Strategic Alliances, Collaboration and Joint Ventures Case Study

Microsoft-Yahoo! Mega Deal: Competing for Competition with Google?

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Abstract:
In early July 2009, the largest search engine service provider, Google announced its plans for developing the much publicised ‘Chrome Operating System’ to be released as a free online source. With a number of free online applications like Google Apps and Google Chrome, Google has been expanding across Internet space to establish its dominance in all the web-based operations. Starting as a search engine portal, Google and its innovative tools are subtly infiltrating into the operational areas of a number of software technology developers. Even the operational areas of the largest software provider in the world, Microsoft, were no more immune to the threatening infiltration of Google. It prompted Microsoft to foray into the search engine market which was hitherto dominated by Google.

On the other hand, the second-largest search engine portal, Yahoo! has been struggling to overcome its financial problems. This encouraged Google to aspire for a partnership with Yahoo! negotiating the terms as if it was a bail-out package. With clear understanding of Yahoo!’s financial condition since past 2 years and Google’s attempt to join hands with Yahoo! which could make the giant even more bigger, Microsoft decided to acquire the firm and announced an unsolicited bid to acquire Yahoo!. However, Microsoft was viewed as a threatening intruder into the Silicon Valley from the North. Facing stiff resistance from Yahoo! and realising that it was an impolite attempt to acquire the second-largest search engine player, Microsoft planned for a middle path. Microsoft intelligently forged an alliance with Yahoo! in search engine technologies without affecting the competitive climate among them. As the deal is still pending for the approval of US anti-trust regulators, it is suspected that the combined technologies of the competitive collaborators can create a potential arsenal strong enough to confront Google in the search-engine market. Additionally, the promising potential offered for the Internet-based businesses by fast expanding digital universe is enticing Microsoft to carve out a strong foothold for itself. With the deployment of combined forces of collaborators, Microsoft and Yahoo! to take on the rival Google, the war field is set for the ‘Age of Search Engine War’ to begin. Intended to teach a course on ‘Business Strategy’, this case study, set in mid-2009, mainly focuses on the possible change in the competitive landscape when the competitors become collaborators.

Pedagogical Objectives:

This case study aims at achieving the following pedagogical objectives:
• To understand the business model and the revenue model of the three players – Google, Yahoo! and Microsoft – in the search engine market to analyse the competition and to understand why search-engine is important for top players in the Internet arena and what are the critical success factors in search engine market
• To delve into the innovations brought in by Google that improved its economics in the search engine market to achieve the dominance in the industry and also to debate and discuss on various other attempts made by Google to enter into rival’s business areas with its Chrome, Chrome Operating System, Google Voice, Google Checkout, etc.
• To assess the implications of the deal for Yahoo! and Microsoft and to understand why does it make sense for Yahoo! to collaborate with Microsoft to take on their rival. To debate on the challenges to be faced by Yahoo! and Microsoft in building their combined brand in market and also the immediate and long-term consequences to be faced by the two companies
• To build arguments – for and against – whether this deal should be approved or disapproved by the US Justice Department/Anti-trust regulators.

Keywords : Strategic Alliances, Collaboration, Competitive Collaboration, Collaborating with Competitors, Competitive Strategies, Competitive Threats, Collaboration Synergies, Google Vs Microsoft, Google Vs Yahoo, Steve Ballmer, Anti-Trust Legislation, Browser Wars, Online Ad Revenues, Search Engine Market, Business Models, Emerging Business Models

Contents : 
Emergence of the Search Engine Market?
A Note on the Age of Browser Wars
Worldwide Search Market Overview
A Comparison of the Top Three Search Engines
The Economics of Search Engine Market and Google’s Dominance
Microsoft-Yahoo! Deal
Segment Revenue and Operating Income/Loss
Anti-trust Anachronism: Government’s Intervention