Alphabet (Google) PESTEL Analysis: Company’s Growing Ability to Impact External Factors

PESTEL is a strategic analytical tool and the acronym stands for political, economic, social, technological, environmental and legal factors. Alphabet (Google) PESTEL analysis involves the analysis of potential impact of these factors on the bottom line on long-term growth prospects.

Political Factors in Alphabet (Google) PESTEL Analysis

Google has been suspected of a political agenda a number of times with negative effects on its brand image. Particularly, Google has been accused by Chinese state media for “playing an active role in exporting culture, value and ideas”[1], thus pursuing political aims, rather than conducting appropriate business practices. Moreover, Project Loon, an initiative to provide internet in rural and remote areas via balloons and cell towels based on the ground is faced with geopolitical challenge in a way that the project is perceived as undercover by US intelligence services to conduct espionage activities[2].

Google is also criticized for interfering with politics and influencing political environment in the US and other parts of the world. It has been noted that “goggle nearly anything political and you’ll get a result that contains both legitimate news and partisan hackery, equally ready to be read. Better yet, clear out your search history, begin a search, and see what pops up to finish the search for you. Googling “Hillary” gave me “Hillary Clinton age” and “Hillary Clinton email.” So without even trying, I’ve gotten the impression of an old lady with an email problem”[3]

A range of political factors that might impact Google range from political stability and government attitude towards the brand to the impact of home market lobbying and pressure group. Activities of international pressure groups such as One World Broadcasting Trust can be mentioned as an additional political factor that might affect Google in direct or indirect ways.

Economic Factors in Alphabet (Google) PESTEL Analysis

The volume of Google revenues is subject to the impact of a set of macroeconomic factors such as inflation rate, the value of USD, interest rates, relevance of economic slowdown and others. Currency fluctuations are one of the major economic factors affecting Alpabet’s revenues. International revenues accounted for approximately 53% of Alphabet Inc. consolidated revenues in 2016[4]. Alphabet Inc. is a net receiver of foreign currencies and therefore, benefits from a weakening of the U.S. dollar and is adversely affected by a strengthening of the U.S. dollar relative to the foreign currency. As of December 31, 2016, the company’s most significant currency exposures are the British pound, Euro, and Japanese yen.[5]

Changes in interest rates are another important economic factor with implications on company’s performance. It has been estimated that a hypothetical 1.00% (100 basis points) increase in interest rates would have resulted in a decrease in the fair value of Alphabet marketable securities of approximately USD1.3 billion and USD2.2 billion as of December 31, 2015 and December 31, 2016 respectively.[6]

At the same time, it is interesting to note that impacts of some of the above factors on Google performance has proved to be different compared to the impact of the same factors on many other businesses within and outside e-commerce industry. For example, as illustrated in figure below, despite the severity of the global economic and financial crisis of 2007 – 2009, Google revenues declined only by 3 percent in the first quarter of 2009, at the same time when many other businesses including  Google competitors experienced much sharper decline at the earlier stages of the crisis.

Alphabet (Google) PESTEL analysis

 Google revenues before and during the global economic crisis[7]

It can be argued that a lack of negative impact of the global economic crisis and other macroeconomic factors on Google financial performance is primarily associated with the company’s leadership position for many of its products and services in general, and its leadership in search engine sector in particular.

Alphabet Inc. (Google) Report contains a full version of Alphabet (Google) PESTEL analysis. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, Porter’s Five Forces, Value Chain analysis and McKinsey 7S Model on Alphabet Inc. Moreover, the report contains analyses of Alphabet business strategy, leadership, organizational structure and organizational culture. The report also comprises discussions of Alphabet marketing strategy and addresses issues of corporate social responsibility.

Alphabet Inc. (Google) Report

[1] Reuters (2015) Available at: http://www.reuters.com/article/2010/03/21/us-china-google-media-idUSTRE62K0A120100321

[2] Goldstein, P. (2013) Fierce Wireless, Available at: http://www.fiercewireless.com/story/political-issues-spying-concerns-could-drag-googles-project-loon/2013-06-24

[3] Murphy, P. (2016) “How Google is Ruining Politics” Roll Call, Available at: http://www.rollcall.com/news/opinion/google-ruining-politics-armchair-experts-brexit-clinton-trump

[4] Annual Report (2016) Alphabet Inc.

[5] Annual Report (2016) Alphabet Inc.

[6] Annual Report (2016) Alphabet Inc.

[7] Shankland, S. (2009) CNET, Available at: http://www.cnet.com/news/recession-hits-for-real-but-google-unfazed/