Posted: April 24th, 2025

Business Finance – Management this is an assignment and i must have ORIGINAL work only with up to date references PLEASE read and follow INSTRUCTIONS PLEASE!

 PLEASE READ AND FOLLOW INSTRUCTIONS THIS IS A DRAFT INTRODUCTION TO THE FINAL PAPER!!!

Overview

This course has four assignments. Assignments 1 through 3 focus on preparing you for the fourth capstone assignment and accompanying PowerPoint presentation. In each assignment, you will apply the skills, experience, and knowledge gained from completing prerequisite program courses.

You will use the same company case study for each assignment so that your capstone assignment represents culminating research and analysis. Select one of the three recommended cases listed below, identifying the problem or issue detailed in the case as the basis for your strategic analysis and development. Each case is located in the Cases to Accompany Contemporary Strategy Analysis section of the textbook.

• Case 2: Kering SA: How Does Its Performance Compare to That of LVMH?
• Case 3: Pot of Gold? The US Legal Marijuana Industry.
• Case 12: Google Is Now Alphabet—But What’s the Corporate Strategy?

You may also use the Strayer Library or the Internet to further research articles on your chosen case. The

MGT599 Library Guide

provides information about using resources for your research.

After you make your selection, begin your initial research. For this activity, you will start outlining your paper as a structure to guide the rest of your work, so that each assignment in Weeks 3, 5, and 7 builds towards your final plan.

Instructions

To complete your Week 2 activity, please prepare and submit the following:

1. Draft an introduction to your final paper.

   Describe to your reader the paper’s intent.
   Explain the main points you will cover in the paper.

2. Outline the structure of the paper.

   What: Summarize the facts of the case study.
   How: Describe the problem in the case study details. How did the problem happen?
   Where and when: How old is the problem? Describe external environmental factors at the time—local factors, cultural issues, and corporate culture within the industry. Was there a consistent corporate culture or did it vary a great deal by region? What has happened since?

3. Use at least three quality references to begin your research. Note: Wikipedia and other similar websites do not qualify as academic resources.

After you’ve outlined the structure of your paper, draft a conclusion. Your conclusion will highlight the significant findings you uncover in researching the paper.

Base your work on course materials and in-depth academic research, using critical thinking and verifiable data and proof. For help with research and writing, access the

library

or review

library guides

.

This course requires the use of Strayer Writing Standards (SWS). The library is your home for SWS assistance, including citations and formatting. Please refer to the

Library site

for all support. Check with your professor for any additional instructions.

View RubricWeek 2 Assignment – Activity – Case SelectionWeek 2 Assignment – Activity – Case SelectionCriteriaRatingsPtsDescribe to your reader the paper’s intent.11.25 to >10.12 ptsExemplaryDescribed to your reader the paper’s intent.10.12 to >9 ptsCompetentDescribed to your reader the paper’s intent, but the description was incomplete.9 to >7.87 ptsNeeds ImprovementDescribed to your reader the paper’s intent, but the description was incorrect.7.87 to >0 ptsUnacceptableDid not describe to your reader the paper’s intent./ 11.25 ptsExplain the main points you will cover in the paper.15 to >13.5 ptsExemplaryExplained the main points you will cover in the paper.13.5 to >12 ptsCompetentExplained most of the main points you will cover in the paper.12 to >10.5 ptsNeeds ImprovementExplained some of the main points you will cover in the paper.10.5 to >0 ptsUnacceptableDid not explain the main points you will cover in the paper./ 15 ptsSummarize the facts of the case study.15 to >13.5 ptsExemplarySummarized the facts of the case study.13.5 to >12 ptsCompetentSummarized most of the facts of the case study.12 to >10.5 ptsNeeds ImprovementSummarized some of the facts of the case study.10.5 to >0 ptsUnacceptableDid not summarize the facts of the case study./ 15 ptsOutline a description of the problem the case study details and how the problem happened.15 to >13.5 ptsExemplaryOutlined a description of the problem the case study details and how the problem happened.13.5 to >12 ptsCompetentOutlined a description of the problem the case study details and how the problem happened, but with a few omissions.12 to >10.5 ptsNeeds ImprovementOutlined a description of the problem the case study details and how the problem happened, but with some significant omissions.10.5 to >0 ptsUnacceptableDid not outline a description of the problem the case study details and how the problem happened./ 15 ptsOutline an explanation of how old the problem is, the external environmental factors involved, the corporate culture, and what has happened since.15 to >13.5 ptsExemplaryOutlined an explanation of how old the problem is, the external environmental factors involved, the corporate culture, and what has happened since.13.5 to >12 ptsCompetentOutlined an explanation of how old the problem is, the external environmental factors involved, the corporate culture, and what has happened since, but with a few omissions.12 to >10.5 ptsNeeds ImprovementOutlined an explanation of how old the problem is, the external environmental factors involved, the corporate culture, and what has happened since, but with some significant omissions.10.5 to >0 ptsUnacceptableDid not outline an explanation of how old the problem is, the external environmental factors involved, the corporate culture, and what has happened since./ 15 ptsProvide at least three quality references.3.75 to >3.37 ptsExemplaryProvided quality resources that are credible, relevant, and appropriate.3.37 to >3 ptsCompetentProvided quality resources that are credible, relevant, or appropriate, but not all three.3 to >2.62 ptsNeeds ImprovementProvided references, but they are not credible, relevant, or appropriate.2.62 to >0 ptsUnacceptableNo references provided./ 3.75 pts

THIS IS THE TOPIC I CHOSE

 Case 12 Google Is Now Alphabet—But What’s the Corporate Strategy?

 

Case 12 Google Is Now
Alphabet—
But What’s the
Corporate Strategy?*

On August 10, 2015, Google’s CEO, Larry Page, announced that Google Inc. would
become Alphabet Inc., a holding company of which Google (comprising the compa-
ny’s search and internet businesses) would be the biggest operating company. Extracts
of the announcement are reproduced in Exhibit 1.

The creation of Alphabet was widely viewed as Google’s top management finally
conceding to investors’ demands for greater transparency by separating Google’s pri-
mary source of profits, its search business, from Google’s other businesses. It was also
a confirmation by Google’s founders, Larry Page and Sergey Brin, that their company
was no longer simply a search company. The announcement reaffirmed the company’s
commitment to developing and commercialization of revolutionary technologies. This
quest had already led Google beyond search, beyond the provision of information, and
beyond software into mobile devices, home appliances, life sciences, self- driving cars,
broadband services, digital eyewear, and a host of other ventures.

Soon after its founding, Google had proclaimed “Ten Things We Know To Be
True”— a set of business principles that would guide the company’s development.
Second on the list was, “It’s best to do one thing really, really well,” to which the
response was: “We do search.”1

By 2012, five years after establishing its new identity, it was clear that Alphabet was
no longer a search company. But what was it?

Founders Brin and Page had consistently emphasized that the essence of their
company was applying technology to improving the lives of people. Page had declared,
“The societal goal is our primary goal,” the challenge being to: “.  .  . use all these
resources . . . and have a much more positive impact on the world?”2

If Alphabet was to be described by technology— then which technologies? From
the beginning, Google/Alphabet has been about algorithms— initially, its PageRank
algorithm, but increasingly artificial intelligence algorithms that model the functioning
of the human brain. By combining machine learning and artificial intelligence, Alphabet
has identified areas where machine intelligence can be superior to human intelligence.
The scope of these applications— from autonomous driving to medical diagnosis, to
facial recognition, to education— seems limitless.

The diversity of Alphabet’s business and technology initiatives also fueled suspi-
cions about the motives of the founders, Brin and Page. Despite their proclamations
to pursue the good of society and to “do no evil,” it seemed to some that Google
was locked in battle with Apple, Amazon, Facebook, and Microsoft for the control of
cyberspace.

* This case was prepared by Robert M. Grant. ©2021 Robert M. Grant.

Case 12

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CASE 12 GOOGLE IS NOW ALPHABET— BUT WHAT’S THE CORPORATE STRATEGY? 463

Investors’ perceptions of Alphabet were shaped more by its financial performance
than by its technology. Given that advertising accounted for more than 80% of revenues
and all of its operating profit: “Alphabet is essentially an advertising company.”3 Most
of Alphabet’s businesses that did not carry advertising were sources of information that
could be utilized to better target advertising.

The confusion over Alphabet’s corporate strategy was no recent phenomenon. In
2009, San Jose the Mercury News observed:

Google increasingly feels like a company running in a thousand different directions at
once . . . The problem is that in expanding into so many different areas, the identity
of Google itself has become muddled . . . it’s getting harder every day to articulate
what Google is. Is it a Web company? A software company? Something else entirely?4

Although comparisons have been made with other diversified giants— the Economist
proclaimed Alphabet to be “the new General Electric” and Alphabet’s Chairman Eric
Schmidt likened it to Berkshire Hathaway— ultimately, it seemed that Alphabet truly
was “a different kind of company.”5

EXHIBIT 1

Google Announces Plans for New Operating Structure
August 10, 2015

As Sergey and I wrote in the original founders’ letter 11

years ago, “Google is not a conventional company. We

do not intend to become one.” . . . From the start, we’ve

always strived to do more, and to do important and

meaningful things with the resources we have.

We did a lot of things that seemed crazy at the time.

Many of those crazy things now have over a billion

users, like Google Maps, YouTube, Chrome, and Android.

And we haven’t stopped there. We are still trying to do

things other people think are crazy but we are super

excited about.

We’ve long believed that over time companies tend

to get comfortable doing the same thing, just making

incremental changes. But in the technology industry,

where revolutionary ideas drive the next big growth

areas, you need to be a bit uncomfortable to stay relevant.

Our company is operating well today, but we think

we can make it cleaner and more accountable. So we

are creating a new company, called Alphabet. I am really

excited to be running Alphabet as CEO with help from

my capable partner, Sergey, as President.

What is Alphabet? Alphabet is mostly a collection of

companies. The largest of which, of course, is Google.

This newer Google is a bit slimmed down, with the com-

panies that are pretty far afield of our main internet prod-

ucts contained in Alphabet instead. What do we mean

by far afield? Good examples are our health efforts: Life

Sciences (that works on the glucose- sensing contact

lens), and Calico (focused on longevity). Fundamentally,

we believe this allows us more management scale, as we

can run things independently that aren’t very related.

Alphabet is about businesses prospering through

strong leaders and independence. In general, our model

is to have a strong CEO who runs each business, with

Sergey and me in service to them as needed. We will rig-

orously handle capital allocation and work to make sure

each business is executing well. We’ll also make sure we

have a great CEO for each business . . .

Larry Page, CEO, Alphabet

Source: Larry Page, Google Announces Plans for New Operating
Structure. Retreive from https://abc.xyz/investor/news/
releases/2015/0810.html, accessed March 21, 2018.

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464 CASES TO CONTEMPORARY STRATEGY ANALYSIS

The History of Google, 1996–2021

The Google Search Engine

Larry Page and Sergey Brin met as Ph.D. students at Stanford University. Their PageRank
algorithm was the basis of their search engine “Google” and, in September 1998, Google
Inc. was founded.

Among the early web search engines such as WebCrawler, Lycos, Excite, Infoseek,
Inktomi, Northern Light, and AltaVista, Google attracted a rapidly growing follow-
ing because of its superior page ranking and simple design. In 2000, Google began
selling advertisements— paid web links associated with search keywords. Its AdWords
placed “sponsored links”— brief, plain text ads with a click- on URL— which appeared
alongside web search results for specific keywords. Advertisers bid for keywords; it was
these “cost- per- click” bids weighted by an ad’s click- through rate (CTR) that determined
the order in which the paid listings would appear. By 2004, Google became the US
market leader in web search; between 2010 and 2021, its share of web search fluctuated
between 85% and 91%.

Google became a public company on August 19, 2004. However, founders Brin and
Page retained control by owning 51% of shareholder votes.

Organizing the World’s Information

Google’s expansion beyond web search was a reflection of its mission “to organize the
world’s information and make it universally accessible and useful.” Google’s IPO pro-
spectus elaborated this intent:

We serve our users by developing products that enable people to more quickly and
easily find, create and organize information. We place a premium on products that
matter to many people and have the potential to improve their lives, especially in
areas in which our expertise enables us to excel.

Search is one such area. People use search frequently and the results are often of great
importance to them. Delivering quality search results requires significant computing
power, advanced software and complex processes— areas in which we have expertise
and a high level of focus.6

Between 2001 and 2006, Google launched a series of new products that allowed
access to information from diverse sources. These included images (Google Image
Search), maps (Google Maps), academic articles (Google Scholar), books (Google Book
Search), satellite imagery (Google Earth), street photographs (Google StreetView), news
(Google News), patents (Google Patents), video (YouTube), finance (Google Finance),
weblogs (Google Blog Search), and many more.

However, Google’s entrepreneurial and technological dynamism led it well beyond
the accessing and organizing of information. Beginning with Gmail in 2004, Google
introduced a widening array of software and services for communicating, creating and
manipulating images, producing documents, creating web pages, managing time, and
social networking.

These new products expanded Google’s advertising revenues by providing addi-
tional opportunities for carrying ads and improving Google’s ads targeting. Google’s
primary source of advertising revenue was AdWords, launched in 2000. Advertisers

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CASE 12 GOOGLE IS NOW ALPHABET— BUT WHAT’S THE CORPORATE STRATEGY? 465

specify the keywords that should trigger their ads and the maximum amount they are
willing to pay per click. When a user searches google.com, short text advertisements
appear on the screen. The rank ordering of ads is determined by advertisers’ cost-
per- click bid and the “ad quality” (its relevance to the user). The advertiser then pays
Google according to the number of clicks on the advertisement.

AdSense uses an advertisement placement technology developed by Applied Seman-
tics (acquired in 2003) that allows Google to place ads on third- party websites. Table 1
shows Alphabet’s revenues from advertising and other sources.

In 2007 and 2008, Google’s diversification efforts took a dramatic new turn with
Google’s entry into mobile telephony and web browsers.

Android and Mobile Telephony

Google acquired Android Inc. in 2005 and in November 2007 launched the development
of its Android software platform, a Linux- based operating system for mobile devices.
According to Google: “Android is being developed . . . with the goal of providing con-
sumers a less expensive, richer and more powerful mobile experience.”7 Most observers
thought that Google’s primary concern was the threat that the shift from desktop to
mobile devices posed to Google’s advertising revenues.

Android was a spectacular success: in establishing market leadership (Table  2),
it prevented Apple from dominating the smartphone and tablet market. By offering
Android as a free, open- source, mobile operating system, it was able to attract a large
number of handset manufacturers (the most important being Samsung) and an army of
application developers— at the end of 2020 there were 3 million Android apps available
on Google Play.

TABLE 1 Alphabet’s revenue sources, 2008–2017 ($bn.)

2020 2019 2018 2017 2016 2015 2014 2013 2012

Google Search 104.1 98.1 85.3 69.8 63.8 52.4 45.1 37.4 31.2

YouTube ads 19.8 15.1 11.2 8.2

Google network members’ properties 23.1 21.5 20.0 17.6 15.6 15.0 14.0 13.1 12.5

Google total advertising revenue 146.9 134.8 116.5 95.6 79.4 67.4 59.6 51.1 46.0

Google othera 21.7 17.0 14.1 10.9 10.1 7.2 6.9 5.0 2.4

Google Servicesb 168.6 151.8 130.5 110.5 79.4 67.4 59.6 51.1 46.0

Google Cloud 13.1 8.9 5.8 4.1 n.a. n.a. n.a. n.a. n.a.

Other Bets revenuesc 0.7 0.7 0.6 1.2 0.8 0.4 n.a. n.a. n.a.

Total revenuesd 182.5 161.9 136.8 110.9 90.3 75.0 66.0 55.5 46.0

Notes:
a Includes revenues from Google Cloud prior to 2017.
b Google advertising revenues prior to 2017.
c Revenues from Other Bets were included in Google Services revenues prior to 2015.
d Includes gains and losses from hedging.
Source: Modified from Google Inc. and Alphabet Inc. 10- K reports, 2017.

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466 CASES TO CONTEMPORARY STRATEGY ANALYSIS

Chrome

Google’s Chrome web browser announced on September 2, 2008 generated huge pub-
licity, but little surprise. Sundar Pichai, then Google’s head of product development,
explained: “Google’s entire business is people using a browser to access us and the
web.” Google’s website added: “Google Chrome is a browser that combines a minimal
design with sophisticated technology to make the web faster, safer, and easier.”
By contrast, Microsoft’s Internet Explorer (IE) was constrained by the legacy of its
15- year history.

Google’s goal for Chrome was not simply a superior user experience. Version 8 of
Microsoft’s IE launched in 2008 allowed an “InPrivate” protection mode that would
delete cookies, making it more difficult to track users’ browsing habits. This would limit
Google’s ability to use such information to target consumers with advertising.

Others saw Google’s primary intention as, not so much to protect its search engine,
but more to attack Microsoft’s dominance of personal computing and to speed the
transition of computing to a new online environment. Wired magazine viewed it as:
“an aggressive move destined to put the company even more squarely in the crosshairs
of its rival Microsoft.”8

The announcement 10 months later that Google would add an operating system to
its Chrome browser reinforced the impression that Google was increasingly locking
horns with Microsoft.

Google in 

Hardware

As internet access transitioned toward mobile devices, Google sought to reinforce its
proprietary technology in that sphere. Since 2010, Google has marketed and distributed
smartphones under the Nexus and Pixel brands. HTC, LG, and Samsung have manufac-
tured these phones. Its acquisition of the struggling handset maker Motorola Mobility
in 2012 for $12.5 billion was primarily to acquire its rich portfolio of patents relating to
wireless communication. After selling Motorola to Lenovo in 2014, Google continued
to develop and market its Pixel brand of smartphones (built by HTC) and a range of
notebook and tablet computers based upon its Chrome operating system.

TABLE 2 Shipments of smartphones: Market share by operating system

2020 2018 2015 2013 2011

Android (Google) 84.8% 86.1% 78.0% 75.5% 36.1%

iOS (Apple) 15.2% 13.7% 18.3% 15.9% 18.3%

Blackberry OS (RIM) 0.0% n.a. 0.3% 2.9% 13.6%

Windows (Microsoft) 0.0% n.a. 2.7% 3.2% 2.6%

Other 0.0% 0.2%b 0.7% 1.5% 29.4%c

Total 100.0% 100.0% 100.0% 100.0% 100.0%

Notes:
a The data are for the first quarter of each year.
b Includes Blackberry and Windows.
c In 2011, “Other” comprised Symbian with 26.0%, Linux with 3.1%, and other systems 0.3%.
Source: Modified from IDC, Smartphone Market Share, Apr 2021.

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CASE 12 GOOGLE IS NOW ALPHABET— BUT WHAT’S THE CORPORATE STRATEGY? 467

Subsequent diversifications also increased Google’s involvement in hardware:

●● Google Glass is an internet- enabled, optical display built into a set of spectacles,
was introduced in 2013 and marketed on an experimental basis.

●● With the acquisition of Nest in January 2014, Google became a supplier of
home security and control devices— including thermostats and smoke detectors.
Google Home’s smart speaker business was merged into Nest, and Nest broad-
ened its range of security and entertainment cameras in order to build Google’s
position in the “smart home.” Google Assistant, an AI-powered virtual assistant
supporting two- way conversations, formed an integral part of Google’s smart
home initiative.

By 2021, individual products, notably its smart speakers, had achieved notable
success. However, in connected devices for home security and climate control,
Nest had achieved limited market penetration. Google halted the development of
its operating system for connecting devices, Android Things, early in 2021.

●● Google’s Chromecast is a plug- in connected device to a TV. Chromecast com-
plements Google TV’s video on-demand service that allows viewers to select
movies and TV shows from Disney, Amazon, and others.9

●● The acquisition of Fitbit (concluded in January 2021) provided Google with a
well- established position in the digital wearables market and access to a massive
stream of biometric data.10

Social Networking

Google’s forays into social networking were defensive moves aimed to counter Face-
book’s growing online presence and its growing share of online advertising:

If you were an advertiser, who would you rather place your ads with? On the one
hand, you have a company that will attempt to gear ads to things like the search his-
tory of users. On the other hand, you have a company that knows where its users
went to college, where they work, who they are friends with, what they’re reading
and sharing, and their favorite bands, books, foods, and colors. Advertisers want to
target their ads to the people most likely to be receptive to them, and information is
the key to targeting. The more information available, the better the targeting.11

However, all four of the social networks launched by Google (Orkut, 2004; Google
Friend Connect, 2008; Google Buzz, 2010; and Google+, 2011) failed to dent Facebook’s
dominance.12 In 2019, Google took a different tack: Shoelace, launched only in New York
City, was an experimental “hyperlocal” social network— it was closed the following year.13

Cloud Services

The launch of Google Cloud Platform in 2008 involved Google extending to third-party
customers the infrastructure hardware and services that it used in its own data centers
to run its end-user products. Since its launch, Google Cloud Platform has extended
its product range to include storage and database services, computing services, big
data services, an application programming interface, identity and security support, and
other cloud-based services. In 2016, Google’s G Suite productivity applications—Gmail,
Docs, Drive, Calendar, and Meet—were added to Google’s cloud platform to create
Google Cloud.

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468 CASES TO CONTEMPORARY STRATEGY ANALYSIS

Google has sought to differentiate its cloud offerings through emphasizing its soft-
ware strengths, particularly in big data and artificial intelligence. However, despite
strong revenue growth, it lags far behind Amazon Web Services and Microsoft Azure in
both market share and profitability.14

Other Bets

The restructuring of Google Inc. into Alphabet Inc. provided a powerful signal of the
breadth of the company’s ambitions and its willingness to take on risk (“alpha-bets”).
These “other bets”—as Alphabet referred to its non-Google businesses—include the
following (among others):

●● Waymo began as a self-driving car project in 2009. By 2015, Google was testing
fully autonomous cars on public roads in five states. In 2016, Waymo LLC was
established as a subsidiary of Alphabet; in 2020 it raised $3 billion in external
investment.

●● Life sciences ventures included Alphabet subsidiaries Verily and Calico. Verily
engages in bioelectronics research developing wearable and portable devices
and surgical robotics. It has also launched a health insurance venture backed
by Swiss Re. Calico’s mission is “to harness advanced technologies to increase
our understanding of the biology that controls lifespan.” Through R&D alliances
with AbbVie, C-4 Therapeutics, and other organizations, it has developed drugs
for treating cancer and other conditions.

●● Broadband. Alphabet’s Access subsidiary combines several broadband projects
directed at expanding access to the internet. Its principal business is Google
Fiber, which offers broadband and TV service in 19 US cities. It also includes
Webpass, a gigabit internet provider acquired in 2016.

●● DeepMind Technologies is a UK-based organization engaged in cutting-edge
research into artificial intelligence and its applications to computer science, neu-
roscience, engineering, and public policy.

●● X is Google’s “moonshot factory,” an incubator for developing experimental
technologies: “X is perhaps the only enterprise on the planet where regular
investigation into the absurd is not just permitted but encouraged, and even
required.”15 In its 2020 annual report, Alphabet reaffirmed its commitment to
working at the frontiers of technology:

Many companies get comfortable doing what they have always done, making
only incremental changes. This incrementalism leads to irrelevance over
time, especially in technology, where change tends to be revolutionary, not
evolutionary.16

Projects at X that have “graduated” into commercial undertakings include:

○○ Project Loon—high-altitude balloons providing internet connectivity in areas
lacking broadband infrastructure;

○○ Project Wing—package delivery via airborne drones;

○○ Malta—storing renewable energy in molten salt;

○○ Dandelion—geothermal energy for home heating;

○○ Chronicle—a cybersecurity intelligence and analytics platform that helps
companies to detect and counter hackers and cybercriminals.

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CASE 12 GOOGLE IS NOW ALPHABET— BUT WHAT’S THE CORPORATE STRATEGY? 469

Current projects include:

○○ Mineral—unlocking the genetic diversity of the world’s 30,000 edible plant
species to identify plant species and varieties that can thrive under the
pressure of climate change;

○○ Tidal—developing a system of cameras, sensors, and machine percep-
tion tools to improve the management of fish farms through improvements
to feeding systems, identification of pests, monitoring of fish health, and
providing a better understanding of events beneath the waves;

○○ Everyday Robots—developing a robotic system that can operate autono-
mously in unstructured human environments;

○○ Taara—using beams of light to deliver high-speed connectivity over long
distances to areas lacking broadband access.17

●● Venture Capital. Google Capital was established in 2013 to make late-stage
venture capital investments in technology companies. In 2016 it was renamed
GoogleG. The companies it invests in have access to technological and strategic
advice from Alphabet’s executives and engineers. Its investments include Survey
Monkey, Lending Club, Airbnb, Snap, Stripe, Robinhood, Databricks, and Lyft.
Google Ventures—renamed GV in 2015—is Alphabet’s other venture capital
subsidiary. It provides early-stage investment to companies in life sciences,
artificial intelligence, robotics, and cybersecurity.

Alphabet’s Management and Capabilities

In Alphabet’s holding company structure, each subsidiary is a separate legal entity with
its own CEO and a high level of decision-making autonomy (see Figure 1). The parent
company, Alphabet Inc., has limited functions and lacks the corporate staff typical of
diversified, multidivisional companies such as Procter & Gamble or General Electric.
Alphabet’s parent company functions are limited to overall financial control, legal mat-
ters, and shareholder relations. Operational and strategic decision- making lies almost
entirely within the operating companies. This structure allows considerable flexibility:
new businesses (either acquisitions or “graduates” from X) can be added, businesses
can be spun off, and external equity capital can be tapped.

A l p h a b e t I n c .
(parent company)

G o o g l e

Google
Search

Google
Ads

Google
Maps

Android
Google
Cloud

You
Tube

Nest

Waymo
LLC

DeepMind
Technologies

Ltd.

Verily
LLC

Calico
LLC

Access
LLC

Webpass
LLC

X

Sidewalk
Labs LLC

Wing
LLC

Fiber
LLC

Hardware

Capital
G

GV

O T H E R   B E T S

FIGURE 1 Alphabet Inc.: Organization structure

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470 CASES TO CONTEMPORARY STRATEGY ANALYSIS

While the holding companies are a highly traditional structure for diversified
companies— even if they are uncommon in the technology sector— Google’s management
system is unique, even by the unorthodox standards of Silicon Valley. Some of its key
features include:

●● Hiring policy: From its earliest days, Google committed itself to hiring only
the “brightest of the bright.” Google’s targets were not simply the highly
intelligent. They were “smart creatives”— people who were “not confined
to specific tasks . . . not adverse to taking risks . . . not hemmed in by role
definitions . . . don’t keep quiet when they disagree . . . get bored easily and
shift jobs a lot . . . combine technical depth with business savvy and creative
flair.”18 As founders Page and Brin explained: “Our employees, who have
named themselves Googlers, are everything. Google is organized around
the ability to attract and leverage the talent of exceptional technologists and
business people . . . Because of our employee talent, Google is doing exciting
work in nearly every area of computer science . . . Talented people are
attracted to Google because we empower them to change the world.”19

●● A “dramatically flat, radically decentralized” organization: Google structure
and systems were designed around the simple notion of “What do smart cre-
atives need in order to be productive?” The answer was primarily about the
aspects of traditionally managed organizations that should be avoided: authority,
rules, formality, defined job roles, and hierarchical privileges. Google was a flat
organization because its smart creatives needed easy access to key decisions in
order to get things done. To minimize hierarchy, Google used a “rule of seven”:
each manager must have at least seven direct reports.

●● Small, self- managing teams: Most of Google’s employees, including all those
involved in product development, worked in small teams. Most engineers were
in teams of three or four. Team size was limited by the “two- pizza rule”— teams
should be small enough to be fed by two pizzas. Teams appointed their own
leaders, and engineers could switch teams without the need for permission from
the HR department.

●● An environment that fosters creativity: For employees to be productive, they
required a working environment that stimulated and fostered their interaction.
Google’s workplaces were designed to minimize separation among colleagues.
Google’s opulent eating and sports facilities were similarly designed to increase
human interaction. Creativity and innovation were institutionalized through
Google’s “70–20–10” rule, which stipulated that Google would devote 70%
of its engineering resources to developing the core business, 20% to extend
that core into related areas, and 10% allocated to fringe ideas. As a result,
Google employees were able to spend time working on pet projects of their
own choosing.

●● Rapid, low- cost experimentation: According to Gary Hamel: “Evolutionary
adaptation isn’t the product of a grand plan, but of relentless experimenta-
tion . . . Google’s ‘just- try- it’ philosophy is applied to even the company’s most
daunting projects, like digitizing the world’s libraries . . . That kind of step- wise,
learn- as- you- go approach has repeatedly helped Google to test critical assump-
tions and avoid making bet- the- farm mistakes.”20

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CASE 12 GOOGLE IS NOW ALPHABET— BUT WHAT’S THE CORPORATE STRATEGY? 471

TABLE 3 Alphabet Inc.: Selected financial data, 2012–2020 ($ bn.)

2020 2019 2018 2017 2016 2015 2014 2013 2012

Income statement items

Revenues 182.5 161.9 136.8 110.9 90.3 75.0 59.1 50.5 43.7

Cost of revenues 84.7 71.9 59.5 45.6 35.1 28.2 25.7 22 17.2

R&D 27.6 26.0 21.4 16.6 13.9 12.3 9.8 7.1 6.1

Sales and marketing expense 17.9 18.5 16.3 12.9 10.5 9.0 8.1 6.6 5.5

General and admin. expense 11.1 9.6 6.9 6.9 7.0 6.1 5.9 4.4 3.5

Income from operations 41.2 34.2 27.5 26.1 23.7 19.4 16.5 15.4 13.8

Other income 6.9 5.4 7.4 1.0 0.4 0.3 0.8 0.5 0.6

Income before income taxes 48.1 34.3 30.7 27.2 24.2 19.7 17.3 15.9 14.5

Net income 40.2 34.3 30.7 12.7 19.5 16.3 14.4 12.9 10.7

Balance sheet items

Cash and marketable securities 136.7 119.7 109.1 101.9 86.3 73.1 64.4 58.7 48.1

Total assets 319.6 275.9 232.8 197.3 167.5 147.5 129.2 109.1 93.8

Long- term liabilities 40.2 28.2 20.5 20.6 11.7 7.8 9.8 7.7 7.7

Total stockholders’ equity 222.5 201.4 177.6 152.5 139.0 120.3 104.5 87.3 71.7

Source: Modified from Alphabet Inc. 10- K reports, 2017.

Underlying Alphabet’s capacity for innovation and effective implementation of
new initiatives was a set of resources that few other technology- based companies
could match. With an operating cash flow of $65 billion in 2020 and a cash pile of
$137 billion, Alphabet was a financial powerhouse that could buy its way into almost
any market or area of technology. (Table 3 shows financial data for Alphabet.) How-
ever, most of the time it was content to make small acquisitions. Owning one of the
world’s most valuable brands (Google) and the world’s two most visited websites
(google.com and youtube.com), Alphabet commanded attention in any market it
chose to enter.

Despite the flexibility benefits of Alphabet’s holding company structure, would lack
of integration undermine the organizational capabilities that had made the company
so successful? Commenting on the transition from Google to Alphabet, the Financial
Times observed: “Further down the organization, life gets more compartmentalized.
It is not obvious that working in a silo at Company XYZ, ‘an Alphabet subsidiary’,
is as attractive as working on complex issues across today’s Google.”21 Two years
later, Fortune confirmed these fears, noting that the creation of Alphabet has “changed
what it means to work for Google. Some grumble that their role now is to subsidize
innovation at their sister companies, rather than to innovate themselves. . . . That’s a
striking shift, especially for high- performing employees accustomed to moving about
the company almost at will.”22

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472 CASES TO CONTEMPORARY STRATEGY ANALYSIS

The Future of Alphabet

Google’s reincarnation as Alphabet established that Google was no longer a search
company, but failed to articulate what Google had become: Alphabet’s “strategy remains
as opaque as ever,” and lack of strategic clarity may translate into loss of “coherence,
insight, and resilience.”23

Undermining Alphabet’s pronouncements concerning its technological ambitions, the
fact remained that none of its “Other Bets” had achieved significant commercial success.

The dire financial performance of Alphabet’s Other Bets (see Table 4) reinforced the
tensions between Alphabet’s technological ambitions and its responsibilities to inves-
tors. These tensions have contributed to the high turnover of senior managers in the
Other Bet companies:

They signed up with the promise of being CEOs running their own startups, but
were instead constrained from the top by Alphabet’s CFO Ruth Porat, who con-
trolled funding, as well as by the whims of Google cofounders Larry Page and Sergey
Brin . . . The vision of Alphabet was to create nimble startups. Still, many of the entre-
preneurs tasked with leading these startups concluded that they had better prospects
of accomplishing their goals outside Alphabet than within.24

During 2019 and 2020, employee dissatisfaction became more widespread within
Alphabet. Employee complaints included bullying, sexual harassment, lack of commit-
ment to diversity, and unethical practices. The rising tide of discontent culminated in
the formation of the Alphabet Workers Union in January 2021 by a group of Google
employees.25

In addition to the problems arising from increasing size and— by 2021, Alphabet
had more than 135,000 employees— the company was also facing increasing external
pressures.

TABLE 4 Alphabet Inc.: Financial results of business segments, 2018–2020

2020 2019 2018

Revenues

Google Services 168,635 151,825 130,524

Google Cloud 13,059 8918 5838

Other Bets 657 659 595

Total revenues 182,527 161,857 136,819

Operating income (loss)

Google Services 54,606 48,999 43,137

Google Cloud (5607) (4645) (4348)

Other Bets (4476) (4824) (3358)

Corporate costs (3299) (5299) (7907)

Total operating income 41,224 34,231 27,524

Source: Modified from Alphabet Inc. 10- K reports, 2017.

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CASE 12 GOOGLE IS NOW ALPHABET— BUT WHAT’S THE CORPORATE STRATEGY? 473

Concerns over Google’s market power had resulted in antitrust actions in the
European Union, United States, and several other countries. In 2017, the European
Commission imposed a fine of €2.42 billion for anticompetitive practices regarding
Google’s display and ranking of shopping search and, in 2018, a €4.3 billion fine
for anticompetitive practices related to Android. In 2020, the US Department of
Justice charged Alphabet with antitrust contraventions in relation to search and
advertising.26

Privacy issues were another area where Alphabet faced regulatory and legal threats.
Privacy advocates and political activists have long expressed concern that Google’s
ability to track individuals’ search and browsing behavior, the content of their Gmail
messages, and, through Android, their cell phone usage and locations, represented
a threat to individual privacy. Initiatives to restrict Alphabet’s use of individuals’ data
included the European Court’s “right to be forgotten” judgment in 2014, which allowed
individuals to require that Google removed search results about them. Under the 2018
European General Data Protection Regulation, which extended protection of personal
data, Google was fined in 2019 and 2020.

One indication of growing regulatory and political pressures that Alphabet faced
was its growing presence in Washington, DC. In 2019, Alphabet spent more on lobby-
ing than any other company.

Competition provided another dimension of Alphabet’s increasingly complex external
environment. As the company diversified from search into an ever- increasing range of
activities, so it came into competition with a widening range of rivals. In advertising,
Facebook was its closest competitor; in mobile platforms and online payment systems,
it was Apple; in browsers, computer operating systems, and office software, Microsoft;
in home automation, Amazon and Honeywell; in autonomous driving, Tesla, Uber,
Ford, and General Motors; in cloud computing, Amazon and Microsoft. Competing with
multiple companies on multiple fronts meant that Alphabet could not operate as a set
of quasi- autonomous companies.

When Sundar Pichai took over as Alphabet’s CEO in December 2019, it was hoped
that he would bring a more commercial orientation and greater emphasis on opera-
tional effectiveness compared to Page and Brin’s hands- off style and preoccupation
with breakthrough technologies in the service of humanity. However, the range and
the complexity of the internal and external problems that Alphabet faced in 2021 had
raised doubts over Pichai’s capacity for the kind of leadership the situation demanded.
In particular, Pichai struggled to develop a vision for Alphabet that reconciled the
firm’s technological and humanitarian aspirations with Google’s continued dominance
of online advertising.

The new structure would also facilitate adding new businesses— either by acqui-
sition or internal development— thereby setting the scene for further diversification.
This raised concerns among investors as to whether the new company would provide
greater opportunity for Page and Brin to pursue their ambitions of using technology
to change the world. In an interview with the Financial Times in October 2014, Larry
Page declared, “The societal goal is our primary goal,” and outlined the main challenge
as: “How do we use all these resources . . . and have a much more positive impact on
the world?”27 The answer seemed to be to use the money generated by Google’s search
advertising business to make bets on technologies that offered long- term solutions to
some of the world’s most pressing problems. Many of these initiatives grew out of the
curiosity and personal interests of the two founders. For example, the inspiration for
Calico came from the interests of Larry Page’s wife, Lucy, in bioinformatics and the dis-
eases of old age.

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474 CASES TO CONTEMPORARY STRATEGY ANALYSIS

Notes

1. https://www.google.com/about/philosophy.html, accessed
March 22, 2018.

2. “FT Interview with Google Co- founder and CEO Larry

Page,” Financial Times (October 31, 2014).

3. https://www.fool.com/investing/2019/02/03/better- buy-
google- vs- apple.aspx, accessed February 14, 2021.

4. “Google’s Growing Identity Crisis,” ( July 19, 2009), http://
www.mercurynews.com/ci_12853656?IADID, accessed
July 20, 2015.

5. “The New GE: Google, Everywhere,” Economist ( January
18, 2014).

6. Google Offer Prospectus (November 23, 2004): 69.
7. Google Inc. 10- K Report for 2008: 4.
8. “Inside Chrome: The Secret Project to Crush IE and

Remake the Web,” Wired (October 16, 2008).
9. https://www.wired.com/review/chromecast- with-

google- tv/, accessed February 15, 2021.
10. “Google to Buy Fitbit for $2.1 Billion,” New York Times

(November 1, 2019).
11. “Why Facebook Is a Threat to Google’s Earnings,” (April

12, 2012), http://www.cnbc.com/id/47030496, accessed
February 18, 2021.

12. https://finance.yahoo.com/news/googles- social- network-
spectacular- failure- 183906984.html, accessed February 15,
2021.

13. https://www.pcmag.com/news/google- is- shutting- down-
shoelace, accessed February 16, 2021.

14. https://www.theverge.com/2021/2/2/22263048/google-
cloud- loss- alphabet- q4- 2020- earnings, accessed February
16, 2021.

15. “Google X and the Science of Radical Creativity,” The
Atlantic (November 2017).

16. Alphabet, Inc. 10- K Report for 2020: 5.
17. For descriptions of current projects see: https://x.company/

projects/, accessed February 17, 2021.
18. Letter from the Founders, “An Owner’s Manual,” for

Google’s Shareholders, http://investor.google.com/
ipo_letter.html, accessed July 20, 2015. Reproduced with
permission from Google Inc.

19. Ibid.
20. G. Hamel, The Future of Management (Boston: Harvard

Business School Press, 2007).
21. “Google: Hacking the Structure,” Financial Times

(August 11, 2015).
22. http://fortune.com/2017/06/27/google- alphabet- corporate-

structure/, accessed February 18, 2021.
23. https://www.forbes.com/sites/kenfavaro/2015/09/07/

still- searching- for- the- strategy- in- alphabet- nee-
google/#16a0a49b6601, accessed February 18, 2021.

24. http://www.businessinsider.com/is- alphabet- other- bets-
strategy- doomed- to- fail- 2018- 2, accessed March 23,
2018.

25. “Hundreds of Google Employees Unionize, Culminating
Years of Activism,” New York Times ( January 4, 2021).

26. Alphabet Inc. 10- K Report for 2020: 82–83.
27. “FT Interview with Google Co-founder and CEO Larry

Page,” Financial Times (October 31, 2014).

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