Increase your revenue with Ansoff Matrix: Google Case Study | IBS Ame... https://ibs-americas.com/en/online-library/article/34/increase-your-reven...

Knowledge is power, which is why people who had it in the past often tried to make a secret of it. In post-capitalism, power comes from transmitting information to make it
productive, not from hiding it.
(Peter Drucker, Managing in a Time of Great Change)

Google has one of the biggest business success records of all time. Founded in August 1998 by Larry Page and Sergey Brin, the "Google Guys" from Stanford, it had become a
multi-billion-dollar company within a few years. In 2004, it conducted its initial public offering (IPO) through an online auction, achieving a market capitalization of over $23bn.
The most visited website in the world runs on around one million servers in data centers around the globe, processing over five billion searches and twenty petabytes of user
data every day. This means trillions of indexed web sites and over 80% of online searches worldwide (Heileman, 2005). According to Fortune, from 2013 to 2019, Google was the
best company to work for (100 Best Companies, 2019). BrandZ called Google the most valuable existing brand standing at $245bn (100 Most Valuable, 2019).

Such success could result in slacker business activities, but this is not what we have been observing so far. On the opposite: the company launches lots of new services annually,
inside and outside its core business and target market. In 2006, the firm opened its headquarters, Googleplex (Heileman, 2005). At one of its entrances, you can find a replica of
a dinosaur skeleton. These ruled over the world, but ended up extinct... And this is exactly what could be observed in the market: Yahoo used to retain over 50% of the market
share until Google entered the industry in 2002. To avoid the same fortune, Google needs to keep innovating, always. And this idea was taken very seriously: the company has
developed dozens of innovative products and services, with extraordinary results.
 
Google's revenue worldwide from 2002 to 2018 in billion U.S. dollars, Statista, 2018

1 of 5 6/22/2021, 10:25 AM
Increase your revenue with Ansoff Matrix: Google Case Study | IBS Ame... https://ibs-americas.com/en/online-library/article/34/increase-your-reven...

BrandZ Top 100 Most Valuable (2019)

One of the biggest challenges in management is iden fying business opportuni es and defining priori es to expand revenue. And the classic tool to help managers deal with a
myriad of op ons is the Ansoff’s Product-Market Expansion Grid or Ansoff Matrix (Ansoff, 1957). In his 1957 ar cle, Ansoff defines product/market strategy as "a joint statement
of a product line and the corresponding set of missions which the products are designed to fulfill”. Supported by this straigh orward approach, Ansoff Matrix has defied me and
market changes, becoming one of the most important management tools.

The objec ve of this ar cle is to be er understand how the Ansoff Matrix and its recent developments can be used by companies like Google to improve their abili es in
managing an ever-growing por olio of products offered to different segments of market. It is par cularly useful for managers aiming at be er organizing the discussion about
how to expand their companies’ revenues.

Ansoff Matrix: Founda ons

 
The concept of a “mission” is borrowed from military jargon: “A product mission is a descrip on of the job which the product is intended to perform.” From that point, Ansoff
establishes four basic missions for each of the four intercep ons of the matrix.
 
Ansoff Matrix (Ansoff, 1957)

Each of the above strategies describes a dis nct path which a business can take towards the future growth. A simultaneous pursuit of more than one of them at the same me is
usually a sign of a progressive, well-run business and may be essen al for survival in the face of economic compe on.
Market Penetra on poses the lowest risk since the company will focus on its current products and markets and will be able to boost its currents assets and capabili es – if
it has a strong compe ve advantage and/or the market is growing.
Market Development presents further risks for the company since this means expanding to unknown markets. It requires company’s strong marke ng capabili es on top of
core competencies related to its current products. The firm will be able to explore opportuni es, reposi oning the brand, exploring new uses for the product or expanding
to new regions.
Product Development is riskier than market access, but it could make sense when the company iden fies an opportunity to sell new products to meet needs from its
customers; has a strong brand and large par cipa on in a compe ve market, where con nuous innova on is necessary to avoid obsolescence and, finally has a strong
R&D and/or proprietary technologies so that new products can boost their advantage thanks to the pioneering spirit.
Diversifica on is the path that presents the biggest risks, since the company will be simultaneously developing new products and entering new markets and will need to
develop or gain new resources and capabili es. The diversifica on strategy generally requires new skills and almost invariably leads to physical and organiza onal changes
in the structure of the business which represents a dis nct break with past business experience.

Ansoff Matrix: Expanding the Concept

Several authors offered their contribu ons to improve the classic matrix, making it more suitable to the challenges of the high tech, globalized market of the twen eth century.
Others created new managerial tools, clearly inspired in the original one. Ansoff himself reviewed the concept in subsequent ar cles and books (Ansoff & McDonnell, 1988). In
1999, Philip Kotler suggested an important “expansion” in both axes of the Product/Market matrix (Kotler & Armstrong, 1999). This sugges on reflects the strong
complexifica on of markets, with increasing compe on and the development of interna onal trade. Inser ng an addi onal step between “current” and “new” provides a more
refined analysis and be er orienta on for managers.

 
Expanded Ansoff Matrix (Kotler & Armstrong, 1999)

2 of 5 6/22/2021, 10:25 AM
Increase your revenue with Ansoff Matrix: Google Case Study | IBS Ame... https://ibs-americas.com/en/online-library/article/34/increase-your-reven...

Expanded, the Ansoff Matrix has now nine intersec ons, represen ng a set of ac ons that a company may take to deal with new market opportuni es brought by this analysis. A
short descrip on of each of the nine possibili es is presented below.

 
Expanded Ansoff Matrix (Kotler & Armstrong, 1999)

As stated above, star ng with its main product – the search engine - Google developed a wide por olio of products and services, some of them with great success. Using the
expanded Ansoff Matrix, we can be er understand Google’s efforts to expand its revenue and develop new ventures. The Ansoff Matrix helps managers organize the pursuit of
new ini a ves considering diversifica on in both axes, markets or products, or both at the same me.

The Google Family

From the very beginning of its expansion, Google invested in new products for its exis ng customers, which corresponds to the Strategy 3, Product Development. These clients
already used the main Google tool – a search engine, so the company started to offer new products to its users in order to meet their new demands, thus, limi ng the entrance
of compe tors in the industry that poten ally could threaten the market with the development of specific products and services.

Besides Google Search, the “generic” search engine, there are several other search tools: Google Books, for searching complete texts from books, or Google Custom Search,
which allows users to create customized searches for their websites, and Google Scholar, for searching academic papers. They represent typical examples of the Strategy 2,
Product Modifica on, an effort to sa sfy specific needs of the same market by adding new important features to the original product.

 
But Google also targeted new markets developing new products, which corresponds to the Strategy 9, located in the lower right corner of the Matrix - Diversifica on. Google
Maps competed in the market with companies like Garmin and Tonton, bea ng these compe tors with solu ons that explored the possibili es of cell phones; despite having
different aspects and func oning, the business model is the same: selling ads, in this case complemented with geo-loca on. In another ini a ve aimed at a rac ng new markets
with new products, Google acquired YouTube in 2006, boos ng its search algorithms and applying the same successful revenue model: here, ads are related to specific content –
videos. Other examples of the Strategy 9 are the Google Chrome browser, Gmail, Google Translator and Android. Most of these products are offered for free to users, genera ng
income when combined with adver sing services like AdSense (adver sing service offered for websites owners) and AdWords, an adver sing service in the form of links, a highly
segmented type of adver sing, based on the cost per access system. With the DoubleClick technology, it is possible to map the interests of users; Google Analy cs allows

3 of 5 6/22/2021, 10:25 AM
Increase your revenue with Ansoff Matrix: Google Case Study | IBS Ame... https://ibs-americas.com/en/online-library/article/34/increase-your-reven...

Expanded Ansoff Matrix, Google Products and Services

At the same me, the company tried to establish its presence in new regions with the same tools, a typical effort associated with Strategy 4, Geographic Expansion. Although this
strategy was generally successful, Google faced problems in 2010, when it was banned from China. While crossing na onal borders following the waves of globaliza on,
companies may take risks in environments where cultural, market and legal differences can bring unpleasant surprises.

We also o en see Google adop ng the Strategy 5, Expansion with Adapta on, to be er meet customers’ expecta ons in other regions of the world. References to cultural
events and na onal holidays on Google's home page are common, and the unsuccessful a empts to stay in China were followed by several changes in the tool.

Google Core Values

Google states its core values in the slogan “Don’t be evil”, later extended with “Do the right thing”. However, It is difficult to create and maintain a business of this size without
cri cism and problems. Google is accused of using its immense market power to smash compe tors by offering services for free, some mes losing money un l it becomes the
only company standing in the market and then starts charging for its services. Several tax conflicts with governments around the world brought a en on to the company’s
ethics. In France, Google was fined with €1bn for tax evasion, affec ng its reputa on among clients from all over the world, which proves that companies of all sizes should
follow the rules and reflect society’s expecta on regarding their managerial decisions (Google To Pay, 2019). Nevertheless, it is undeniable that Google provides relevant
services to society, vastly increasing the access to knowledge, even for those who would be completely excluded otherwise. “The maximum of good for the maximum of people”
– this is the main principle of corporate ethics.

Conclusion

 
Even a er over fi y years from its ini al formula on, the Ansoff Matrix is s ll considered a conceptual framework useful for the crea on of market strategies. The more
compe ve, dynamic and turbulent sectors/markets are the more important the crea on and execu on of adequate strategies will be. Ansoff himself said that crea ng a
strategy is not difficult – the true challenge is making it work (Ansoff, 1957). But the most important contribu on the Product-Market Matrix created by Ansoff and expanded by
Kotler offers is a set of guidelines for managers of different companies around the world. The case of Google presented here can serve both for be er understanding of this tool
and as inspira on for managers to develop the sense of entrepreneurship within their companies in search of new sources of revenue and growth in their careers.
 
 
 
-------------------
 
Sources and References
 
100 Best Companies to Work For, Forbes, retrieved from: h ps://fortune.com/best-companies/

100 Most Valuable Global Brands, 2019, retrieved from: h ps://www.brandz.com/admin/uploads/files/BZ_Global_2019_WPP.pdf

Ansoff Matrix Defini on, Importance, Advantages, Disadvantages, Example & Overview, retrieved from: h ps://www.mbaskool.com/business-concepts/marke ng-and-strategy-
terms/2550-ansoff-matrix.html

Ansoff, I., McDonnell, E. The New Corporate Strategy, 1988

Ansoff, I.H, Strategies for Diversifica on, 1957

Empresa, que possuia receita de US$ 5 bilhões em 2004, hoje dobra este valor em apenas um trimestre, 2012, retrieved from: h ps://olhardigital.com.br/no cia/infografico-
acompanhe-a-evolucao-do-google/25522

Google Stock, 2020, retrieved from: h ps://www.nasdaq.com/market-ac vity/stocks/goog

Google to pay €1bn to end French tax probe, 2019, retrieved from: h ps://www.bbc.com/news/business-49674544

Google's revenue worldwide from 2002 to 2018 in billion U.S. dollars, Sta sta, 2018, retrieved from: h ps://www.sta sta.com/sta s cs/266206/googles-annual-global-
revenue/

Heileman, J. Journey to the Center of Google, 2005, retrieved from: h ps://www.gq.com/story/google-larry-sergey

Kotler, P., ?Armstrong, G. Principles of Marke ng, Volume 1, Pren ce Hall, 1999.

Spencer, T. Product/Market Expansion Matrix, 2013, retrieved from: h ps://www.spencertom.com/2013/10/09/ansoff-matrix/#.XdRBD-hKgdV

 
Yarow, J. This Chart Shows Google's Incredible Domina on Of The World's Compu ng Pla orms, 2014, retrieved f

4 of 5 6/22/2021, 10:25 AM
Increase your revenue with Ansoff Matrix: Google Case Study | IBS Ame... https://ibs-americas.com/en/online-library/article/34/increase-your-reven...

5 of 5 6/22/2021, 10:25 AM