Facebook Inc. Business Environment Analysis

This report analyzes Facebook Inc.'s business environment, using PESTLE, Porter's Five Forces, and SWOT frameworks to assess external and internal factors. It examines political, economic, social, technological, environmental, and legal factors, analyzes competitive rivalry, bargaining power of buyers and suppliers, threat of new entrants and substitutes, and identifies strengths, weaknesses, opportunities, and threats. The report concludes with insights on how these factors can inform decision-making for Facebook Inc.

Analysis of Business Environment

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Analysis of Wider macro environment using PESTLE analysis within which Facebook Inc.
operates...................................................................................................................................1
2. Analysis of Micro environment within which Facebook Inc. operates..............................3
3. An analysis of the internal environment of Facebook Inc..................................................6
4. Identify the strengths, weaknesses, opportunities and threats faced by Facebook Inc.; stating
how these factors can be used to inform decision making.....................................................8
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business environment is all about the internal and external factors that affect the business
and its functioning in some or the other way. It covers all the customers, employees,
management etc. Every organisation gets affected by the different factor and is required to
analyse the same for running their business operations smoothly. In this present report Facebook
Incorporation has been chosen for assessment. It is an American online social media networking
company which has its headquarters in California, United State. Company has more than 25,000
employees working for it and it is ranked among top four in technology companies. Facebook
Inc. is serving in all over the world except the nations where it is banned to run the Facebook
site. This present assessment will focus on wider macro environment that affects company by
using PESTLE analysis. In addition to this, Porters Five Forces framework will be discussed in
detail to assess the attractiveness of industry where the company operates its business.
Furthermore, SWOT analysis of firm will be described in brief.
MAIN BODY
1. Analysis of Wider macro environment using PESTLE analysis within which Facebook Inc.
operates
PESTLE analysis will help in knowing about all the external factors that affects in some
or the other way to Facebook Inc. These all factors are discussed in detail to make understand the
same.
Political factors :
In order to run the business in different nations, Facebook Inc. has to accept all the rules
and regulations of the nations. As the organisation offers a platform to express views it is
important to comply with the same. It operates in various countries and every nation has different
rules and regulations (Alexander, 2018). Like it affects Facebook Inc. due to the political barriers
in Chinese market the company has a big threat of the same. In addition to this, political stability
in different nations will be a huge opportunity for Facebook to grow its business in social
market. Sometimes due to the unstable government rules, the business of Facebook has got
affected to a great extent. But on the other hand, due to the political stability in countries it has
also got the opportunity to expand the business. Thus, the political factors such as Taxation, trade
regulations of technology and benefits of the internet providers in the internet information
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providers sector in the country's economy will be analysed. These are required to be determined
before entering in to the market so that all decisions can be taken accordingly.
Economic factors :
This factor of every country where the business is being operated by Facebook Inc. is
required to be determined. It will help the organisation in knowing more regarding the income
level of people and economy of the nation. Like GDP of country affects the business of
Facebook Inc., if the purchasing power and income of customers is low then it will be tough for
people to adopt technology. Thus, business will not be expanded to a great extent so such factors
are required to be taken into consideration before starting the business in any country. As the
company has always achieved success and it has more than a billion active users on daily basis.
Various people like to invest due to its growth and safety in the future. Thus, all people who
invest their money in the company are its resources and they are managed properly for its sake
and development (Al Abri, McGill and Dixon, 2011). In addition to this, Facebook Inc. has
provided various job opportunities in different nation and raised the income level of people
which is an advantage. In developing nations the improvements of telecommunication and
infrastructure has allowed the Facebook Inc. to grow its business as every developing country is
more likely to adopt higher innovation and technology for their growth and business.
Socio- cultural factors :
These are the factors which have high impact on the business of Facebook Inc. as people
and their culture towards the social media acceptance affects the business of Facebook in higher
way. Like if in any nation people have thinking on not sharing their personal information to
others than they are less likely to accept and use Facebook. Hence, it will affect the revenue of
the organisation (Barr, 2014). Other than this, social Sites such as Facebook, Instagram are used
majorly by young generation people so there is huge population of the country that will use the
application. So this is also a factor which is required to be considered by company before
expanding business in any nation. In addition to this, online buying behaviour and its advertising
through social media also has affected the business of Facebook Inc. in positive way to a great
extent.
Technological factors:
The cited company is all about technology and it keeps on adopting higher version of
technology to grow the business to another level. This has grown the business and increased its
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revenue as well. Furthermore, investing in technology by Facebook Inc. has allowed the sales in
growing and helped the organisation in achieving its goals and objectives. In developing nations
people are buying phones and use of Mobile phones has increased to another level which has
created positive impact on the business of Facebook Inc.
Environmental factors :
Facebook Inc. is contributing towards the sustainability of the environment and it has
helped the company in building creating a good brand name (Barrett, 2012). It has also created
waste disposable standards which have resulted in making a huge contribution towards the
economic environment. In addition to this, Facebook has huge threat of climate change which is
being faced by it. To lower this threat establishment can come up with better policies and
standards. These all factors will have a huge impact on the business of Facebook Inc. directly or
indirectly.
Legal factors :
In international market, Facebook has to take into consideration all the patent and
copyright laws of certain nations. It will allow the organisation to run the business in smooth
way and more revenues can also be earned by the same. As every country has their own rules
and regulations which are required to be complied with for smooth running of business.
Facebook accepts all the rules and apply them in running business in different nations. As it is a
social media platform, people are highly connected with it so it is important to take care of legal
factors (Clarkson, 2013). On the other hand, Facebook is suffering the ban in China which is a
huge loss for it as China is a big market however Facebook cannot operate its business. So it is
important that Facebook Inc. is dealing in proper manner with Chinese government that could be
helpful in increasing their share of market.
2. Analysis of Micro environment within which Facebook Inc. operates
Facebook Inc. is one of the biggest social media Platform in the entire world. Here are the
five forces which help in eliminating the negative effect of competition. All the forces are
discussed in detail below:
Competitive rivalry or competition : Facebook Inc. is one of the biggest social media
platform still it faces competition. As every person likes to adopt changes in technology so
organisation has to come up with many updates for running in the market. Major competition is
faced from the different advertising platforms such as YouTube, Google etc. As these are also
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highly active sites which are used by people for advertising purpose. Thus, there are higher
competition faced by the organisation and it deals with the same. Apart from this, many people
spend their time on Twitter, YouTube and different social networks. So it creates higher
competition for Facebook Inc. and affects its business. Thus, it can be said that Competitive
rivalry has high effect on the operations and business of the organisation. So for this company
should be improving their policies regarding safety and security and trying to engage or attract
more number of customers towards Facebook. There is good opportunity for exploring new areas
with effective marketing strategies like that of China so that their competitive rivalry is not
effecting more.
Bargaining power of Buyers or customers : People who are highly active on Facebook
and are puts a pressure on the organisation of what they need from the company. Customers have
high bargaining power due to high level of available substitute in the industry. The major
revenue comes from the advertising to the company and people have many social media
platforms from where they can advertise. Other than this, there is very low switching cost which
makes easy for the customers to shift away from the website of the establishment and this is
regarded to as loss to company (Driscoll and Starik, 2014). The organisation cannot raise its
advertising prices to a large extent due to the threat of shifting to another social networking
application.
Threat of New entrants: It is not easy to develop a new application and run the same by
building the brand image. So new entrant’s threat to Facebook is low but on the other hand, rapid
use of mobile phones allows the people to come up with new websites and application for
messaging and social sharing. But it can be said that it is very tough to develop the brand name
similar to Facebook and Instagram. So the organisation has less threat of new entrants which can
give them a tough competition. Other than this, people feel trusted with Facebook in sharing
their personal information due to its high security and its regulations. For new entrants it will be
very difficult to develop higher amount of trust and thus, Facebook has low threat of new
entrants.
Threat of Substitutes: These are the businesses which affect the other business of
similar type and pose challenges in the entire industry. There are various substitutes available for
the advertisers for the purpose of reaching people through mediums like radio, television. Hence,
the switching cost of the advertiser is high and it is a big threat for Facebook due to the reason
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that advertising is the major source of income for the company (Beer, 2018). But on the other
hand, low cost of advertising on Facebook as in comparison to Television allows people to
advertise through Facebook and Instagram. This will help organisation in low threat from its
substitutes. New and innovative mobile applications keep entering the market and they could
potentially impact user growth on Facebook in the long-run.
Bargaining power of supplier: Facebook Inc. is a big platform for suppliers to provide
storage, data and power. They get higher sales if they deal with such big organisation where
demand is high so bargaining power of supplier is low. There are various suppliers available in
the market this is also a reason for company to switch easily hence, the organisation will be less
in threat of supplier bargaining power. But Facebook Inc. manages to deal and maintain the
relationships with the suppliers and make it possible to manage the supply chain to a great
extent.
Key stakeholders operating in the global social media industry:
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Illustration 1: Interest and influence of Stakeholders
(Source: Interest and influence of Stakeholders, 2017)

The major key stakeholders are customers, government, suppliers and investors who
assess and attract the operation of the company. All the stakeholders and their interest and
influence are discussed in detail below:
Government: They are the one who have entire knowledge regarding thing that are
happening in the company. They have high interest but have low influencing power in the
organisation.
Suppliers: These are those stakeholders who have regular minimal contact with the
company (Interest and influence of Stakeholders, 2017). Suppliers have lower interest and have
low influence and power in the industry.
Employees : These are most important part of the company who are considered to be one
of the major resource of the organisation. These stakeholders have the highest level of influence
and have major interest in the company.
Customers : Facebook Inc. has the large base of its customers who are always prioritised
before taking any decisions. They have higher influence on the organisation but have low interest
in other things other than getting their needs fulfilled.
3. An analysis of the internal environment of Facebook Inc.
Resources : It is something which is needed by the organisation to run its business. It can
be productive factor or economic as well which helps in achieving organisational objectives.
Facebook Inc. has various resources which help the organisation and its proper efficient use
helps in accomplishing growth and objectives.
Employees : Facebook Inc. believes in hiring the best people who are experts and
innovative so that they can contribute more to the establishment. Currently the organisation has
25000 employees which are being trained properly and they contribute their maximum for the
growth of the organisation. So it is one of the major resource of the organisation which helps in
its development and growth.
Investors : As the company has always achieved success and it has more than a billion
active users on daily basis. Various people like to invest due to its growth and safety in the
future. Thus, all people who invest their money in the company are its resources and they are
managed properly for its sake and development.
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Capital : It is the most important resource of the organisation which allows the company
to run its business successfully. Facebook Incorporation has the capital of US $41602 million.
This is one of the biggest resource that is owned by the organisation to run its business.
Core competencies :
 The major core competencies of Facebook are Social graphs and network is one of the
major competencies of Facebook which allows in knowing the reason behind why people
connect to each other. This knowledge allows the organisation in building products for
people to stay connected and keep the network growing (Chaudri and Wang, 2017). It can
be said that Facebook is the largest surveillance based enterprise in the entire history of
mankind.
 One of the core competencies of Facebook is that it has large client base. It allows the
organisation in leading the market and always leads on the top of all other social sites. So
another such platform and its popularity is tough to create and this becomes the major
core competencies of Facebook Inc.
 Facebook privacy policy is great which helps people to trust the site and share their
information through the same. This allows the company in covering the market to a large
level and performs the best through the same. This is one of the reason Facebook has
grown higher and people like to use the same because of its higher security and privacy
policies.
Capabilities : There are various capabilities of Facebook which allows the application for
running their business and leading the entire world. Some major capabilities are discussed below:
 Facebook is very good platform which allow other advertiser to promote their own
products and service thus helping them to know potential customers. This is one of the
best feature that Facebook has come with and becomes its major capability for earning
more through advertising.
 Some extra security features has been added by the company for better privacy policies
for its users. This the major reason behind trust of people while using this site for getting
connected with people (Clarkson, 2013). Facebook is still working on the same for being
better and trying to being more capable so that privacy can become its major capability.
 One of the feature of Facebook is of sending funds through it which became its most
important feature and allows user to be more comfortable. This feature is tied up with
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Facebook messenger and one can send funds to another user through messenger. This is
also considered to be its major capability and allows covering maximum of the market
through the same.
Core skills :
Innovative : Facebook possess the major skill of being innovative and tries always to
come up with new technological developments in its site. This skill is majorly helpful in reaching
maximum people and covering its target audience.
Works on feedbacks : Facebook company has always brought major updates which
bothers its users and tries to solve the same. It is possible due to feedback policy of the
organisation and allowing its users to give their views for being better. This is one of the skill
that is owned by the company for being better and growing more.
4. Identify the strengths, weaknesses, opportunities and threats faced by Facebook Inc.; stating
how these factors can be used to inform decision making
Strengths :
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Illustration 2: SWOT Analysis
(Source: SWOT Analysis, 2017)

Strong Brand image : It has the strongest brand image in all social media platforms
which allow people to share their personal information to it. As the company develops its
business in social media service provider it requires developing trust to expand the business.
Facebook Inc. has always got success in creating its brand image due to its high networking and
big platform with various features and great connectivity.
Large consumer base : As in today's world people like to get connected with everyone
and Facebook provides the Platform for the same (Driscoll and Starik, 2014). Young generation
is highly active on social media and thus company gets a large consumer base for its business.
High Revenues : There are various people in all around the world which are connected
to Facebook. It is one of the best Platform to advertise as it is economical in comparison to
Television advertising. It also allows reaching higher number of people and hence, it helps the
organisation in earning higher revenues through the same.
Innovative workforce : Facebook company is all about technology and it has innovative
workforce which is its major strength. The organisation has major focus on hiring those people
who are experts in technical field. Thus, Facebook is also a big platform for people to get their
jobs and earn good reputation and income through the same. So it can be said that due to its
tough interview process and better jobs facilities it manages to get innovative workforce to work
for the same (SWOT Analysis, 2017). Hence, it became the major strength of the company and it
is one of the reason for its higher success and giving tough competition to other organisation.
Most popular social networking sites : There are various social media platforms which
are used by people to stay connected. But Facebook and Instagram are the most popular social
networking sites due to its privacy policies and better features. Facebook has managed to make
its image in the entire world and that allows the organisation to reach people in faster way. It is
the great strength with the company which allows getting more people connected with it. It
allows earning higher revenue to the organisation and creates a brand image.
Weaknesses :
Low sources of Revenue : Facebook generates its revenues only through advertisement
and thereby it is one of its weak points for the company (Halme, 2015). Different advertises
make a small period of commitment with the company and break the contract on raising the
prices for advertising.
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Low diversification of business : Facebook has major weakness that it has its major
source of income through its site of social networking and application that is provided by it in
mobile. So in long term if the company plans to grow more than it becomes tough for it due to
low diversification in other fields. It is a huge weakness in long term on which organisation
should work to increase its growth and achieving its objectives and goals.
Privacy issues : Facebook has always faced the difficulty due to privacy issues. People
make fake user profiles with another name and post wrong information. It is a major weakness
on which the company always work on and faces different problems on daily basis. Even though
the organisation has updated its terms and conditions on privacy, still personal information
posted by people can be vulnerable.
Opportunities
Growing more in advertising : Target audience marketing for advertisers is one of the
powerful points for Facebook Incorporation. It is not only about understanding the
demographics, interests, activities and connections of its user, it also helps generate the traffic
based on offers, news and events (Al, McGill and Dixon, 2011). As in today's world people like
to get connected with everyone and Facebook provides the Platform for the same. This will help
in growing more and earning higher growth through advertising.
Market development : Facebook Inc. has huge opportunities in developing nations
where the company can grow more. As people started using more phones and highly diverted
towards social media sites so it will be an opportunity for company. Increasing number of users
of internet will be increasing the demand of customer and thus raising market development
opportunity for Facebook Inc.
Threats
Growing use of ad blocks : Due to various advertisements on the social sites people
started to block the same. It has affected the revenue of Facebook and also cost heavily to the
organisation. This was a big threat for the organisation as it was resulting in loss of revenue
which is the major thing for every business.
High competition : In today's world, so many social networking sites has been launched
and people get diverted towards the same. It has always affected the business of Facebook Inc.
and also its revenues are affected. Like Google and other sites gives a tough competition in
advertising sector to Facebook and it is always considered to be in lead for the purpose of
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advertisements. So this is a big threat on which the company is working from so long to
overcome the same.
Cybercrime : This is one of the biggest threat that is faced by the organisation as
Facebook is one of the attractive cybercrime target that is being faced by the company. It results
in affecting the business performance of the company due to such cybercrimes
(Alavi and Leidner, 2017). In the recent times, it has grown more and created a negative effect
the user experience. Many spammers are also creating experience of user worst and allowing the
people to deactivate their account. As no one likes to spread their wrong and personal
information on social media sites.
By knowing the threats, weakness, opportunity and strength it will be easy for Facebook
Inc. to make and carry out their decision making process. As if they are having knowledge about
threats then company will be formulating strict policies regarding this. They could also explore
new opportunities only after identifying them all and making strategies for achieving them. if
Facebook is analysing its weakness then it becomes easy for it to formulate programs to lower it
down. Thus SWOT analysis is very much helpful for Facebook Inc. in decision making process
of company.
CONCLUSION
From the above report it has been determined that there are various internal and external
factors which affect the business of Facebook company. Many a times due to the unstable
government policies business of companies get affected to a great level. But on the other hand,
due to the political stability in countries it has also got the opportunity to expand the business. In
addition to this, it has been determined that legal factors are required to be complied with, as
every country has its own rules and regulations for smooth running of business. Facebook
accepts all the rules and follows for the purpose of operating the company as per the same. Other
than this, as it is a big brand name it is tough for suppliers to bargain and provide products at
higher cost. Furthermore, Young generation is highly active on social media and thus company
gets a large consumer base for its business and earns higher revenue through advertising.
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REFERENCES
Books and Journals
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on citizens' intentions to use e-government services: an Oman perspective, Journal of
Information Privacy & Security, Vol. 5 No. 2, pp. 3-26.
Alavi, M. and Leidner, D., 2017. Knowledge management systems: issues, challenges, and
benefits. Communication of the AIS. Pp. 1-37.
Alexander, R., 2018. Framing Discourse on the Environment: A Critical Discourse
Approach, Routledge, New York, NY.
Barr, S., 2014. Are we all environmentalists now Rhetoric and reality in environmental
action, Geoforum. Pp. 231‐49.
Barrett, D.J., 2012. Change communication: using strategic employee communication to
facilitate major change, Corporate Communications: An International Journal. Pp. 219‐
31.
Beer, D., 2018. Social networking sites – revisiting the story so far: a response to Danah Boyd
and Nicole Ellison, Journal of Computer-Mediated Communication. Pp. 516-529.
Chaudri, V. and Wang, J., 2017. Communicating corporate social responsibility on the internet:
a case study of the top 100 information technology companies in world, Management
Communication Quarterly. Pp. 232‐47.
Clarkson, M.B.E., 2013. A stakeholder framework for analysing and evaluating corporate
social performance. Academy of Management Review. Pp. 92‐117.
Driscoll, C. and Starik, M., 2014. “The primordial stakeholder: advancing the conceptual
consideration of stakeholder status for the natural environment”, Journal of Business
Ethics. Pp. 55‐73.
Halme, M., 2015. “Developing an environmental culture through organizational change and
learning”, in Welford, R. (Ed.), Corporate Environmental Management 2: Culture and
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