Evaluating Strategic Choices and Innovation in Facebook's Growth Strategy

The study examines the strategic choices adopted by Facebook in the social networking industry, where rival firms are providing services at a lower price and majority of revenue is generated from advertisements and promotional offers. The company has taken significant initiatives to modify tools such as Cost per Capabilities and Cost per Impressions. Research and development department can take crucial steps for making more innovation and adding new attributes and features in existing services. The study concludes that strategic choices adopted by Facebook are effective for ensuring long-term growth of the enterprise, but necessary modifications can be made to provide better social networking experiences to customers.

STRATEGIC DECISION MAKING
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Table of Contents
INTRODUCTION ...............................................................................................................................5
(a) ....................................................................................................................................................5
(b) Strategy Clock; Porter’s Generic Strategies...............................................................................6
(c) SAFe analysis ............................................................................................................................7
(d) Selection and justification of the optimum strategy ..................................................................8
CONCLUSION ...................................................................................................................................8
REFERENCES.....................................................................................................................................9
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INTRODUCTION
Strategic decision making id complex and critical business function and it is required that
systematic and organized approach should be adopted for making action plans for the enterprise.
Present report describes about Strategic choices adopted by Facebook for gaining accomplished
goals and targets of enterprise. Moreover evaluation of strategic choices and recommendations for
making improvements have been mentioned.
(a)
1 STRATEGIC PURPOSE AND INTRODUCTION OF THE ORGANIZATION
FACEBOOK is a multinational company that was incepted in the year 2012 and it was
founded by Mark Zuckerberg. The company provides internet services in large number of countries
and more than 5000 employees are working under it (Facebook . 2016). More than 1 billion people
across globe are availing internet services that are offered by Facebook. It is a social networking
sites which provides medium to users for getting connected with friends, family members and their
fellow group members (Acquisti and Gross, 2006). People are allowed to create profiles, post
updates, make interaction with friends and exchange videos and messages. Company also started
for public offering in year 2012 and it supported in maximizing capitalization of the company.
2 EXTERNAL ENVIRONMENT ANALYSIS
Political:-Facebook provides social networking services in diverse countries across globe and many
privacy issues are faced by the company from the side of users and government. Many financial
damages have been faced by the company and it aided in reducing the overall performance of the
enterprise.
Economical :-Company has gained strong growth rate and it supported in achieving huge
profitability and revenues for the enterprise. Facebook Gaines higher margin returns on a low
expenses base (Zhao, Grasmuck and Martin, 2008).
Social :- Facebook company is facing diverse range of social issues due to high rate of competition
that is faced in industry. Moreover culture and trends that are running in a company also affects the
working operations of enterprise.
Technical :- Frequent advancements that are made in technical sector also gives impact on overall
working of system. Use of advanced technical methods will support for gaining competitive
advantage for business and adopting all this supports facebook for ensuring growth and success for
the business.
Environmental :- Company sometimes faces network related issues sue to bad climate and
environmental conditions.
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Legal :- It is assertive that Facebook should comply with legal guidelines that are rendered by
government of an nation.
3 COMPETITIVE INDUSTRY ANALYSIS :-
Porter's five forces will aid in assessing competitive industry analysis and it is as described :-
Threat of new entrants :- Due to high success and growth opportunities that are offered by this
industry threats of new entrants is high.
Competitor rivalry :- Facebook is facing competition from many rival firms including Twitter, You-
tube, Linked and Myspace.
Bargaining power of buyers :- Buyers have many options to avail superior quality social networking
services and it increases bargaining power of buyers. It makes competition ion the industry as vary
high (Valenzuela, Park and Kee, 2009).
Bargaining power of suppliers :- Bargaining power of suppliers is low as there are many options for
suppliers to sell their services and due to that it is vital for Facebook to maintain effective relations
with suppliers.
Availability of substitutes :- There are many substitute available and due to that it becomes
essential for Facebook to offer superior quality services as compared to rival firms availability of
substitutes is moderate to high in this sector.
4 STRATEGIC CAPABILITY ANALYSIS :-
5 SWOT ANALYSIS
Strength :- More than 1.3 million users are availing services provided by Facebook and it aids in
providing superior quality internet services to users.
Weaknesses :- Facebook company's advertising and promotional strategies are not effective and due
to that company is facing difficulty in gaining competitive advantage (Hewitt and Forte, 2006).
Opportunities :- Company has opportunity for spreading operations of enterprise in large number of
countries and doing globalization of business.
Threats :-Company is facing threats sue to increasing number of competition that is faced in the
industry. In addition to that problem is also faced due to increasing theft and security related issues
that are faced by the company.
(b) Strategy Clock; Porter’s Generic Strategies
Facebook is a leading social networking company that provides internet services to large number of
people. Porter's generic business strategies for Facebook are as described :-
Cost leadership strategy :- Facebook offers method of connection to people through its social media
platform. Company has opportunities for entering into a new market area and for expanding
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existing base by adopting cost leadership strategy (Waters and Lucas, 2009). Facebook generates
maximum of its revenue from advertising and promotional messages that are got from it. Moreover
company also earns financial revenues by Zynga which is a social networking game developer site.
Cost sensitive and price conscious consumers can be attracted by making use of cost leadership
strategy. There are large number of companies that are offering services in this industry and big
market share and large consumer base can be gained by making use of this approach. It also
supports in gaining economies of scale and entry barrier can be created for potential consumers
(Raacke and Bonds-Raacke, 2008). In addition to that middle and lower income group are provided
better services by making use of this approach.
Differentiation strategy :- Facebook has adopted differentiation strategy for creating a unique image
of the firm in market area. It aids in promoting services of the company to a larger market area and
broader market area has been captured by Facebook by making use of this strategy. Company has
taken initiative for launching its own self advertising platform and it supports for competing with
Amazon.com, You -tube and Twitter. Facebook is dealing in cloud marketing which is a low cost
oriented industry. Use of this strategy supports in maintaining a unique position in market and
differentiating the services from other rival firms.
(c) SAFe analysis
Safe analysis for evaluating effectiveness of strategic choices that have been selected by Facebook
for managing its operations and stimulating the company towards growth. SAFe analysis of
Facebook is as mentioned :-
Suitability :- Facebook has adopted cost leadership and differentiating strategy for acquiring large
market share and it aids in accomplishing desired goals of the organization (Valenzuela, Park and
Kee, 2009.). Adopted strategies aids in addressing the key opportunities that are available for the
company and moreover constraints will also be removed by the methods that have been faced by the
company. Huge potential for business has been gained and various tools such as Cost per click
(CPC) and Coat per impression has provided an effective medium for making and developing an
attractive user interface and Facebook has became capable for launching free social media services
that are integrated with highly valued websites.
Acceptability :- Proposed strategy supports in meeting the expectation of consumers, buyers and
other people that are associated with the business. All the stakeholders have shown a positive
attitude for accepting the strategy and probability for getting likely returns is also vary high.
Facebook has became capable for building a strong brand loyalty and gaining support of all the
stakeholders of the organization (Hewitt and Forte, 2006).
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Feasibility :-The proposed strategy of Facebook works actually in practice and it has supported in
achieving the long term and short term objectives of the organization. It is also required that
strategy should be financed and Facebook has allocated budget and resources for implementing the
strategies in effective manner. Moreover required resources for employing the action plan and
strategy has been allocated in proper manner. Existing staff members are having appropriate skills
and capabilities for implementing the strategies in proper and effective way.
(d) Selection and justification of the optimum strategy
Cost leadership strategy is the best method that can be adopted in Facebook for ensuring growth and
success of the enterprise. More innovative and advanced technical tools can be adopted by
Facebook for improving the strategic choices that are made by it (Acquisti and Gross, 2010). Most
of the rival firms in social networking industry are providing services at vary lower price and
majority of revenues are generated from advertisements and promotional offers received by the
company. More than 85 % of revenue earned by Facebook comes from advertising opportunities got
by the company and company can take significant initiates for modifying tools such as Cost per
capabilities and Cost per impressions. Recently Facebook launched free social media services that
and these are integrated with highly valued websites (Dwyer, Hiltz and Passerini, 2007). It provides
options for gaining exposure for carrying out business activities in effective manner. Research and
development department of the company can take crucial steps for making more innovation and
adding new attributes and features in existing services that are offered by the enterprise.
CONCLUSION
Summing up the present study it can be concluded that strategic choices adopted by
Facebook are effective for ensuring long term growth of the enterprise. Moreover it is vital that
some necessary modifications can be made so that customers can be provided with better social
networking experiences.
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REFERENCES
Books and Journals
Acquisti, A. and Gross, R., 2006, June. Imagined communities: Awareness, information sharing, and
privacy on the Facebook. In International workshop on privacy enhancing technologies (pp.
36-58). Springer Berlin Heidelberg.
Dwyer, C., Hiltz, S. and Passerini, K., 2007. Trust and privacy concern within social networking
sites: A comparison of Facebook and MySpace. AMCIS 2007 proceedings, p.339.
Hewitt, A. and Forte, A., 2006. Crossing boundaries: Identity management and student/faculty
relationships on the Facebook. Poster presented at CSCW, Banff, Alberta, pp.1-2.
Raacke, J. and Bonds-Raacke, J., 2008. MySpace and Facebook: Applying the uses and
gratifications theory to exploring friend-networking sites. Cyberpsychology & behavior. 11(2).
pp.169-174.
Roblyer, M.D. and Witty, J.V., 2010. Findings on Facebook in higher education: A comparison of
college faculty and student uses and perceptions of social networking sites. The Internet and
higher education. 13(3). pp.134-140.
Ross, C. and Orr, R.R., 2009. Personality and motivations associated with Facebook use. Computers
in human behavior. 25(2). pp.578-586.
Valenzuela, S., Park, N. and Kee, K.F., 2009. Is there social capital in a social network site?:
Facebook use and college students' life satisfaction, trust, and participation1. Journal of
Computer‐Mediated Communication. 14(4). pp.875-901.
Waters, R.D. and Lucas, J., 2009. Engaging stakeholders through social networking: How nonprofit
organizations are using Facebook. Public relations review. 35(2). pp.102-106.
Zhao, S., Grasmuck, S. and Martin, J., 2008. Identity construction on Facebook: Digital
empowerment in anchored relationships. Computers in human behavior. 24(5). pp.1816-1836.
Online
Facebook . 2016. [Online]. Available through:
<http://www.forbes.com/sites/greatspeculations/2014/11/28/facebook-through-the-lens-of-
porters-five-forces/#5185c591cd3f>. [Accessed on 12th December 2016].
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