The Case of Alphabet Inc - the Purpose, Strategic Leadership & Internal Analysis

The Case of Alphabet Inc.:

The purpose, strategic leadership & internal analysis

Executive summary

The Alphabet was started by founders Larry Page and Sergey Brin in the year 2015 as an umbrella company under which Google and its subsidiaries like Google Maps, the Chrome OS, Picasa, Google Earth, Chromebook would function under one management. The companies were merged under one head for providing the subsidiaries with efficient and effective managerial guidance and control for improving their financial and operational scope. The Alphabet registered on the NASDAQ under the name of GOOG. The company, though relatively new, is performing relatively well financially in the stock markets. The earning per share have been very high along with the revenues generated from the operations. The financial figures depict very positive outlook for the company. Based on the SWOT analysis of the firm, it reveals that the company has a strong hold of the internet service providing market despite the threat of intense competition from the various competitors. The Alphabet has a wide range of opportunities to develop and enhance the overall profitability of the company along with the subsidiaries under it. If the other factors affecting the business environment remain constant, the company is likely to prosper in future. However, the dynamic nature of the market for Internet services does not provide any guarantees.

Outlines:

• Executive summary………………………………………………….……1
• Introduction……………………………………………….………….……2
• Analysis……………………………………………………….……….…..2
• Financial Analysis…………………………………………….…….……..2
• SWOT-Analysis……………………………………………….…………..4

1. Strengths……………………………………………………….……....5
2. Weaknesses……………………………………………………………6
3. Opportunities…………………………………………………………..7
4. Threats…………………………………………………………………8

• Conclusions………………………………………………………………..9
• References………………………………………………………………..10

• Introduction

Alphabet Inc. was founded by Larry Page and Sergey Brin in the year 2015 following an intense corporate restructuring move by Google with its subsidiaries. Alphabet Inc. aims to combine all the subsidiaries ad sister concerns of Google including the companies servicing the internet domain like Google search engine, Google AdWords, email engine Gmail, companies servicing computer software like the Chrome OS, Picasa, Google Earth, Google subsidiaries servicing the consumer electronics like Nexus, Google TV, Chromebook, Venture Capital firms like CapitalG, and Healthcare firms like Calico and Verily under one umbrella of the Alphabet. The company is registered at the NASDAQ under the name of GOOG and has become the sixth largest internet servicing company in the world (Alphabet.inc, 2017). Obviously, the Alphabet has already established a strong hold of the market and has started capturing the market share from its competitors. The purpose of this essay is to analysis the business strategies of the Alphabet, also to analyze the opportunities and threats available to the company, then to determine and interpret the future scope and opportunities available to Alphabet Inc.

• Analysis

1. Financial Analysis

The financial result for the year 2016 provided by the financial statement for the year for the Alphabet depicts a fairly good view of the operations and profitability of the firm. The reported revenues were $90.3 billion with a reported growth rate of 20 percent per annum and a currency revenue growth rate of 24 percent per annum. Out of the subsidiaries, the revenues generated by Google were found to be $ 89.5 billion while the revenues generated from the Other Bets were discovered to be $0.8 billion making Google the largest contributor to the overall revenues. The operating expenses were estimated at $31.4 billion while the income from operations was $23.7 billion. The effective rate of tax paid by the company on its income for the given year was 19%. The net income was found out to be $19.5 billion while the net income provided to each share was estimated to be $27.85. The total headcount was found to be 72,053 people as counted on 31 December 2016 (Alphabet, 2017).

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Figure 1. Revenue distributed over the world (2014-16)

The figure depicts the distribution of revenues of Google over the period of 2014 to 2016. Apparently, the United States of America is the largest revenue generating market for the company and has an almost equivalent share in the revues as compared to the rest of the world apart from the United Kingdom. Although, the United Kingdom has a relatively smaller share as compared to the whole of the United States, it still a significant contributor to the revenues as compared to the rest of the world. The distribution of revenues has been basically remained unchanged for the years that have been studied wherein minor changes were experienced. The share held by the United Kingdom declined from 10 percent to 9 percent in 2016, while the contribution made by the US to the total revenues increased from 45% in 2014 to 47% in 2016 (Alphabet, 2017).

Source: (NASDAQ, 2017)

Table 1. Total Revenue, Earning Per Share and Dividends for Google (2014-16).

The table presents the revenue generated by Google Alphabet as presented by NASDAQ (2017a) in the estimates of the income and earnings per share of the company. The revenue generated increased from $74,989 million in the year 2015 to $ 90,272 million in the year 2016 while the earnings per share increased from 22.84 in the year 2015 to 27.85 in the year 2016. The first quarter of the year 2017 reveals a positive picture for the income of the company wherein the revenue was estimated at $24,750 million and the earning per share was estimated to be at 7.73. The price-earnings ratio as represented by NASDAQ (2017b) was estimated at 35.67 which reflected the ratio of the price of the security to the earning per share provided. The figures for the revenue and the earning per share define the Google Alphabet shares as a strong buy in the market and are likely to be a profitable investment. The forecast made by NASDAQ (2017c) define the earning per share for Alphabet.inc for the year 2017 as 34.9 which reflects the positive outlook for the company in the current year. Financially, the Google Alphabet resonates well financial health which is expected to continue for the coming years given all other factors remain favorable.

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