Business, Management

Google (Alphabet) PESTEL/PESTLE Analysis & Recommendations

Updated on Updated on by Christine Rowland
Google Alphabet PESTEL analysis, PESTLE analysis, political, economic, sociocultural, technological, ecological, legal external factors, technology business
Google’s homepage accessed through an iPad. This PESTEL analysis (PESTLE analysis) of Google (Alphabet) indicates industry trends that create opportunities and threats relevant to the technology business. (Photo: Public Domain)

This PESTEL/PESTLE analysis of Google (Alphabet) provides insights into external factors in the industry environment. In the PESTEL analysis (PESTLE analysis) framework, these external factors are opportunities or threats, which in this case influence business operations and success in the online advertising and information and communications technology and services industries. Google’s (Alphabet’s) generic competitive strategy and intensive growth strategies are partly a response to these external factors and how they shape the company’s external business environment. This application of the PESTEL analysis framework in Google’s business yields information on the opportunities and threats that affect strategy formulation. As one of the world’s most valuable companies, the information technology and services business must address the biggest threats in its remote or macro-environment and continue enhancing its competitive advantages. In addressing the issues raised in this PESTEL analysis, Google can expect stronger performance despite challenges in its external industry environment.

The technological nature of Google’s operations points to strategic focus on the technological or technology-related external factors identified in this PESTLE analysis. The online advertising, software and hardware, online services, and on-demand digital content distribution markets are all related in the company’s operations through their use of computing technologies. Overcoming the threats and utilizing the opportunities shown in this PESTLE analysis contribute to fulfilling Google’s (Alphabet’s) mission statement and vision statement, which direct the business to maintain a strong leadership position in all its markets and industries.

Political Factors

Governmental activities and policies affect Google’s strategies, revenues, profits, and competitive position. This part of the PESTEL analysis model assesses governmental influence on the information technology and services business. In considering Google’s industry environment and relative business performance compared to other firms, the following political factors are relevant:

  1. Broader free-trade agreements (opportunity)
  2. Stable political climates in most of the major markets (opportunity)
  3. State-sponsored online companies (threat)

Current international relations maintain wider free-trade agreements, which present opportunities for Google. For example, these agreements facilitate exports of the company’s products, such as Pixel smartphones. Thus, free-trade agreements are political factors that benefit Google. Also, in this PESTLE analysis, stable political conditions pave the way for the company’s further growth in technology markets worldwide. Such stability is an external factor that makes the remote or macro-environment conducive to the growth of Google. In contrast, state-sponsored or state-owned online companies in some countries are a political factor that poses a competitive threat in the industry environment. The combination of these political factors in this part of the PESTLE analysis indicates that Google can focus on growing its operations based on free-trade agreements and markets’ political stability.

Economic Factors

Google’s business is subject to economic trends, which in the PESTEL analysis model are external factors that affect business revenues, profits, and growth, based on market growth and stability. For example, economic trends dictate customers’ willingness to pay for Alphabet’s information technology services. The following economic factors influence Google:

  1. Economic stability of major markets (opportunity)
  2. Rapid growth of developing countries (opportunity)
  3. Gradually decreasing cost of renewable energy (opportunity)

This part of the PESTEL analysis presents opportunities for Google’s business growth through economic opportunity based on major markets’ stability. The rapid growth of developing countries is also an economic factor that equates to significant business growth opportunities for Google. For example, the company can expand its distribution of mobile computing devices in these countries. In addition, this PESTLE analysis indicates the decreasing cost of renewable energy as an opportunity to strengthen Google’s energy supply. The digital advertising services company can expand its renewable energy programs to enhance operational stability. This move can support Google’s (Alphabet’s) corporate social responsibility strategy. These economic factors facilitate the technology company’s growth. With the right strategies, business growth and expansion are expected through the external factors identified in this part of the PESTLE analysis of Google.

Social/Sociocultural Factors

Social or sociocultural factors affect Google through people’s behaviors. For example, these external factors influence customers’ perception of and behavior toward Alphabet’s online advertising operations. In this part of the PESTEL analysis, the following social factors are considerations in Google’s business:

  1. Increasing use of social media (threat and opportunity)
  2. Rising diversity of online users (opportunity)
  3. Rising criticism against online companies’ use of personal data (threat)

The increasing use of social media is a threat because of aggressive competition. Other firms compete with Google, especially in online digital advertising through social media operations, as in the case of Facebook. The same external factor is considered an opportunity in this part of the PESTLE analysis because of growth in social media operations. For example, riding this sociocultural trend, Google can innovate its YouTube operations to further grow its customer base. In addition, this PESTEL analysis indicates the rising diversity of online users that creates opportunities to improve the company’s business performance through technological tools and innovation. Google can improve its algorithms to match the diversity of customers and their preferences. In contrast, rising criticism against companies’ use of personal information is a social factor that adds hostility in Alphabet’s remote or macro-environment, especially against online firms that use personal information and related data for digital advertisements. Overall, this part of the PESTEL analysis of Google shows that, despite sociocultural threats, there are opportunities to boost the corporation’s performance. The IT business needs strategies that holistically address the identified external factors. Google’s (Alphabet’s) marketing mix or 4P helps entice more customers, based on these social/sociocultural trends.

Technological Factors

The technological nature of Google’s business means that technological factors significantly impact the firm and its industry environment. The PESTLE analysis model considers technological trends as makers or breakers of Alphabet’s technology business. The following are the technological factors in Google’s industry environment:

  1. Growing Internet access in developing countries (opportunity)
  2. Rapid adoption of mobile devices in the global market (opportunity)
  3. Growing use of cloud services worldwide (opportunity)

Google can grow based on increasing Internet access in developing countries. This external factor in the PESTLE analysis translates to market growth in these countries, where Alphabet can offer more of its hardware, software, and online services. Also, the continuing worldwide adoption of mobile devices gives the corporation the opportunity to grow through higher sales of its smartphones and wider use of the Google Play Store via devices with the Android operating system. The company can improve the mobile friendliness of its products to ensure wider adoption among mobile users. Furthermore, this PESTLE analysis indicates the growing use of cloud services as a technological factor that gives Google the opportunity to improve its revenues in this market. For example, the company can implement more aggressive marketing strategies to grow its cloud computing services. The external factors in this part of the PESTEL analysis of Google show that there are various business growth opportunities based on technological trends influencing the company’s remote or macro-environment.

External analysis of Google Alphabet, PESTLE analysis, PESTEL analysis, information technology business industry remote macro-environment
A smartphone. This PESTLE analysis (PESTEL analysis) of Google (Alphabet) reveals that rapid adoption of mobile devices is a technological trend relevant to the company’s industry environment. (Photo: Public Domain)

Ecological/Environmental Factors

While Google generates most of its revenues online, the firm is subject to ecological or environmental factors. In the PESTEL analysis model, these external trends influence business strategic direction, such as Alphabet’s development in the cloud computing services industry. The following ecological factors affect Google’s remote or macro environment:

  1. Continually growing support for environmentalism (opportunity)
  2. Growing interest in sustainable business among suppliers (opportunity)

Strengthening environmentalism is an external factor that affects the industry environment of Google. For example, environmentalism makes green technology products more attractive. In this PESTLE analysis case, Google’s use of renewable energy makes its services satisfactory regarding customers’ preference for green technologies. Similarly, the technology giant’s suppliers are increasingly taking interest in sustainable business practices. This ecological trend creates the opportunity to further strengthen Google’s corporate image by doing business with suppliers with sustainable operations. This part of the PESTEL analysis emphasizes ecological factors that create opportunities to improve Alphabet’s business through ecologically sound strategies. Google’s corporate social responsibility strategy helps ensure that these opportunities are addressed.

Legal Factors

Google operates within limits imposed through laws or regulations. In the PESTLE analysis model, regulatory requirements influence what firms can do, such as the extent of Alphabet’s use of online users’ personally identifiable information. The following are the legal factors that shape Google’s remote or macro environment:

  1. Increasing regulations on online privacy (opportunity)
  2. Stronger regulations on intellectual property rights (opportunity)
  3. Growing restrictions on the use of customers’ personal information (threat and opportunity)

Increasing regulations for online privacy is an external factor that gives the opportunity to improve products and increase customer satisfaction. In the PESTEL framework, addressing this trend can make Google more competitive against companies with weaker privacy protections. However, many competitors already have strong privacy protections integrated into their products, as in the case of the consumer electronics of Apple, Samsung, Sony, and Microsoft; the online advertising services of Facebook and eBay; the on-demand video streaming services of Amazon, Disney, and Netflix; and the Internet connectivity services of Verizon.

Stronger regulations on intellectual property rights are a legal factor that presents another opportunity for the company to improve its technological goods and services. For example, in relation to the operations of Alphabet Inc.’s other subsidiaries, Google can strengthen its intellectual property filings while providing tools for individuals and organizations to ensure the protection of their respective intellectual properties.

This PESTEL analysis indicates growing regulatory restrictions on the use of customers’ personal information as a threat, considering Alphabet’s dependence on using customers’ individual and aggregate data to support online digital advertising services. Nonetheless, in this PESTLE analysis, such an external factor creates an opportunity for Google to build on its existing systems and processes to enhance its consensual use of online users’ information. Such an enhancement can make the company’s image more satisfactory among target customers in the online environment. These legal factors relate to the competitive factors identified in the Five Forces analysis of Google (Alphabet).

Recommendations based on this PESTLE/PESTEL Analysis of Google (Alphabet)

This PESTEL analysis identifies trends and external factors that present opportunities for growth and higher business performance for Google. However, some of these external factors threaten Alphabet’s technology business and its remote or macro-environment. Considering the diversity of its operations, Google has the resources, systems, and business capabilities to exploit these opportunities and reduce exposure to the threats. For example, the company can improve the performance of its Pixel devices to capture a bigger market share of mobile users. Also, this PESTLE analysis indicates that Google can develop new operations or acquire existing smaller firms, to address technological trends influencing product design and development, and ecological trends pertaining to sustainability. The approach should improve organizational capabilities through rapid innovation to match trends in the market for information technology and online services. Strategies maximizing the strengths identified in the SWOT analysis of Google (Alphabet) can optimize business performance amid the opportunities and threats discussed in this PESTLE/PESTEL analysis.

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