Facebook Inc. Business Environment Analysis

This assignment examines Facebook Inc.'s internal and external business environment using a variety of analytical frameworks. It conducts a SWOT analysis to identify the company's strengths, weaknesses, opportunities, and threats. A PESTLE analysis explores political, economic, social, technological, legal, and environmental factors influencing Facebook. Finally, it applies Porter's Five Forces Model to assess the competitive landscape. The aim is to provide insights into Facebook's position in the market and potential strategies for success.

Introduction to Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1. Analysis of the micro-environment affecting operations of Facebook Inc.............................1
2. Analysis of the micro environment in which Facebook Inc. operates....................................5
3. Analysis of the internal environment of Facebook Inc...........................................................7
4. Application of SWOT framework for Facebook Inc..............................................................8
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................11

INTRODUCTION
Business environment refers to the conditions or situations in which an organisation
operates to achieve growth and generate huge revenues. There are various factors such as
internal and external which brings difficulties and challenges towards them in achieving
sustainability in market for longer period. Thus, the management is held liable to identify such
factors and making proper evaluation so as to operate business operations in complex
environment without facing any problems. Facebook, a USA company which engaged in
offering social media and social networking services all over the world is taken for the purpose
of preparing this report. It has been recorded that the company has attained more than 2 Billion
monthly active users in June 2017. The present assignment covers the internal and external
factors of business environment and their effects on the business operations either negatively or
positively. In addition to this, SWOT analysis of the firm with a motive of identifying strengths
and weaknesses are also discussed under this report. The project also covers PESTLE analysis
and Porter’s Five Forces which direct an organisation to improve their performance and achieve
desired goals and objectives within limited period of time (Cassell and Blake, 2012).
TASK 1
1. Analysis of the micro-environment affecting operations of Facebook Inc.
Facebook is a American online social media and social networking service whose website
were launched on 4 Feb, 2004 by Mark Zuckerberg with the support of Eduardo Saverin,
Andrew McCollum. They cover almost all countries for providing their online social networking
services due to which they attained large market share in Social networking business world. In
2017, Facebook has recorded over 2 million monthly active users which enhance their strengths
and their products such as Whatsapp, Instagram, Oculus etc. which maximises their market
share. According to the international reports, Facebook Inc. has earned over $40.653 billion in
2017 and has attained over 25,105 employees who contribute their valuable services to company
in order to achieve their desire goals and objectives.
Therefore, Facebook is one of the Top player in social media market which covers almost
all countries in the world for providing their social networking services. Thus, their business
operation obviously influences by several factors which brings difficulties and challenges for
company to operate their business operation more successfully. Internal and external factors of
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business environment which affects their business operation in wither negative or positive
manner. Internal factors may occur within an organisation which are related with employees,
technologies etc. whereas the external forces arises from outside of the organisation in form of
political, legal, environmental, social, economic and technological components. Therefore, to
analyse all such factors the management of company are held responsible to identify and
examine such factors which direct them to implement an effective plans and strategies to
overcome the effects that comes due to such factors. For this, the management need to do
PESTLE analysis through they can cope up with such factors in more effective way (Cavalcante
and et. al., 2011).
PESTLE Analysis:
Political factors: The business of Facebook is related with political landscape. As the
company provides its social networking services to almost all countries due to which they may
face difficulties and challenges due to rules and regulations implemented by government which
are different in each countries. Sometimes, the government may put some restriction on using
social networking services in their country with a motive of securing personal information of
their people. This step taken by government will increased the cost of operation for Facebook
which affect their revenues as well. Furthermore, the government also implement specific rules
and regulation regarding social networking as their main objective is to eliminate illegal acts
such as hacking of personal information and number of fake accounts which brings their country
into danger. There are following political factors that affects and influences Facebook Inc. which
are as follows:
 Political stability in developed countries
 Government support for globalisation
 Political restrictions in the Chinese market
The political stability of developed countries provides sufficient supports to Facebook
Inc. to expand and diversifying their business in their markets. They have an opportunity to
expand its business and display marketing services with the help of taking support from
government for the purpose of globalisation (Cronan and et. al., 2011). However, the company
may face challenges to operate their business in some countries such as China where the social
networking services are prohibited. Because from this, it restricts company to achieve global
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growth. Therefore, it is important for Facebook to contact with Chinese government with the
purpose of opening up the display advertising market in the country.
Economic factors: This factor is related with economic stability of country which helps
Facebook Inc. to achieve growth in their business. Therefore, the company mainly focuses on
expanding their business on such countries after considering their economic stability. As if the
economy of the countries are stable or increases, then the purchasing power of people also
increases due to which they are able to spend more on buying computer and mobile devices that
could access Facebook services which will bring beneficial result to company. There are major
economic factors which affect and influence Facebook Inc. are as follows:
 Increasing stability of developing countries(opportunity)
 Rapid economic growth of developing countries(opportunity)
 Increasing disposable income(opportunity)
Therefore, Facebook Inc. needs to focus on expanding their business to the developed countries
where the infrastructure including telecommunications infrastructure are improved so that
maximum number of people are able to access Facebook's services (Elliot, 2011).
Social factors: These are the factors which are related with interest and behaviour of
people towards the company' services. In order to attain good public image in the society, the
company needs to ensure them to expand their quality of life through providing high quality
services. Nowadays, people lay more emphasis on using high quality in services which causes no
problems in their lives. The social condition presents an opportunity for Facebook Inc. to
enhance their quality in services so as to satisfy and retain loyal clients who pay them to display
their advertising services. Apart from, the people more prefer to buy products through online
rather than visiting the physical stores thus, Facebook Inc. needs to contact with different
retailers to avail their products on their social networking websites and related mobile apps
which help their business in expansion on large scale. The company also needs to grab an
opportunity to improve their Corporate Social Responsibility (CSR) programs in order to satisfy
related expectations of users. Therefore, there are many opportunities Facebook Inc. needs to
focus on in order to achieve competitive advantage and generate huge revenues.
Technological factors: It is related with technologies, infrastructure facilities which need
to be adopted by Facebook Inc. etc. to provide their services to their user in such an effective
way that will help in maximising their level of satisfaction. According to the international
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reports, every third person of population carry mobile devices which may bring beneficial result
to company if they use advanced technology to entertain them and help them in interacting with
others without consuming more money. However, there are large number of online social media
companies which comes into market and take their customers way from the company's social
media services. Online retail firm also threatens to compete with Facebook Inc. Amazon is the
biggest example which offers online advertising services through their online websites. The
company also need to focus on using the latest technology in order to secure information of their
users so that it will help customers to feel safe and comfortable while accessing Facebook
services (Hall, 2011).
Legal factors: Law imposes restrictions on expanding Facebook business across
worldwide. There are certain laws and regulation implemented by government in each country
related with using social networking services which either supports or bind them to operate their
business in different countries. Therefore, Facebook Inc. need to first understand all such laws
and regulation and need to comply them in order to operate their business more smoothly. The
innovative new products and legal protection improve the patent laws by providing an
opportunity of Facebook. In addition to this, the company can get benefits through increasing
coverage of free Wi-Fi by expanding its social media reach in many areas worldwide. As the
Facebook Inc. suffered from its ban in China which affects their market share. Thus, the
management of Facebook Inc. is required to coordinate and communicate with them so as to
resolve all issues among them (Kaufmann and et. al., 2011).
Environmental factors: Facebook social business is directly linked with natural
environment. Various environmental factors which affect Facebook Inc. are as follows:
 Increasing emphasis on business sustainability
 Increase complexity of waste disposal standards
 Climate change
Facebook Inc. also has an opportunity to improve its social medial business sustainability
conditions in order to satisfy concerns regarding the natural environment. Along with this, the
company should implement better waste disposal policies and standard for its corporate
operations. Due to climate change, the company faces problems regarding servers which restrict
their users to use their services. Therefore, the company need to make an effective decision
regarding transferring servers and other equipment to another location in the future. While doing
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PESTLE analysis, an organisation must take steps regarding enhancing their CSR standards and
policies.
2. Analysis of the micro environment in which Facebook Inc. operates
The business operation of Facebook Inc. may be affected and influenced by internal
factors due to which they need to make corrective actions and step to overcome such factors as
quickly as possible. The interact factors arises within an organisation which may wither
internally damage company or help them in achieving growth and future in market for longer
duration. Therefore, the management need to identify their issues and barriers occurred in an
organisation and accordingly analyse them with the purpose of resolving in an effective and
efficient manner. In order to analyse such complex environment, Facebook Inc. need to adopt
Porter Five Forces Model which help them in analysing the competition of business. It includes
all forces which affects its capability as compared to their competitors which help them to
minimises negative effects which restricts the business to operate its business operating
competitive environment (Lee and et. al., 2012).
Porter Five Forces Model:
Competitive rivalry: The porter five forces model begins with finding out the competition
which affect their stable position in market. As there are limited companies which offers similar
services as provided by Facebook Inc. For an example, Youtube LLC has social media website
which provide an opportunity to people to advertise their products and services. Thus, due to low
competition, the business of Facebook Inc. may affected less. The company should also required
to target people on the basis of their requirements so that they can able to implement corrective
actions and decision in order to attract large number of people to becomes user of their services.
For example Large number of youngsters prefer to use Facebook, Whatsapp or its competitors
Snapchat whereas professional users prefers to use Linked In, twitter or Facebook pages.
Therefore Facebook Inc. faces medium risk as they faces less competition from their rivals.
Bargaining power of customers: The customer's preferences and behaviour should
required to determine by Facebook Inc. in order to attain large market share in competitive
environment. Generally there are two types of customers such as users and advertisers. Users are
the one who uses their Facebook services just to interact with their friends, relatives etc. whereas
advertisers uses Facebook services for the purpose of advertising something. As the revenue
generated by Facebook Inc. are mostly earned through advertisers therefore the company need to
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focus on them as well so that they cannot move towards using competitors services. There are
many substitutes for advertising purpose such as Television, radio and print media which are
more helpful in reaching advertisement to large number of target audience (López-Gamero and
et. al., 2011). But due to low switching cost, the chances of shifting loyal customers from
Facebook to other social networking sites which brings difficult to Facebook Inc. Therefore the
management need to spend more money on conducting research and development (R&D) to add
new features and put their maximum efforts in order to create integration wit Facebook and other
sites or varices.
Bargaining power of suppliers: Suppliers are those people who support the Facebook
Inc. to build and maintain their servers to the software through which the company can run its
different social media platforms. There are large number of suppliers which are widely available
thus the existing suppliers could not put more pressure on Facebook Inc. Therefore more number
of suppliers, the chances of influences of individual suppliers on the company will be minimum.
Thus, Facebook Inc. may not affect that much affects from the suppliers as they have lots of
options to hire for their company.
Threat of substitution: Substitutes may reduce the performance of Facebook Inc. and
also decreases their profitability as well. In addition to this, the company may also lose its
customers through which the company may comes into danger. As the main source of generated
revenue of Facebook Inc. are from advertisers. As there are large number of substituted with the
help of which the advertisers may shifted to substitutes. Television, print advertising etc. are
some substitutes through which Facebook Inc. may lose its advertising users. But to charging
high cost from such substitutes, the chances of shifting from Facebook to other will be minimum.
This element of the five forces of model analyses shows that substitution may brings difficulties
to Facebook Inc. but can be overcome through adding new features in Facebook services (Onetti
and et. al., 2012).
Threat of new entrants: Entry of new firms into social media business is not that difficult
as it becomes inexpensive to create application and platforms but the only requirements to enter
is to have good programmer and a secure server. Entering into this business is easy but attain
strong brand image will be more difficult due to which they may failed to attract users. It takes
time to get customers into confidence by providing them variety of services. The customers
prefers to use those social media sites which secure their personal information and charges less
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prices as compared to Facebook Inc. On the basis of element of the Five Forces Analysis, new
entrant are minimal issue as Facebook Inc. only need to focus on implement strategies to
enhance their quality of services on continuous basis.
3. Analysis of the internal environment of Facebook Inc.
Facebook Inc. has operated its business on large scale this it is more important for the
management to analyse their business environment exist within an organisation. It essentially
required for an organisation to utilise their resources, capabilities and identify their core
competencies which help them in competing with their rivals in more effective and efficient
manner. Thus, Facebook Inc. need to analyse all such elements which supports them to achieve
growth and success in market for longer duration. Following are main factors which need to be
examined and analysed by the management of Facebook Inc.:
Resources: There are two types of Resources which supports and contributes in achieving
desired goals and objectives of an organisation. Such resources includes:
Human resource: It has been recorded that over 25000 employees are employed in
Facebook Inc. which gives their maximum efforts in providing its social networking services.
Therefore analysing their needs and requirements should be done in order to fulfil them in
effective an efficient manner. The management need to provide them rewards and compensation
on the basis of their performance so as to motivate them ton perform well (Owusuand and
Habiyakare, 2011).
Physical resources: This resources includes the technologies, equipment used by
Facebook Inc. to offer their online social networking services across worldwide. Using software
for the purpose of securing personal information of users will help in improving brand image in
competitive market. This will attract large number of customers as well.
Capabilities: Facebook Inc. has been always ready to adopt new products and ways for
users which help them in making proper communication with each other so as to achieve
competitive advantage. The CEO of Facebook has determined different cultures of people on the
basis o which they can add features which maximises their level of satisfaction. Implementing
different languages in the Facebook services help them in attracting large number of people from
different background and cultures. The management need to always focus on improving their
capabilities so as to maximise satisfaction level of their users which helps in increasing their
number of users. They also need to conduct training and development programs for their
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employees with a motive of enhancing their skills and knowledge so that they can give full
support to Facebook Inc. fro reaching their services to different countries (Palo and
TähtinenSaleem, 2017).
Core competencies of Facebook
Core competency means the capacity of organisation to use their resources and skills to
attain their results within stipulated period of time. This ability of the organisation creates the
difference from their competitors. The major competencies which are attained by the
management of Facebook is mentioned below:
 They provides their services in all the world. It means they have access to all markets.
 They provide the quality services to their customers which helpful in attainment of trust
of end customers
 They should adopt full safeguards measures which prevents the competitors to imitate
their services and misuse their data.
Through this large number of benefits are gathered by organisation like competitive
advantage, high number of users, higher profitability and satisfaction of the demand of end
customers.
4. Application of SWOT framework for Facebook Inc.
Facebook Inc. is one of the American online social media and social networking service
company which covers almost every countries for the purpose of providing their services. But
due to several factors, the business operation of Facebook Inc. may affected and influences either
in negative or positive manner. Therefore, to overcome such factors the management need to first
identify their strengths, Weaknesses, Opportunities and Threats through conducting SWOT
analysis. This will help in examining such factors and implement corrective steps and measures
to improve their strengths, converting strengths into weaknesses, grabbing opportunities and
eliminating threats. Following are the SWOT analysis:
Strengths:
Integration with websites and applications: To enhance the experience of users and
engaged large number of users to use Facebook services, the company has launched many
features that would help user to easily access other websites directly from Facebook websites.
Therefore integration and use of application help company in achieving competitive advantage as
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compared to other social networking websites which find difficulties to provide similar quality
services (Teece, 2012).
More than a billion monthly users: Facebook Inc. has already attained over 2 billion
users in 2017 which is biggest achievement for company. Their main motive is to connect people
not only locally but also at global level. The more users Face book has the more revenue they
generated and market share.
Excellent under experience: Facebook can be easily accessed through using PC or
mobile devices. According to the international reports every fourth person of population carry
mobile phones thus it brings beneficial result to company. The more people have smartphones
the number of users may also increases due to which the company can earn huge profit and
achieve sustainability for longer duration.
Understanding of user's needs and behaviour: Except google, Every business failed to
collect data related with user's dislikes, needs and how they behave online. Therefore with the
help of such data, Facebook Inc. can able to identify what services they need to provide which
attracts large number of users. The company are able to decide which type of additional features
would be added so that the interest and experience of users will be maximised.
Weaknesses:
Weak CTR of advertisements: It has been observed from international reports that
Facebook Inc. has lower click-through rate which is much is much lower than average i.e. 0.05%
and 4% respectively. This will affect their revenue as well therefore the Facebook Inc. should
required to change the way it displays the ads but without disturbing user's experience.
Social network lacks of some features: There are some features which are not available
at Facebook due to which the customers may shift to other social websites.
One source of revenues-advertisement on Facebook: According to the international
reports, it has been noted that more than 80% of Facebook's revenue are earned from advertising
on its social network. Thus, large proportion of revenue are depend upon one source which is not
good sign for company. If any such platform goes down then the existence of Facebook Inc. may
comes into danger (Welter and Smallbone, 2011).
Weak protection of user's information: Facebook has attained more than 2 billion users
which gets their continuous services. Thus, Facebook Inc. are liable to secure their personal
information so that no one can use their information for illegal purpose. Having large number of
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fake accounts also brings Facebook Inc. into trouble. Leak information of users increases the
chances of leaving their sites which brings disadvantages to company.
Opportunities:
Increasing number of people using Facebook through mobile devices: More than 600
million users are having mobile devices out of this, only 14% of all Facebook users are accessing
Facebook services using mobile devices. Therefore the company should required to create a
platform for mobile device users to display ads for them and increases company's income.
Expansion to China: Accessing Facebook services in Chine are banned which restrict
Facebook Inc. to capturer large market share. Thus it is important for the management of
Facebook Inc. to make contact with Chinese government and providing them the benefits of
using their services for their people. Conducting meeting with them may increases the chances of
reaching their services to China as well (Business environment, 2012).
Diversify sources of revenue: The revenue of Facebook are all depend on the advertisers
using their platform to advertise their products and services. Thus the management of Facebook
Inc. should required to focus on other areas as well through which they can generate huge
revenues.
Threats:
Increasing number of mobile internet users: There are more than 600 million users who
using Facebook services through mobile devices. Thus if the company failed to monetize mobile
users it will be difficult for them to earn huge revenues.
Users using ad-block extensions: Educated internet users sometimes ignore the
advertisement which are not relevant to them. Therefore, increasing such number of users is
becomes threat for Facebook's model as they don't want to see their advertisement and click on
them.
Slow growth rate of online advertising: As recently observed that the ratio of using
online advertiser goes down which brings threat to Facebook' income. As most part of the
revenue are generated from advertisers therefore it brings disadvantages to the company if the
number of advertisement falls continuously.
Identity thefts: Sometimes Facebook Inc. may failed to secure personal information of
Facebook user's due to which the chances of misusing their personal information are more. This
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will decreases the Brand image of Facebook Inc.. Through this, the users may show less interest
to use their Facebook services (PESTEL ANALYSIS, 2011).
CONCLUSION
It has been concluded from the above project report that an organisation can able to
survive in competitive environment only when they are able to identify and analyse the internal
and external environment which affects their business operations wither in negativity or
positively way. For this, management of Facebook Inc. need to conduct PESTLE and SWOT
analysis in order to identify and overcome such factors. Porter Five Forces Model should also
required to be adopted in order to find out the competition in market which directs managers to
implement corrective plans and policies to achieve competitive advantage in market.
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REFERENCES
Books and Journals
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Online
Business environment. 2012. [Online]. Available through:
<http://www.investorwords.com/19252/business_environment.html>.
MARKETING THEORIES – PESTEL ANALYSIS. 2011. [Online]. Available through:
<https://www.professionalacademy.com/blogs-and-advice/marketing-theories---pestel-
analysis>.
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