The Google Computer?
Reuben is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Business is a dog eats dog world. There are few companies that have a leading position that don't have to defend their top-dog status at some point or another. It's simply part of doing business. So, more often than not, a rival or new competitor will see an opportunity to enter a market and take it. The industry leader has a few options, but one time honored approach is to strike back by entering the market of the feisty upstart.
It can be high drama, in some cases. And, over the long term, can actually lead to materially better products and services for customers. A great example right now is Google (NASDAQ: GOOG) and its introduction of a computer, of sorts. The Chromebook, as it is called, is sort of a cell phone meeting up with a netbook, that could be a blueprint for ultimately replacing the personal computer. Will it really do that? Probably not. However, the company has fired a shot across the bow of such industry giants as Hewlett-Packard (HPQ) and Dell (DELL).
Who Cares If We Succeed
The logic of Google's approach is a clasic move. Companies will do this even if they don't really have a chance to unseat the new entrant in its dominant market. The logic for this approach is simple, however. As Competitor B encroaches on Company A's dominance, Company A must spend more money to compete. This will include such things as improving the product or spending more heavily on advertising, but regardless, increased competition generally means more spending. To counter that, Company A will often spend money to enter Competitor B's industry, causing similar expenses to hit the bottom line of the upstart.
In the current situation, Apple (NASDAQ: AAPL) is already attacking the legacy computer companies very successfully with its iPad device, but Google's approach takes a different angle because it looks like a laptop. Interestingly, Apple could actually be the real target of Google's efforts, as the latter tries to carve out a place for itself in the burgeoning field of ultra portable computing devices. It already has a massive market share in the cell phone operating system space, and this new device could simply extend that into the computer space. The real win for the search giant, however, would likely be if other computer makers picked up its operating system as so many cell phone makers have in the phone market. Indeed, hardware isn't Google's strong suit, but it could be a very effective way of shaking up the industry.
More Than One Target
Google's push could also be a way of shoving back at Microsoft (NASDAQ: MSFT), which is making an aggressive push into the cell phone operating space with Nokia (NYSE: NOK). The new phones from Nokia have gotten high marks, though consumer demand has yet to be determined. Regardless, Google can't appreciate the new competition in a market that it was starting to dominate.
What comes out of Google's Chrombook effort will be interesting to watch. However, this tactic isn't the only one available to companies. If the upstart is small enough, and the industry leader large enough, acquisitions can come into play. This was the case with Facebook (FB) buying Instagram, as many of Facebook's younger customers were migrating to that photo sharing service. Another option is to go to court, which is what Apple has done in its efforts to stop Samsung from selling a phone that looks remarkably similar to the iPhone. While these dramas can be interesting, they often don't end up creating better products and services for customers, instead stifling creativity and leading to long delays in new advances.
Keep An Eye On Google
For now, keep an eye on Google and its Chromebook. They are cheap and look to disrupt a business model that has been stressed of late by natural decline and intense competition. This could be a game changer for many companies.
ReubenGBrewer has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!