This paper presents a strategic and financial evaluation of Google (Alphabet Inc.), examining the company's internal strengths and weaknesses, five-year financial performance (2017–2021), and competitive advantages. Key strengths identified include Google's globally recognized brand and strong revenue growth, while weaknesses center on overreliance on advertising revenue and employee dissatisfaction. Financial metrics including revenue, net profit, return on equity, and debt ratio are analyzed across five years to assess profitability and solvency. Finally, the VRIO model is applied to evaluate Google's competitive advantages in market position, customer experience, and brand image.
The following analysis examines Google (Alphabet Inc.) across three dimensions: internal strengths and weaknesses, financial performance over the period 2017–2021, and competitive advantages as evaluated through the VRIO model.
i. Brand reputation: Google is a well-known brand that is generally well regarded by various stakeholders, including customers. As one of the most recognized brands in the world, Google is to a large extent considered a market leader in its space, which could help in efforts to promote customer loyalty.
ii. Financial stability: Google's total revenue, as indicated in the financial analysis section, has been on an upward trend over the last five years. This has allowed the company to invest in various systems and features that further enhance its ability to satisfy customer needs.
i. Overreliance on advertising revenues: Google derives a large share of its revenues from advertising. As of 2021, 81.3% of the company's revenues could be traced back to advertising. If this particular source of revenue were disrupted for any reason, the company's financial stability could be greatly impacted.
ii. Unaddressed employee concerns: According to Elias (2022), various surveys indicate that "Google employees are becoming unhappy with pay, promotions, and execution." This points to internal issues related to compensation and career advancement that ought to be addressed if the company is to continue operating effectively going forward.
Table 1 below lists a number of metrics useful for evaluating Google's performance. Specifically, the following items have been captured: revenues, costs, profits, return on equity, and debt ratio.
Table 1: Google Financial Metrics, 2017–2021 (figures in millions USD, except ratios)
Revenue: 2017 — $110,855 | 2018 — $136,819 | 2019 — $161,857 | 2020 — $182,527 | 2021 — $257,637
Total costs and expenses: 2017 — $84,677 | 2018 — $109,295 | 2019 — $127,626 | 2020 — $141,303 | 2021 — $178,923
Net profit: 2017 — $12,662 | 2018 — $30,736 | 2019 — $34,343 | 2020 — $40,269 | 2021 — $76,033
ROE: 2017 — $12,662/$152,502 = 0.08 | 2018 — $30,736/$177,628 = 0.17 | 2019 — $34,343/$201,442 = 0.17 | 2020 — $40,269/$222,544 = 0.18 | 2021 — $76,033/$251,635 = 0.30
Debt ratio: 2017 — $44,793/$197,295 = 0.23 | 2018 — $55,164/$232,792 = 0.24 | 2019 — $74,467/$275,909 = 0.27 | 2020 — $97,072/$319,616 = 0.30 | 2021 — $107,633/$359,268 = 0.30
Google's performance over the last five years has been exceptional, having essentially doubled its revenues over this period. Even more impressive is the net profit growth, with the company increasing its net profit figure by approximately 500% between 2017 and 2021. The ability of Google to generate profits using shareholder funds also improved within the five-year period, as evidenced by the return on equity (ROE) ratios computed in Table 1.
However, the company needs to keep its costs and expenses in check, as they have ballooned over the last five years — increasing by 111.3%. To assess the long-term solvency of Google, a debt ratio was also computed. Although the company's debt ratio has increased (from 0.23 in 2017 to 0.30 in 2021), this ratio remains low and within an acceptable range — that is, below 1. Thus, Google cannot be considered highly leveraged. This is consistent with the position of Fabozzi and Drake (2009), who indicate that "companies with higher levels of liabilities compared with assets are considered highly leveraged and more risky for lenders" (p. 119).
Table 2 below presents an assessment of Google's key competitive advantages using the VRIO framework, which evaluates resources along four dimensions: Value (V), Rarity (R), Imitability (I), and Organization (O).
Table 2: VRIO Assessment of Google's Competitive Advantages
Competitive Advantage | Value (V) | Rarity (R) | Imitability (I) | Organization (O)
Market position (market leader) | ✓ | ✓ | ✓ | ✓
Customer experience | ✓ | ✓ | ✓ | ✓
Brand image | ✓ | ✓ | ✓ | ✓
"Market position, customer experience, and brand image"
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