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Google’s Corporate Strategy

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Contents

Corporate Strategy of Google

Introduction

The main purpose of the report is to discuss about the aspects of organisational strategy of technology giant Google. This report will focus on the corporate strategy of Google by highlighting the vision statement of the company. After that the diversification strategy of Google into new products and business will be evaluated. The diversification strategy with Chrome, Android and Motorola will be evaluated. After that the need to refocus on the business strategy of Google will be provided. The next segment of the report will outline the corporate boundaries of Google and recommendation will be provided on the abandoning or selling strategies for Google. In the final segment, the report will focus on the factors influencing the organisational strategies of Google and suggestions will be made to recover the complexities and ambiguity of strategy decision making.

1. What is Google’s corporate strategy?

Corporate Strategy is an action plan to design organisational approach to achieve the long term organisational value maximisation goal of the organisation (David, 2011). Strategy creates a link between the firm and the industry environment.

Figure: The basic framework: strategy as a link between the firm and its environment.

Source: Grant, (2013).

Google has developed its business strategy by linking its organisational goals and values, resources and capabilities and structure and systems with the participants of external business environment such as competitors, customers and suppliers.

Goals and Values of Google’s corporate strategy

Google has developed its competitive environment by focusing on innovation and product development commitment. The key goals and values of Google are as follows:

  • Innovation and product innovation
  • Market development
  • Extending product and service lines
  • Quality commitment
  • Great user experience
  • Strong market position with service commitment

These goals and values of Google have clearly stated the organisational commitment to the quality and customer satisfaction issues (Dess, et al. 2011). While designing the corporate strategies, Google has focused on the consistency of the strategies with the continuous improvement commitment in the organisational value delivery system.

Resources and Capabilities of Google’s corporate strategy

While developing corporate strategy, organisational resources and capabilities should be considered. Google has developed its organisational capabilities through diversification and acquisition strategies (Gamble, et al. 2014). For example, the acquisition of Motorola has enhanced the hardware capabilities of Google. Again the diversification strategy to the introduction of Chrome browsing platform, Google+ social networking site and Android smartphone mobile operating platform has helped Google to strengthened its market position.

Structures and Systems of Google’s corporate strategy

Google has focused on the continuous improvement strategic approach while developing its corporate strategy. The introduction of extended product and service lines explains the success of the continuous improvement strategy within the volatile technology market. While designing the organisational structures and systems, Google has focused on developing a high performance workforce where the human resource management has focused on stimulating the employees to the product innovation and service development (Harrison and John, 2009). The strategic partnership with the smartphone manufacturers has helped Google to become the number one Operating System in terms of usages. The current market share in the operating system used in the smartphone explains the success of the strategic alliances with the smartphone manufacturers. Again the organisational structure has been developed by focusing the continuous monitoring and supervision of the management over the organisational value delivery system. The key advantage of this strategic move within the organisational strategy development is the quality control assurance within the organisational value delivery system (Hill and Jones, 2012).

The Industry Environment

Google’s corporate strategy has linked between the company capabilities and the industry environment factors. With the help of SWOT model, the development of corporate strategy of Google by considering the industry environment can be explained.

  • Strengths: Google has focused on the organisational capabilities and the resources while developing its corporate strategies. For example, the introduction of own browsing wing Chrome, Google has focused on the strategic move towards reducing the market strengths of its rival Microsoft.
  • Weaknesses: The structures and systems of Google are based on the continuous development and the quality commitment (Hitt, et al. 2012). But with the changing technology market and the changing customer buying behaviour, Google has focused on both vertical and horizontal integration which has raised the tension in the market share development.
  • Threats: The rise of price sensitive customers and the industry rivalry are the market threats that should be taken into account while designing the corporate strategy. Google has focused on the intensity of market rivalry while designing its business strategies. For example, the acquisition strategy of Motorola has helped Google to get access to the thousands of wireless patents developed by Motorola which would help Google to beat the market rivals such as Microsoft and Apple.
  • Opportunities: Customers in the technology market are very volatile and the changing buying pattern of the customers have shaken the market rapidly (Hunger and Wheelen, 2010). In order to explore the market opportunities in such volatile market environment, Google has focused on the capacity development and system improvement. This strategy has helped Google to explore the market opportunities.  

Strategic Fit of Google’s corporate strategy

The term strategic fit refers to the consistency of the organisational strategy with the changing external market environment (Johnson, et al. 2011). If the corporate strategy of Google is analysed then it can be said that Google has focused on maintaining consistency in the corporate strategy development. For example, Google has focused on the development of its corporate strategy by focusing on the activity systems theory where the consistency of the corporate strategy with the internal organisational capabilities is maintained. The strategic fit characteristics of Google have been explained below:

  • Hiring Policy: The corporate strategy of Google has focused on the efficiency and effectiveness issue where maximum utilisation of the human resources has been given strategic priority. For example, the innovation and creativity aspects have been emphasised while recruiting the employees so that the employees can contribute to the value maximisation goal of the company.
  • Dramatically flat, radically decentralised strategy: The organisational structure has been designed by eliminating the middle manager within the hierarchy so that constant supervision over the organisational value delivery system can be ensured (Lynch, 2010). The corporate strategy has been designed by focusing on the decentralisation in the decision making so that time and resource constraints issues in the decision making can be eliminated.
  • Small and self-managing team: Google has focused on the development of high performing team where team conflict issue has been managed with creating bonding and responsibilities within the organisational team. By developing small and self-managing team, the team effectiveness has been ensured where goal oriented organisational team has been developed.

The Future Strategic Move of Google’s Corporate Strategy

The transition of Google Inc. to Alphabet Inc. has focused on greater market presence of the technology giant. The new corporate strategy has focused on the capacity development where autonomy will be maintained to the subsidiaries. The diversification business of Google has been marked with the transformation of the structure to Alphabet. This transformation strategy of Google has faced challenges of privacy, antitrust legislation and patent infringement claims (Mintzberg, et al. 2008). In such situation, it has become a challenge for the strategic decision makers to draw a boundary around the corporate strategy of Google.

2. Does Google have a clear vision of what it wants to become?

Vision of Google

The vision statement explains the strategic movement of a company where long term value maximisation commitment is depicted (Patron, 2008). If the corporate strategy of Google is analysed then it can be observed that Google has focused on the quality commitment where organisational move to ensure improved customer experience can be ensured through their product development and innovation strategies.

Factors Contributing to Vision Development

Google has focused on the volatility of the technology industry while designing its vision statement. While analysing the industry nature, Porter’s Five Forces model can be analysed where the threat of new entrants, bargaining power of the customers, bargaining power of the suppliers, complementary products and industry rivalry.

  • Bargaining power of customers: In the technology market, customers are driven by brand loyalty and the price elasticity. While designing the vision statement, Google has focused on the brand loyalty and pricing issue (Pearce and Robinson, 2014). As the vision statement has focused on the innovation and product development through diversification, the customer loyalty has been ensured by this strategy.
  • Bargaining power of suppliers: In the technology industry, the pricing structure and quality of the services and products offered are largely dependent on the suppliers involved in the value delivery system. Google has focused on the bargaining power of the suppliers in the service delivery and has designed its vision statement by focusing on the own service delivery strategy.
  • Threat of new entrants: Due to higher fixed costs involved in the technology market, Google has limited threat from the new entrants. While designing the vision statement, Google has focused on the brand loyalty issue which has also limited the threat of new entrants.
  • Complementary products or services: Google has focused on the issue of complementary products while developing its vision statement (Peng, 2009). For example, the diversification strategy both vertical and horizontal has helped Google to reduce the threat from the complementary products.
  • Competitive rivalry: In the technology market, there is an intense market competition where the market competitiveness has been developed by focusing on the brand loyalty and the product innovation and the superior customer service experiences. While designing the vision statement, Google has focused on the pricing strategy, customer brand loyalty and the product development strategies of the competitors such as Microsoft.

Current Business Strategy and the Influence of Vision Statement

Google has adopted a diversification strategy both vertical and horizontal and their vision statement has been developed by focusing on the diversification strategy. By transforming into Alphabet Inc. the strategic vision of Google has focused on the greater independent on the diversification activities of the business wings. The main theme of the diversification strategy that Google has adopted is to extend the product and service lines so that a competitive environment within the technology industry can be developed (Rotaermel, 2012). If the characteristics of the management and the capabilities of Google are analysed, it can be observed that the vision statement has contributed to the competitiveness development of Google. For example, in order to fulfil the strategic goals Google has focused on the competitive hiring policy, flattened organisational structure, decentralised decision making, self-managed organisational team, innovation and low-cost experimentation strategy. These management capabilities and organisational resources have helped to fulfil its organisational objectives developed by the vision statement.

3. Evaluating Google’s diversification into new products and businesses, with particular reference to (a) browsers (Chrome), (b) mobile phone operating systems (Android), and (c) mobile devices (Motorola)

Evaluating Diversification Strategy of Google into New Product (Chrome)

The strategic move of Google to introduce Chrome browsing tool has resulted in greater user experience to get access to the web. This strategic move has helped Google to facilitate the users with faster, safer and easier access to the online resources. The key challenge that Google has faced while introducing Chrome is the 15-year legacy of Microsoft’s Internet Explorer (IE). The challenges that Google has to face with the introduction of Chrome are as follow:

  • Microsoft’s IE Version 8: Microsoft has introduced version 8 of IE which has an ‘InPrivate’ protection mode which has facilitated the users to enjoy a browsing experience where cookies will be deleted which will result in difficulties to track users’ browsing history.
  • Profitability from Advertisement: If Google also responses to the ‘InPrivate’ feature of IE in their Chrome, then it would limit Google’s ability to use user browsing information for targeted advertising which would have direct impact on the profitability of Google from advertisement.

Evaluating Diversification Strategy of Google into New Product (Android)

Acquisition of Android Inc. in 2005 and the introduction of Android software platform has been marked as a successful diversification strategy of Google. The success of this business wing can be established by comparing the market data.

Figure: Shipments of smartphones, classified by operating system, 2011-12

Source: Grant, (2013).

If the market share of Android OS for the period of 2011 and 2012 is analysed, then it can be concluded that at that time, Android’s market share had been increased by 63.43% from 2011 to 2012. On the other hand, the second market leader iOS (Apple) had experienced a market share increase of 25.68%. It clearly indicates that Google has been able to develop a sustainable market position by beating its market rivals.

Figure: Worldwide Smartphone OS Market Share (Share in Unit Shipments)

Source: IDC, (2016).

If current market data is analysed in terms of market share of the smartphone operating systems, then it can be observed that in the second quarter of 2016, Android has 87.6% market share whereas iOS is in the second position with 11.7% market share. This market data clearly states that Android has strengthened its market share by holding significant market share. The key factors of the business strategy of Google that have contributed to the business success of Android are as below:

  • Google has been able to create strategic alliance with a large number of smartphone manufacturers which has strengthened the market share of Android.
  • Google has been able to create strategic alliance with a large number of application developers which has helped to ensure continuous development of the operating system according to the changing customer needs.

Evaluating Diversification Strategy of Google into New Product (Motorola)

The acquisition of Motorola has given strategic advantage to Google with higher bargaining power, access to rich portfolio of patents relating to wireless communication, presence in mobile internet use and innovation in home business (Williams, 2009). The strategic advantages that Google has been ensured with the Motorola acquisition are as follows:

  • Access to rich portfolio of patents to wireless communication: Google has gained the access to rich portfolio of patents to wireless communication by acquiring Motorola business. This has strengthened market position of Google in technology market.
  • Higher bargaining power: The acquisition of Motorola business has raised bargaining power of Google as more than 6,000 mobile-device-related patents have been purchased by a consortium of technology companies led by Apple and Microsoft.
  • Strong presence in mobile internet use: Motorola’s Motoblur has opened great business opportunities for Google to build strong presence in the mobile internet use. This competitive advantage will facilitate Google to develop a sustainable competitive advantage within the market.  

Though the acquisition of Motorola has resulted in strategic advantage to Google, the intensity of market competition has also increased rapidly. For example, Google’s strategy to make handset has created conflict of interest with its major customer Samsung. As a result, Samsung has announced to develop its own operating system to replace Android which will result in great shock to the market position of Google in the smartphone operating system.

4. Provide evidence to support the argument that Google needs to refocus

The diversification business strategy of Google has helped the technology giant to remain competitive in the changing technology market environment (Agarwal and Ansell, 2016). The following segment has focused on the factors that Google should consider to the corporate strategy implementation:

The New Environment of Business

The global financial market has been marked with credit crunch, political instability, natural calamities and the changing legal environment. Google has focused on implementing its global diversification strategy through the product development and quality commitment.

  • Turbulence: The world economy has been affected with the changing political environment in the middle-eastern countries and the change in the global economic conditions (Ajmal and Lodhi, 2015). For example, the rise of the BRICS economy should be considered while designing the business strategies. Google should focus on the global balance of economic power which is shifting from the US and other EU countries to the emerging economic countries such as BRICS, ASEAN etc.
  • Competition: The economic characteristics of the world is changing with the changing fiscal and monetary policies of the countries. In order to overcome the adverse impact of the global economic crisis, the US and other EU countries have adopted expansionary fiscal policies which has widened the business scope of the multinational firms like Google. By considering the flexible economic conditions, Google is required to revise its global diversification strategy.
  • Technology: The technology market has been changed with the rapid innovation and changing customer buying behaviour. If the companies fail to update their corporate strategy with the changing market forces, then it will no longer be competitive in the industry (Al-Haddad and Kotnour, 2015). The case of Nokia in the mobile phone market can be stated here. Google is required to response to the technological innovation as well as change in the market forces.

New Directions in Strategic Thinking

The traditional strategic thinking aspects have been greatly changed with the change in market forces. The following new directions in strategic thinking should be considered by Google to restructure its corporate strategy:

  • Reorienting Corporate Objectives: The traditional shareholders’ value maximisation goal has been adversely affected by the increased social and environmental commitment of the organisations (Appelbaum, et al. 2012). While designing the value delivery system, Google should focus on the increased social and environmental pressure on the business activities.
  • Managing Options: In the recent years, the corporate bodies have relied on the strategic alliances to maintain their market competitiveness. Google has already adopted the strategic alliance options in designing its market competitiveness. By acquiring Motorola and Android, Google has ensured diversified business entry to the global technology market.

Redesigning Organisations

With the increased complexities in the strategy implementation and maintaining global competitiveness, Google is required to focus on realigning its organisational structures (Babar, 2016). For example, multi-dimensional structures should be adopted. Here continuous improvement in the value delivery system should be ensured. By developing high-performance work team, Google will be able to ensure organisational responses to the continuous improvement.

The Changing Role of Managers

The traditional resource management role of managers have been shifted to the value management role.  Google has to focus on the knowledge based approach to the value delivery system (Banker, et al. 2011). The managers should develop emotional intelligence where maximum utilisation of organisational resources will be ensured.

5. How should Google delineate its corporate boundaries and which businesses or products would you recommend abandoning or selling

Delineating Corporate Boundaries of Google

Google has focused on the diversification strategy to maintain its competencies in the changing technology market. The transition from Google Inc. to Alphabet Inc. has redefined the corporate boundaries of Google. Under the holding company, Alphabet, Google will enjoy more freedom in terms of product development, functional activities and greater independence for the individual subsidiaries (Barney and Hesterly, 2014). The following points have identified the corporate boundaries of Google under Alphabet Inc.:

  • Google wings: Search engines, maps, YouTube, Android and advertising will remain under the Google wing.
  • Calico: This wing will focus on the biotech product development by remaining an independent wing of Alphabet.
  • Sidewalk: This subsidiary company will work to develop strategies for smart cities.
  • Nest: The basic activities of the company is to develop internet-connected devices for home.
  • Incubator projects: Self-driven cars and delivery drones will be designed and structured under the Google X segment.
  • Investment Arms: Google ventures and Google Capital wings are responsible for developing investment opportunities for Google.

Google has developed its corporate strategies by focusing on the acquisition strategy which has helped Google to develop diversification strategy over the volatile technology market. The acquisition of Android in 2005 and the introduction of Android software platform has helped Google to become a market leader as the smartphone operating system developer. The introduction of own browsing platform, Chrome, has helped strengthened the market position by beating the key market rival Microsoft in this market segment (Batra, 2016). Though Google is facing challenges of trading off between the user privacy and advertisement opportunities while responding to the ‘InPrivate’ feature of Internet Explorer, Version 8 of Microsoft. The acquisition of Motorola has facilitated Google to get access to the thousands of mobile-device-related patents developed by Motorola. The handset manufacturing strategy has been initiated with the acquisition of Motorola. This has intensified the market competition of Google as in response to the handset development strategy of Google, the biggest customer of Google, Samsung has also announced to develop its own operating system platform. Google+ is the social networking platform of Google and this venture has been challenged with the biggest market rival in the social networking market Facebook.

Businesses or Products to Abandon or Sell

The social networking wing of Google which is Google+ should be abandoned. In the social networking market, Facebook has gained the largest market share. In the US market, Facebook has 42.4% market share and this strong market position has attracted advertisers. Online advertising revenue depends on the availability of information of the target customer segments and in this case, Facebook is beating other social networking sites in terms of active user numbers. Again Facebook is working to develop own search engine to facilitate its users with enhanced experience. In 2013, Google+ had experienced the highest number of active users since its introduction. Since then, the number of active users are decreasing in an alarming rate and Google+ is losing its market share in social media (Blomme, 2014). In such situation, it is recommended Google should abandon its social networking venture and should concentrate on developing other business wings.

6. what the influences have been on the strategies followed by Google

The corporate strategy development phases should focus on the maximum utilisation of the organisational capabilities so that the external business opportunities can be maximised and the threats can be minimised. Google has developed its corporate strategy by focusing on the product development and improved customer experience so that customer loyalty and competitive market environment can be developed (Batra, 2016). From the corporate strategy analysis of Google, it has been identified that Google has focused on the greater capacity usage to the value delivery system. The transformation of Google to Alphabet has been marked with the challenges of capacity usage to maximise its value.

The strategy development process of Google has been influenced by the external market factors such as changing customer buying behaviour, intense market competition, complementary products and supplier power in the market (Biggs, 2010). Again the organisation specific factors such as management efficiency, employee turnover, diversification business strategy and changing management role have affected the corporate strategy formulation strategy of Google. The vision statement of Google has focused on the organisational and external market environment analysis. The factors that have influence on the vision development of Google are the rapid change in the technology market, changing customer attitude and the transition of Google Inc. to Alphabet Inc.

The diversification strategy of Google to Chrome browsing platform has been affected by the strengthened market position of Microsoft in this segment. While designing the diversification strategy to the introduction of Chrome, Google has focused on the market competition and market presence. Again the strategy with Android operating system has helped Google to become the market leader in this market by using strategic alliance with the handset manufacturers and the programme developers. The challenges that Google has focused while developing the business strategy in terms of Android is the open source programme development and ensuring superior customer expectation (Bouzon, 2012). The market strategy of Google in terms of Motorola acquisition has affected the business strategy of Google through increasing market rivalry and developing new market competencies. For example, Motorola acquisition has helped Google to get access to the mobile-device-related patents. But the handset manufacturing strategy has resulted in intensifying the market competition with the announcement from Samsung to develop their own operating system instead of using Google’s one. It has been suggested that Google should abandon its social networking site Google+ due to lack of market potentiality in this market segment. This strategy will impact overall market competencies of Google as it will lose its market presence in the social network segment.

Conclusion

In the concluding segment of the report, it can be said that Google has developed a diversification strategy which has helped the technology giant to maintain its market competitiveness. In the volatile technology market, Google has focused on creating brand loyalty and ensure organisational commitment to superior customer experience. This report has identified that while developing the corporate strategy, Google has focused on the firm specific factors such as organisational capacities, resources and strengths which have been linked with the external market environment such as customers, competitors and suppliers. Again the vision statement has been developed by linking the market opportunities and the threats and the organisational resource implications. The diversification strategy of Google in terms of Android, Chrome and Motorola acquisition has helped to maintain market competitiveness. It has been suggested that Google should abandon its social networking wing Google+ due to changing customer attitude and brand loyalty.

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