Fin 543 Case Study

Discussion Questions

1. What is Google’s business? What are the strategic threats to Google?

Google’s main business is its search engine. This is a technology that substantially organizes the massive volume of information that is the World Wide Web and delivering this information to end users in accordance to relevance the user’s needs.

While Google’s growth has been outstanding, it has not been without hurdles. The key strategic threat is competition especially from big tech firms. These include Microsoft and Yahoo. These companies viewed Google’s dominance in the web search department as a major threat to their core business. Moreover, the introduction of Google’s email service, Gmail, into the market, got negative reception by yahoo and Microsoft which ran their own Y mail and hotmail services respectively.

Yahoo later came to acquire a series of smaller search providers in a bid to develop a search engine that would rival Google’s. Microsoft on the other hand spent billions in development of its own search engine, Bing.

2. What are the costs and benefits of going public? Is IPO underpricing a cost to the company concerned?

Going public, the company could have a chance to tap into the equities market as a source of funds to fuel its growth needs. It also provided the founders, employees and initial investors a chance to profit from their investment in the company.

3. What is the role of investment banks? How much value do bankers add to corporations? What are the services they provide? How much value do they extract from corporations? Through which means?

Investment banks’ main jobs are to provide expertise which includes underwriting, and sale of securities and other trading activities. The lead investment bank advises the issuing firm on the type, timing and price of the issue. It also markets the issue to the public and institutional investors. Investment banks also guarantee to buy the securities and resell them.

4. Can...