Research Paper: Google
Google is one of the global companies listed in the SEC and is based in Mountain View California, US. The company’s main focus is on the internet related services as well as products as search engines related activities, online advertising cloud computing as well as software development. The company was founded in September 1998 by Sergey Brin who is currently is a director along with Larry page, the CEO at the the standard University. Google’s headquarters are found in a campus known as “Googleplex” in Mountain View, California. Currently, Google has managed to extend and possess more than 70 offices all over the world across more than 40 countries (Google Inc, n.d). The companies international interest are enormous, with the best example being in 2014 when they extended their investment arm, Google Ventures to the city of London, with a preliminary capital of $100 million capital to start assessing for investment opportunities in Europe.
From this investment arm, Google has managed to open more than 5 investment ventures (Google Inc, n.d). In this assessment, there will be an evaluation of the financial, income statement, the balance sheet offers excellent insights into the company’s returns, with the best meant of assessing Google’s balance sheet being via the assessment of the company’s financial ratios.
The evaluation below is of Google’s (GOOG) 2014 yearend balance sheet as s means of assessing the financial as well as management strength.
The Liquidity Ratios
Through the use of Google’s quick and current ratio, it will be possible for us to assess the ability of the company to pay their liabilities. Google’s liquidity ratios encompass:
Source: Google Inc. (2014).
The assessment of the liquidity ratios follows that the higher the ratios, the more sturdy the company and in this case, it implies that Google is in a position to cover their current liabilities with their current assets. The current assets encompass those assets that can easily be changed into cash as the account receivables, cash as well as marketable securities. For the year 2014, the current ratio implies that for every $1 of their current liability, Google possesses $4.8 current assets, an indication that the company’s general liquidity is very good (Google Inc, 2014).
The Assessment of Google’s Efficiency Ratios
The assessment of these ratios will offer an indication of the manner in which Google’s uses their assets as well as liabilities, indicating the duration it takes to receive payment from customers, the duration the company takes to pay their bills as well as how effective they convert their fixed assets into sales revenue (Source: Google Inc. (2014).The assessment of Google’s efficiency ratios is as follows:
|Fixed asset turnover||3.27||4.22|
|Sales to net working capital||7.73||9.16|
|AP to sales||0.03||0.04|
|Days sales outstanding||56.73||54.80|
|Intangible % of BV||0.04||0.07|
Source: Google Inc. (2014).
From this assessment, the underlying attributes encompass the assertion that the higher the receivables and turnover of fixed asset ratios, the more the sturdy the company. In this case, it is evident that Google can turn their receivables into cash. In the year 2014, the company collected their receivables approximately seven times every, which was slightly lower than the previous year but generally at a good pace. It is also evident that a higher fixed asset ratio is additionally preferable as it indicates that Google generates $3.27 in sales for every $1 they invest in fixed assets (Google Inc, 2014). The situation, however, indicates that the ratio has decreased slightly from what it was in the year 2013, in the same manner that is noted of the company’s sales to net working capital from the previous year. The lower accounts payable to sale, the days sales outstanding along with the days payable outstanding further indicate that there is a higher efficiency at Google. Although the company’s DSO is higher than those of 2013, there was an improvement in the DPOs, indicating that the company pays its bills (Google Inc, 2014).
The Strength and Profitability Ratios
The leverage and solvency ratios are vital measures relating to the levels of assets that are generated internally against what is provided by others in the form of debt. Additionally, the management or profitability strength is accessed via the return on equity assets and the asset ratios. The core ratios for Google include:
|Debt to equity||5%||6%|
|Debt to assets||4%||4.7%|
|Return on equity||15%||14%|
|Return on assets||12%||14%|
Source: Source: Google Inc. (2014).
It follows that the lower the debt to equity, the better the company is and the assessment of Google leads to the realization that Google employs a lower proportion of debt that equity or assets in financing their assets and follows that the trend is better in 2014 than 2013 (Google Inc, 2014). The employment of the profitability ratios is to aid in the assessment of the management’s strength as well as how the company can manage to generate profit from the assets or equity used. Google’s return on equity for the same year has been marginally favorable kin 2014 compared to the situation in 2013 while their return on assets is slightly lower. In general, the assessment of Google’s balance sheet, as well as management strengths, indicates that the situation was better in 2014 that in the previous year.
Valuation of the Balance Sheet-Based
Making decisions on whether to buy or sell GOOG shares of is further influenced by the valuation of the company. The common appraisal multiples encompass the price to earnings (P/E) as well as the enterprise value to EBITDA inputs that come from the income statement. The balance sheet additionally offers insights into how attractive of a company’s stock chiefly derived from the cash and book value furthermore how it changes over time.
Source: Google Inc. (2014).
The assessment of the cash value per share in provides the investor with insight into the company even without profits. In this assessment, it is evident that Google can invest in itself at a rate of $93 per share. The book worth per share of $152 indicates that at the end of the year 2014, the company was trading approximately 3.5 times per share book value.
Google Products and Services
The main premise that informs the delivery of products and services at Google encompasses the provision of a perfect search engine that has the capability to understand precisely what you mean furthermore give back accurately what you want. Google has enlarged their service, and product delivery includes products that are beyond the search (Claburn, 2011). Through the diverse technologies that Google has at their disposal in addressing the search needs as Chrome and Gmail, their objective has been in the ensuring that the users find it as easy as possible to find the information they need.
The implication of this assertion is that they have made the search smarter as well as faster ensuring that it understands specifically what one is searching. The main products that Google provides to their users include:
- The blogger
The invention of the Blogger by the company allowed the clients to self-publish. The invention is currently accessible to the users in more than 20 languages globally, making it the premier tools that people can own blogs (Haucap & Heimeshoff, 2014). Google obtained Blogger's creator Pyra Labs in the year 2003, with the acquisition allowing for the entire platform to become free for the users.
- Google translate
Google translate is an additional product offered by the company that ensures the user access free translation supporting up to 64 languages. The translations through this product are instant and that the service can translate sentences, words, as well as web pages between any combinations of the 64 languages.
Contrasting most of the other advertisers, the ads that are delivered via the Google's platform are helpful most of the time. When the users search for a product, the advertiser can serve you an ad. This service makes Google lots of money moreover, helps users.
The product was developed in the year 2008 and is one most favorite browser mainly due to its speed as well as simplicity. The browser is additionally very reliable; an attribute that allows users to sign in with their Google account on several computers and ensuring that one enjoys a similar experience. As of May 2012, the product had approximately 3% universal usage share of web browsers, which made it the most extensively used web browser.
This product stands out as Google's best acquisitions. According to Reuters, "YouTube, which is Google Inc's video website, was streaming more than 4 billion online videos daily, which was a 25% augment in the precedent eight months. The product that was rolled out in February 2005, it makes it possible for billions of users to discover, watch moreover share originally-created videos.
Android is the additional product that Google offer their users and the launched Android by in the year 2007 is considered a direct competition to Apple's iPhone as well as the mobile operating system. Android operates on the Linux software and is seen to offer the users with a dissimilar way of experiencing their mobile phones. In the opening quarter, 2012, there were 331 million Android users with more than 934,000 activations taking place daily
- Google maps
The introduction of Google maps by the company changed everything. The service debuted 2005 help millions of users not get lost, allowing them to travel around the world from the calmness of their homes.
The introduction of Gmail by Google changed the manner in which the world saw the email. The product offers the users unlimited email storage ensuring that they are never compelled to delete an email to create space; an attribute that had been unheard of previous to the introduction of the service. By the end of the start of 2012 Gmail had 350 million active users.
Google Competitor Analysis
Looking at Google’s website section, it is evident that the company is in competition with others players as the Internet pioneer moreover media company AOL, search innovator Yahoo, technology giant Microsoft, career, and business social networking site LinkedIn, among other companies (Haucap & Heimeshoff, 2014). In the evaluation of the overall advertising revenue section, Google is seen to be in competition with Yahoo as well as AOL and the employment website operator Monster Worldwide. The additional competition that Google faces is from the online travel corporation Expedia, media multinational E.W. Scripps Company, media company Scripps Interactive, along with the online auctioneer eBay.
Microsoft introduced their search engine, Bing, in the year 2009 to offer direct competition with Google. Microsoft made huge investments in the promotion of Bing and managed to successfully manage to increase their market share within a comparatively short timeframe. Relying on the statistics supplied by comScore, the Microsoft sites had garnered a 20% share of all the U.S. desktop searches as of April 2015. In the same way, Google, operates, Bing makes money from the selling of online advertising, allowing customers to place ads together with both Bing and Yahoo search results.
Yahoo began as an online directory in 1994, and by the year 1998, it had become the most accepted starting point for web users. Yahoo is further known globally for their web portal that provides content on subjects as sports, music, finance, along with movies. Consistent with comScore, the sites owned by Yahoo have a 12% share of U.S. desktop searches by April 2015.
The main threat that is posed Facebook is associated with the socially powered search that draws from the company's wealth of data. The evidence that Facebook has more than 1.4 billion users in the year 2015 as well as a deep comprehension of their interests along with relationships, Facebook is becoming ingredients that can make a difficult search alternative.
In the year 2014, Google chairman confessed that their chief competitors are not Yahoo or Bing but Amazon. He supported his assertion was supported by saying that the shoppers bypass Google, asserting that approximately a third of people desiring to purchase something started on Amazon, which is more than two time the number who went straight to Google.
There is an assortment of skills as well as capabilities that have been instrumental to the success that Google as a company has been enjoying. Among these capabilities include the coordinated leadership group whereby the coordinated group leadership has been central to their success (McAfee, Brynjolfsson, Davenport, Tatil, & Barton, 2012). In this case, the leadership at Google has been described to function as a single unit as well as the effective team that has been charting the way forward for the company.
The commitment to the cutting edge technology through the possession of the smartest and dedicated teams is one of the reasons that the company has managed to enjoy the success they have exhibited in the industry. The creation of the real-time search, universal search as well as the instant makes the searching process for information on the web both more revealing as well convenient for the users (McAfee, Brynjolfsson, Davenport, Tatil, & Barton, 2012).
The wise expansion employed by the company is additionally a reason they have enjoyed the amount of success, with Google seen to have an eye for the new ventures as well as acquisitions that are outside the search engine market, focusing on the areas that generated some synergy within their core. This capability has allowed Google users to the convenience through drawing more than 4000 news sources (McAfee, Brynjolfsson, Davenport, Tatil, & Barton, 2012).
Subtle marketing is the additional capability that Google enjoys and is seen in the fact that they have become adept in marketing themselves as a brand name. The features that are found on the Google’s homepage mostly just the letters on the word “Google” colorfully displaced.
Google’s Competitive Advantage
Google, owing to their innovation, size, in addition to market position, exhibits an assortment of competitive advantages. Although Google has numerous competitive advantages, Google’s competitive advantages can be classified into three chief areas that include the innovative services, infrastructure, as well as market share (Haucap & Heimeshoff, 2014). In the context of the infrastructure, Google possesses an exceedingly powerful infrastructure that cannot easily be simulated. In the same as Wal-Mart is identified for possessing a highly proficient supply chain infrastructure that has an enormous investment in equipment and plant assets that encompasses enormous warehouse facilities, high-tech inventory systems, and transport vehicles, Google possesses a huge technology infrastructure.
The additional source of competitive advantage that Google enjoys is via their innovative services. Google enjoys more than 100 Google services encompassing the famous Google Search, Gmail, Google Finance, Blogger, Google Apps, Google Docs, as well as Google Chrome, among others. The immense value of Google’s services is found in the fact that Google has the capability to offer almost all their services at a zero cost to their users (Haucap & Heimeshoff, 2014). The fact the number of services and users, Google can offer an eye-catching advertising model and additionally make billions of dollars each year. Through the infrastructure Google possesses they are in a position to offer users with a huge range of services. Additionally, even on those occasion that the competition offers similar services, Google offers the users with the opportunity to enjoy a “one-stop-shop” for their computing and Internet and needs (Haucap & Heimeshoff, 2014). The attribute becomes hard for the competition to meet with the fact that the company continues to make innovations further ensure they retain the competitive edge.
The Wide Assortment of Products & Services
Google’s tendency of unvaryingly trying to increase their portfolio of products as well as services is one of the strategies instrumental to their sustained competitive advantage. From the time Google was incorporated, it has acquired more than 100 companies as a strategy to expand their products and services, particularly in YouTube as well as Motorola Mobility. YouTube currently serves over 800 million distinctive visitors on a monthly in addition to possessing the leading market share of more than 40% of online video market (Haucap & Heimeshoff, 2014). Google further encourages its staff to adopt their creativity as well as innovation in the daily practices as a strategy of contributing to the formation of new products and ideas.
The Basis That Google Has Employed In Exerting Their Global Dominance
The reliance on the components of the resource based view, Google has managed to realize sustained competitive advantage as well as global domination. The realization of the global dominance of Google has been the observation of the criteria whereby they are rare, valuable, and imperfectly imitable as well as non-sustainable (Bloodgood, 2014).
Regarding the rare resources, it follows that Google possesses a rare portfolio encompassing the patented technology and the improvement in the number of patents held especially with the acquisition of Motorola Mobility in 2013 (Bloodgood, 2014). Through this acquisition, Google has managed to get an additional 24,000 patents.
The Valuable resource as the additional tool Google has been using in their global domination follows the assertion that Google among the best search engines (Bloodgood, 2014). The search engines have been Google’s most important resources that drive advertisements, accounting for more than 98% if their $37.9 billion revenue.
The inimitable quality encompasses the fact that Google’s scale of their infrastructure cannot be easily imitable (Bloodgood, 2014). The fact that Google does not reveal their infrastructure but estimation indicates that they own huge assortment of data centers all over the world.
The substitutability is the last domination strategy follows their clean, minimalist user interface; the use of Google search engines presents the users with an unparalleled mode of retrieving information fast that is hard to substitute (Bloodgood, 2014). Through the reliance on these attributes, Google managed to develop their competitive advantage and the consequent global domination.
The mains strategies that Google needs to adopt in ensuring they enjoy guaranteed success include:
- There is additional investment in R&D to develop solutions that meet market demand
- There is an increase in the involvement of the employees in the organization productions as a way of promoting creativity and commitment
- Encouraging innovations through rewards to ensure there is an increase in solutions that and productivity
- Training the management on effective leadership skills as a way of ensuring the company enjoys a working environment that guarantees success
- Implementation of CSR strategies to increase the awareness of the company’s products and getting goodwill from investors and users
The assessment of the financial situation of Google encompasses the assessment and observation of an assortment of indications. For instance, the assessment of the company’s balance sheets offers great insight into the company as it tells the investors of the company health as well as the efficiency of the management in the running of the business. Additionally, the balance sheet assessments offer the necessary input that can be used in the calculation of the diverse line of items on the income statement. Some of the valuable lessons that have been learned from the assessment of Google case include the fact that:
- Effective management is central to the success of a company operating in the global arena
- Ensuring the focus of the business is to the users is additionally a valuable lesson that ensures a business is fully focused on ensuring the needs of their customers are met, they greater retention
- Giving employees the freedom to fix anything that appears out of place is vital to the success of the company as it ensures the company is better regarding addressing the possible shortcoming that affects their productivity.
- When data drive the operations of a company, it becomes easy to make decisions as they are all founded on substantiated facts.
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Bloodgood, J. (2014). Enhancing the resource-based view of the firm: Increasing the role of awareness. Strategic Management Review, 8(1), 61-75.
Claburn, T. (2011). Google Founded By Sergey Brin, Larry Page... And Hubert Chang?!?. InformationWeek. Retrieved from http://www.informationweek.com/applications/google-founded-by-sergey-brin-larry-page-and-hubert-chang!/d/d-id/1072309
Google Inc. (2014). Google Inc. Annual Reports. Retrieved from https://investor.google.com/pdf/20141231_google_10K.pdf
Haucap, J., & Heimeshoff, U. (2014). Google, Facebook, Amazon, eBay: Is the Internet driving competition or market monopolization?. International Economics and Economic Policy, 11(1-2), 49-61.
McAfee, A., Brynjolfsson, E., Davenport, T. H., Patil, D. J., & Barton, D. (2012). Big data. The management revolution. Harvard Bus Rev, 90(10), 61-67.