Introduction to Business Environment Report

This report analyzes Facebook Inc.'s business environment using PESTLE, Porter's Five Forces, VRIO, and SWOT frameworks. It examines external factors like political, economic, social, technological, ecological, and legal influences, as well as internal factors like strengths, weaknesses, opportunities, and threats. The report concludes with recommendations for strategic positioning and decision-making.

Introduction to
Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1 ...........................................................................................................................................3
Analysis of macro environment of Facebook Inc. in which its operation is going by the help of
PESTLE framework...............................................................................................................3
TASK 2............................................................................................................................................6
Porters Five Forces framework..............................................................................................6
TASK 3 .........................................................................................................................................10
An analysis of the internal environment of organization with the help of VRIO model.....10
TASK 4..........................................................................................................................................12
Analysis and commentary of the macro, micro and internal environment...........................12
CONCLUSION..............................................................................................................................15
REFERENCES .............................................................................................................................16

INTRODUCTION
Business environment refers to the all external and internal factors that impact the
respective business (Erasmus, Strydom and Rudansky-Kloppers, 2016). These factors can effect
each other too, but effect a business together. The external factors are uncontrollable in nature
but internal factors are controllable in nature. This assignment covers all the internal and external
factors of a business environment. The chosen organization in this assignment is Facebook. The
pestle framework used to analysis main factors which impacting company and some macro
factors which strongly influence the organization than other factors. In the remaining sections
porters five force, SWOT analysis and analysis by the help of VRIO model clarify the influences
of internal and external both factors on Facebook Inc.
TASK 1
Analysis of macro environment of Facebook Inc. in which its operation is going by the help of
PESTLE framework
The PESTLE analysis model help to represent the analysis of external factors in the
Facebook Inc.'s macro environment (Hilton and Platt, 2013). The following discussed various
factors presents the clear image of Facebook Inc.:
Political factors: Facebook business is totally linked with the political landscape.
Political factors as its external factor in the it's environment. Political factors decide the progress
of the whole business of the organization. There are various major political factors which effect
the business of Facebook Inc.:
1. Barriers in chines market due to political factors.
2. Action of Govt. on online data.
Above discussed are the broad political factors which effect business environment of
Facebook externally. These factors can slow down the companies growth. The political factors
exert a stronger effect on the company than other factors as discussed above.
Economic factors: These factors helps to analysis the impact of economic conditions on
business's macro environment. The followings are the various economic factors which effect the
Facebook Inc.'s macro environment:
1. continuous increment in the stability of developing countries.

2. Rapid increment in the growth and income of countries which are in developing
phase.
3. Incomes of disposable nature are increased rapidly.
There were the opportunity for the Facebook Inc. to increase its share in market with
the help of these various economic factors, but if it doesn't consider these factors then it can grow
up its business in the market so these economic factors majorly influence the macro environment
of the business of Facebook Inc.. The market penetration is the major factor through which the
company can gain the benefits of its economic factors (Wetherly, 2014). In this way the
economic factors influence the Facebook Inc. widely.
Sociocultural factors: The social conditions influence the Facebook Inc. business and its
operations at global level and popularity of its business operations (Charter, 2017). The various
impacts of sociocultural trends on the Facebook Inc.'s macro environment through the following
factors:
1. preference increased day by day for high-level services.
2. Online trading increasing rapidly.
3. Support is increased for corporate responsibility along with other activities.
By the help of sociocultural factors Facebook can do analysis the various opportunities in
the macro environment but without these factors it can't analysis the situations of macro
environment. so in this way these factors affect the business of Facebook Inc. at wide level.
Technological factors: Technological factors affect the macro environment of the
Facebook business, because it is a type of business which founded on online technologies. These
factors identifies the various technological influences on the macro environment. Following are
the various technological factors which affect the macro environment of Facebook Inc.:
1. Mobile devices are used very broadly.
2. Rapid growth of social media firms.
3. Online retail firms are diversified.
Facebook can use these factors as its opportunity to increase its business share in users
portfolio. As these factors influences the external environment of Facebook business widely than
the other factors, because whole business is based on the technologies.

Ecological factors: The various ecological factors influence the macro environment of
Facebook Inc. business such as trends and ecological issues in company. The following
described ecological factors influence the Facebook Inc.'s business operations:
1. more focus on sustainability of business.
2. Increment in Waste disposal standard's complexity.
3. Environment change.
These above described factors influence the company's business very widely because
through these factors company can gain the advantage of various opportunities. So the impact of
these factors on macro environment of Facebook Inc. is very vital.
Legal factors: The legal factors affect the macro environment of Facebook business very
widely, because it imposes various requirements and limits on Facebook business (Craig and
Campbell, 2012). The following are the external legal factors:
1. patents laws world wide.
2. Increasing regularity support world wide for free wireless connection.
3. Regulation of internet connection in china.
4. Increment in the regulation of data.
Facebook can gain various opportunity for its business through these legal factors but if it
does not consider these factors then these affect the Facebook business very widely.
There are some main factors which impact on the company business or can say that some key
drivers of change which are as follows:
The mobile platform is under-penetrated within brand advertising budgets: While
customers spend their heavy proportion of free time on internet devices, this platform comprises
merely around 5% of the budget of brand advertising, according to a study by Forrester (Smith
and Wong, 2016). This is largely due to the inability to accurately measure the return on mobile
ad spending. We believe mobile advertising will gain share in the overall advertising market in
the future, with the maturity of the market and development of more accurate ad measurement
tools. Facebook is uniquely positioned to gain from this trend, considering mobile monthly
active users comprise for more than 85% of its overall active user base, and since the company is
undertaking various measures to improve its ad relevance and measurement. So this factor
majorly influence the business of Facebook Inc.. than the other factors.

Growing user base on several platforms: Facebook added 165 million user who are
active in 2014, to grow its user platform by 13% over the session (Jeston, 2014). Users on FB's
mobile platforms also grew at a stellar pace during 2014. Recently, Monthly Average Users
(MAU’s) on Instagram, Messenger and WhatsApp exceeded 390 million, 400 million and 690
million, respectively (Irwin, 2013). We think Facebook’s user base will continue to grow at a
healthy pace in the coming years as well, owing to increasing Internet penetration across
developing markets, such as India, Indonesia and Brazil, as well as rising popularity of these
platforms. These user trends will lead to expansion in the number of marketers and, hence, will
drive up monetization on the platform. So that the respective factor influence the macro
environment of Facebook business more than other external factors.
This PESTEL analysis of Facebook Inc. emphasis the importance of strategic changes to
address wider opportunities in international social media and digital advertising market. The
company needs various plans and procedures, regulations to provide safety zone to its business
from external threats. For example, management need to identify and resolving the threat of
governmental crackdown and corresponding regulation on digital data gathering and processing.
Such issues require strategic management methods that address the essentialist of governmental
and regulatory possession. It is suggested that Facebook Inc. should have to identify issues with
China’s government to penetrate the online social media market of their country, which is
biggest market in the all markets of whole world. The purpose is to have the prohibition on the
network of social media lifted. The other alternative suggestion is that the organizatio should
produce fresh products that support digitally working retailers to make new revenue streams for
the organization. Moreover, on the basis of this PESTEL analysis, it is suggested that Facebook
should have difrentiate to its business. Diversification can deduct the risk of market exposure of
organization's.
TASK 2
Porters Five Forces framework
Porter's five forces model is considered as an analysis tool which utilises five force of
industry in order to ascertain the competition intensity within industry as well as their profits
level (Putrevu and et.al., 2012). These forces influence the structure of industry and competition
level in same industry. Porter's five forces frame work of Facebook Inc. assess the all

competition extent within social media industry. This model was introduced by Michael porter in
year 1979 that includes five forces such as competitive competition, bargaining power of buyers,
bargaining power of suppliers, threats of substitutes and threats of new entrants. All these are
explained below:
Competitive rivalry: with the leading position in social media industry, Facebook Inc.
experiences the importance competition impacts. This forces ascertain how competitors effects
industry environment of firm (Bovenberg and Cnossen, 2012). Some external factors that leads
to moderate forces of competitive competitors against organisation are:
 Small numbers of company
 Moderate variety of company
 Low cost of switching
There are small firms which offers online showing advertisement services which is same
as Facebook Inc. For example: YouTube LLC have a websites of social media which provides
targeted online services, advertisement. In regard of five forces analysis, small competitive
organisation utilise a weak forces against Facebook. Therefore, differences of those company
assists to attract advertisers, thereby distinguishing moderate force into the environment of
industry. Also, low switching cost form it easier for advertisers in order to switch from firm to
wards rivals. These external factors develop the competition moderate forces. Depending upon
this components of five force analysis, the competitive competition is a circumstance within
management as well as strategic formulation of Facebook Inc.
Bargaining power of buyers: In that factor the customers/buyers put a force on the
Facebook Inc. in terms of what they need from the organization. Followings are the various
factors or strong forces of customers bargaining power:
 The availability of substitutes are very high.
 Switching cost is very low.
 Buyers demand tends to very high.
In this, there are five components which demonstrate that Facebook Inc. must put their
customers or buyers in priority section where they attract them towards firm products or services.
It is ensure about competitive advantages, because this factor exerts a strong force against the
business of organization.

Bargaining power of suppliers: In this, suppliers involves factors that effect on
Facebook Inc.'s social networking web site and show promotional facilities (Clarke, 2013). In
that element of five force analysis it is examined that how suppliers effect the industry
surroundings. There are various factors which main reasons is to weak bargaining power of
suppliers on Facebook Inc.:
 The size of individual suppliers are moderated.
 Suppliers are in very large size of population.
 Overall supply is very high.
There are various external factors in the five forces analysis where suppliers are major
issue within an organisation's social media channel and online advertising industry surroundings
effectively. Thus, firm can assist in improving in their management of suppliers relationships
with the help of best suitable strategies in the supply chain management. Such strategies and
tactics are contribute their company corporate social responsibility in order fulfil their demand
and needs.
Threats of substitutes: It can be analysed that Facebook can be business performance
and also develop challenges in the social media. The impact of substitution is determined in this
component of Five force analysis. It is one of the most vital external factors which help in
creating strong threat of substitute of Facebook company which are described as follows:
 Low switching value.
 Advanced substitute availability.
 Moderate cost of substitutes.
Along with this, it is very simple for advertiser is to paid money for promoting their
goods and services with the help of various methods such as radio, television and print media. In
this, Porters Five force analysis framework, such type of situation gain a string force within an
organisation. In this context, high level of availability of these substitute that are directly affect
on industry surroundings. There are various substitutes in which they are mainly used television
that are seen as more expensive as compared to Facebook promotional services. This type of cost
condition can apply a average force on the business operations. It is that element of Five force
analysis which shows threat of substitute is seen as major problem that are faced in managing
strategies of the respective firm.

Threats of new entrants: Social media face various negative effects of new entrance in
the industry environment. Five force analysis includes major impact of new business. In this
external analysis case of Facebook Inc. and their social network which are associated with
desired goods and services. There are various external factors which can lead towards identify
weak threat of new venture that are described as under:
 Low switching costs.
 High cost of brand development.
 High cost of customer loyalty.
In this, new entrance has force against Facebook due to lower the switching values or
cost of advertisers in moving towards one service to another. Therefore, five force analysis
demonstrate that it is complex for developing reliable and popular social media method which is
similar to Facebook. It is very difficult in order to build and develop loyalty among customers
regarding such company services or facilities. In this, external factors weaken the threat of new
entry as compared to others. It is based on the element of Five force analysis, the new entrant is
the minimum issue which arse in an organisation and develop strategic procedures.
On the basis of porters five force analysis, the organization can avail its position in
industry due to weakness of some factors. (Forsgren and Johanson, 2014). these weaknesses
becomes the hurdles in path of organization. However, customers impact the organization in the
sense of their switching choice to other companies, which are currently providing various online
and social media services. Apart from that the substitute firm have also strength to take away
market share. So that the external factors in this Five Forces analysis shows the need for various
approaches that continually satisfy customers of Facebook’s website and mobile apps. This
suggestion can help retain customer and share in market. Apart from that, it is suggested that the
organization have to imposes various strategies that keep its display advertising services more
attractive than those of substitutes. This move should minimize the negative influence of
substitution in the industry environment. Also, improvements in Facebook’s operations
management strategy can enhance business efficiency in addressing competitive challenges.

TASK 3
An analysis of the internal environment of organization with the help of VRIO model
VRIO analysis: The following VRIO frame clarify the various terms according to VRIO
framework of Facebook Inc..
How to make the VRIO analysis: Followings are the some steps which defines how to take
VRIO analysis:
1. The valueless resources should be outsourced.
2. If the nature of resources are valuable but not rare then it brings the competitive situation.
3. The resources are valuable and rare in nature but less cost to imitate, organization have a
temporary advantage of competition. Other companies will easily copy these in the near
future.
4. If the characteristics of resources are valuable, rare, and imitate then it is very dificult for
the organization to organize these resources.
5. If the company able to manage the advantages and organize competitive advantage, then
later it converted into permanent competitive advantage.
same steps are taken by the Facebook Inc. for taking a successful VRIO analysis of
organization, because these specific steps make the model very effective and impressive
analytical tool.
Factors for which the VRIO is Good: With rthe help of that model the resources of
company can be evaluated perfectly. If an organization analysis its resources properly then it can
understand its weaknesses and strengths easily. The Facebook Inc. also can take much
advantages of this model. The VRIO analyse every possible type of resources for both the
company and competitors such as in the form of following questions. (Prajogo, 2016). various
phases of VRIO model are as follows:
 Value – The cost of obtaining resources and level of obtaining these on market?
 Rareness – what is the limitedness of resources?
 Imitate ability – what is the level of producing similarity as respective resource?
 Organized - level of managing resources through existing or new measures?
There are some key resources which are valuable for the Facebook Inc. as well as some
of rare, imitable and organized. Such resources are as follows:

Relations with developers: This resource explain the good interaction of company with
other developers.
 valuable: This resource of company is very valuable
 Rare: it is not rare because other companies can also established good relations with
developers.
 Imitable: These are imitable because a proper stimulate relation can be established.
 Organized: This also be organized in nature.
Company culture: It is the foremost important resource of company. It defines the
various beliefs and other working ways of organization.
 Valuable: This resource create a value for the company because it encourages
innovations and taking risks. Zuckerberg says “riskiest things is to take no risk”.
 Rare: it is rare because other in other companies there will not be unique culture.
 Imitable: These are not imitable because a proper stimulate culture can't be established.
 Organized: This also not be organized in nature.
Software: It is very important resource and can be say that as assets of company. It is
most valuable resource of organization.
 Valuable: This resource create a value for the company because it provides a unique and
attractive features to encourage more and and customer towards company's products.
 Rare: It is rare because other in other companies there will not be same software.
 Imitable: These are not imitable because a software can't be imitate by other firms due
to some specific rights.
 Organized: The software can't be organized such as other things or resources of
companies.
Manpower: Manpower of the company is also very foremost resources because without
manpower all the machinery and other resources are waste.
 Valuable: This is very beneficial for the Facebook Inc. because manpower play a
foremost role in the every organization activity activity.
 Rare: These resources are rare for every organization because every company can't
acquire simulate skilled manpower as Facebook Inc..
 Imitable: Manpower is a different kind of resource which can't be imitable.

 Organized: Manpower is also be organized in a well setted manner by the organizations.
Source : VRIO Analysis. 2016.
TASK 4
Analysis and commentary of the macro, micro and internal environment
Facebook Inc.'s strengths and weaknesses, as well as opportunities and threats in then
global social media and online advertising through SWOT analysis of respective business
(Storey, 2016). It identifies the internal as well as external factors of the significant business. It
helps to company some issues which must have to address by the business. Following discussed
are the factor which helps in SWOT analysis of Facebook Inc.:
Strengths: Facebook Inc.'s market position as one of the i6ts biggest strengths in the
social media market and advertising market. The following stated are the main strengths of
company:
1. strong brand image.
2. Having a large consumer base.
3. Huge revenue generation point.
4. Innovative workforce.
Illustration 1: VRIO analysis

Facebook Inc.'s strong brand image generate its social network's popularity. The strong
and large consumer base of the company brings a number of beneficial externalities. More high
revenue support the internal financial position of the company. So these strengths shows
capabilities to maintain the companies competing benefit and attraction in the online
marketplace. These strengths helps in taking various decision regarding the financial position,
consumer attracting strategies, etc..
Weaknesses: These are the internal factors of the company which yet it have to develop.
Facebook Inc. also have some weaknesses which majorly based on the nature of its business
operations (Seethamraju, 2012). The followings are the some weak points of the company:
1. imitable products and services providing by company.
2. Online advertisements negative impact.
3. Very low diversification in the operations of business.
These above discussed factors considered as weaknesses of the company because these
make the company vulnerable to competition. Facebook Inc. also suffer from the low
diversification as well as same type of competing firms, which are a threatening situation to
company because of having weak points on that matter. By the help of addressing these
weaknesses the Facebook Inc. can take a strong decision to cut down market hazard influence
and regarding increase in possible business development.
Opportunities: These factors helps the company in expanding business by putting
various options towards the business activities of company (Casson and Rose, 2014). These are
the some external factors which helps Facebook Inc. to improve its business situation. Some of
the factors are as follows:
1. diversification in business
2. innovation in product line
3. market development and penetration.
Facebook Inc. has the opportunity to diversify outside its core social media and online
advertising business. The company has taken steps to exploit this external factor. For example,
the company acquired Oculus VR, which is a virtual reality technology business that can
complement social networking services. However, this SWOT analysis points to the need for
further diversification to reduce Facebook’s business risk exposure. Another opportunity is for
the organization to innovate products that are complementary to its social networking website

and mobile apps. So these external factor analysis helps the companies a lot in taking various
decisions regarding new product innovation, selecting the ideas of business diversification and
etc.. These decisions helps a lot to the Facebook Inc. in globalization of it's business operation
and in some other business area as well.
Threats: As the Facebook Inc. operating its business at multinational level so it must
have to address some threats for smooth running of its business operations globally. Following
are the some factors which shows threats for the company's business:
1. Imitation
2. cybercrime
3. market saturation
The above described are the major threats which can be spoil the business of Facebook
Inc.. These threats must have to address by the company, because these helps in taking the
various decisions about the development of new product and adoption of various new
technologies, enter in new business line. Overcome of these threats is very crucial task for the
company which can be only possible through deep analysis of these threat factors with the help
of SWOT analysis.
Facebook Inc. can easily acquire advantages from their market position which are
establish by them by delivery innovative services to their customers. Therefore, SWOT analysis
assist in identify various issues and problems through which company can maintain and manage
their growth and success level (Kandachar and hamle, 2017). Facebook major target source and
method is cybercrime. Such type of issues and problem need strategic management which assist
in maintaining and managing firm status or position for attracting customers through online
communication. It can be suggested that Facebook need to change their business operations
which assist in reducing market risk. It is exploiting best possible methods and sources of income
to keep organisation growth and development. This can be recommended that firm required to
conduct research and development that help them in enhancing their capabilities and abilities.
Along with this, business can gain efforts in negotiating with government bodies and in open
market company does not get their existence and presence.
CONCLUSION
At the end of the report it can be concluded that the Facebook Inc. have to address
various macro and micro environmental factors which affects its business operation. For

analysing these factors it uses various frameworks such as SWOT, PESTLE, porters five force
and VRIO. These frameworks helps the Facebook Inc. in taking major decision about its
business operation, because with the help of analysis it enable to know the areas and factors
which require development. This assignment help in conducting a scan of Facebook Inc. which
currently working in international market, and help in the process of decision making for its
strategic position.
REFERENCES
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Online
VRIO Analysis. 2016. [Online] Available through <https://managementmania.com/en/vrio-
analysis>