage documents, presentations, and spreadsheets. Google Docs is similar in function to Microsoft Office and is free, while MS Office costs at least $150. With an increased range of product offerings, Google places itself in direct competition with competitors including Microsoft, Yahoo!, Apple, Viacom, and AT&T, among others. Breakthroughs in personal computer hardware have an important effect on Google too. The company does not disclose these details, but experts estimate that the company uses between 500,000 and 1 million computer servers worldwide, making it by far the largest global buyer of servers. Google is also involved in several ethical issues. One set of concerns is about the natural environment. Google's computer servers lrkely consume enough electricity to power several midsized American cities. O n the other hand, Google is one of the largest companies to enthusiastically embrace and promote energy-saving technologies. In 2007, the company installed solar panels that make up the largest corporate alternative energy system in the United States. The company plans to reduce its carbon footprint, its contribution to global warming, to zero by the end of 2008. Google's energy initiatives are supported by the company's nonprofit charitable foundation, Google.org. The foundation was established in 1994 with $1 billion of corporate profits. The organization focuses on three global causes: climate change, public health, and poverty. Among the foundation's projects are development of a plug-in electric vehicle and more efficient and affordable clean renewable energy sources. Another ethical issue that concerns critics of Google is click fraud. Click fraud occurs when a person or automated program imitates a legitimate Internet user, clicking on a pay-per-click online ad without any true interest in the link. The extent of click fraud is unknown, but one 2006 report estimated that one-fifth of all clicks were invalid. To the extent that click fraud is occurring on Google's website, the company stands to benefit at the expense of its advertising customers. User privacy is an additional area where Google becomes involved in thorny ethics. The search firm tracks user information using "cookies," bits of stored information about the user and the websites he or she has visited. Cookies contain personally identifiable information that some users do not want to reveal. Google's cookies persist for longer than many competitors' cookies. Google Earth, which offers detailed maps and satellite images, also has been criticized. Some individuals are upset, for example, by oniine satellite images in which their faces can be identified. Some countries and security-sensitive facilities are concerned that detailed maps could aid terrorists. Nuclear power plants, regions in conflict along the palcistan-~ndiaborder, and the White House are all clearly seen using Google Earth. Google is facing many challenges, but clearly has advantages and resources to help the company succeed. Parts 2, 3, and 4 of this case will examine various aspects of Google in greater detail.
CASE QUESTIONS

1 Based on what you have read, how would each type of management skill be important to . Google's success? Give specific examples to explain your answer. 2. Consider Google as a system. Give an example of each type of input available to Google. Give examples of transformation processes and outputs at Google. What impact does the environment have on Google and what impact does Google have on the environment?

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Introduction to Organizat~onalBehavior

3. Which environmental force (globalization, diversity, technology and competition, or ethics) d o

you think will provide the most benefits to Google in the near future? Which force do you think will provide the most difficulties o r problems? Why?
REFERENCES

"Corporate Information," Google website, www.google.com on May 3, 2008; Gemma Simpson, "Google Beats Microsoft, Coke in Brand Stakes," CNet Nms, April 23,2007, www.news.com on May 3,2008; Verne Kopytoff, "Google Surpasses Microsoft as World's Most-Visited Site," San Francisco Chronicle, April 25,2007, www.sfgate.com on May 7,2008; Alex Halperin, "Google's Sudng Safari," Fast Company, April 11,2008, www.fastcornpany,com on May 2,2008; Kenji Hall, "Japan: Google's Real-Life Lab," Business Week, February 14,2008, www.businessweekcom on April 29, 2008; Erick Schonfeld, "Yahoo's Chma Problem," Business 2.0, February 8,2006, www.cnnmoney.com on May 27,2008; "Cookie Monster," Finamid Ems, April 23,2008, ~ww.ft.comon May 2,2008;Mchael Liedtke, "Lawsuit Alleges Google Discriminates Against Older Workers," USA Todoy, July 23,2004, wv.usatoday.com on May 27,2008; jay Greene, "Inside Rlicrosoft's War Against Google," Buszness Week, May 19, 2008, pp. 36-40.