Team project google chromebook mba 528

RUNNING HEAD: Chromebook Channel Design, Coordination and Management 1

Google Chromebook: Channel Design, Coordination and Management

MK 528 Channel Marketing

City University of Seattle

Chaia Schupack

Allison Kelsey

Xiaolong He

Stephanie Richardson

Google Chromebook: Channel Design, Coordination and Management 2

Google announced the Chromebook in May, 2011. The Chromebook is a laptop computer

designed to be used while connected to the Internet. Although a variety of apps that can be run

offline are preinstalled, the device offers extremely limited functionality if offline. Chromebook

users’ data, and most applications, are stored in the “cloud” and can only be accessed via a

connection to the Internet.

Figure 2: Google Product Timeline

The Chromebook is an example of a thin client. The thin client is a computer or a

computer program that depends heavily on some other computer to fulfill its computational roles.

This is different from the traditional fat client, which is a computer designed to take on these

roles by itself. The specific roles assumed by the server may vary, from providing data

persistence to actual information processing on the client’s behalf. Thin client computing is also

a way of easily maintaining computational services at a reduced total cost of ownership (Nieh

2005).

The Chromebook represents an alternative computing model and an alternative type of

computer. A computer’s default state is connectedness. Core functionality is online, with offline

capability for some apps added as a bonus. The device still has a resident OS, but the OS is very


browser-centric, and application bits are executed through the browser-rendering engine. This

means that a Chrome book relies heavily on a broadband Internet connection for optimal

functionality. This paper will analyze the channel design and strategy for the Google

Chromebook.

Customer segmentation

The Education segment is the largest initial Chromebook customer segment. Google

designed the device with key features for the Education market: low cost, fast start-up and Cloud

connected. Google targets the segment with the following advantages for Chromebooks for

Education: the operating system offers a new administrators’ control panel which can set

students’ access to the application by grade levels and the power to control devices remotely; it

allows updates to be simultaneously rolled out across devices and eliminates the need to install

virus protection software; 3G and wireless capabilities make it easier for the student to use at

home or at school. Schools that contract for the Chromebooks will receive enterprise-level

support, device warranties and replacements. In the past, Google has not offered this type of

dedicated support; educational users have come to expect.

Google has also broadened its marketing strategy to include first-time computer users and

households seeking an additional computer. The segmentation strategy is showing success; the

Chromebook is the fastest-growing device in the PC category.

Google’s target market also aims at the two ends of the computer using spectrum, with

millennials and seniors squarely in the company’s sights. However, the price point should help

bring in a younger market segment; in addition, that generation understands the Cloud and can

make the most out of the device. People will purchase the laptop for their parents because it is

low-priced and simple to use.


Critical reaction to the device was initially skeptical, with some reviewers unfortunately

comparing the value proposition of Chromebook with that of more fully featured laptops running

the Microsoft Windows operating system. That complaint dissipated in reviews of machines

from Acer and Samsung which were priced at $200-$250 respectively. Google’s first entry into

the PC market with its Chromebook was dismissed as a basic laptop with limited appeal when it

debuted two years ago. Now it has defied skeptics and gaining share as the rest of the PC market

shrinks.

Google has built an ecosystem that aims to change the way you think about personal

computers and computing. Chromebook are the focal point of that ecosystem. Just as full

Chromebook functionality depends on a broadband connection, it also depends on your

participation in the Google ecosystem. The Chromebook are primarily sold online, both directly

from Google and from the company’s retail partners.

Channel strategy

Google has evolved from an internet search and advertising company to one of the

dominant players competing in the “one cloud, many screens” environment. According to some

analysts, cloud-connected screens, providing a seamless connection to all our personal content,

are the future of personal computing (Bajarin, 2013). As the device landscape continues to

evolve into the “internet of things”, the Cloud provides the connection among all a user’s devices

to the content that really matters.

Google’s strategy is to leverage its dominance in search, browser, device operating

system and content services to position itself as the best provider to connect all a consumer’s

screens: desktop, tablet, Smartphone, glasses. Its goal is to commoditize sectors that it cannot

dominate, such as cell phones and low-end laptops (Lin, 2013).


The Google Chromebook is a unique product that is designed to look like a laptop, but is

designed to run completely in the Cloud. Chromebooks have no hard drive or software; its

operation is completely based on a web browser. Email, Calendar, documents and websites are

all accessed via the browser, with nothing but the browser resident on the hardware. The

hardware is priced above the low-end tablets, but with no software to license the overall cost is

much less.

Google’s Chromebook channel is designed as a horizontal channel. Google licensed its

operating system and browser to 3rd party manufacturers, who in turn used their own distribution

channels as well as other partner channels to deliver the device to consumers via online and

brick-and-mortar retail outlets. The channel initially involved a limited number of channel

partners in a classic horizontal supply channel.

Figure 1 Chromebook Channel Design

To support a low-cost pricing structure for the devices, Google underwrites marketing

and distribution expenses. In mid-2013, channel partners expanded to include Walmart, Staples,

Target and other Big Box retailers. This expanded the number of retail outlets to more than 6,600

in the US (Kass, 2013). At the end of 2013 Chromebook distribution was expanded even further


to include Office Depot, OfficeMax and regional chains like Fry’s and TigerDirect. Google also

increased the number of countries in which Chromebook could be purchased.

By the end of 2013, the channel showed signs of evolving into a multi-channel design

(Ryciak, 2013). Google partnered with Intel to open “Winter Wonderland” showrooms in a

small number of cities. Channel partners account for the large majority of Chromebook sales

through online and brick-and-mortar retail.

Why not take the channel vertical and control manufacturing of the Chromebook? In the

technology sector, hardware manufacturing requires a special set of operational capabilities. As

technology markets mature hardware becomes commoditized. Demand shifts to low-cost

designs and requires a reduction of time to market (The VAR Guy, 2007).

Service flows Channel must provide

Google has been testing Chromebook equipped store kiosks that make it easier for

businesses to help their customers and employees check merchandise stock, place orders or get

more information while shopping or working. The kiosks use Managed Public Sessions to allow

employee and customer use of the devices without the need for logging in. Because Chromebook

models are low cost, easy to set up and manage, and require virtually no maintenance,

Chromebooks with Managed Public Sessions make perfect shared kiosks. Some of Google's

suggested uses for the Chromebook kiosks include:

Ordering out-of-stock items online while customers shop at a retail store. Searching for

books and browsing the Web at the library.

Updating machine and inventory information from the manufacturing floor of a company.

Accessing a company portal and updating human resources information from the

employee break room.


Chromebook notebooks and their desktop brethren Chrome boxes run Google's Chrome

operating system and feature a wide range of preinstalled, cloud-based Google services and

products, including Google Drive, Docs, Sheets and Google Calendar.

Channels/tiers of Distribution needed

Since Google does not engage in direct sales of the Chromebook, strong online and brick-

and-mortar retail intermediaries are critical to the product’s success. Google will therefore

continue to bring new retailers into the channel. The company will also increase the number of

existing retailers’ stores selling the device in the U.S. Expansion into other markets worldwide

is also important.

A key competitor in both hardware, software and Cloud services, Microsoft is targeting

the Chromebook in its marketing efforts. Microsoft ad campaigns highlight the issues with thin

clients by highlighting the superior offline features of desktop software packages such as

Windows, Office, and even Apple's iTunes. The desktop software giant hopes the strategy will

raise awareness of online personal privacy issues and help turn public opinion against Google's

methods of using consumer’s online behavior to improve its ad targeting. However, Google’s

customer segmentation strategy is used to define the features, marketing and channel flows for

the Chromebook, and the Chromebook is the top-selling laptop.

Chromebook devices from Acer, Hewlett-Packard and Samsung Electronics have rolled

out in Australia, Canada, France, Germany, Ireland, and the Netherlands. Chromebooks are also

being delivered to businesses and schools in the countries to help improve computing for

organizations. It is imperative for Google to have brand name recognition in their channeling

activities. Consumers identify with these brand names and will be more likely to use

Chromebooks.


CDW offers Google Chromebooks with web-based management for private and public

sector customers. In addition to the device and web-based management console, the solution

includes an array of network, integration and the management console; IT administrators can

apply policies, applications and settings to different sets of users. Via the management console,

IT administrators can manage user access and control network access, making it easy for users to

get up and running. The system ensures that web filters and firewalls protect user hardware

configuration services.

HP announced in February the availability of its Pavilion laptop running the Chrome

operating system, to try to improve laptop sales by offering an alternative to Microsoft's

Windows operating system.

Channel partners

As previously discussed, Google is using several channel intermediaries to manufacture,

market and distribute the Chromebook. Google is maximizing their distribution and marketing

channels by licensing the OS to third-party manufacturers. Brands including HP, Acer, Samsung,

and Lenovo each offer their own version of the Chromebook which are sold within the North

American markets. This provides numerous brands and options for consumers for how to buy

Chromebooks.

Most Google revenues come from search advertising. However, Google’s channel

partners also book significant revenue on their own. App developers, hardware manufacturers

and value added resellers also stand to earn revenues through sales of apps, phones and tablets,

and the Chromebook.

The biggest threat to Google’s channel partners is for the giant to take its business direct

to customers (Weinberger, 2011). After all, this was the initial strategy for Chromebook sales.


However, since Larry Page assumed the role of CEO of Google, the company is involving more

partners even while it reaches out directly to consumers (The Var Guy, 2007).

Gap Analysis

The Chromebook initially offered a very limited distribution channel, with few models,

offered only in the US. As the pricing, marketing and channel strategy has been filled out those

gaps have been closed.

Another channel gap that is starting to close is the lack of Enterprise features and

services. Although the Educational and Home user segments are the key customer segments for

the Chromebook, there is room for such a device in the Enterprise solutions array. Throughout

2013 Google brought in additional partners such as CDW to engage the Enterprise segment by

providing those expanded channel flows.

Channel effectiveness

Google Chrome OS is part of the company’s strategy to evolve the traditional notion of

computing to a “one cloud, many screens” ecosystem. The Chromebook challenges desktop

operating systems, conventional hardware, and the software applications that run on them.

Chrome OS is open source, meaning it is free to users and developers. Open source licensing is

an effective way to propagate a platform.

Toshiba has now officially entered the Chromebook market with a $279, 13.3-inch

device. While the Chromebook market has made a splash in education circles, Google believes

this model’s larger screen size will change the perception of the Chromebook from a browsing-

centric device to one that is capable of serious productivity through the use of Google supplied

docs, sheets and slides software. Also to highlight this new perception, Toshiba has powered the


Chromebook with an updated Intel Celeron processor. It is important for consumers to identify

with Intel because it is a trusted brand.

Google’s marketing strategy is geared toward convincing customers that the larger screen

size of the Chromebook relative to phones and other connected devices is more beneficial for

students to do their work and learn.

Buyers in this industry group vary in size, from small individual customers to

multinational companies and government agencies, with financial muscle and greater buyer

power.

The smaller end of the market is fairly fragmented, with local and regional firms serving

the needs of small businesses, as well as small firms that target clients in specific industries. The

existence of large buyers helps strengthen buyer power, as the loss of business from one of these

customers could have a detrimental effect on players’ revenues. The impact of Chromebook has

the potential to rob market share.

Conclusion

Google’s Chromebook is an important addition to the company’s product lineup. The

channel design shows a clear customer segmentation and definition of required channel flows for

the Education and Home consumer. Over time, the channel design has evolved to allow better

penetration into those and other segments. The pricing and licensing strategy, as well as

Google’s marketing support, offer incentive for manufacturers and distributors. The success of

the product shows that the right mix of features, connectivity and pricing can be a winning

formula.


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