Sources of Google’s Competitive Advantage

Google’s Competitive Advantage – How sustainable?

Apart from being one of the most valuable brands of the world, Google is best known for its search engine and a vast advertising empire that extends to every corner of the world and rests on innovative technology. It is one of the leading names in the world of technology that has grown at a very fast rate. The primary source of revenue for Google is online advertising. In this area it has got very few competitors and the only one with strong clout is Facebook.

However, apart from providing online services for individuals, developers and companies, the brand also makes and sells several other products like cell-phones. (Check a complete marketing mix here.) The primary basis of differentiation for Google is innovative technology. However, the brand has managed several critical strengths that are important sources of competitive advantage for it. To grow and retain a leadership position in the technology industry is possible only if the business has some sources of sustainable competitive advantage. This is an analysis of the strengths that have created sources of advantage for Google in the tech industry.


Google's sources of sustainable competitive advantage

Innovative technology:

Google’s most critical strength is its innovative technology and also the enabler of its fast growth. The growth story of Google started from its search engine which was for helping users reach all the necessary information they needed. This is also the reason behind Google’s popularity that it created a network which brought a very high level of convenience for users.

Its search engine is known as the most efficient search engine whose algorithms are far ahead and much faster and efficient than its competitors. Apart from its search engine, Google is a provider of several other internet and cloud based services and owner of the biggest online advertising platform Adsense.

Alphabet is the parent company of Google. It has patented a large range of technologies and is now aggressive about having more. Another important thing about Google is that it invests a lot in R&D for development of new technologies.
Some other key technological products which are known for their efficiency are Chrome browser, Android OS, Gmail, Analytics and Google docs. While many of its free tools are for used by individuals, several of them are for the developers and are free for limited use. Its Pixel cell-phone has several attractive features for Gen-Xers and professionals. In this way, Google has a quite large portfolio of technology products and services. Its technology is the main source of competitive advantage for the brand. Due to a very high level of differentiation, it has proved to be a source of sustainable competitive advantage.

The company has also continued to increase its investment in research and development to improve its products and services and bring new technological products to the market. In fiscal 2021, Alphabet, the parent company of Google invested $31.5 billion in research and development. The biggest advantage of the leading players in the tech industry including Amazon, Google, Apple and Facebook is that, they can invest billions in research and development.

Innovative HR:

HR innovation can also be a source of competitive advantage and that has been proved in the case of several brands. In the 21st century, the role of skilled IT professionals has grown most important to the success of the technological companies. Google is known as one of the leading innovators in the field of HR. In fact, it led a change influencing several other brands in the technology industry which is otherwise known for complex tasks, roles and a highly complex and brutal HR environment.

It came to be known as an employee focused company offering its employees more opportunities to use their creativity as well as better salaries and benefits.
An amazing culture has helped Google position itself as one of the best employers and proved great for its brand image. Google has continued to innovate in the area of HR through better HR policies and programs. However, the most notable thing is that the brand founded by Larry page and Sergey Brin has achieved so many milestones successfully under Sundar Pichai with the help of those thousand Googlers and it is why it cares so much for its employees.

A good culture, environment and proper management of your Human Capital helps you in both the short and the long term and can be a very critical source of competitive advantage. When you innovate in HR, you easily remove so many performance bottlenecks which leads to better performance and higher productivity.

Customer friendly brand image:

A customer friendly brand image works in every industry inspiring easy brand recall and leading to a higher level of popularity. Google’s image is that of a customer oriented company and like other customer oriented technology companies like Apple and Microsoft, it has also grown faster because of its popularity.

Its search engine is the most user friendly search engine in the world. Apart from that, its browser, Mobile OS, and several other online products and services are also very friendly to use and come free of cost or free for limited use. These things have led to a deeper level of market penetration as well as higher reach and sales. The number of people using Google or some of its products must be in billions. This is an advantage which is sustainable in the longer term. User friendliness in this way can create a major source of competitive advantage for any brand.

Global presence:

Where there is internet, there is Google. It is not difficult to imagine that Google is present globally. Global accessibility is a major source of competitive advantage for a technology brand. If your users can reach you anywhere it does not just mean higher reach but higher sales too. This is also a reason that Google was accused of trying to monopolize the internet market. Whatever be Google’s intentions, but its global presence becomes a source of clout and a major challenge for competitors globally. Accessibility is an advantage whose effect is difficult for rivals to counter and makes a brand’s position stronger against them. The primary competitors of Google’s search engine are Bing and Yahoo and they have a considerably smaller share in the market compared to Google.

Large product portfolio:

A large product portfolio can also be  a major source of competitive advantage. As a technology company Google has  a quite large and diverse product portfolio ranging from a search engine to several other online products and services as well as cellphones. Some of them are performing very well like its search engine and Adsense.  A large product portfolio caters to the needs of  a large customer base and can provide sustainable advantage.

Financial strength:

Financial strength can be a major source of competitive advantage for any brand in the 21st century. It allows you to spend more on marketing and research and development as well as release of new products. Google is continuously working on developing new technologies and technology products. It also spends much on marketing and promotion. Its 2021 revenue was $257,637 Billion, which was the highest in its history. Higher earnings also help with better management of infrastructure and human resources. It also creates a source of sustainable competitive advantage since the brand can easily release new products or diversify into new areas if it likes. Google has continued to diversify its sources of income and apart from the sales from its core advertising business, its non advertising revenue has also grown in recent years. In 2021, the company generated more than $47 billion from non advertising sources. Its financial position continues to improve further strengthening its competitive position against its rivals.

Conclusion:

Google’s successful business model is based on several sources of competitive advantage. The major ones among them are its technology, human resources, brand image and financial clout. These provide it with a sustainable source of competitive advantage and formidable competitive strength in the technology industry. Its main source of revenue is online advertising and the brand had near monopoly in this area except for the challenging rise of Facebook in mobile ads. Still, its popularity and dominant position in the internet industry have helped it cement its position and the ability to diversify into new areas.

Google is a market leader in advertising and also one of the leading players in the cloud industry. Its growth in the cloud segment will help it reduce its dependence on advertising. However, its revenue from digital advertising continues to improve and from non advertising sources also proving its strong advantage against other players. Google is pitted against some mighty rivals like Apple, Facebook, Amazon and Microsoft. Its lead in search advertising has helped it retain its dominant position. Its improving financial performance will only help it further cement its position and accelerate its growth momentum.

Sources:

Google SWOT Analysis – Notesmatic

Google Marketing Mix


Alphabet Revenue