Google Case Study: P.E.S.T.L.E. Analysis and 5-Forces Model

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In the mid 1990s, two Stanford University students would meet and meld minds to create one of the most well-known technological giants of the twenty-first century. This company, the creation of Sergey Brin and Larry Page would come to be recognized after multiple name transitions as Google. Throughout the midst of the early 2000s technological boom, Brin and Page would manage to develop and market a technology that is used by ordinary citizens, students, academics, and more from across the globe. On the path to success with Google, the co-founders had to manage strategic challenges and develop an approach to conquer the competitive advantage of pre-established companies such as Yahoo and AOL which held majority of market share. While the current commanding status of the technological giant is apparent, Google continues to face many internal and external challenges to continue its relevance in an ever-growing field of rivals. To greater understand these challenges, a PESTEL, 5-forces, SWOT, and VRIO analysis will be used to conduct an examination of the forces faced.

P.E.S.T.E.L. Analysis

Political Factors

The first area of the P.E.S.T.E.L. analysis is understanding the political factors that hinder or advance the strategy of Google today. Given a trend towards globalism and an inter-connectedness between countries, the ability of Google to create access to information has positively helped many around the globe in pursuit of knowledge. However, due to such a large influence on the access of information, governing bodies such as the Federal Trade Commission and European Union have become concerned regarding the level of power Google holds. In response to this, the FTC and EU initiated investigations into the company which resulted into conclusions of anticompetitive behavior and punishment of anti-trust sanctions (Rothaermel & King, 2016, pg. 266). Opposite of these restrictions, recent political changes regarding the change in U.S. tax code have been of benefit to Google. These massive cuts allowed for large tech companies to purchase stock buybacks which in turn raised the price per share and benefitted analytical numbers of the company such as earnings per share. Figures from Bloomberg show that tech giants spent an extensive $169 billion on share purchases post Tax Cut and Jobs Act creation (Grant & King, 2019). On the next front for Google is the most substantial factor of economic forces.

Economic Factors

Stepping back to the foundation of Google, the company has long been impacted by strong economic pressures. Google initially was able to get a foot into the market by brokering a deal with Yahoo stemming from 2000 which implemented the search capabilities into the platform of Yahoo which was sourcing almost 900 million-page views per day at the time (Rothaermel & King, 2016, pg. 267). Ever since the launching point of working with Yahoo, Google hasn’t looked back, recording the first profitable year for the company in 2001 and an astounding no net losses since that time even during the financial collapse of 2008 (pg. 267). Conversely, despite a continued strong economic presence on a global stage, Google is facing increasing competition in the advertising market which is based off of their search platform. A need for expansion of markets is a necessity to keep the trend of growth in the right direction. However, as previously referenced in the political factors, many countries fear Google’s ability to control the spread of information which has caused these nations to censor the entrance of the tech giant. Leading the way in this suppression are Russia and China which have requested 61,471 informational removal requests and China has banned Google all-together respectively (Ma, 2019). Were Google able to enter these markets, a brand-new population, and marketing base would be wide open for their advertising partners and continuously growing database of information. Nonetheless, Google must find a way to enter these markets even at a marginal level if they are to continue competing with other economic powerhouses such as Facebook and Amazon.

Sociocultural Factors

While economic markets continue to trend towards globalization, Google must also maintain its relevance and prominence with its number one priority, the consumer. Given the rise of technological innovation, many consumers are becoming more concerned with their privacy and amount of data and personal information known by big tech. This concern was even further sparked by the Facebook and Cambridge Analytical data scandal revolving around the 2016 presidential election in which 87 million Facebook users had their data unknowingly shared with the U.K. based data firm Cambridge Analytica which helped candidates as a political strategist (Kozlowska, 2018). This became such a large scandal that it resulted in multiple Capitol Hill hearings for Facebook. While Google was not at the epicenter of this crisis, it has signaled a further trend towards privacy concerns on the consumer end. This has lead towards customers starting to use newer search engines such as Firefox Focus and DuckDuckGo which boast numerous privacy benefits such as no data collection or ads meaning a user cannot be tracked or targeted based on their past searches since no personal information has been stored to create a curated selection (Cihodariu, 2019). Despite limited privacy, Google continues to hold the upper hand for those consumers who still prefer to have an integrated platform for all personal technological needs from email, maps, web-searches, data storage, and more.

Technological Factors

As a controller and primary influencer of the technological movement, Google has made many steps towards maintaining its relevance as a leader in the industry. These measures include evolving with a consumer trend towards usage of mobile devices over traditional web-surfing likely sparked by the Blackberry in the early 2000s and later the iPhone which has remained dominant in the technological landscape. To get up to par with this trend, Google launched its own Android operating system in 2008 and has recently begun to create its own line of phones after an acquisition of Motorola (Rothaermel & King, 2016, pg. 276). Critics of the open-source Android operating system have pointed to vulnerabilities in malware and corruption which Apple devices are known to be relatively secure from. Another technological trend sparked by Apple which Google is trying to come to par with is the user preference for continuity between all devices owned i.e., the MacBook, iPhone, iPad, and more which can all link between one account. Efforts to compete on this landscape include the invention of the Chrome browser, Gmail, Google Photos, Google Drive, and the ability to link social networking sites such as Pinterest to a Google account. This progression towards becoming more than just a one-service search site will continue to be key in the competitive efforts of Google.

Ecological Factors

As the world continues to become more and more concerned with the impact of climate change, many are looking at the practices of Corporate America with concern. In turn, these companies have begun to look inward in effort to become more sustainable and appealing to customers with environmental concerns. Results of an in-house analysis revealed that such extremely large amounts of searches and data by Google consumers caused the company to invest in expansive data centers to house all the serves and historical information. Furthermore, these data centers employed swaths of electricity which has spurred Google to invest in research and development of sustainable solutions to help power their infrastructure which limits their electrical pollution (Rothaermel & King, 2016, pg. 279). Nonetheless, Google’s efforts in other areas of ecological improvement such as autonomous vehicles are facing much more of an uphill battle in legal and political regulations.

Legal Factors

As mentioned above in the political section, Google has been facing heavy criticism from regulatory bodies such as the FTC and EU for perceived monopolistic behavior. Beyond the individual legal factors faced by Google, the industries in which it operates are increasingly complex in their legal intricacies. Examples of this include the push for autonomous vehicles which have received high levels of consumer complaints, in certain areas, to the government and may be facing more legal challenges as more autonomous vehicles become a reality. Other industries in which Google operates in that are heavily regulated include the telecommunications sector which has been in a back-and-forth battle in recent years over Net Neutrality. Net Neutrality is best defined the “policy of no Internet Service Provider (ISP) giving preferential treatment of any kind, either in terms of slowing down or speeding up transmission of any specific Internet traffic” (“Google’s Take”, 2020). This specific policy was over-turned in recent years, but the battle is likely to continue as companies like Google and Netflix vouch for Net Neutrality to return to its previous form.

With these factors in mind, the P.E.S.T.E.L. model brings to a head numerous challenges Google and similar companies will likely face. While Google is still undoubtedly one of the most powerful companies in the world, one of the biggest matters for the company is the consumer concern of ethical practices in the industry. For many years’ consumers were in awe of the power and capability of companies like Google and Amazon, but tides signal a referendum on the use of personal data. Other challenges Google needs to be wary of is avoiding the criticisms that Facebook has faced for allowing the rampant spread of misinformation, or “fake news” as it has been dubbed”, on its platform. Lastly, Google and other internet-technology industry giants must be aware of the likely pushback it will receive as more and more of its inventions cause displacement of workers due to an autonomous information technology revolution. While hints of the revolution have hit sectors such as manufacturing, more and more will likely be impacted in the coming years.

5-Forces Model

I. Rivalry

Albeit the success of Google, their rise to popularity as a technological giant was not a simple feat. Dating back to their origins, competition in the industry has been strong and majority would say is at its peak level of competition in today’s age. This can be surmised from noting that in 2002, Google maintained just 31.8% of web-searches on its own volition, however, due to heavy capital investment through agreements with competitors like AOL and Yahoo, Google now maintains a 67% majority on internet searches (Rothaermel & King, 2016, pg. 268). Although, Google is no longer just competing based on its search function; it now battles against competitors like Amazon and Facebook for advertising shares and Apple in the phone, computer, and user experiences category.

II. Threat of New Entrants

As a result of Google’s effort in expansion of its services, the list of competitors can be endless depending on the analysis of which industry it is specifically competing in. Based on the primary strength of the company as a search function, Google’s faces mild new entrant competition from DuckDuckGo and Firefox Focus as mentioned above due to their ability to boast stronger security features. Other older competitors based purely on their search capability include Yahoo and Bing which hold 10 and 18% of the search market function respectively.

III. Threat of Substitutes

From a full-service standpoint as a browser, Google’s medial substitute competition is primarily in the likes of Internet Explorer, which is developed by Microsoft, Firefox, and Safari, although Google holds majority share of browser users with 56.1% (Rothaermel & King, 2016, pg. 268). What makes this industry different than those such as retail is that users can download as many browsers as they’d like, although Safari is exclusively an Apple application. There is very little switching costs on the end of the consumer and each of the browsers offer similar features, thus Google has maintained some semblance of dominance by coupling its search feature with the likes of creating an individual Google account for each user which provides them with email, saved map information, and access to applications such as Google Docs and Google Sheets that competitor Microsoft offers through its dominant Office Suite of applications.

IV. Buyer Power

In contrast to the strong competition Google faces in its revenue generating advertising business, consumers appear to have little power over the technological giant. This is likely due to the fact that the primary revenue source for.

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