Strategic Management

Strategic Management
Case Study: Chrome steals a march on Windows
The dramatic slide in sales of PCs continues, but for one new player in this market this is an
opportunity. Google has launched another of its Chromebook laptops this week – made by HP
in this case – and is poised to grab a bigger share of a shrinking market. That won’t amuse
Microsoft whose own mission to expand beyond its PC powerbase isn’t making much progress.

Google’s Chromebooks are quite limited devices that only really function well for web- surfing, email and document writing rather than for more sophisticated applications.
Nevertheless, their price is making them attractive to anyone wanting an easy way of getting
online and doing some work without going to the expense of buying a tablet whose touch
screen interface might not suit them. The latest figures from Gartner, reporting an 8.6% fall in
PC sales in the last three months compared to a year ago show that the trend is away from
devices like the Chromebook and towards tablets. The volume of sales in the back-to-school
quarter were at their lowest level since 2008. Against this background though, the
Chromebook is surging ahead. Gartner reckons two million will be sold this year, over five million in 2014, and 12 million by 2016. Now that will still leave the Chrome OS with just over 3% of a PC market where margins will grow ever slimmer and profits will be harder to find.
But for Google that’s not really the point. Every time someone opens a Chromebook they are
signing into a Google account and almost certainly becoming part of the search firm’s
contextual advertising audience. That, rather than selling hardware, is how the company
makes its money – and its reach on PCs, mobile phones and tablets is growing all the time.
True, its relationship with manufacturers is increasingly important. Google has already
worked with Samsung and Acer on Chromebooks, and now HP, still a huge force despite
losing number one spot to Lenovo, is putting its weight behind the Chrome OS. By contrast,
Microsoft is going it alone as it tries to build a presence in a mobile world increasingly
2
Course Tile: Strategic Course Code: 118 STM
Management 104
Academic Year: 2013-14 Semester: Spring
dominated by Google’s Android. Its Windows RT operating system, designed to offer users
the benefits of the touch screen tablet experience combined with the familiar Windows desktop, has failed to excite the big manufacturers.
Right now, Microsoft’s Surface RT – recently revamped – is the only tablet using the OS, with
the likes of Samsung, Dell and Lenovo all dropping it in favour of Android or the full- strength Windows 8. Now Microsoft still has much closer and longer relationships with
manufacturers than Google, and is making far more in profit from Windows and Office than
the search giant makes from advertising. But Microsoft executives who get their hands on the latest HP Chromebook may feel slightly sick if they turn it over and read the message on the
back – “Made with Google.”

 

ANSWER ALL QUESTIONS (20 marks)
(b) Analyze the laptop industry structure and based thereon discuss whether the
industry is expected to be profitable?

1 (a) Use Porter’s 5 forces model to analyze the position of Google Chromebook in
the laptop market?

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