CASE STUDY 1:

Google, Inc.: Searching for New Avenues for Growth

This case discusses the different businesses that Google is operating in and its strategy in
foraying into them. Google started off as on online search engine in 1998 and within a span of 5
years, became the market leader in search services due to the speed and relevance of the search
results that it delivered. Its fundamental business model was to make revenue out of the
contextual paid ads that were displayed with the search results. By October 2011, Google's share
of the desktop search market and wireless search market, globally, was 82.4% and 91.1%
respectively. It had also branched out into other online services like web hosting (YouTube,
Google Maps, etc.), enterprise services (Google Docs and Cloud computing), communication
services like Gmail, social networking (Orkut, Google+), mobile operating software (Android),
and mobile phone design and sales (Nexus One). But this growth came at the cost of its
reputation as the company drew criticism for violating users' privacy by hawking details of their
web usage patterns to advertisers, for turning a blind eye to copyright issues as in the case of
Google Books, and for playing the bully by manipulating its search results to benefit its own
services and stifle the competition. It not only had to deal with formidable rivals such as
Microsoft, Facebook, and Apple, but also had to face scrutiny from antitrust authorities in the US
and Europe for allegedly abusing its leadership position. Google ruffled many feathers when, in
August 2011, it acquired the mobile device manufacturer Motorola Mobility Holdings Inc.
Through this acquisition, Google morphed into a full-fledged device maker. The acquisition left
many wondering whether Google had bitten off more than it could chew.

In August 2011, Google, Inc. (Google), the undisputed leader in online search, took many by
surprise when it announced that it was taking over Motorola Mobility Holdings Inc, the mobile
device manufacturer. The surprise was understandable, given the fact that Google, which had
previously focused on web services and software, was getting into a brick-and-mortar business,
where the margins were wafer thin, and which required skills that it did not possess. In fact, the
only way that Google and Motorola were related was that both operated in the technology
sphere. So could substantial synergies be derived from the deal, was the question on people's
minds. Also, with Google morphing into a complete mobile device manufacturer, other smart
device makers that had previously worked with it to make the Android operating software a
roaring success, would in all probability, take a relook at their alliance with it. Analysts
wondered whether Google, which had previously achieved phenomenal growth without going
anywhere near hardware, was actually making a mistake. With the growth of the Internet, there
was a felt need among users for a search mechanism to get the information they sought from
websites. One of the pioneers of search services was Yahoo! Inc., which used human editors to
sort websites. As Internet usage exploded, this human-powered search proved inadequate.
AltaVista, a search engine, deployed computer programs called spiders or crawlers that checked
various websites and listed the relevant ones. The relevance of the web pages and their ranking
was based on the frequency of keyword occurrence. But this process, in many cases, threw up
irrelevant results. For instance, in a search for Oracle, the pages of vendors of Oracle products
might rank above Oracle Corporation's website as the vendor pages might feature many Oracle
products. This problem was addressed by Larry Page (Page) and Sergey Brin (Brin), two
students of Stanford University. In 1998, Page and Brin came out with a search engine named
Google, the result of a project they had undertaken at the university. Key to this search engine
was the algorithm PageRank which gave a serialized ranking to each constituent of any
hyperlinked batch of notes (as was the World Wide Web), with the objective of assessing its
comparative significance within the batch. In the case of the World Wide Web, PageRank ranked
web pages according to their importance, which was a derivative of the number of websites that
were linked to it. They launched their paid search ads under the name AdWords in October 2000.

Investment in Hardware Technology

A distinct facet of Google's overall strategy was its heavy investment in hardware technology
that would enable its search engine process queries faster. Google felt that the faster the results
showed up, the greater would be the users' tendency to stick to its search engine. This in turn,
would enable Google to push more of its paid listings. It was estimated that in 2010, Google had
a total of 900,000 servers.

Nurturing Innovation
During the US recession in 2008, Google's share price plummeted 35% between early 2008 and
April 17, 2008 – when Google was to declare its first quarter results. Google's business was
expected to contract, in sync with the economy.

But Google came up with strong numbers, resulting in its share price rocketing up 20% on April
18. This was attributed to Google's endeavor to encourage innovation in the company, resulting
in its coming out with disruptive technologies from time to time. Google's employees had to
spend 20% of their time on new ventures that interested them and where they could explore new
horizons. Some of Google's bellwether products evolved from this initiative.

Lines of business: Google kept its focus on coming out with new search tools that significantly
improved the search process. In early 2004, Google introduced personalized web search that let
browsers filter search results according to their interests. A user could create a repository of
his/her interests and use a "glider" slab that cropped up above the search results to have the
results tuned to his/her pursuits. In September 2002, Google launched Google News. Google
News collected headlines from 4500 online news publishers globally, clustered similar topics,
and gave links to articles on these content providers.In 2004, Google launched the Google Books
project, wherein it collaborated with universities globally to scan the entire stocks of their library
books, and create an online data mine of these digital copies for text search. By March 2011, 12
million books had been scanned. Google deployed its paid ads adjacent to the search results
depending upon the keywords. In 2005, the Authors Guild in USA and the Association of
American Publishers sued Google alleging that it was profiting from the illicit sale of
copyrighted books.

Facebook
Facebook was a leader in the online social networking space globally. Since its inception,
Facebook had concentrated on this segment, and was expected to have an edge over Google in
attracting Internet traffic. It was estimated that users in the US devoted 9.9% of their web
browsing time in August 2010 to Facebook when compared to 9.6% for Google. As users spent
more time on Facebook, advertisers preferred it.

Apple
Apple was a leading player in smartphones. Some observers felt that it had a status that the other
players, including Google, could only aspire to. In the low-margin hardware industry, Apple
consistently stood apart with operating profits of around 32%, due to its brand equity which
enabled it to charge a premium.

Google's dominance over the online search segment was, over time, proving to be a double-
edged sword. Over the years, there were growing protests among Google's competitors and
government authorities in the US as well as in Europe that Google was abusing its search
leadership position. Critics contended that Google's invincibility in the search business placed it
in a position to determine what browsers could locate on the web. Since Google had fanned out
into new service domains like mapping, travel, and shopping, it was felt that Google was
favoring its own sites in ranking the search results.

Questions:

1. Discuss the strategies that companies need to follow in building market shares without
compromising on their financial performance.

2. Elucidate the specific strategies that Internet companies need to follow, operating as
they are in a field notorious for technological obsolescence.

CASE STUDY 2:
 SUN MICROSYSTEMS IN TWILIGHT SAGA

Sun Microsystems (Sun) is a leading manufacturer of workstation computers. It has traditionally

pursued a unique, vertically integrated business model. Unlike most computer hardware vendors,
Sun makes its own chips (SPARC) and operating system (Solaris). Sun rose to fame during the
early 1990s with its huge bet on the server market paying-off. Riding the exploding growth in
that market, Sun grew faster than any other computer company to reach revenues of $1 billion.
But things have not been going well for Sun in recent times. Sun's stockprice, which hit $60 by
the end of 2000, has fallen to about $3 by August 2004. In mid-2004, Sun seems to be beset by
various problems. Low cost computers based on Intel chips and Linux software are posing a
major threat. The company's cost structure appears to be bloated.There has also been major
management turmoil. It remains to be seen whether Sun can overcome these problems and
reinvent itself.

Sun Microsystems (Sun), a leading manufacturer of workstation computers, had traditionally

pursued a unique, vertically integrated business model. Unlike most computer hardware vendors,
Sun made its own chips (SPARC) and operating system (Solaris). Its software portfolio included
application server, office productivity, and network management applications. Sun had also
developed Java, a programming language for creating software that ran unchanged on any kind
of computer. Once a shining star amongst the tech companies, Sun had slowly but steadily lost its
sheen. Its stock price, which hit $60 by the end of 2000, had fallen to about $3 by August 2004
For the fiscal year ended June 2004, revenues declined by 2% from the year before to $11.19
billion.

In mid-2004, Sun seemed beset by various problems. Low cost computers based on Intel chips
and Linux software were posing a major threat. The company's cost structure had become
bloated.The four people who came together to setup Sun Microsystems in 1982 had seen a
great market potential for high-speed workstation computers. Andreas Bechtolsheim
(Bechtolsheim), a Stanford engineering graduate student, had built a workstation from spare
parts.Incorporated in California in February 1982 and reincorporated in Delaware in July 1987,
Sun employed approximately 36,100 employees in 2004. It conducted business in over 100
countries.

Sun’s Decline:

Sun had risen to fame during the early 1990s with its huge bet on the server market. Riding the
exploding growth in that market, Sun reached $1 billion in revenue--the fastest rise ever for a
computer company with a direct sales force. During this time, Sun seemed to single-handedly
drive innovation in both hardware (SPARC chips) and software (Java, Solaris).

Road Ahead:
Sun reported a net loss of $376 million or 11 cents per share for fiscal year 2004. McNealy was
quick to defend his company's position, noting that Sun's services business had reached a
benchmark $1 billion in sales with total revenues of $1.04 billion compared with $979 million in
the same period last year.
Case Study 3:

Steve Ells: Food with integrity

The case examines the business model of the US based fast casual restaurant chain, Chipotle
Mexican Grill Inc. (CMG). CMG was founded by Steve Ells (Ells) in 1993. The company,
which initially sold burritos, was well known for its 'made to order' food and use of organic
ingredients. In the late 1990s, the company started expanding rapidly throughout the US. In
2001, CMG released a mission statement called "Food with Integrity," which highlighted its
commitment to naturally raise meat, organic produce, and dairy products without adding
hormones. Apart from usage of organic ingredients, CMG's restaurant design, marketing
strategy and culture of the company played an important role in its success.The case also
analyzes the role of Ells leadership in the success of the company.

On November 17, 2009, the US-based fast casual restaurant chain, Chipotle Mexican Grill Inc.
(CMG), announced that it would open a restaurant in London, United Kingdom (UK). This was
the company's first restaurant outside the US and Canada. The restaurant was expected to be
operational by April 2010. Commenting on the plans to open the first CMG restaurant in
Europe, Steve Ells (Ells), Founder, Chairman and Co-Chief Executive Officer (CEO) of CMG,
said, "We are very encouraged by the prospects for Chipotle in the UK. London has become an
important food city over the years, especially because of the awareness of food and desire for
things like locally sourced, seasonal, and artisanal ingredients.

These are all core values of Chipotle and we have been instrumental in bringing this kind of
thinking to fast food in the US. We call it 'Food with Integrity' and it is how we are changing the
way people think about fast food." Apart from London, CMG planned to open restaurants in
other locations including Paris in France and Munich in Germany.CMG was the brainchild of
Ells. Ells was born on September 12, 1965, in Indianapolis, US. At a very young age, he had
developed an interest in cooking, and an admiration for fine cuisine.In 1998, McDonald's made
an initial minority investment in the company. With this investment, CMG started expanding
rapidly in the US. In 1998, CMG's expansion plans helped the company cater to an increasing
number of Hispanics in the US, who were the largest minority group in the country at that
time.Analysts attributed the success of CMG to some differentiating factors including the use of
organic ingredients, interactive service, restaurant design, marketing strategy, and the culture at
the company.Although CMG managed to emerge as the leading fast casual restaurant chain in
the US, it attracted criticism on several fronts. Some analysts expressed concerns about the food
served at CMG, saying it had high calorie and sodium content.Despite these criticisms, CMG
continued its focus on providing food with organic ingredients and also on enhancing its
customers' experience. Analysts attributed the success of CMG to Ells. According to Kenny
Lao, Co-owner of Rickshaw Dumpling Bar, New York, Ells has done an amazing job with
operations, with standards.
Questions:

» Understand the business model of CMG Inc.

» Analyze the factors behind the success of CMG Inc.
» Examine the leadership style of Steve Ells.
» Study the criticisms against CMG and evaluate the future prospects of the company.