Google (Alphabet Inc.) SWOT and Financial Analysis

Introduction: Google (Alphabet Inc.) Overview

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.

Internal Strengths and Weaknesses

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.

Financial Analysis (2017–2021)

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).