business strategy Analysis for Apple Inc.

  

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Group 1
Business Strategy
TABLE OF CONTENTS
Introduction…………………………………………………………………3
Question 1: Identify the firm’s apparent current mission. Then briefly review
the firm’s current objectives and strategies…………………………….……..5
Question 2: Describe the firm’s current financial condition………………….7
Question 3: Outline and discuss the firm’s external opportunities and threats.11
Question 4: Outline and discuss the firm’s internal strengths and weakness…..
Question 5: a. Revise the firm’s mission and objectives………………………
b. Develop and discuss corporate and business strategies that you recommend
to achieve the firm’s mission and objective……………………….
Question 6: Outline and discuss the specific action needed for implementation
for your chosen strategy……………………………………………………..
Question 7: Recommend procedures for strategy review and evaluation……..
Appendix tables
……………………………………………………….
Extra credits………………………………………………….
“Google” Case Analysis Page 2 of 55
Business Strategy
Introduction
Google Inc. is an American multinational technology company, founded in 1998 by Sergey
Brin and Larry Page, while they were Ph.D. students at Stanford University. It headquartered at
Mountain View, California.
Google began as an online search firm, but it now offers more than 50 internet services and
product, which related to online advertising technology, search, cloud computing, software, and so
on. More than 70% of worldwide online search requests are handled by google today; led the U.S.
explicit core research market share in February, 2015 with 64.5%. In addition, google acquire with
Motorola Mobility in 2012, and put it in the position to sell hardware in the form of mobile phones.
Also, google is one of top four influential companies in the high-tech market place along with
Apple, IBM, and Microsoft. Today Google has more than 70 offices in more than 40 countries
around the globe (Hall, 2015). End of 2014, Google has net income 14,444 million (Google 10K
2014), and 53,600 full time employees (Google, 2014).
By studying Google past year’s performance based on its current mission statement,
objectives, financial status, and internal and external environment, we evaluated its strategies, and
recommended new strategies for Google’s future development. Here is our finding.
History/Timeline
There were many things going on every year in Google Inc. Here are main subject happened
in Google’s history.
1998—Google Inc. was born
1998—the first “Google doodle” was intended to let visitors the homepage know that Google’s
minders were offline at the Burning Man Festival in Nevada.
“Google” Case Analysis Page 3 of 55
Business Strategy
2000—Google introduced AdWords, a self-service program for creating online ad campaigns.
2004—Google launched Gmail and its approach to email included features like speedy search, huge
amounts of storage and threaded messages.
2004—Google Initial Public Offering of 19,605,052 shares of Class A common stock took place on
Wall Street on August 18, 2004.
2005—Google acquired digital mapping company Keyhole in 2004, and launched Google Maps
and Google Earth in 2005.
2006–Google acquired online video sharing site YouTube
2006—Google introduced Google Apps—application software hosted by Google that runs through
users’ Web browsers.
2007–Amidst rumors of a “Gphone,” announced Android—an open platform for mobile devices—
and the Open Handset Alliance, in 2007.
2008–Word got out about Google Chrome a day ahead of schedule when a comic book introducing
our new open source browser was shipped earlier than planned.
2010– The “Google Phone, “was born.
2011—Google introduced the Google+ project, aimed at bringing the nuance and richness of reallife sharing to the web, and making all of Google better by including people, their relationships and
their interests.
2012—acquire Motorola; google glass is unveiled.
“Google” Case Analysis Page 4 of 55
Business Strategy
2013—announced Calico, a new company that will focus on health and well-being, in particular the
challenge of aging and associated diseases.
2014—Android Lollipop launches-designed for a multi-screen world; Google announced will sell
Motorola to Lenovo.
Question 1: Identify the firm’s apparent current mission. Then briefly review the firm’s current
objectives and strategies.
Mission statement
Google Company’s mission statement is to organize the world’ information and make it
universally accessible and useful. (Google Web, 2015)
Mission statement evaluation
According to Fred R. David, An effective mission statement exhibits nine components
(David, 2008). They are:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Customers
Products or services
Markets
Technology
Concern for survival, growth, and profitability
Philosophy
Self-concept
Concern for public image
Concern for employee
Applying to these components to Google’s mission statement, it shows that Google has
three out nine components exhibited in its mission statements as below table, which means Google
has a weak mission statement.
Components
Google
1
No
2
Yes
3
No
4
No
5
No
6
Yes
“Google” Case Analysis Page 5 of 55
7
No
8
Yes
9
No
Business Strategy
Company objective
According to the note about forward-looking statements from Google 2014 Annual Report,
we got Google company’s objectives as follow:
1. To continue to invest in new businesses, products and technologies, systems, facilities, and
infrastructure, to continue to hire aggressively and provide competitive compensation
programs, as well as to continue to invest in acquisitions.
2. To continue growth advertising revenue.
3. To continue to take steps to improve the relevance of the ads Google deliver and to reduce
the number of accidental clicks.
4. To continue invest in international markets.
Company strategies
Google’s search engine business is the dominant business of the company. Google has built
a competitive advantage based on search engine differentiation. Google’s strategies are innovation
and concentric diversification. Also, Investment strategy is another important strategy for Google,
Google have invested and expect to continue to invest in new business, products, services, and
technologies. Investment strategy is to achieve a return that will allow us to preserve capital and
maintain liquidity requirements. Google invest primarily in fixed rate securities including those of
the U.S government and its agencies, corporate debt securities, mortgage-backed securities, money
market and other funds, asset backed securities, municipal securities, time deposits and debt
instruments issued by foreign governments. In addition, Google has acquisition strategy.
Acquisitions are an important element of Google overall corporate strategy and use of capital, and
these transactions could be material to Google financial condition and results of operations.
“Google” Case Analysis Page 6 of 55
Business Strategy
Question 2: How would you describe the firm’s current financial condition? [Use financial
ratios and other pertinent income and balance sheet data to support your analysis.]
Historical Evaluation
Liquidity:
Current Ratio isa useful indicator of cash flow. The current ratios of Google show a positive
trend in three-year period. Quick ratio is often referred as the acid test because it only looks at the
company’s most liquid assets. The quick ratio shows a slight increase in three-year period.
Asset Utilization:
Inventory Turnover isa good indicator of production and purchasing efficiency. A high ratio
indicates inventory is selling quickly and a low ratio indicates overstocking or less selling of
inventory. Accounts Receivable turnoverfor Google has slightly increased than last year. The higher
the turnover, the shorter the time between sales and collecting cash. Fixed Asset turnover and Total
Asset turnover measures the productivity of the firm. It indicates sale generated by every dollar
spent of fixed assets and amount required to generate certain level of revenue. An increasing ratio
indicates that the firm is using its assets more productively. Google’s fixed asset turnover ratio has
decreased in three-year period time.
Debt Management:
Debt Ratio measures the proportion of debt a company has relative to its assets and gives
ideas of potential risks that firm may face in terms of debt load.Google’s debt ratio has changed
from 23.54% to 20.31% in three-year period indicating positive trend. Time Interest Earned Ratio
“Google” Case Analysis Page 7 of 55
Business Strategy
measures the firm’s ability to meet interest payment obligations with business income.The TIE ratio
for Google has showed a slight positive trend compared to 2012 (Appendix 5).
Profitability:
The gross profit margin for Google indicates that the company has been improving in terms
of earning profit as the ratio shows a positive trend from 58.88% to 61.07%. The operating margin
for Google has slightly increased from last two years.Google’s net profit margin has shown a
positive trend.Basic Earning Power measures basic profitability of assets and it is useful in
comparing firms with different leverage.The BEP ratio for Google has decline comparing to past
two years. The return on asset ratio of Google has declined in three-year period, which show a
negative trend.Return on Equity helps to determine if the firm is making enough profit to
compensate for the risk of being in business. Return on equity ratio for Google has slightly declined,
which indicates a negative trend. Investors might not be willing to invest in the company if it
continues to decline (Appendix 5).
Market Value:
Price earnings Ratio is used to compare different investments or same investments over
different period of times. This ratio shows what market is willing to pay for the stock based on its
current earnings. The P/E ratio for Google has changed slightly than past year. The P/E ratio for
Google is 27.9, which means investor will pay 27.9 on their stock on each dollar income (Appendix
5).
Competitor Evaluation
“Google” Case Analysis Page 8 of 55
Business Strategy
Liquidity ratio
Liquidity ratio is used to determine a company pays off its short-term debts obligations. The
current ratio of Facebook is stronger than google, and yahoo is weaker than google. That means
Facebook have larger margin of safety to cover their short term debts than google and yahoo
(Appendix 4).
Asset Utilization
Asset utilization ratio determine how well the company to use its available assets to generate
a profit. The chart analysis three ratios: receivable turnover, fixed asset turnover, and total asset
turnover. For Receivable turnover and fixed asset turnover, Google is stronger than yahoo, but it is
weaker than Facebook. That means Facebook have more effective in using the investment in fixed
asset to generate revenues than Google and Yahoo. For total asset turnover, both competitors is
weaker than Google. Google use efficiently its assets to generate sales than Facebook and Yahoo
(Appendix 4).
Debt Management
Debt management ratios measure how a firm use financial leverage to run their business. We
calculate debt to assets ratio. Google have less debt than yahoo, but more debt than Facebook. That
means Yahoo have higher leveraged than Google and Facebook. The ratio of three companies is
less than 0.5, and they are financed through equity (Appendix 4).
Profitability
Profitability ratios are used to assess a firm ability to generate earnings as compared to its
expense and other relevant cost. On the one hand, Google of Gross profit margin and net profit
“Google” Case Analysis Page 9 of 55
Business Strategy
margin is weaker than two competitors. On the other hand, the ratio of return on asset, return on
equity and BEP are less than Yahoo, but it is great than Facebook. That means Yahoo generates
more profit with the money of shareholders than Google and Facebook (Appendix 4).
MarketRatio
Market ratio shows how other investors evaluate a company. Investor evaluate that
Facebook have more value than Google and Yahoo, because Facebook have highest Price earnings
ratio, which is 74.1 (Appendix 4).
Overall Comparison
Category
Historical change
To Competitors
(2012 – 2014)
(2014)
Liquidity
Positive
Strength
Asset Utilization
Positive
(Fixed Asset turnover =
Negative)
Positive
Strength
Profitability
Gross Profit/ Net profit/
Operating Margin =Positive
(BEP/ROA/ROE= Negative)
Strength
(Gross profit margin =
weakness)
Market
Positive
Strength
(P/CF = weakness)
Debt Management
Strength
Appendix 4
Assessment Notation:
Historical: S=Strength, W=Weakness, Dash=Neutral
Competitor: P=Positive Trend, N=Negative Trend, Dash=No difference
Google shows that its asset can be quickly sold in the market. The main competitors of the
industry are Yahoo and Facebook. Google have no interest and dividend, and it has strong
“Google” Case Analysis Page 10 of 55
Business Strategy
competitive advantage for debt management. Google can sell its product quickly than its
competitors. In contract to historical data, Google showed negative in fixed asset turnover than last
year. As google is leader in the industry, its profitability is more positive than the competitors. The
shareholders is willing to buy the stock of google.it means Google have a strong market value.
Recommendation:
On the one hand, Google have two weakness in two factors for competitors: Gross profit margin,
P/CF ratio. We recommend to extend the market share in Brazil and Mexico. It will increase the
sale ratio and the gross profit margin. On the other hand, Google have negative factors in Net Profit
margin and Fixed asset turnover for historical. We recommend to retrenchment some department
and decrease the cost of fixed cost.
Question 3:Outline and discuss the firm’s external opportunities and threats, using any
analytical model(s) you believe are relevant.
Opportunities
Bringing the next 5 billion online.
Along with the rapid development of technology and advancement of society, internet has
become an indispensable component in people’s life. Somehow, Google Company could take the
potential advantages and make further advancement since internet could be experienced by more
population. Currently, there are only a portion of seven billion people worldwide have the
resources and opportunities to be able to get internet. Lots of useful and life – changing information
are available online, but not many people can truly experience the internet or achieve the
information they need. Essentially, internet cannot successfully reach the most majority of
population’s daily life, which might also become a significant stumbling block of people’s way to
“Google” Case Analysis Page 11 of 55
Business Strategy
their futures. Fortunately, Google Corporation’s internal resources and R&D ability allow it to
bridge the gap between internet and people who currently cannot easily experience internet. The
project that has been invested by the company called Loon. The compose of this project was built
based on the hypothesis of what would happen if the network is able to fly like a balloon at the edge
of space and provide connectivity in rural and even more remote regions. Google Company has
already successfully made its first movement of this compose since the students reside in Brazil and
farmers in New Zealand got the internet connections first time. The more opportunities could be
created. As well as, more people will be given the chances of experiencing the internet. With
internet, more and more people will be able to get the information they need and start their
businesses. Eventually, the significant proportion of population cannot get online can bring a
significant opportunity for Google Company if the company has abilities to reach them.
The users from developing countries increasingly come online
The tendency indicates that people and functions from many developing countries have
shifted to online. That is, Google Company could catch this shift and generate more profits in the
countries other than U.S. Along with the costs of purchasing mobile devices became cheaper in
developing countries, more people can be engaged into experiencing internet. Google Company
can reach the new emerged markets more directly and easily. The increase of revenues from
foreign markets can impact the company, in turns, the company’s performances in those countries
can be continually improved. According to the annual report of Google Company in 2014, the
revenue generated by the markets overseas was approximate 55% of the total revenues in 2013, and
the index was 57% in 2014. In the other words, it was higher than the revenues from U.S markets.
Meanwhile, the revenues from foreign countries have also been increasing during these two years.
Google Company continually update and develop its localized visions in order to better meet the
“Google” Case Analysis Page 12 of 55
Business Strategy
local customers’ needs and preferences. The localized visions will assist the customers to better
understand and accept the company’s products and services. Once the conveniences and
satisfactions can be realized by foreign markets, the customers’ loyalty would be established
respectively. Google Company’s market shares and revenues will be further boosted.
The availability of multiple devices
The potential revenues can be generated through those devices and other newer formats.
The attributions and functions of advanced devices have remarkably broken the potential constrains
for people to access internet. That is, as multiple devices emerged recently, people would be given
the chances to experience the internet wherever they are or whatever they do. People can be
connected freely and timely. The more deeply and frequently people are experiencing internet, the
more opportunities will be appeared for Google Company. Essentially, the world is progressively
shifting from offline to online. People’s routine behaviors and business activities are more related
with internet since more mobile devices can allow people to access internet. By continually
matching this tendency, the company’s continuing growths can be achieved. Furthermore, the more
advertising revenues will be generated through the use of mobile phones and other newer formats.
Advertisements can widely reach the targets through various mobile devices other than computers
and televisions. More people will be engaged to advertisements, the more chances will be created.
As more multiple devices nowadays can help people to get connected with Google quickly, the
company’s social status and awareness will further grow respectively. It will also facilitate Google
Company to use its internal resources and capabilities competitively and effectively. The traditional
constrains broken by multiple mobile devices released a large market share gaining opportunities
for the company. Therefore, the market value of company will be maintained and enhanced.
Threats
“Google” Case Analysis Page 13 of 55
Business Strategy
Intense competition
Google Company is subject to rapid social changes and influenced by the newer
technologies. The external competition permeated every internal aspect of the company. Generally,
as people’s demands of getting internet and information online increase, there are many other
companies emerge to satisfy people’s demands. They seek the better ways to help people to
connect with internet, and these companies also have the abilities to provide people with relevant
advertisements and information. For example, some main rivals might be Yahoo, Microsof …
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