This industry is very attractive for incumbent organizations. Facebook, Twitter, and Google all have an established presence and foothold in this sector. Judging by shares and price, each of these companies is doing very well as they all have high market capitalizations. According to Yahoo, Google’s market capitalization (as listed) is over half a trillion dollars, at $562.6 billion. Data from Yahoo also shows that Google and Facebook have ROE percentages of 15.02 and 19.76, respectively. These show very good returns. However, data from Yahoo also shows Twitter with a ROE of -10.18%. This company does not seem to be doing as well as Google or Facebook. Here we can see that Google and Facebook are generating a lot of profit for their shareholders, while Twitter is not. This industry is attractive and for the most part, the returns from these stocks are very good. Incumbent organizations are able sustain competitive advantage as there are many barriers to entry for new firms, and companies of this size are able to form strategic alliances and continue to capitalize on new investment opportunities in the industry.
Considering long term potential for the industry, attractiveness is very high. Looking at long-term debt, we see that Google has a fairly high ratio, and Twitter’s is extremely high. This means that each of these companies have long term debt obligations in comparison to their shareholders equity. However, these types of companies have intricate assets, and companies in the technology sector make many long term investments. The technologies that these companies utilize continue to grow, offering new opportunities every day. Therefore, the industry should see continued success over the next 5 to 10 years. However, Twitter does not seem nearly as attractive as Google or Facebook, since its ROE is negative and it has very high long term debt to equity ratio. These companies show large market capitalization, meaning they have the breadth to attract a number of investments and opportunities in the future in the form of mergers, alliances, and new product developments. Advancements in technology, which increase year after year, make companies in this industry extremely attractive in the long run.
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