PESTLE Analysis of Alphabet (Google)
Alphabet Inc. is an American multinational tech conglomerate holding company. It is a parent organization of Google. The structure of Alphabet is similar to Berkshire Hathaway of Warren Buffett. It trades with two ticker symbols such as GOOG and GOOGL. Alphabet has numerous subsidiaries that work in a range of businesses. In this post, we will do PESTLE Analysis of Alphabet (Google) for our learning.
The main business of Alphabet is the Google search engine which is one of the most popular search engines in the world. Baidu, Bing, Yahoo, and Microsoft are some of its main competitors of Google. The overall business of Google is highly profitable.
The major source of income of the company is heavily dependent on advertising. These ads appear on websites and their searches. The company is also making revenue from ecommerce business. Over the years, Alphabet has acquired several companies and startups. They have been working on self-driving car technology and robotics.
Several external business factors highly influence the overall business performance of Google. So, this is the right time to see how these factors can impact the business performance of this tech giant. To analyze these external factors, we will conduct its PESTLE analysis that mainly identifies political, economic, social, technological, legal, and environmental factors.
Political Factors | PESTLE Analysis of Alphabet (Google)
According to some famous critics, Google is just a monopoly. Because of this, Google has faced several anti-trust actions in different countries, especially in Europe. The company must improve its way of conducting searches. It is also a significant concern that Google has so much control over searches. Several critics have made accusations against Google for influencing the results of elections. This thing could create political pressure on the company in the future.
Like other American companies, Google also keeps its cash in different international countries in order to avoid income taxes imposed by the American government. Nationalists pressure the government to force these companies to bring back their money to the country. It can cut the free cash flow of Google. As a result, Google has to make expensive international acquisitions for its growth.
On the other hand, Google is not actively present in some areas or markets of the world such as China. These markets can be proved beneficial for its revenue and long-term growth. They are not present in these markets due to political tensions. In short, it could limit its future expansion.
Economic Factors | PESTLE Analysis of Alphabet (Google)
There is speculation that the company has gathered a considerable sum of cash, which makes it highly exposed to inflation. If the currency’s value fluctuates, it can disturb the company’s worth in the market. Moreover, the Alphabet company keeps most of its cash in overseas accounts, so it can also face exchange rate problems. If the dollar goes strong, then it could impact the worth of Google because of the exchange rates. However, the company can also face trouble if the dollar goes downward. Alphabet is highly vulnerable to stock price, and if anything happens with the stock market, then the company can reduce its market share as well as capitalization.
Social Factors | PESTLE Analysis of Alphabet (Google)
Several social factors can affect the business and performance of Alphabet. Here we have mentioned some important ones,
- The usage of traditional desktop computers and laptops is decreasing day by day. They are the main means of using Google services. According to a report, most of the searches are made through smartphones these days. This change in using patterns can impact the company’s value in the long run.
- Competitors like Facebook, Amazon, and other social media platforms have reduced the usage of the Google search engine because they are providing better services and information to consumers. They offer their services with better streaming, money transfer, shopping, and search features.
- When it comes to shopping searches, Amazon has almost beat Google. The company failed to translate its business in conventional search to other sectors. In short, Amazon is the only leader for online shoppers. According to stats, nearly 30 percent of shoppers begin their shopping searches from Amazon. It is challenging for Google to make money from this sector.
- The huge decline in media and TV networks is allowing several streaming platforms to enhance their apps in order to give tough competition to YouTube. Netflix, Disney+, and Amazon are leading when it comes to online streaming platforms. They are providing paid services to users so that they can get access.
- Many people and companies think that Google is very powerful and sinister. Just because of this purpose, many people are avoiding Google and using alternatives such as Duck Duck Go, Baidu, and Yahoo.
Technological Factors | PESTLE Analysis of Alphabet (Google)
- These days, people love to use mobile devices such as smartphones. They access the internet from their mobile devices. Apple’s search engine is the only competitor of Google search engine Its use is increasing with the passage of time.
- Competitors like Microsoft and Amazon have developed useful search algorithms to give tough competition to Google. Plus, they are dominating in different sectors such as Amazon is leading the search engine chart in online shopping. There is a chance that any competitor can develop a better search algorithm that can beat Google in the future.
- Nowadays, you can send messages, videos, audio, images, and even streaming videos through several apps like WhatsApp, Messenger, and WeChat. Some of these apps are also able to make transactions. This thing can limit the use of Google’s products that are not desktop-based.
- Several social media apps are available for users with better features and tech tools. You can find so many alternatives to Google’s services or products with utmost ease.
- In order to ditch search engines, many organizations have developed useful apps that enable users to get a plethora of information and news. Shopping apps are one of the biggest examples in this regard.
Legal Factors | PESTLE Analysis of Alphabet (Google)
- Google is heavily growing its business in complex fields such as automobiles, robotics, finance, telecommunications, and insurance. Each field holds specific restrictions. This could limit the business operation of the company.
- The company is highly exposed to legal and liability costs because of its venturing into different fields such as insurance and finance. They are further increasing their business which is not a good idea right now.
- The successful anti-trust action can give an upswing to similar struggles, especially in Europe. This would cost expensive litigation.
- There are so many big insurance companies in the industry that will try their best to keep the company out of the zone. As a result, Google can face legal proceedings and legal costs. This will ultimately reduce the expansion of Alphabet.
- Plenty of businesses and brands are working under the umbrella of Alphabet. So, they need to spend a huge amount of money for protecting their patents and ownership.
Environmental Factors | PESTLE Analysis of Alphabet (Google)
The company’s overall business model is majorly dependent on internet infrastructure and data centers and electricity. Nowadays, people are conscious of climate change and green power. The increasing pressure of using greener energy can increase the operational costs of Google. As a result, they will not be able to provide free services as they used to do in the past. By exploiting green energy and ethical practices, Google can increase its market share and annual revenue as well.
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