Alphabet Inc is an amalgamation of different technology ventures, operating in the technology industry in the US. The company headquarter is located in California while the company services are being used across the globe. The restructuring of Google has resulted in the division of the company into multiple segments, which were integrated under the parent company Alphabet Inc. The largest segment of the company is Google which is recognized as a leading technology giant. This discussion covers the PESTLE analysis for Alphabet Inc.
Political Factors
The political factors such as political stability tend to affect all business, the technology industry being no exception. The changing political climate can affect the policies and business practices of technology companies. For example, the transfer of data is governed by the political condition and negative political changes can change the processes significantly.
Information sharing and displaying of relevant information carries strong political implications, as evident in case of the company. Involvement of Alphabet Inc’s domain of Google in political manipulation has led to criticism of the company. It was claimed that the electoral results were influenced by the company as it was deemed to portray biased media coverage for Trump (Gibson & Heavey, 2018).
Moreover, the breach of consumer privacy has also been an area of debate as Alphabet’s segment Google was criticized for continuous surveillance of its service users. Another example where technology growth was adversely effected due to political concerns is Project Loon. The project had to be discontinued due to political complications and concerns over data protection (Zhang et al., 2022).
Failure to establish strong political ties that promote supply of services is another political factor that can limit the reach of Alphabet Inc. For example, Chinese government maintains its own technology based companies and Alphabet is not able to enter the Chinese market.
Economic Factors
The use of technology services is largely dependent on the economic condition of a country. The economic slowdown can affect the way a company is able to perform financially. Alphabet Inc faced losses due to slower economic activities due to increased inflation. The digital advertising of Google has been mainly affected causing a 34% reduction in profits (Grant, 2023).
The company had to lay off the employees as well as make other decisions in an effort to reduce the negative impact of the loss of revenue. The uncertainty of the global economy in the post pandemic time is another factor constituting the economic sphere for the company. Decision making is dependent on the economic stability and forecasted patterns (Alphabet Inc, 2020).
In addition, the investment decisions in various projects are guided by the forecasted return and the economic viability of the venture. Project Loon was discontinued due to poor economic viability, while acquisition of YouTube brought financial gain.
Social Factors
Social factors such as consumer trends and preferences have a major effect on the technology companies. Alphabet Inc was able to gain significant growth during pandemic as the consumers shifted to online mode of work and interaction. However in the post pandemic time, the company is not able to maintain the same influx of users.
Advertisers have also refrained from using Google segment for the promotion of their services as the higher interest rates resulted in rearrangement of investment decisions. As a result, Alphabet Inc had to engage in cost restructuring as well to balance out the negative effect of economic slowdown (Grant, 2023).
Technological Factors
The technology industry is a rapidly evolving and changing sector; therefore, the companies have to keep up with the pace of changing landscape. Since the technology industry is highly competitive in nature, Alphabet Inc has to focus on R&D process to create and launch new products. Currently, the company is managing different segments in the hardware and service sector.
Artificial Intelligence and machine learning are two domains which have made significant changes to the operations of tech companies. Alphabet Inc identifies new developments in the technology sector and incorporates them as a part of the business to remain updated. The company also engages in acquisition of technology firms to expand its portfolio (Alphabet Inc, 2020).
It also needs to maintain its hardware and software and keep it updated to ensure smooth management of the operations. In addition, any issues with the software or hardware can cause losses for the company, indicating how a minor setback can have significant monetary implications.
Environmental Factors
The sustainability concerns have a significant effect on the business activities of organizations. Alphabet Inc has made efforts to incorporate sustainability as a part of its business operations. Google has maintained carbon neutral state since 2007, while recently the company has developed emphasis on climate resilience strategy.
In addition, the goal of becoming carbon free energy user in next 7-8 years, Alphabet Inc has invested in sustainable energy as well as making the consumers make eco friendly choices. For instance, Google Flights enables the users to identify the flights that have lowest degree of impact on the environment (Alphabet Inc, 2020).
Legal Factors
The legal factors such as regulations for managing information privacy, sharing of information and other legalities for managing online business operations affect Alphabet Inc. The company has been facing legal claims against the content displayed via its online channels and anti-trust claims which add to the legal pressure.
Besides these issues, the changing regulations pertaining to data protection carries implications for the company. The complications arising out of General Data Protection Regulation (GDPR) and privacy shield has made it difficult for the company to manage transfer of data.
The implementation of News Media Bargaining Code in Australia is another legal development that would affect Alphabet Inc. The code would inevitably result in an increase in the cost of company operations in Australia.
Conclusion
Alphabet Inc is operating in the technology industry which is significantly influenced by political, economic, social and legal factors. In addition, the environmental concerns and technological developments also influence company decisions and the management has to adopt a suitable strategic direction accordingly.
References
Alphabet Inc (2020). Form 10-K. Retrieved from: https://abc.xyz/investor/static/pdf/20210203_alphabet_10K.pdf?cache=b44182d
Gibson, G & Heavey, S. (2018). White House probes Google after Trump accuses it of bias. Reuters. Retrieved from: https://www.reuters.com/article/us-usa-trump-tech-idUSKCN1LD1I1
Grant, N. (2023). Alphabet’s Profit Falls 34% Amid Ads Slowdown. NewYork Times. Retrieved from https://www.nytimes.com/2023/02/02/technology/alphabet-earnings.html
Zhang, L., Zhang, C., Dang, S., & Shihada, B. (2022). Lessons from the Commercial Failure of Project Loon for 6G Research Roadmap Design. Frontiers in Communications and Networks, 11. Retrieved from: https://www.frontiersin.org/articles/10.3389/frcmn.2022.867581/full