Alphabet Inc. is the American based multinational conglomerate, whose headquarter is in California. Alphabet Inc was established through the corporate restructuring of the Google in 2015. It became the Google’s parent company and many other formal subsidiaries of Google. Alphabet Inc is the collection of several businesses, and the biggest of them is Google. The company also includes businesses which are combine as the Other Bets and are far afield of main Internet goods like Calico, Verily, Nest, X, Google Capital, Google Fiber, and GV. The structure of Alphabet is all about helping the businesses to prosper through the independence and strong leaders (Alphabet, 2019). The company needs to shape its strategy continuously and Porter five forces framework helps the company in doing so. It is a strategic management tool, use to determine the competition level in the industry. The framework is important to derive the new strategies for the company according to the objectives. Here is the detailed analysis of Porter’s five forces of Alphabet Inc;
Bargaining Power of Buyers
The bargaining power of the buyers is low in the Alphabet Inc case, because of the growing demand of online advertising in the industry or among major businesses who are striving hard to reach to the bigger market. Online advertising is known to be efficient and cheapest due to numbers of people accessing the internet, and the speed of making the advertisements, its distributions and achieve high traffic in several minutes. In this industry, every buyer contributes to the little part of the revenue and does not consider important because of the fact of Google’s customer base. If any consumer switch to competitors, it won’t make a big difference, as Google has the largest customer base, and has most of the market share (Mencinger, 2017).
Bargaining Power of Suppliers
Despite of numerous suppliers in the industry with limited firms to buy, the bargaining power of the suppliers is low in this case. Alphabet is one of the main consumers of the suppliers it buys from, and most of the profit of the suppliers is earned from the company. This clearly means suppliers are dependent on the company and have no say in deciding the prices. They need to lower down the prices or reasonable prices to continue the business with Alphabet Inc. The company also as the efficient supply chain, which helped the company in replacing any of the suppliers if they are not agreeing on the company’s terms (Murphy, 2018).
Threats of New Entrants:
Alphabet Inc. has successfully achieved the economies of scale as it is the second largest company of the world and use its size to keep itself from the competition and protect the market share. Starting up the business and start-ups to provide products and innovate goods and services faster than the Google can. Low barriers of entry are present because of the high capitalisation, and strict rules and regulations. However, many cost advantages are involved due to the constant expenses used for serving the services. It focuses on differentiating the services to attract more consumers (Fernfort, 2019).
Threats from the Substitute Products
Threats from the substitute products in Alphabets Inc scenario is moderate. The cost of switching is relatively low by using different search engines, and advertising platforms are not expensive and are very simple. Moderate availability is present for the advertisements such as radio, Tv, news paper etc, different specialized search engines which might draw the market share. It moves people from the traditional platforms to modern advertising platforms of marketing. Hence, Google does not need to worry much about the substitute threats due to large market share and high control, and their better analytics of advertising as compare to competition (Mencinger, 2017).
Rivalry of Existing Players
Microsoft, Facebook, and Apple are the biggest rivals of Alphabet Inc. and are the leading companies in the international market. They compete intensely on the technological level. There are many other firms and start-ups which specialize in specific areas of the technology and online advertisements which can be the threat for Alphabet. Low switching costs in the industry create the intense competing environment in the industry (Mencinger, 2017).
References
Alphabet, 2019. About the company. [Online], Available at: https://abc.xyz/, [Accessed on: 7th May, 2019].
Fernfort university, 2019. Alphabet Inc. Porter Five Forces Analysis. [Online], Available at: http://fernfortuniversity.com/term-papers/porter5/analysis/3572-alphabet-inc-.php, [Accessed on: 7th May, 2019].
Mencinger, M. 2017. Alphabet Inc. Qualitative Paper. [Online], Available at: https://www.slideshare.net/MatthewMencinger/alphabet-inc-qualitative-paper-70926468, [Accessed on: 7th May, 2019].
Murphy, E. 2018. Alphabet Inc Porter Five Forces Analysis. [Online], Available at: https://www.essay48.com/term-paper/5786-Alphabet-Inc-Porter-Five-Forces, [Accessed on: 7th May, 2019].