Porters Five Force Model in Social Networking Industry

This report analyzes Porters Five Force Model in the social networking industry and its impact on Facebook. It discusses the threat of competitors, threat of substitutes, threat of suppliers, threat of buyers, and industry attractiveness. The report also explores Facebook's resources, capabilities, and generic strategies.

Management
Facebook
Student’s name

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Introduction
Facebook one of the well-known social networking website which helps people to
remain in touch with one another, share photos and meet new people. Moreover, till dated
there are 30 million active users via connecting through Facebook (Zeckerberg, 2019). As
the main aim of initiating this website was to give people a way to share information in an
easy and entertaining way. Hence, by this, Facebook has become one of the largest social
networking sites with the education focus (Nations, 2018).
Porters five force model
(Source: E. Dobbs, 2014)
Threat of five forces in social networking industry-
As theory of porters’ five-force model generates from five specific elements, which
contributes to the overall profitability of a business, whether they are based on other fields of
businesses or business, which works in the same industry. The major factors are threat of the
new entrant, threat of substitution, bargaining power of the suppliers, bargaining power of
buyers and lastly rivalry amongst existing competition.
Threat of competitors- Competitive rivalry factor or the strong competition among the
competitors is having a greater impact over their existing business in which businesses are
selling the same products and services, whether in terms of social media platforms,
successful competition, and are succeeding, if they will perform something different from the

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other social media sites. In term of Facebook, there is high competition such as snap chats,
Instagram, YouTube and many more (Dobbs, 2014).
Threat of substitutes- In concern to social media threat of substitute is high as other social
media sources because they offer similar performances such as sharing photos, videos and
messages. Hence, each substitute products of Facebook offers similar services through
various processes, which are different from each other (Dobbs, 2014).
Threat of suppliers- this aspect highlights that business suppliers has an ability to raise the
prices, which would help in lowering the profitability. In this, less number of suppliers
having greater ability to rise prices. In terms of Facebook, company having larger revenues
that have more power to get goods or services from its suppliers at the lowest possible costs
to maximize its profit margins.
Threat of buyers- In this aspect, the biggest drier of the digital business comes from the
needs and the expectation of the customers. As bargaining power of the buyers, lays out the
new set of expectation for the digital customers experience and necessitates continual
cooperate innovation across the business model, processes, products and lastly services.
(Dobbs, 2014)
Industry attractiveness based on five forces-
By the analysis of porters’ five-force model in terms of social networking, industry is
at moderate concern. In terms of attractiveness of the industry, technology plays a major
role. If the numbers of industries are growing in the market with the various advanced
technology concepts and methods then the players are becoming more lucrative in terms of
existing industries. In social networking aspect, through the adoption of effective strategies
and through continuous improvement and innovation they generate attractiveness. In
addition, through speed in innovation, more of user engagements, improvement in people-to-
people interaction are also be the reasons for industry attractiveness (Singla, & Durga, 2015).
Facebook resources/ capabilities-
Facebook in terms of resources considers technical equipment, capital and latest 1.2
billion users. In terms of capability, Facebook has a strong sense towards their performances
and hence this generates or forms the base of competitive advantage. In Facebook concern,
the major competency is networks and social graphs. The main reason regarding Facebook is
the knowledge that was helpful to prepare the products for the individuals to keep on pulling

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their family, relatives and friends through the advance social networking. Other than this in
terms of resources and capabilities, Facebook can be more innovative and creative in order to
sustain its popularity among their social networking industry. Lastly, in capacity concern,
Facebook has keen sense, by which they can acquire instagram, Watsapp and snap chat.
Facebook generic strategies-
Cost leadership- it involves minimizing cost of doing business and improving growth
aspects for fulfilling strategic objectives. Facebook is providing social media services,
globally. In this, company uses technology at its best in order to improve efficiency. By doing
this, larger numbers of users are satisfied and through this, Facebook easily searches internet
users across the international market.
Differentiation- This strategy majorly highlights about the companies’ product uniqueness
and quality, which are different from competitors. In Facebook, individual can share articles,
written blogs, produce and share videos, post infographic or events and display many
products for selling. The latest and the current updates regarding news happening around the
world is the differentiation strategies adopted by Facebook (Rothaermel, 2013).
Focus- Focus highlights about certain target group, part of the product or particular area.
Facebook always focus on two things- cost effectiveness and relevancy while forming ads,
attracting customers and pinpointing target audience. Lastly, monitoring daily aspects
towards changes to be made in company and working according to external environment
(David, & David, 2013).
Conclusion
Above report concludes that there are numerous factors in terms of threat of social
networking industry. Facebook is one of those websites, which is the most popular among the
entire world. Moreover, it’s also focuses on various generic strategies in terms of focus, cost
and differentiation.

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References
David, F. R., & David, F. R. (2013). Strategic management: Concepts and cases: A
competitive advantage approach. Pearson.
E. Dobbs, M. (2014). Guidelines for applying Porter's five forces framework: a set of
industry analysis templates. Competitiveness Review, 24(1), 32-45.
Nations, D.(2018). What is Facebook? Retrieved from: https://www.lifewire.com/what-is-
facebook-3486391
Rothaermel, F. T. (2013). Strategic management: concepts. New York, NY: McGraw-Hill
Irwin
Singla, M. L., & Durga, A. (2015). How social media gives you competitive
advantage. Indian Journal of Science and technology, 8, 90
Zeckerberg, M.(2019). The facts about Facebook. Retrieved from:
https://www.wsj.com/articles/the-facts-about-facebook-11548374613