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 as Google after multiple name transitions. Even though Google has invented and achieved greater heights, the company is now flying beneath entirely new challenges as far as market sustenance and future growth are concerned. Since the birth of Google, the technological arena has experienced tremendous and new emergency pressures from regulators, a shift of consumers, and entry from competing sources. This PESTLE analysis case study of how Google's complicated regulations will play out against changing user needs and high-tech competitive advantage will define the company's future in an increasingly predatory digital marketplace. This essay discusses several analytical frameworks, including PESTEL, 5-forces, SWOT, and VRIO, to find out the major challenges that are likely to bring about change in Google's future competition in the technology-based world.
Understanding this, we see the need to explore and connect various environmental factors that will define the strategic terrain of this giant company. This exploration will show many pressure points that need to be carefully navigated for continued success.
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PESTLE Analysis
Political Factors
The first area of the PESTEL analysis is understanding the political factors that hinder or advance Google's strategy today. Given a trend towards globalism and interconnectedness between countries, Google's ability to create access to information has positively helped many around the globe in the pursuit of knowledge. However, due to such a large influence on access to information, governing bodies such as the Federal Trade Commission and the 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 in conclusions of anticompetitive behavior and punishment of anti-trust sanctions (Rothaermel & King, 2016, p. 266). Opposite to these restrictions, recent political changes in the U.S. tax code have been beneficial to Google. These massive cuts allowed large tech companies to purchase stock buybacks, which in turn raised the price per share and benefitted the 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 was initially able to get a foot into the market by brokering a deal with Yahoo in 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, p. 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 on its search platform. The expansion of markets is necessary to keep the growth trend 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 altogether, respectively (Ma, 2019). If Google were able to enter these markets, a brand-new population and marketing base would be wide open for their advertising partners, and the database of information would continuously grow. 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 the 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 toward privacy concerns on the consumer end. This has led to 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, p. 276). Critics of the open-source Android operating system have pointed to vulnerabilities in malware and corruption, from which Apple devices are known to be relatively secure. 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 in 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 Google's competitive efforts.
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 an 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, p. 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 from the government and may be facing more legal challenges as more autonomous vehicles become a reality. Other industries in which Google operates 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 as the "policy of no Internet Service Provider (ISP) giving preferential treatment of any kind, either in terms of slowing down or speeding up the transmission of any specific Internet traffic" ("Google's Take," 2020). This specific policy has been overturned 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 PESTEL model brings to the head numerous challenges that 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 consumer concern about ethical practices in the industry. For many years, consumers have been in awe of the power and capability of companies like Google and Amazon, but tides signal a referendum on the use of personal data. Another challenge 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 they 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.
Beyond the broader environmental factors, Google's position within the competitive landscape presents additional strategic challenges that warrant careful analysis through Porter's 5 Forces framework.
With these factors in mind, the PESTEL model brings to light interconnected challenges that Google must address simultaneously. Directly related to the company's capability of entering into new markets is political and legal pressure for regulatory compliance, as seen in China and Russia with their restrictions. Regulatory obstacles coupled with user privacy concerns create a conundrum for Google, where technological innovations are weighed against the expectations of society and statutes. The model environment, with a sustainable data center for the company, denotes its adaptability - such adaptability will be tested across Google when interacting within the ever-changing digital world. The concurrence of these environmental forces creates a complex web of challenges that will, in direct consequence, affect Google's competitive and marketing strategy.
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 the majority would say it 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, p. 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 the 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 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 a majority share of browser users with 56.1% (Rothaermel & King, 2016, p. 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 are very few switching costs on the end of the consumer, and each of the browsers offers 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
Customers, apparently, hold little power against this technology giant. This state of affairs arises from the company's supreme position in the market combined with the way its different services have integrated themselves into the everyday digital life of the average customer. Nevertheless, it is increasingly opting for privacy-friendly platforms and switching among them as soon as an issue arises related to the usage of data or protection of personal information. This will become an increasing challenge to the traditional 'data' business model of Google as well as introduce the need for a careful balance between the optimization of services and the rising concerns about privacy.
V. Supplier Power
Given Google's extensive vertical integration and technological infrastructure, traditional supplier power remains relatively low. The company maintains its own data centers, develops proprietary technology, and creates much of its required software in-house. However, Google faces increasing pressure from content creators and publishers who supply the information that populates its search results. These groups have finally started demanding equitable remuneration for their content, especially within the news business; in response, various nations have promoted legislation calling for technology platforms to negotiate with content providers. Moreover, Google's dependency upon a skilled technology workforce gives rise to a different form of supplier power as the competition over the best talent in the technology sector gets fiercer. The 5-Forces analysis shows how Google's competitive stressors are closely linked with the pressures from the environment. The analysis shows how the mercilessly competitive position works for the company, but the scrutiny from the regulatory point of view is increasing following the PESTEL analysis. Changing social attitudes, where preference for privacy-based alternatives is increasingly tapped by consumers, as pointed out above under the description of sociocultural factors and analyses of buyer power, are becoming a direct factor in competitive dynamics. In addition, content experts negotiating and fighting commercial battles with the global giants in PESTEL environments were analyzed by using topics like the power of suppliers and, in these negotiations, the interplay between the forces formulated by the legal and political environments affecting Google is exemplified. Such interconnectedness of the challenges facing Google necessitates viewing any set of interring situations from a broader strategic planning perspective, and solutions would have to address more than one pressure point at any one time.
Conclusion
The comprehensive analysis of Google's position reveals interconnected challenges that require strategic responses for continued market leadership. The search and advertising markets are still largely in Google's favor, though multiple pressures are mounting from all walks of life. Global governmental bodies have begun to scrutinize Google's operations, which could eventually limit its freedom of action, while privacy threats raised by users may infringe upon Google's data-driven operational principles. Competitors are emerging in different segments in the competitive environment as tech giants increase their digital offerings. However, with such a foundation in innovation and technology, Google must be given the tools to approach these challenges. In this sector of highly advanced technology, Google's ability to find a balance between regulatory issues, privacy concerns from its users, and competitive pressures will chart much of its way ahead. The success with which Google meets these challenges will have wide-ranging implications, not only for itself but for the entire evolution of the digital landscape.
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