Facebook was founded in February 4, 2004. It is a social networking site which was founded by Mark Zuckerberg alongside his college roommates from Harvard University. They include Andrew McCollum, Dustin Moskovitz, Eduardo Saverin and Chris Hughes. Its mission is to make the world more open and connected. This is achieved through giving people the power to share whatever they want to whoever they want no matter where they are. Over the years, Facebook has gained popularity all over the world and millions of people use it every day to connect with friends, upload photos, share links and videos among other social things.
According to Zuckerberg, he said his three pillars towards achieving this mission is to build the best and most appearing mobile product, to build a platform where every new application that is created can be social and enable people to share, and to build strong monetization and economic engine that will eventually build Facebook into one of the world’s most valuable companies.
An external analysis of the most important factors in a company’s remote environment is done through this model. Facebook being a top player in social media market, its market capability can be maintained through popularity, brand development and R&D investment. However, this model shows that Facebook Inc. needs to adjust its strategies to ensure that its products remain competitive enough so as to maintain their lead in the market. This work will now put its focus on the factors that affect Facebook
- Political factors. Under this we have; political stability in developed countries, that is an opportunity, governmental support for globalization (opportunity), political barriers for example in Chinese market (threat). These however are just a few among other political factors.
- Economic factors. They include; it has the opportunity that can increase its market penetration efforts in the developing and stabilizing countries. Another opportunity is that the rapid development of these developing countries also increases the telecommunication factor which is an added advantage for Facebook Inc. when a country develops, the disposable incomes of that country increases. This means that more people are able to by gadgets with better features for internet connection and this is an opportunity for Facebook.
- Social/social cultural factors. Among them include; the preference for high quality services. This happens when there is increased financial capacity and improved living conditions. Increased online buying creates an opportunity for Facebook to retail some of its products online since purchasing is easy.
- Technological factors. Among them is the increasing worldwide use of mobile devices, this is a great opportunity for Facebook. The advancement in technology has also led to the increase in social media companies which are a big threat for Facebook. Another big threat for Facebook business is the fact that some online retailers have diversified their business and are now offering advertising services.
Some other factors include; environmental factors and legal factors. This analysis recommends that Facebook should address some major opportunities as well as threats so as to reach more people and the result is increased revenue.
Porter’s 5 forces
This analysis deals with five forces that shape industry competition. They include: competitive rivalry, bargaining power of suppliers, bargaining power of customers, threat of new entrants, and threat of substitute products. We will now look at how each of this affect Facebook.
- Understanding current competitors. Currently, Facebook is facing competition from social networks such as Google plus, Tumblr, twitter, LinkedIn among others. Facebook Inc. faces direct competitions from these sites which pose a moderately high risk.
- Customer bargaining power. If all Facebook customers ceased to use the social site today, nobody would pay for their advertisements to be done on Facebook. For this reason, Facebook must work extra hard to make sure that most of the customers are not just checking in for a while but they are also actively using the site. When more users stay active, Facebook makes more money through ads and market research.
- New entrants’ assessment. Most Facebook customers are the youth. If a person today comes up with an app that would be addictive to them more than Facebook, then that person would have beaten the odds. Unfortunately, getting enough brand recognition would be the biggest challenge. For this reason, Facebook remains unchallenged and the risk is low.
- Supplier bargaining power. Here we are talking about the people who build and maintain the servers, software developers and anybody else who contribute to make Facebook run properly. For example, if the internet providers would make internet extremely expensive today, this would reduce the amount of time people spend on Facebook and others would also stop using it.
- Threat of substitutes. In terms of new technologies and shifting trends, social networking is very vulnerable. If a certain feature on Facebook becomes outdated or unfashionable, many users will shift to the up-to-date substitute. For it to stay in business it must keep pace with the changing technology.
Strategic Capability Analysis
Concerning face book’s resource view, its biggest recourse is the over 1 billion users’ information stored in its database. It also had a million business pages, which allowed companies to attract potential customers and tell about themselves. Facebook home is the mobile experience that connects people with their friends using a mobile device. Facebook messenger is a messaging app that is used for texting friends on Facebook for free. Facebook Inc also uses Instagram app which it acquired to increase its value. It is also the owner of whatsapp, a free messaging app. It also bought face.com a face recognition platform enabling auto-tagging feature on shared pictures. All these resources allow Facebook to have a competitive advantage over other imitator companies.
For a company to be successful, it must be having it strengths and opportunities that keeps it growing or that drives it. For this reason, Facebook Inc. has its strengths and market opportunities that keep it going. However it can never be all smooth as we also have some external threats that if not carefully looked at, it would hinder its growth and prosperity. The internal strategic factors (strengths and weaknesses) as well as external strategic factors (opportunities and threats) play a big role in the dynamics of the online social networking environment as well as online advertising market. Despite Facebook Inc being the leader in social media market, there are still issues which have to be continuously addressed for the company to stay in the lead.
Some of the major strengths that keep Facebook in the lead include:
- It has a strong brand image. Over the years, Facebook Inc has gained trust in that it is a reliable social media service provider. The strong image has been built through their interesting feature which has proved to provide to meet the social needs of many people around the world ad especially the youths. As an example, features like the LIKE, COMMENT, and SHARE among others have made people love Facebook.
- It has got a large consumer base. Since its launch, it has seen millions and millions of new users every year signing up into the social platform. The more the number of users it gets every year the more it attracts even more number of new users the following year. This particular strength makes it more difficult for new social media platforms to compete with Facebook.
- Its revenue is amazingly high. For a company to have a strong research and development centre which is vital for new developments to deliver what the consumer want, it must invest heavily. Facebook has put a lot of funds in this sector helping it maintain its competitive advantage as well as attractiveness.
However successful Facebook Inc. maybe, it also have some weaknesses. Some internal strategic factors that may contribute to slow or reduced growth include;
- Their products and services can be copied easily. This includes basic features such as LIKE and COMMENTS among others. Many companies can copy these features which in my understanding is a threat because some people will use other social platforms to do what can be done on Facebook.
- The advertisements which are the main source of income for Facebook have a negative impact on user experience. This is because some users could have the perception that some advertisements which are not in their areas of interest are nuisance to them.
- It suffers from a low level of business diversification. It highly depends on its social networking website and mobile apps related to the site. This makes it vulnerable to market risk exposure because in case one or both of them fails, then the business would not survive for long.
From the external strategic factors, Facebook have some opportunities.
- Business diversification is one of the best opportunities that Facebook has. This would reduce the business risk.
- Product innovation. Innovating more complementary products to the social site and mobile apps is a good opportunity too.
- Market penetration and development. The more it penetrates across the world the more the revenue it gets.
The last element of SWOT analysis is the threats. Some of them include; imitation. Many networking companies have tried or have created websites which are similar or serve the same purpose as Facebook. This poses a major threat in Facebook as a business. Another threat is the cybercrime. The higher the number of new users it attracts, the higher the rates of cybercrimes it experiences. In case a user’s accounted have been hacked as a result of this, then it reduces the attractiveness of the social site to the user. Of many more such cases then it might become a disaster for Facebook Inc.
Generic strategy (porter’s model)
It is through cost leadership generic competitive strategy that Facebook Inc. grows its business through. The strategy involves minimizing the costs of doing business. Now that it provides its services globally, it uses advanced computing technologies to maximize speed so as to serve its customers better. Its online nature makes it possible to easily reach users across the global market thus satisfying broad competitive scope of the generic strategy.
To understand Facebook selection and justification of the optimum strategies, we will look at some advanced ad targeting strategies that it uses. These are:
- Target the people who already know you.
- Target the audience that looks alike. After marketing to the people you know, the next target is the people who look like those you know because they might be having the same preferences.
- Combine lookalikes with interest targeting.
- Use detailed targeting.
- Use behavior and life events targeting.
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