GSBS6060 Strategic Management | Analysis of Facebook

Introduction

The case study which will be analysed in the report is based on the operations of Facebook which is a multinational technology based organization. The company was established in the year 2003 by Mark Zuckerberg along with his college friends. The website which was developed by them was primarily known as Facemash. The social media website provided opportunities to the members to post their pictures and those photos were further judged by the other members who commented as “hot” or “not”. Zuckerberg had hacked the computer systems of Harvard in order to collect the images. The website had been able to gain huge amounts of popularity within a short period of time and had created a base of 22000 users.

The report will be based on the analysis of the internal and external environment of the company. The internal environment of Facebook will be analysed with the help of SWOT framework. On the other hand, external environment of the company will be examined by using the PESTEL framework. The analysis of the resources, capabilities, core competencies, current business strategy, corporate culture, corporate structure will also be a part of the report.

SWOT analysis of Facebook

The internal environment of Facebook can be analysed with the help of proper implementation of SWOT framework. The four important areas which will be analysed with the help of this framework include, the strengths, weaknesses, opportunities and threats.

Strengths – Facebook was formally started in the year 2004 in order to provide the students of the university with an effective platform to interact with each other. The organization was able to grow with a huge speed with the help of services which are offered to the users. The website was in use in greater than 800 universities and colleges. The user base of Facebook has shown immense levels of growth which has increased the levels of revenues as well. The third party advertising based services which are provided by Facebook is considered to be a major strength of the company (Barros, Hernangómez and Martin-Cruz 2016).

Weaknesses – Facebook had placed its initial public offering or IPO in the year 2012. Each share of the company was prices at 38 Dollars. The company was valued at 104 Billion Dollars in the year 2012. The organization faced major threats before the IPO based on different systems which were implemented within the processes. The company also faced major issues after the trading had started in 2012. The stock prices of the organization had also fallen and the CEO was criticised. The mistakes which were made by Facebook were based on the inappropriate development of the mobile based software.

Opportunities – The rise which was experienced in the advertising based activities had been considered to be important opportunities for Facebook in the technology industry. The usage of the advertisements in News Feed has been considered as a major opportunity for growth for Facebook in the industry. The management has provided the much needed importance to ads which are featured in the website. The major brands which provide their advertisements on Facebook website include, Procter & Gamble, Samsung, Microsoft, AT&T. The advertisement based revenues of the organization have increased in a huge manner recently with the help of different media buyers which have partnered with the company (Daspit et al. 2017).

Threats – Facebook has started facing huge levels of competition from different multinational organizations which provide social media based platforms to the users. Google has become the biggest rival of Facebook in the social media based platform. Online advertising based capabilities of Google are also considered to be a major concern and threat towards the revenues and profitability levels of the company. The dominance of Google in advertisement service providing area is a huge concern for the operations of Facebook.

PESTEL analysis of Facebook

The operations of Facebook are affected by the external environment based factors of the countries in which it functions. The social media based market operates on an international basis and the capabilities of the organization can be analysed effectively with the help of PESTLE framework. The condition related to macro environment of the organization can be analysed with the help of proper implementation of this framework. Facebook has penetrated in different countries which include, most parts of North America, Asia. South America, Europe. The major exceptions in this case include, Japan, South Korea and Germany where the growth levels are slow (Demir, Wennberg and McKelvie 2017).

Political factors – The political landscape of the country has a major effect on the operations of Facebook. The movements which are related to different countries can affect the profitability of the organization. Major opportunities are provided by the political stability of developed countries. On the other hand, the political barriers which are faced by the organization in countries like China can act as major threats for Facebook. The global growth of Facebook has been affected by the barriers which have been created in China. The levels of privacy and security of the organization was based on the political condition of the countries.

Economic factors – The economic situation of the country is able to affect the growth levels of the business and the stability of revenues as well. The economic situation of the country is able to provide effective levels of opportunities to Facebook in order to penetrate the market. The development of the mobile based platform of Facebook is based on the focus of the organization in forming different products and offering them to the users. The global reach of Facebook is increased in an effective way with the help of the economic stability of the country. The economic situation is able to have immense levels of effects on the acquisition based activities which are performed by Facebook (Durand, Grant and Madsen 2017).

Social factors – The platform which is provided by Facebook is based on the ways by which the company aims at connecting different types of individuals or users. The social conditions of various countries have also proved to be useful for connecting users. The main aim of Facebook has been to develop a platform which is helpful in providing effective communication based facilities to the consumers. Facebook is able to provide a social context to the advertisers with the help of the News Feed of users. The social media platform is helpful in developing the social web and improve engagement levels of the users.

Technological factors – Facebook has developed different types of products which have been helpful for the app developers. The various technologies which are effective for the usage of developers mainly include, open graph, payments, social plugins, graph API. The development of various technologies within the organization are based on recent developments which have been made by the company. Technologies have been used by Facebook in order to enhance the position in paid search and online advertising activities. Another major technology which was implemented by the company was the Atlas advertising based platform which had been acquired by the company from Microsoft (Dyer et al. 2015).

Legal factors – The acquisition of various organizations like Instagram is based on the legal factors within the industry. Instagram is a photo-sharing based service for the usage on different platforms in Android phones and iPhones. Acquisition has been considered to be a major milestone for the growth of Facebook in the industry. Facebook also acquired the mobile messaging based service named WhatsApp in the year 2014. The legal conditions of different companies can affect the acquisition related activities of Facebook.

Environmental factors – The ecological issues can affect the successful operations of Facebook in a huge manner. The level of sustainability of the business is also considered to be an important factor which provides growth opportunities to Facebook. The threats based on climate change are related to the process of transferring the servers and various other equipments to separate locations in near future. The corporate social responsibility based factors are able to provide help in addressing the issues related to external environment of Facebook (Engert, Rauter and Baumgartner 2016).

The external environment analysis of Facebook based on different factors like political condition, economic situation, social factors, technological advancement, legal factors and environmental based factors has been able to prove that the company has been provided effective opportunities to increase its growth.

Resources of Facebook

Facebook had been able to develop huge amounts of resources in the technology industry with the help of huge number of users and high revenues generated from advertisements. The financial capability of Facebook is considered to be a major resource which is helpful for development of the core competency of the company. The Business Model of Facebook is also considered to be a major resource which is based on three major pillars including, Timeline, Graph Search and News Feed. The consumer-facing products which are offered by Facebook to users can also be considered to be major levels of resources (Frynas and Mellahi 2015).

Capabilities of Facebook

The capabilities of Facebook are developed with the help of the reputation which has been created by the company in the industry. The huge level of global reach of Facebook has been developed with the help of the resources which have been gained in the course of its operations. The products which have been developed and are offered to the users include, Messages, Events, Places, Notifications, Videos and Photos, Friend Lists, Pages, Video calling, Subscription options and Gifts.

Core competencies of Facebook

The core competencies of Facebook are based on the value propositions which have been set by the company for the marketers and advertisers. The four major value propositions of Facebook thereby include, relevance, reach, engagement and social context. The global reach of Facebook which has been developed in the industry is thereby based on the ways by which the company has formed the core competencies. The value which is created by Facebook for the customers is considered to be a core competency of Facebook. The acquisition based activities which have been conducted by Facebook over the years of its operations in the industry have created a core competency in the technology based industry (Hill, Jones and Schilling 2014).

Current business strategy of Facebook

The business strategy which has been implemented in the operations of Facebook is based on the platform which has been provided by the company for the users to connect with each other in an effective manner. The products which have been designed by the company are based on the needs of consumers and their demands.

Current value chain of Facebook

The current value chain of Facebook is based on the marketers and advertisers of the company. The services which are offered by the company to these individuals are considered to be highly effective for the effective operations of Facebook.

Recommendations for improving value chain of Facebook

Facebook can improve its value chain by increasing its reach in order to the compete with the others in the technology industry. The increase in levels of relevance is also considered to be a major factor which will play a major role in the development of the value chain. Facebook can further increase its engagement levels with the help of dynamic ads.  

Corporate culture

Facebook has provided huge value to the decision-making and problem-solving based activities. The corporate culture of the organization is based in the ability which has been gained by the employees in order to develop the unusual levels of ideas. The ideas are able to enhance social networking based activities of the company.

Corporate structure

The matrix organizational or corporate structure has been developed by Facebook which is helpful for the expansion and diversification of the social media based business. The online based social network is thereby resilient against the levels of competition in the industry. The development and growth of the organization is supported by the corporate structure.

Alignment between the corporate culture and structure

The corporate culture and the structure of Facebook is aligned in an effective manner in order to facilitate the social networking platform and its activities. The organization is able to develop a competitive advantage in the technology industry with the help of proper alignment of the structure and culture.

Finding of facts based on different departments

Management department

The management of Facebook has aimed at generating high levels of revenues by connecting millions of users in different countries of the world.

Recommendation based on finding of fact related to management

The recommendation which can be provided to the organization is based on the change of focus from only providing a social platform to users. The organization can aim at giving more importance to the advertising based revenues.

Marketing department

The marketing based department of Facebook has developed different services in order to attract users which include, video calling, subscription and gifts. The organization is able to attract users in comparison to the other organizations in the industry.

Recommendation based on finding of fact related to marketing

The recommendation which can be provided to the marketing department of Facebook is based on the ways by which the organization can increase its revenues. The marketing activities of the company need to be targeted towards the third party advertisers (Kasemsap 2014).

Finance department

The changes which have taken place in the operations of Facebook are based on the third party advertising based services. The revenues which were generated by the users previously, were generated by the third party advertisers in the year 2014. The division of revenues which were generated by Facebook were divided between advertising activities and fees and payments.

Recommendation based on finding of fact related to finance 

Facebook however needs to maintain the revenues with the help of mobile advertising. The advent of mobile advertising will create a stable position of the company in the industry.

Accounting department

The accounting based activities of Facebook were based on the revenues which were generated by the company from the advertising based activities and the users as well. The acquisitions which were made by Facebook were based on the levels of revenues which were generated by the company.

Recommendation based on finding of fact related to accounting

The accounting department of Facebook is able to play a key role in the ways by which the company is able to invest the revenues which have been gained by the company. The acquisitions which will be made by Facebook in the future will also be related to the ways by which the revenues and profit levels of the company are managed by the company.

Conclusion

The report can be concluded by stating that Facebook has operated in a profitable manner in the technology industry. The internal environment analysis of Facebook has been based on different factors which have affected the operations of the company. The analysis of external environment is based on different factors based on various countries of the operations of Facebook. The resources and capabilities of Facebook have been used in order to generate high levels of revenues in the market. The analysis of different departments of Facebook include, management, marketing, finance and accounting has depicted the issues which have occurred in the organization. The departments have been provided with effective recommendations in order to improve the revenues of Facebook in the technology based industry.

References

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