Business Management Case Study Practice

1.2 Types of business entities

Case Study: The GoogleTM Phenomenon

In 1995, Larry Page and Sergey Brin met at Stanford University. The following year they formed a
partnership and began collaboration on a search engine called BackRub. In 1997, they decided to
rename BackRub and came up with Google (derived from “googol” a mathematical term for the
number represented by the numeral 1 followed by 100 zeros).

a) Define the term “partnership”. [2]

A partnership is a group of one or more people working together to run a business. Within this group, it is usual
for each person to have specific or similar skills that will bring advantages to the company.
b) Explain two benefits to Larry Page and Sergey Brin of starting Google
as a partnership. [4]
One of the advantages of forming a partnership is that each owner will bring new skills to the company. Meaning that it will broaden the areas of knowledge and
upgrade the company. Another benefit is the bigger accessibility in finance due to the collaboration of multiple owners into putting capital in the company. As
shown in the study, Sergey brought financial expertise.
With $100,000 support from a backer, Google Inc was started up in 1998 in a garage in California.
Later that year, PC Magazine recognized Google’s search engine as one of the top 100 websites.
In 2000, Google became available in many languages including French, German, Italian and
Chinese.

c) Explain the difficulties the partners would have encountered when

they started up Google.
difficulties is inevitable in such way of starting a company, in the case of google, the following disadvantages
are some of the most relevant. Having unlimited liability is one [6]
Facing
of loosing everything, including their house and personal belongings.
of the difficulties due to the need to have capital to start the business, however there is always the possibility
a clear plan or how to do it. In order to link these with the case, it
Another difficulty might’ve been the lack of a set goal, since it was only a platform that kept developing without
could be said that with the $100000 support from a backer, there was always a risk of failure and loosing everything.
By 2004, the Google search index contained 6 billion items, including 4.28 billion web pages and
880 million images. It moved to an office in California called Googleplex with over 800 employees
and offices all over the world. In the same year, Google became a publicly held company offering
for sale 19,605,052 shares at an opening price of $85 a share.

Over the next five years, Google refined and added to its search engines a range of products such
as Google News, Google Earth, Google Maps and Google Video. Today, Google is a huge
multinational corporation worth around $160 billion and its share price is over $500 a share.

d) Discuss the advantages and disadvantages to Google’s decision to change its form of
business entity to a publicly held company in 2004. [10]
Regarding the
By making this decision of going public on the stock market,Google became accessible for anyone who wanted to buy shares of the company.
raise the company’s
advantages of this, it could be the fact that they have a limited liability where people only loose their investment. Also, going public helps
shareholders. Now, some disadvantages are the mandatory annual reports that the company has to publish every
finance due to the multiple collaboration of the
Nonetheless, it has been
year, even if they are going through a crisis and the stocks drop, as well as the company’s vulnerability to a takeover in any moment.
proved that this decision of going public, brought more advantages than disadvantages since Google decided to take the decision in 2004.
Source: Adapted from various sources

NOTE: OLD data - Google is worth significantly more now. What is it’s current share price?

D. Kelly Page 1