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TOWS Matrix Analysis

2. Identify and critically evaluate Google Alphabet’s resources and capabilities using relevant frameworks and concepts. In your answer you should use your evaluation of resources and capabilities to assess how Google Alphabet achieves competitive advantage in its industry.

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3. What type of diversification strategy is Alphabet pursuing? Explain the organizational structure of Alphabet using its strategic business units? What is the rationale behind this structure and diversification strategy?

Alphabet INC is a giant conglomerate and holding company for Google LLC and more than 200 companies which are subsidiaries to it. It has online, digital and moon shoot companies under its verticals which are independent from one another. From 2001 to 2020, the company has done more than 200 acquisitions. If we consider companies acquired, it appear to be unrelated diversification, however, when these companies are evaluated on the basis of their activities, most of them are generally to support Google search advertising which is the main activity of Alphabet Inc. Acquisition of Alphabet Inc proves to facilitate diversification strategy. These acquisitions are very specialized in social networking, intelligent home systems, robotics, communication, e-commerce, navigation, office software, and their core capabilities such as search engine, mobile OS, advertising or information technology (voice and image recognition). Diversification strategy of Alphabet Inc is twofold:

Related diversification through product and service innovation and acquisition

Related diversification in terms of acquiring and developing internet and technology based products and services to capture the global internet market such as cloud computing, Android OS, R &D in Artificial intelligence and so on.

The main service of Alphabet Inc is Google online search and major revenue is generated through online advertisement. It has diversified into various internet related products and services such as Gmail, Google drive, Google my business, Google map, Google photos, YouTube; enterprise products such as Ad sense, Ad Word, Pay per click and other utility services such as Google translate, Google news, Google drive, Google map, Google language. It enabled the company to reach to a large number of internet users and make them dependent on its products and services. It helps the company to create consumer base of Google dependent internet users. It also enables the company to position itself as one stop solution venue for all internet related services. Chrome had 60 % market share in web browsing in 2017. Google map allows retailers to advertise their address and products through promoted place application.

Unrelated diversification through company and product acquisitions for expansion

From search engine business in 1998, Alphabet Inc. offers the widest ranges of products and services termed as other bets. Other Bets includes businesses like Access (Google Fiber), Calico, CapitalG, GV, Nest, Verily, Waymo, and X.

Continuous investment in development and acquisition of products such as artificial intelligence, machine learning and robotic technology, health care, venture capital funding, energy, self driving car, drone delivery and R& D in many moon shot projects, consumer hardware, airborne wind turbine, learning thermostats, smoke alarms and many other business segments have led to diversification of Alphabet’s business into other technological segments and industries. First mover advantage is the main Alphabet competitive advantage in relation to the majority of these products and services.

Acquisition of HTC Google will allow engineers to more tightly integrate hardware and software and differentiate its high end pixel phone from Apple I phone X. Acquisition of Android for smartphone OS held 85 % market share in 2017.

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Alphabet INC organisation structure

Rationale behind Alphabet INC structure and diversification strategy

· It will help company to become process driven and focus on core capabilities and business operations of Alphabet Inc from where it generates most of its revenue.

· It aims to increase competitive features and innovation potential and competitive power of the company.

· Related diversification enables Alphabet to extend its resources and capabilities to create value. It will also help to develop and exploit economies of scope between its businesses.

· Unrelated diversification enables Alphabet in attaining financial economies in terms of cost saving through improved allocations of financial resources based on investments and restructuring of assets.

· It will help in maximizing profit through creation of closed eco system. With inter connected products and services in its product portfolio, users are prompted to use additional services thus allowing company to generate profit from different products and services.

· It will help the company to run lesser risk of anti-trust violations and is also better able to account for income streams from various subsidiaries easily.

· It enables company to enter new markets and improve existing market shares.

· It allows internet giant to empower its current products and services through exploration of other valuable tech ventures to flourish its technological capacities and penetrate new market and users for its services.

· It enables interdependency across different industries and sectors by promoting importance of internet, digital communication and other technologies in the diverse business organisations.

· It will help to focus first on developing the user experience before monetizing a product.

· With the diversification created through acquisitions and division of organisational structure into core revenue generating business and other bets, Alphabet will be able to manage strict financing on the ongoing projects and create profitability for it.

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References

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· Afyon Kocatepe Üniversitesi Sosyal Bilimler Dergisi / Cilt: 20, Sayı: 3, Aralık 2018, 271-289 Afyon Kocatepe University Journal of Social Sciences / Volume: 20, No: 3, December 2018, 271-289 Diversification Strategy in Internet Industry: Case of Google Inc.

· Mohammadhasan Moghadasi (2019).Ershad Damavand Institute of Higher Education Corporate strategy analysis: A case study of Alphabet Inc. Retrieved from https://www.research gate.net/publication/334812560