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In October 2015, in an unexpected move, global technology giant Google Inc (Google) restructured itself as Alphabet Inc (Alphabet), a new holding company under which Google’s non-core businesses, including self-driving cars, life sciences research, high-speed Internet access, and investment divisions, were spun off as distinct entities and separated from the company’s Internet operations such as Android, YouTube, and the Google search engine. The businesses were reorganized into two reporting segments: ‘Google’ and ‘Other Bets’. This marked a massive shift from the earlier setup in which Google was in charge of a number of diverse companies, some of which carried it far afield from its core search business. Under the new structure, a number of businesses including Google operated as subsidiaries of Alphabet and were run independently, each with its own CEO. According to a statement posted by Larry Page co-founder of Google, on the company’s official blog, “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 […]. This new structure will allow us to keep tremendous focus on the extraordinary opportunities we have inside of Google.”

The following points are to guide a review and discussion of some important concepts.

Discuss Alphabet’s corporate governance and evaluate the effectiveness of Alphabet’s board of directors.

Describe Alphabet’s corporate-level strategy and characterize its level of diversification. Discuss the advantages and disadvantages of the company’s organizational structure. Does the organizational design effectively support the needs of Alphabet’s corporate-level strategy?

Identify Alphabet’s current challenges and describe Alphabet’s next move in terms of growth and expansion. Provide an analysis of what additional recommendations would be required to be done to help Alphabet achieve its goals.

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Corporate Governance and Board Effectiveness:

Alphabet’s board of directors faces unique challenges due to its complex structure. While the board oversees both ‘Google’ and ‘Other Bets,’ potential conflicts of interest could arise between prioritizing Google’s established success and nurturing long-term ventures like Waymo (self-driving cars). Evaluating board effectiveness requires considering:

Composition: Does the board possess diverse expertise in technology, finance, and emerging industries relevant to Alphabet’s ventures?
Oversight: How effectively does the board monitor performance across diverse businesses, ensuring each receives adequate resources and scrutiny?

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Transparency: Does the board provide clear communication and accountability for resource allocation and strategic decisions across Alphabet?

Corporate-Level Strategy and Diversification:

Alphabet’s strategy involves diversification beyond its core search business. This offers advantages like:

Reduced risk: Spreading investments across different industries mitigates risk from any single sector.
Innovation potential: Exploring new technologies and industries fosters innovation and potential future growth engines.

However, disadvantages include:

Complexity: Managing diverse businesses with different needs and timelines can be complex and resource-intensive.
Focus dilution: Balancing attention between established and nascent ventures can be challenging.

The current organizational structure with independent subsidiaries reflects this strategy. Evaluating its effectiveness requires assessing whether:

Decision-making: Does the structure empower individual businesses to make agile decisions while maintaining alignment with Alphabet’s overall strategy?
Resource allocation: Does the structure ensure efficient allocation of resources across businesses based on their individual needs and potential?
Performance: Have the independent subsidiaries demonstrated strong performance and progress towards their goals?

Challenges and Next Moves:

Alphabet faces challenges like:

Monopoly concerns: Regulatory scrutiny over Google’s market dominance might impact other Alphabet ventures.
Unproven bets: The success of ‘Other Bets’ is uncertain, requiring sustained investment and patience.
Maintaining innovation: Fostering innovation culture across diverse businesses with potentially different priorities.

Next moves could include:

Focusing on promising bets: Prioritizing and scaling up the most promising ‘Other Bets’ with clear paths to profitability.
Strategic partnerships: Collaborating with established players in relevant industries to accelerate development and market access.
Leveraging Google’s resources: Exploring ways Google’s established infrastructure and expertise can support emerging ventures.

Recommendations for Success:

Strengthen board oversight: Ensure diverse expertise, clear conflict management policies, and robust communication within the board.
Refine performance metrics: Develop metrics that assess both short-term profitability and long-term potential for each business.
Foster collaboration: Encourage knowledge sharing and collaboration between Google and ‘Other Bets’ to leverage existing strengths.
Prioritize responsible innovation: Ensure ethical considerations are embedded in the development of new technologies by ‘Other Bets.’

By addressing these recommendations, Alphabet can navigate the complexities of its structure and strategy, maximizing its potential for both established and emerging businesses in the rapidly evolving technological landscape.

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