Financial Management: Google and Apple - Research Paper Example

?Client’s 17 June Being the best for a really long time is certainly not easy, Google has managed to do that but the journey has been full of challenges. Google has been the best and the most reliable service, almost everyone from kids to adults heavily rely on a Google search to complete their day-to-day tasks and this also means that Google has become a lifestyle. This paper will juxtapose Google and Apple and a comprehensive report will be presented which will also analyze all the important financial ratios. Financial Ratios Financial ratios are extremely important when it comes to analyzing a company, Google has generate a lot of revenue in the last few years, here is a look at their financial ratios and how well they have actually been faring. According to the latest financial report of Google.inc it has been found that they are in a great position when it comes to debt ratio, the debt ratio is 0.02 which means that they have more assets than debt and the debt can be paid off very easily so the company need not worry about anything as far as the debt ratio is concerned. Following are the most important ratios of the company: Current ratio: 5.8 Quick ratio: 5.6 Asset Turnover: 0.6 Return on Assets: 14.0% Return on Equity: 17.3% All these ratios clearly show that Google inc is financially very sound and there is nothing to worry about for the company but they have several competitors and can’t afford to rest on their laurels. Business Model Employees are more than willing to work for Google because the organization has established itself as one of the best companies in the world, in the year 2007 and 2008 Google was the top company to work for, it is one of the very best companies across the globe, they treat their employees with a lot of respect and they take special efforts to motivate them. All this success is because of their leadership and cross-functional organizational structure. Google employs the rule of “70-20-10” this means the employees can communicate directly with each other, this much improved communication system has been the key to success. Formal channels are normally avoided by the company to avoid any misunderstandings, the staff is always highly motivated because they have a sense of belief that they can contribute immensely towards the company, this sense of belief keeps them motivated and inspires them to keep performing for the company. Cross-Functional Leadership Structure of Google Features of Cross-Functional Leadership Structure: “To meet the many demands of performing their functions, managers assume multiple roles. A role is an organized set of behaviors. Henry Mintzberg has identified ten roles common to the work of all managers. The ten roles are divided into three groups: interpersonal, informational, and decisional. The informational roles link all managerial work together. The interpersonal roles ensure that information is provided. The decisional roles make significant use of the information. The performance of managerial roles and the requirements of these roles can be played at different times by the same manager and to different degrees depending on the level and function of management. The ten roles are described individually, but they form an integrated whole.” (Henry Mintzberg). Another big challenge which the leaders of today face is the daunting task of decision making. Decision making is the most challenging task for any leader. One wrong decision can change many things around in an organization and those changes will surely be for the worse of the organization on the other hand one good decision can help the organization in more ways than one. Decision making is a very delicate process, numerous things have to be kept in mind, a leader just cannot go on making wrong decisions because that would result in disaster, even one wrong decision can be disastrous for any organization so considering all these things it becomes imperative that leaders analyze the situation and make their decisions wisely, if a leader analyzes a situation, naturally they will be able to make right decisions so analyzing the situation is a must for nay leader to avoid taking hasty decisions. “Many executives and business thinkers believe that ethical leadership is simply a matter of leaders having good character. By having “the right values” or being a person of “strong character,” the ethical leader can set the example for others and withstand any temptations that may occur along the way. Without denying the importance of good character and the right values, the reality of ethical leadership is far more complex and the stakes are much higher.” (Darden). Google has been handling their employees very well and this is why they are performing so well. “The challenge of creating a multicultural, diverse organization is becoming an increasingly prominent concern for the chief executive officers (CEOs) of companies in Australia and around the world. Top executives such as IBM’s Lou Gerstner and his successor Sam Palmisano have expended considerable energy and company resources on achieving diversity (Thomas, 2004). Many of Their competitors have followed suit, seeking to replicate what they perceive to be best practices in diversity management. By the end of the 1990s, three out of four Fortune 500 companies had launched diversity programs (Caudron, 1998). Today, a cottage industry of consulting Firms specializing in diversity management have emerged—along with a plethora of articles in Academic and professional journals—to help corporate executives identify the keys to diversity and launch diversity programs in their companies.” (Rand.Org). The meteoric rise of Google is anything but surprising, they have the best leaders to keep the team motivated and the employees respond very well towards any kind of motivation, Google manages diversity very well, they certainly know how to make the most of diverse workforce and how to channelize all their energy into making the organization a better one. “Instead of setting goals for them, Google’s management helps their employees meet the objectives that the employees set for themselves. The company sees its managers as leaders who facilitate inspiration and empower employees. Google’s management function controls employee responsibility in similar way to the United States government, through a series of checks and balances. All employees set out and evaluate goals on a quarterly basis. Although Google’s management makes suggestions, employees use metrics that they choose themselves to measure their progress toward their goals.” (Function) Google is the one of very few companies who let the employees set and maintain their own standard, employees never misuse this freedom, they incessantly work towards the growth of the organization, this can only happen when there is cross-functional leadership structure in place, the policies of Google are very open and this again helps the employees to work as a unit, there is nothing hidden from the employees which is really important, the employees should never feel cheated and in Google there is no scope of this happening. Apple Financial ratios of Apple are as follows: Current ratio: 1.6 Quick ratio: 1.3 Asset Turnover: 1.2 Return on Assets: 25.6% Return on Equity: 29.5% Debt/Equity: 0.00 Substitutes Barriers to Entry Switching Costs Technology Number of Suppliers Cost Advantages Buyer Willingness Time and Cost of Entry Suppliers Competitive Rivalry Buyers Size of the Suppliers Exit Barriers Buying Volumes Ability to Substitute Switching Costs Price Elasticity Number of Suppliers Number of Competitors Incentives Summary of Analysis Apple has been a revolution, their products have been selling like hot cakes, “it was earlier reported that company is more stable than the US Government.” (Apple has More Money than the US Government) The products sold by apple are mainly for entertainment, there is a lot of competition in this filed, apple is undoubtedly the present leader but things may change within no time. Dell, Hp and Lenovo give apple a run for its money when it comes to computer hardware. Media player and Windows operating system are the two main rivals of apple when it comes to playing music. Creative, Samsung and Sony and a plethora of other companies manufacture small, portable music players which is an answer to apple ipod, since ipods are quite expensive people prefer buying other reliable music players which are way cheaper than the ipod. Barriers to Entry: Some of the most important points which should be considered under this section are as follows: Time and Cost of Entry Knowledge Economies of Scale Technology Other Barriers Fake Stores in China: “Recently it was found that there are several fake stores of apple in China, the fake apple products are bound to cost the company losses.” (Fake Apple Stores in China) Several big companies have lost a lot of money because of counterfeit products sold by the fake sellers. Threat of New Entrants: The following points must be considered under threat of new entrants: Verizon allows streaming audio and video with the help of a software called v-cast New entrants equipped with disruptive technology could affect apple significantly Bargaining Power of Suppliers: Intel, IBM, Motorola and others are big rivals of apple when it comes to processors and computer technology, it could give the new ipad and the iphone a good run for its money Sony, Warner, BMG and others are huge suppliers of music ABC, Fox, Sony and many others are huge suppliers of movies and popular television shows Bargaining Power of Customer: Peer to peer technology provides free music to the customers Distributors may press apple to reduce its price or for better terms Economic downturn will lead to decreased spending of customers Substitutes Present a Substantial Threat: Satellite radio is becoming increasingly popular for music Xbox and the PS3 provide great entertainment, media and music can be enjoyed on these gaming consoles Dvds and Cds provide an alternate source of movies and music Theaters, cable tv and other sources are alternate sources for movies and videos Recommendations for apple: Maintain the same quality but bring down the prices a bit Joint ventures would surely prove profitable plots Focus on knowledge management Open more stores so that customers can easily get their hands on the latest products Work at making the technology better, innovation is the key to success. Modern Day Scenario The following part of the paper will shed light upon the SWOT analysis of Apple. Strengths: Apple continues to lead when it comes to design and performance, these are the strengths of Apple. The modern day systems look fantastic and can carry out several difficult tasks with ease. Weaknesses: Apple continues to be expensive and these days there are a plethora of other options available to customers, the competition has become even tougher these days and the demise of Steve Jobs has left the company in turmoil. Opportunities: If Apple can maintain the same quality and bring down its price a little then it can make even more money and the company will surely grow and become better. Threats: The likes of IBM and other popular companies are still around and they are looking for new ways of taking Apple’s share away and Apple has to be very wary of the same and take appropriate measure so counter the same and keep going from strength to strength. In case of a financial crisis Apple would handle it better then Google because Apple has more savings and operating margin then Google, their debt ratio is also better than Google which would mean that they would have less debt should a financial crisis occur. Works Cited Apple has More Money than the US Government (2011). Tech News. Retrieved from http://tech2.in.com/news/general/apple-has-more-money-than-the-us-government/233292 Caudron, Shari, “Diversity Watch,” Black Enterprise, Vol. 29, September 1998, p. 91. Developing Ethical leadership, In Darden. Virginia. Org. Retrieved from: Fake Apple Stores in China (2011). The Tech Chronicles. Retrieved from Fake Apple Stores in China (2011). The Telegraph. Retrieved from Function. In E How. Retrieved from: Henry Mintzberg, The Nature of Managerial Work, Harper & Row, 1973. Managing Diversity. In Rand,org. Retrieved from: Thomas, David, “The Truth About Mentoring: Race Matters,” Harvard Business Review, Vol. 79, No. 4, April 2001, pp. 98–107. Read More